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Dmytro Nechyporenko: "Lowering energy bills by the businesses is a key trend of the post-green tariff period in Ukraine"

Dmytro Nechyporenko, Business Development Director, VOLTAGE

1 січ. 2021 р.

Dmytro Nechyporenko: "Lowering energy bills by the businesses is a key trend of the post-green tariff period in Ukraine"

Quarantine reduction of electricity consumption, inconsistent authorities, administrative interventions, economic imbalance in the energy sector, payments of the State Enterprise "Guaranteed buyer” to renewable producers at the level of 5-6% are the reasons for the current energy crisis, which is reformatting the energy sector and, in particular, the renewable energy segment, literally before our eyes. How will the development of this segment, which is still considered one of the most promising global sectors of the economy, continue? What may be its direction in Ukraine? Dmytro Nechyporenko, Director for Business Development and Strategy at Voltage Group, shares his assessments of the situation and prospects with GetMarket.

- Already, many members of the renewable energy market see an actual suspension of the renewable sector with the green tariff in Ukraine. For example, one of the latest statements belongs to the authoritative Northern Environmental Finance Corporation (NEFCO), which confirmed the threat of several influential foreign investors leaving the Ukrainian market and the desire to protect their investment interest in the international courts. In this context, is there a green light for developing Ukrainian renewable energy in the "post-green tariff” period?

- The renewable energy market is developing and will continue to grow. This is a global trend, which is an irreversible process in the face of the destructive consequences of climate change. Even with the coronavirus crisis, the expansion of solar, wind and hydropower is expected to increase global renewable electricity volumes by 5% in 2020, according to the latest report from the International Energy Agency (IEA). At the same time, the share of renewable energy sources in global electricity production increased to 28% in Q1 2020 compared to 26% in Q1 2019. There is progress in a global alternative generation, although it has slowed down due to the global economic crisis caused by covid-19.

If we talk about Ukraine, the crisis that has developed in the energy sector and in the RES segment is more technical. I think that in a year or two, gradually changing towards the system of auctions purchasing quotas for the new generation, the market will "revive" and will move forward. Again, this is inevitable for the European state, which, together with other countries, officially supported the transition to safe energy in the face of climate threats.

- And how will market participants adapt during this stagnant year?

- Today, the market responds adequately to all turbulent changes in the energy sector. Our company, for example, is building new strategies for interacting with industrial clients. They (agricultural holdings, manufacturing enterprises, business centers, gas stations, business in general) are already beginning to realize that “green energy” is not only the sale of electricity by a green tariff. It is also about business stability, an integral part of the uninterrupted production and sustainable development of companies through optimization of energy consumption and energy costs. We are talking about generating our electricity for our business's needs through the installation of our own commercial SPP. This direction is now in trend among EPC contractors and has excellent prospects for development.

- To what extent it is beneficial for businesses that no longer rely on green tariff revenues?

- The problem of high electricity costs at enterprises in Ukraine, which affects their profits, has not disappeared, and due to the inevitable rise in electricity prices, it is gaining an ever-increasing scale. Considering that at the end of June NKREKP adopted an increase in the tariff for the transmission of Ukrenergo by 2.1 times - up to 328 UAH / MWh, which already automatically increases the price of electricity for an industrial consumer, this issue will remain one of the key challenges for modern business. After all, ultimately the cost of electricity will be formed from the electricity tariff + the transmission tariff. And at the same time, according to pessimistic forecasts, transmission prices by the end of the year may double from what they are today.

In this context, the installation of the solar power plants will help to significantly save money and receive free electricity for the needs of your business. The main economic effect will arise from savings that were not spent on the purchase of electricity from the power supply company. In the project implementation scheme, there is no additional bureaucratic red tape and the emergence of additional "relations" with energy supply organizations. There is no need to receive such documents as technical conditions for connection, to conclude any additional contracts. In general, according to our calculations, such a station can reduce annual electricity consumption by 30-50%. The payback will be from 3.5 to 5 years. How you ask?

The cost of the project depends on the characteristics of the operations and power consumption of each enterprise. For example, the cost of implementing a project with a capacity of 108 kW peak is approximately UAH 1.5 million (depending on the choice of the equipment manufacturer and installation conditions). Provided (for example) that the consumer buys electricity from an external supplier at the 2nd class of electricity cost and distribution service, as well as at 100% consumption of generated electricity, the expected return on investment is on average 4 years (25% per year). Thus, the indicators of economic efficiency in the implementation of such station will be quite comparable with the sale of electricity at the green tariff. Suppose to all stages of project implementation (from analytical and preparatory to commissioning) we add not only technical assistance in obtaining loans, but also attracting customers to a number of partnership programs with financial institutions for a better economic result. In that case, this can become a profitable investment for industrial objects. Of the recent banking offers on the market for small solar power plants for businesses, we can single out the updated lending program from JSB Ukrgasbank - "Available loans 5-7-9%", simplifying the implementation of such projects for our clients.

- In connection with the reformatting of activities and more flexible adaptation to the market's needs, what do you have to change at the level of company management and by what criteria do you understand that the company and its team are developing and moving forward?

- A lot has to be changed. Since we are not only influenced by the pandemic, but also by the energy crisis, we are forced to adequately change our business model. In particular, we have detailed and clearly divided powers between operational, technical and administrative management. Separately, we singled out and "strengthened" the divisions that are engaged in the operation of existing solar power plants, of which we have built a lot over the past years, revised and improved the occupational safety policy... As for development... If a company does the same thing for a long time, this is not development for me. This is growth. Growth is the definition of volume. And development is something new. I believe that every year we must occupy a new segment and do certain "experiments". Any crisis provides opportunities for this. If we are able to do this, then the team is developing. I hope that the situation will improve, and we, with our business model and most importantly, the desire to develop and maintain clean energy in Ukraine, will be able to strategically deploy in critical regions of our state "to the fullest" and defend the right of the RES segment to fully develop in Ukraine at the level with other European states in the world.

This article author: Dmytro Nechyporenko

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