Uncertain future for Ukraine’s PV power plants

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As Russia strengthens its grip on Crimea, the fate of PV power plants in the region and in wider Ukraine is in limbo.

Crimea is home to some of Ukraine’s largest PV power plants, most of which have been built by Austria-based Activ Solar. According to Yuri Kubrushko, an energy analyst with Kiev-based consultancy IME Power, in the event of the region separating from the rest of the country (and leaving aside the question of how the West would respond if this happens), there is a “high chance” the plants, which includes Ukraine’s largest, could be nationalised by Crimea’s government.

Should this happen, they would cease receiving Ukraine’s feed-in tariff, which at €0.34/kWh is among the world’s most generous. “There is no political and economic sense to keep them in the loop,” Kubrushko said.

Not only this, but, were Crimea to vote to join Russia in next week’s referendum, Kubrushko pointed out that Russia “does not have focus on supporting renewables”, meaning the projects would be unlikely to receive any support like the Ukraine tariff.

Three months of political turmoil have seen Ukraine’s pro-Kremlin and pro-renewables president, Viktor Yanukovych, ousted and Russia respond by instigating a military lock-down of the region.

Historically a peninsula that has been handed back and forth between east and west, Crimea is also a hotspot for harvesting solar energy. Under Yanukovych, renewables such as solar were encouraged due to Ukraine’s need to break its dependence on Russian gas for energy.

Activ Solar has built four operational PV plants in Crimea, among them the 105MWp Perovo and the 82.6MW Ohotnikovo plants.

Approached by PV Tech, a company spokeswoman said the troubles in Crimea had not put a stop to the operations and management of its plants in the region. But the company did not directly address PV Tech’s questions on what would happen to plants in the event of Crimea separating from Ukraine.

“Irrespective of what happens at the government and territorial level, the fundamental case for PV remains strong in Ukraine,” a statement from the company said.

But even in parts of Ukraine outside of Crimea, where Activ Solar manages a number of other PV plants, the company could face difficulties, Kubrushko said.

Even before the protests that led to the ousting of Yanukovich began, the company had faced growing questions over alleged links to members of the former president’s government.

Although the company has strenuously denied any such ties, Kubrushko speculated that the new government in Kiev may decide the reported links to the former regime are sufficient basis either to seize Activ Solar’s assets and transfer them into state ownership, or reduce the green tariff rates they receive.

Commenting on this suggestion, Kubrushko said: “There have not been any statements from new government concerning renewables and solar, so we need to wait several weeks to see their new strategy in relation to this sector.”

Other players

Although Kubrushko estimated Activ Solar has built around 80% of Ukraine’s PV capacity to sell onto international investors, the company is not the only player in the country. The European Bank for Reconstruction and Development has financed three small- to medium-sized projects in the country; these and the few others of this size should not be affected, Kubrushko believes.

One other company active in Ukraine is eastern European engineering company, Beten International, which builds large-scale solar projects in the country. Kevin Berenfeld, CFO of Eastern European engineering company, Beten International told PV Tech Ukraine’s developers are “all willing to move on” from the unfolding trouble.

However, most developers cannot, he said, as they depend on fresh international capital, which is being spooked by the political uncertainty.

“The most difficult issue in Ukraine has always been to find the capital necessary for the construction. This is even more a challenge since the recent political turmoil,” said Berenfeld.

However developers that are active in Ukraine “are not loosing faith and continue their duties, trying to commission projects,” he added.

“The situation is changing on a daily basis, and a lot of misleading information is spread about this topic, from the pro-Russian side as well as the pro-European side. All my colleagues in the development industry are scrutinising this, with very little sureness of the outcome,” Berenfeld said.

A few developers are looking for financial help from elsewhere. The UK foreign secretary William Hague stated that UK will provide £10 million for technical support with political and economic reform to Ukraine during the political upheaval.

“Some developers see a good sign in the financial help proposed by EU and USA as early as March 2014, to support the Ukrainian government,” says Berenfeld.

Berenfeld concluded that with economic uncertainty and dependence on foreign investment, “the magnitude of the increase in the [solar] capacity installed depends on the perception of Ukraine by foreigners”.

“In the short run, the current government cannot do much unfortunately. But the new government shall count on every possible opportunity to improve energy independence,” he said.

Correction: the quote “there have not been any statements from new Government concerning renewables and solar, so we need to wait several weeks to see their new strategy in relation to this sector” was previously attributed to Activ Solar, instead of Kubrushko.

Activ Solar's Perovo power plant. The future of the Crimea mega-project looks uncertain. Image: Activ Solar.
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