Dispute about Restructuring Support Mechanism for Renewable Energy Projects in Ukraine: Statement by the Mediator

Renewable energy
7 April 2020

Yesterday, the two renewable energy associations party to the dispute about changes to the support scheme in Ukraine submitted an updated proposal to the Government for the solution of the dispute. The negotiations under the auspices of the Secretariat’s Dispute Resolution and Negotiation Center aim at agreeing on a stabilization package, an amicable solution for the liquidity crisis threatening the offtaker of renewable energy in Ukraine.

The liquidity crisis was mainly caused by a surge in renewable investments before the expiry of the administrative feed-in-tariff scheme at the end of 2019, as well as deficiencies in the electricity market design and payment of the renewables surcharge. The crisis is exacerbating in the wake of measures against the Corona pandemic. These developments call for a swift resolution of the pending dispute. At the same time, any unilateral solution, possibly interfering retroactively with existing contracts, will affect the confidence of investors in the stability of Ukraine, an essential asset for the post-Corona recovery. For these reasons, the mediation has aimed at finalizing a memorandum which addresses the liquidity problems effectively and in a spirit of fairness in sharing the responsibility between public institutions and investors. Yesterday’s new proposal by the investor may help breaking the deadlock and should be given sincere consideration by the Government.

The proposal addresses the key issues still open after several rounds of negotiations, namely restructuring of power purchase agreements and feed-in tariffs, the release of capacity for wind energy investors for the benefit of future auctions, balancing responsibility and compensation for curtailments of wind and solar producers.

Whether or not the pledges made by the associations are considered sufficient by the Government or they need to be further improved is not for the mediator to prejudge. To be effective, the commitments made by the investors should be complemented by other measures necessary to stabilize the system, measures to be taken by the public institutions with the support of the international community. A list of such measures has been elaborated during the mediation by working groups consisting of representatives from both sides, and is reflected in the draft memorandum.

The Secretariat is convinced of the value of a sector-wide negotiated agreement over unilateral solutions, not least also for the benefit of future investments in renewables. Yet with the crisis aggravating quickly, time is of the essence. The parties should use the momentum created by yesterday’s proposal, take their responsibility towards a sector increasingly in distress serious and move faster and more substantially towards agreeing on a well-balanced set of mutual commitments. The ongoing mediation has prepared the ground to build on and remains open for a fair, transparent and fast finalization.   

Dirk Buschle

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