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Current state of Ukrainian solar energy

Energy plays a crucial role in ensuring the economic functioning and development of Ukraine. Before the onset of full-scale aggression, the Ukrainian energy sector was one of the largest in Europe. The installed capacity of power stations integrated into the unified energy system of Ukraine in February 2022 was approximately 37 GW

Overall Condition

At the beginning of 2022, the total installed renewable energy capacity in Ukraine was about 10 GW. Most of the green generation facilities were built before 2020. At that time, there was a higher level of the «green» tariff. This increased the investment attractiveness of solar power plant construction projects. As of January 2023, 6.3 GW of industrial and 1.4 GW of domestic solar power plants were built in Ukraine.

Since February 24, 2022, Ukrainian energy facilities have been under constant attack by the Russian military. The energy system has withstood hundreds of such attacks and even endured its first-ever blackout in history.

Overall, about 50% of Ukraine's energy infrastructure has been damaged. The Kyiv School of Economics Research Center estimated the direct damage to Ukraine's energy infrastructure at $8.8 billion as of June 2023. The situation needs to be considered in a holistic manner, as solar energy is part of the United Energy System of Ukraine.

The war is having a significant negative impact on Ukrainian solar energy. Specifically, 14% of industrial solar power plants (SPPs) have been damaged. Additionally, over 500 MW of installed capacity of SPPs is located in the occupied territories.

These are 62 industrial solar power plants, not counting home solar power plants. Some of these SPPs are forced to operate in parallel with the Russian power grid, i.e. not for Ukraine. There are about 5,500 MW of industrial solar power plants and about 1,200 MW of small domestic solar power plants on the controlled territory of Ukraine, which are also severely damaged by the hostilities.

As of the beginning of 2022, there were approximately 45,000 prosumers (owners of residential solar power plants, dSPPs). According to our Association's estimates, this number has now increased to almost 53,000. Therefore, over two years, the number of prosumers has grown by 8,000 residential solar power plants.

Based on our estimates, of the 500 MW total solar capacity built in 2023, up to 90% of them do not exceed 1 MW each, and they were primarily commissioned for self-consumption. In 2023, no less than 40% of new solar power plants were equipped with energy storage systems. However, assessing the total and specific capacity of energy storage systems installed on individual solar power plants is currently challenging.

Major challenges and risks for the solar energy sector in Ukraine.

The accumulation of total receivables in the electricity market has become a serious problem for the entire Ukrainian energy sector.

This is caused by military actions, the use of non-market mechanisms for determining the price of electricity for the population, a decrease in consumer solvency, and delays in settlements for the "green" tariff.

The solar energy sector is significantly affected by the indebtedness of the state enterprise "Guaranteed Buyer" to industrial producers of renewable energy under the "green" tariff. The overall payment level of the state enterprise for the year 2022 amounted to 55.3% of the amount stipulated by Ukrainian legislation.

This is caused by military actions, the use of non-market mechanisms for the formation of electricity prices for the population, a decrease in the solvency of consumers and delays in payments under the "green" tariff.

As of the results of the first nine months of 2023, the payment level stands at 52.3%

By the end of September 2023, the total debt of the company "Guaranteed Buyer" to renewable energy producers exceeded 35 billion UAH. Owners of residential solar power plants were paid only about 36% of the amount stipulated by Ukrainian legislation.
According to the latest statistics from the state enterprise "Guaranteed Buyer," the largest share of purchased electrical energy is attributed to solar energy, accounting for 73.7%. From January 1, 2023, to October 25, only 52.6% of the total outstanding amount has been paid.

The development potential is further complicated by a complex and highly formalized procedure for grid connection and increasing the capacity of power installations.

In addition to the above, the difficulties are exacerbated by the existing damage to equipment caused by the hostilities. This, in turn, reduces the amount of electricity produced by SPPs and contributes to the growth of debt, including to foreign investors who have invested in Ukraine's "green" energy sector.

Near-term goals and strategic development of solar energy

The Institute of Renewable Energy of the National Academy of Sciences of Ukraine estimates the overall capacity potential of all renewable energy sources in Ukraine to be approximately 874 GW.

According to the Energy Strategy of Ukraine, the plan is to build 94 GW of solar power stations by 2050.

Objectives:

The full integration of Ukraine's energy sector into the energy system of the EU and the Energy Community is the highest priority task for all stakeholders in our country.
The development of distributed generation based primarily on «green» energy is a strategic priority. This is aimed at ensuring the stability, reliability, and, from the perspective, of the environmental sustainability of Ukraine's energy sector. The government of Ukraine has developed a State Target Economic Program to stimulate the development of distributed generation of electric power from renewable energy sources until 2030.
The implementation of guarantees of origin for electricity generated from renewable energy sources is a powerful tool for the development of 'green' energy and, overall, the economy of Ukraine. The relevant law has been adopted by the Parliament of Ukraine. The Parliament is developing subordinate legislation for the implementation of guarantees of origin. The adoption of secondary legislation will facilitate the introduction of an effective mechanism for the issuance, circulation, and redemption of guarantees of origin for electricity produced from renewable energy sources. Recognition of Ukrainian guarantees of origin in EU countries is crucial. Further synchronization of the Ukrainian registry with the registries of guarantees of origin for electricity in the EU will contribute to Ukraine's European integration processes.

The Association of Solar Energy of Ukraine's vision of ways to solve problems and achieve goals

Achieving the set goals will help:

Complete transition to market-based mechanisms for electricity pricing across all market segments.
Full synchronization of Ukrainian energy legislation with corresponding EU regulatory acts.
Implementation of targeted subsidies to compensate for the cost of electricity for socially vulnerable segments of the population.
Addressing non-payment issues through offsets and other financial instruments. This will also be facilitated by establishing an economically justified tariff for services provided by the national energy company "Ukrenergo," which partially offsets the "green" tariff.
Providing real opportunities for solar power stations to export electricity to the European market.
Introduction by the state regulator (NCSREU) of more effective incentives for distribution system operators to incentivize them to increase the opportunities for connecting solar power stations to the grid.
Reducing the monopolistic tendencies of distribution system operators.
Maximizing support for the development of ancillary services markets.
Utilizing the Cable Pooling tool, where solar and wind power stations, batteries, etc., are jointly connected to the power grid at one point. This allows for more efficient use of grid connection capacity, potentially reducing costs, and increasing the amount of renewable energy that can be produced and delivered to consumers.
Recovery of occupied territories. Implementing a mechanism for financial compensation for damages incurred and ensuring solar power stations against damage during military actions.

Also, the development of solar generation requires:

Simplify access to preferential and grant financing for households, small and medium-sized businesses interested in utilizing solar energy for their own needs.
Settle debts for the "green" tariff with solar power stations, thus restoring trustful relations between investors and the Ukrainian state.
Create favorable conditions for the development of energy cooperatives that will install solar panels along with battery storage.
Streamline grid connections for various nonprofit citizen associations (cooperatives, homeowners' associations).
Implement incentive programs for those installing rooftop solar power stations.
Ensure a systematic approach to integrating distributed generation into the country's unified energy system.
Introduce partial or, in some cases, full funding from local and state budgets to install rooftop solar power stations with batteries at critical and social infrastructure sites.
Create all necessary conditions for industrial solar power stations to have the option to exit the balancing group of the State Enterprise "Guaranteed Buyer" and further sell electricity on the open market.
The National Regulator (NCSREU) needs to develop and adopt bylaws to support the recently passed law of Ukraine "On Amendments to Some Laws of Ukraine Regarding the Restoration and 'Green' Transformation of the Energy System of Ukraine" No. 3220.