The increase in electricity transmission tariffs will hit the transport sector in Ukraine.

The Federation of Transport Employers of the country warns about this.

In an address to the chairman of the National Commission (NKREKP), which regulates the utilities sector, the federation said that the increase in tariffs in 2021 would lead to "unreasonable costs for transport companies."

The costs will amount to about half a billion hryvnia per year (about € 15 million). 

The Commission was established in 2014 by the President of Ukraine and is accountable to the Verkhovna Rada.

On November 11, NKREKP adopted a draft resolution, according to which in 2021 the tariff of NEC Ukrenergo for electricity transmission may amount to UAH 309.8 (€ 9.3) per MWh.

These rates are 28.9% higher than the current tariff, which is UAH 240.23 (€ 7.2) / MWh.

The increase in tariffs will start in December, at the end of 2020 the cost will be UAH 312.76 (€ 9.4) / MWh.

"The Federation of Transport Employers of Ukraine insists on the inadmissibility of accepting the proposed tariff level," the organization said in a public appeal.

  • Train of JSC "Ukrzaliznytsia"

  • Reuters

  • © Gleb Garanich

It is noted that according to the results of the first half of 2020, the traffic volumes in Ukraine fell by 18.2% compared to the same period in 2019.

Passenger traffic decreased by 30%, which led to losses for JSC Ukrzaliznytsia.

In its appeal, the Federation recalled that it was the state that gave obligations to investors and manufacturers when introducing a “green” tariff for alternative electricity.

Therefore, it is the state that must pay for these obligations.

The Federation referred to the law 810-IX, according to which the state must repay the debt of the State Enterprise "Guaranteed Buyer" by issuing five-year domestic loan bonds.

This, as well as the payment from the budget of debts on alternative electricity, will allow setting the tariff for 2021 at UAH 209 (€ 6.2) / MWh, according to representatives of the transport industry.

Industry under attack

The "green" tariff in the energy sector sets higher prices for electricity generated from renewable sources.

These tariffs are set by the government to stimulate green energy.

In Ukraine, the "green" tariff was established in 2009, the program is designed until 2030.

It applies to all solar, wind and biogas power plants, as well as mini hydroelectric power plants.

The average cost of renewable electricity is noticeably higher than the price of “traditional” electricity.

Thus, the electricity generated by the wind costs about € 0.09 per kWh, solar - € 0.13.

For comparison, the price for electricity generated by the traditional method in Ukraine is about € 0.03 per kWh.

  • Botievo wind farm

  • © Wikimedia Commons

All green electricity from producers in Ukraine is purchased by the state trader, the Guaranteed Buyer SE.

The purchase is carried out at the “green” tariffs established by the state, then the electricity is resold at the average market prices.

The difference between the “green” tariff and market prices should be compensated by the resale of electricity at a low cost - generated at nuclear power plants and large hydroelectric power plants.

If this fails, the losses should be covered by the electricity transmission operator Ukrenergo by increasing its tariffs.

At the same time, Ukraine has the highest tariffs for electricity from renewable sources in Europe.

A source of RT at the Ministry of Energy and Coal Industry of Ukraine drew attention to this in his commentary.

“The government has long planned to reduce the“ green ”tariff, but Western partners opposed it.

Green energy is developing at an uncontrollable pace, and now it occupies 2% in the structure of the energy market.

But the cost of it is already 8% of the total cost of electricity.

All this is the result of a thoughtless policy that is often carried out in Ukraine, ”said a representative of the ministry.

The RT source in the Federation of Employers of Ukraine, in turn, believes that now the industrial industry will have to pay for the exorbitant cost of green energy for the country.

“Now they just want to plug the financial“ hole ”at the expense of the industry, which is already going through hard times.

So the current plan is, apparently, to ditch our own production for the sake of another loan, which still needs to be paid, "the interlocutor of RT is sure.

Experts share a similar point of view.

According to political scientist and economist Alexander Dudchak, corruption schemes are hidden behind the talk about the development of "green" energy in Ukraine.

"In Ukraine, tariffs are constantly growing ... Apparently, the development of an exorbitantly expensive green energy market for the Ukrainian market is simply designed to push Ukraine to increase the supply of energy resources from the United States and Europe," the expert said in an interview with RT.

At the same time, such a policy is capable of finishing off the Ukrainian industry, which will now have to buy electricity at inflated tariffs.

The head of the Ukrainian Analytical Center, Alexander Okhrimenko, said this in a commentary to RT.

“This rise in tariffs will be a painful blow to industry.

However, the Ukrainian authorities are apparently not interested in this, since they act in the interests of the beneficiaries of this scheme with the supply of green electricity, "the expert emphasized.

Foreign interest

In October 2020, the debt of the State Enterprise "Guaranteed Buyer" reached UAH 30 billion (about € 900 million).

Of these, about UAH 23.14 billion (about € 694 million) the company owes to Ukrainian producers of renewable energy, and UAH 6.9 billion (€ 207 million) - for electricity for the needs of the population before the companies Energoatom and Ukrhydroenergo.

The inability of a state trader to pay off renewable energy producers angered Kiev's foreign partners.

In mid-November, ambassadors of a number of countries sent a joint letter to the Ukrainian authorities demanding to resolve the issue of debts to suppliers of green electricity.

The appeal was signed by the ambassadors of Belgium, Canada, France, Germany, South Korea, Turkey, Denmark, the Netherlands, Norway, Sweden and Great Britain.

  • Solar power plant in the village of Ternovitsa, Yavoriv district, Lviv region

  • RIA News

The diplomats note that their countries have invested about € 2 billion in the development of renewable energy in Ukraine and called on Kiev to adhere to the memorandum of understanding dated June 10, 2020.

The document provides for the restructuring of "green" tariffs.

In addition, in accordance with the memorandum, the Rada adopted a law in the summer, according to which “green” tariffs were reduced, and the state undertook to determine a mechanism for compensating for the electricity that was not supplied by producers.

Foreign partners reminded Kiev of its promise to restore payment discipline on the part of the "Guaranteed Buyer" partly at the expense of the budget, as well as issuing debt bonds.

“Thus, we are very concerned that (the company)“ Guaranteed Buyer ”still does not fulfill its obligations to resume full and timely payments to renewable energy producers, as well as to start paying off the accumulated debt of SOEs by the end of 2020,” they said foreign diplomats.

At the end of October, representatives of the embassies of Canada, Norway and Lithuania threatened that Ukraine's failure to fulfill its obligations in the field of green energy would scare away other investors from the country.

Foreign diplomats stated this during the Energy Freedom discussion on the development of renewable energy sources in Ukraine.

According to Laura Pusinskaite, the energy attaché of the Lithuanian Embassy in Ukraine, if the Ukrainian government does not fulfill its obligations, the result will be many arbitration claims.

This situation with "green" investors will be a bad signal for other foreign companies, which will negatively affect the entire investment image of Ukraine abroad.

  • Meeting of the Verkhovna Rada

  • RIA News

According to Dudchak, now the Ukrainian economy is not in such a shape for the authorities to spend huge amounts of money on the development of green energy.

“At the current stage, it would be wiser for Ukraine to direct resources to the development of nuclear energy.

However, personal ambitions and the desire of the elites to enrich themselves lead to sad results, ”Dudchak added.

Alexander Okhrimenko adheres to a similar point of view.

“Ukraine introduced a“ green ”tariff at the wrong time, and also created a system to support renewable energy at the expense of other sectors of the national economy.

Now an increase in electricity tariffs is coming, although the business actively asked to postpone it.

However, the authorities prefer to fulfill the terms of their agreements with oligarchs and Western structures, ”the expert summed up.