Is it worth investing in green energy

What has been happening in the field of renewable energy in Ukraine for the past five years is a reflection of the global trend. But if earlier investing in an “alternative” was a priority for large business, then recently representatives of SMEs have become interested in it. Leading market experts told about whether to invest in renewable energy sources, what to look for and what are the prospects.

Although Ukraine is not among the leaders in the development of green energy, Ukraine is not an outsider either. From January 2015 to 2019, the installed generation capacity increased by 400%: from 967 MW to almost 4 thousand MW. For comparison: over the past year, the generation of green energy in the world increased by only 8%. The level of investment on a global scale is decreasing, and not least because the cost of technology is decreasing. But developing countries, on the contrary, are increasing investment. Thanks to a number of legislative changes, investing in alternative energy began to interest a new layer of business - entrepreneurs.

“Compared with other sectors of the Ukrainian economy, the level of corruption in green energy is almost the lowest. This attracts investors, banks. Since 2009, when the green tariff was introduced, the state did not allow unreasonable non-payments on it. We very much hope that this trend will continue in the future, as it is the most important indicator of a healthy situation in the sector, ”explains Andrey Oleniuk, partner at the renewable energy practice at Everlegal Law Firm. - According to our experience, I can say: every foreign investor who has successfully implemented one - the so-called pilot - project in Ukraine, is looking for the next. And this means that, despite the negative aspects and risks, the positive ones still prevail, and with a competent approach, it makes sense to invest in the green energy business. ”

The representative of the investment company UDP Renevables Andrey Bantser talks about the profile of the "big" investor: "The Sun" successfully competed with bonds and real estate. In bonds - projected income, almost always sovereign risk, it was the same with the green tariff. In real estate - the predicted cash flow with a tenant or several tenants, rhythmic monthly payments. In solar energy, it is similar, however, unlike real estate, payments are fixed in foreign currency. ”

The investor believes that in the new reality (after the introduction of the auction system) everything will not be so sweet: “Risks are increasing, and profitability is decreasing. We are looking at areas that do not require state support, we are trying to find business models where an auction or a green tariff may not exist, and the investor will still earn money. ” However, it is a small business with “microenergy” that can just enter a niche and feel confident there. The green tariff will continue to apply to facilities with a capacity of up to 150 kW.

Maxim Sysoev, adviser to the international law firm Dentons, is convinced that the industry has prospects even after the end of the era of the green tariff. He says that as early as this year, changes are expected in the procedure for the purchase of electricity at the green tariff, which is regulated by the regulation of the NKREKU No. 63. The procedure for forming an arbitration fund to cover the costs of the Guaranteed Buyer and a number of other technical changes will be spelled out. The market expects changes to the contract of sale at the green tariff, a standard contract for the purchase of electricity at auctions will appear soon, the procedure for holding these auctions is being implemented - that is, clear rules for the game in the industry will be introduced.

More interesting forecasts for the future development of the market are provided by Maxim Sysoev: “We can expect that legislation on Energy Stores will be adopted in 2020, and this will become essential for solving the problem of balancing electricity, and it will also stimulate a new market segment - energy storage. We can expect tenders for capacity balancing, which will allow us to open a new direction of investment projects in the field of renewable energy. ”

The expert suggests that Ukraine in the coming years will be able to move on to what is being actively implemented in the West - direct agreements between a producer of energy from renewable sources and consumers. “This is what the industry needs to slowly prepare for right now. Perhaps it will be more interesting than auctions and a green tariff, ”the expert advises. In his opinion, another interesting area of the green energy business is Green Bonds. It is expected that by 2022 this type of activity will appear and will be distributed if appropriate legislation is adopted.

Yuri Podolyak, director of IKNET, a company directly involved in the development and implementation of projects of solar, wind, biogas plants, is also convinced that this is a promising market and needs to be developed. However, he notes: a company of any scale that wants to launch a renewable energy project needs to work it through very carefully. “This business seems very simple, but it is only at first glance. It has a number of pitfalls, and it is easy for an inexperienced entrepreneur to burn out. Therefore, before planning, and most importantly, investing in a project, it is necessary to conduct its legal and technical audit. Make sure that the location is chosen successfully, that the capacity of the electric networks will allow you to connect a new facility, and the land plot meets the requirements of the law. Find experienced contractors, suppliers of high-quality and efficient equipment that have a good reputation, and not just cheap. Get the necessary permissions, sign contracts with the Guaranteed Buyer ”...

Indeed, both large investors and entrepreneurs, when entering the energy business, often encounter a number of problems that ultimately absorb the initiative. To reduce such unsuccessful undertakings, an interesting initiative has recently been launched in Ukraine. Leading legal and consulting companies providing services for the implementation of renewable energy projects have united around the GetMarket platform (http://getmarket.com.ua).

This program, on the one hand, aims to attract investment in such projects. On the other hand, investors (entrepreneurs, medium and large businesses - it doesn’t matter) can use it to find trusted, reliable contractors for various types of work related to the launch of the energy business. From writing a business plan and design to technical implementation, purchasing equipment, and, in fact, connecting to a network and receiving a tariff. Consequently, it can help bypass the traps and thereby make the project a successful competitor to the classic investments that Andrei Bantser spoke about.

Alexander Baskov, Head of Sustainability at Baker Tilly, gives his conclusion and such advice to entrepreneurs: “The electricity market will develop, in particular the green energy market. Small and medium-sized businesses should now think not only about investments in this direction, but also about their electricity consumption. Especially production and other energy-intensive types of entrepreneurship. Indeed, the peak price and the price of balancing can vary 3-4 times. If you ignore the new realities, it is a habit to consume electricity as needed at any time, that is, without forecasting, adjusting to the hourly cost - payment bills will grow 1.5-2 times. Therefore, one of the solutions could be the establishment of a roofing solar power station and the sale of electricity at a green tariff. The cost of launching the station can vary from 10 thousand to 100 thousand dollars, which is the lifting costs for small and medium-sized businesses. Such investments will pay off fairly quickly, will remove the risks of high electricity prices, and also bring additional profit to the business. ”