2020 has been a year of crisis for Ukraine’s energy sector. A direct consequence of this has seen mounting debts and non-payment between market actors destabilize the sector. Renewable energy producers have particularly been affected by the latter as the non-payment of the state-guaranteed feed-in tariff – which now amounts to 20 bln UAH (about $750 million) – threatened to stymy the growth of the industry, writes Andrian Prokip PhD, senior associate at the Kennan Institute.
The national government and market participants, foreign investors and international actors, including from the Energy Community, have been negotiating for months in a bid to reach a compromise. Finally, based on a signed memorandum between the key market players on 15 June 2020, a draft bill amending the renewables stimulating legislation No. 3658 has now been put before parliament. However, there is a risk that earlier agreements could be reneged which in turn could threaten the future of the Ukrainian renewables sector and the country’s reputation as a reliable investment.
Ukraine first established a feed-in tariff to support renewables’ development in 2008. Technical restrictions were later introduced which excluded all but a short list of businessmen from entering the market. It appeared that only oligarchs were benefiting from these restrictions. Following the Revolution of Dignity in the winter of 2013–2014, parliament amended the legislation in order to open the renewable electricity to all willing market participants.
Yet, change had also been occurring on the supply side. As renewable technologies were cheapening and renewable capacities in the country were enhancing, it became clear that the framework devised to support the sector should once again be improved. It had already been evident a number of years ago that the unchanged support system for renewables would eventually cause both a payment crisis and technical difficulties in the future. However, the government inexplicably delayed making the amendments to the regulation.
This passivity has contributed to the serious disparity seen among different renewable capacities in recent years. According to Ukraine’s National Action Plan for Renewables, the country earmarked the domestic generation of 2300 MW of solar capacity, 2280 of wind and 950 of biomass electricity capacities by the end of 2020. However, as of end of June 4593 MW of solar, 1064 of wind and only 171 of biomass capacities were installed.
The government should have had stronger overview on the implementation of the plan, however the absence of legislative levers to control the balance of capacities prevented remedial action from being taken. And now, solar power, the most expensive in terms of the feed-in tariff, has not only exceeded other renewables, but also the planned benchmark for itself. In addition to the extra financial burden, this has also contributed to technical difficulties with balancing the energy system due to the so-called duck curve.
These factors coupled with the simultaneous overregulation of electricity market design and attempts to maintain extra low prices for households were significant contributors to the huge debts shadowing the market today.
Yet, investors and renewable energy producers continued to operate and invest in line with Ukrainian legal framework. Their established energy facilities benefit from the existing guarantee of the state to pay the feed-in tariff, which has placed the government in a troubling position.
If any potential decrease in the feed-in tariffs does not receive the total backing from investors who have already established their businesses, it may undermine the financial landscape for these companies and lead to a series of lawsuits against the state. In this scenario, the companies would win their cases and the state will be obligated to pay the affected parties an amount in line with the initial support model and additional fines. Spain, for example, has already experienced this and now has to pay compensation to the investors.
This is why the memorandum is so important. The draft law No. 3658, based on the MOU, makes provisions for a reduction to feed-in tariffs. Any further decrease may during parliamentary scrutiny and hearings face significant pushback from those who signed the memorandum. Beyond this an equally concerning issue persists, as some Ukrainian solar energy actors say they did not sign the memorandum and therefore do not agree with the draft legislation. On top of this, they are demanding a prolongation of two years to the stimulation period – until 2032.
The government is walking a tightrope and must consider very carefully various future scenarios. The development of the renewables sector is a strategic goal for many countries around the world, and is of particular importance to the EU, into which, of course, Ukraine aims to integrate economically and join in future.
It is of the most importance then for the members of the Ukrainian parliament not to destabilize the market further by making negative amendments to the draft bill and instead listen to all voices in the market. Failure to agree on a draft compromise will not only accelerate the denigration of the sector into ground, but it will also undermine investors’ trust in the Ukrainian energy sector, which requires huge investments to modernize its depreciated assets.
Andrian Prokip, PhD
Senior Associate at the Kennan Institute
Energy Expert at the Ukrainian Institute for the Future
Member of The Younger Generation Leaders Network on Euro-Atlantic Security, European Leaderdship Network
Commission approves €400 million Danish aid scheme to support production of electricity from renewable energy sources
The European Commission has approved, under EU state aid rules, a Danish aid scheme to support electricity production from renewable sources. The measure will help Denmark reach its renewable energy targets without unduly distorting competition and will contribute to the European objective of achieving climate neutrality by 2050. Denmark notified the Commission of its intention to introduce a new scheme to support electricity produced from renewable energy sources, namely onshore wind turbines, offshore wind turbines, wave power plants, hydroelectric power plants and solar PV.
The aid will be awarded through a competitive tendering procedure organised in 2021-2024 and will take the form of a two-way contract-for-difference premium.. The measure has a total maximum budget of approximately €400 million (DKK 3 billion). The scheme is open until 2024 and aid can be paid out for a maximum of 20 years after the renewable electricity is connected to the grid. The Commission assessed the measure under EU state aid rules, in particular the 2014 Guidelines on state aid for environmental protection and energy.
On this basis, the Commission concluded that the Danish scheme is in line with EU state aid rules, as it will facilitate the development of renewable electricity production from various technologies in Denmark and reduce greenhouse gas emissions, in line with the European Green Deal and without unduly distorting competition.
Executive Vice President Margrethe Vestager, in charge of competition policy (pictured), said: “This Danish scheme will contribute to substantial reductions in greenhouse emissions, supporting the objectives of the Green Deal. It will provide important support to a wide range of technologies generating renewable electricity, in line with EU rules. The wide eligibility criteria and the selection of the beneficiaries through a competitive bidding process will ensure the best value for taxpayers money and will minimise possible distortions of competition.”
Commission approves prolongation of two Greek electricity measures
The European Commission has approved, under EU state aid rules, the prolongation for a limited period of two Greek measures, a flexibility mechanism and an interruptability scheme, to support the transition to the new electricity market design. Under the flexibility mechanism, which was initially approved by the Commission on 30 July 2018 (SA 50152), flexible power capacity providers such as gas-fired power plants, flexible hydro plants and demand response operators can obtain a payment for being available to generate electricity or, in the case of demand response operators, for being ready to reduce their electricity consumption.
This flexibility in power capacity will allow the Greek transmission system operator (TSO) to cope with the variability in electricity production and consumption. Under the interruptibility scheme, which was initially approved by the Commission on 07 February 2018 (SA. 48780), Greece compensates large energy consumers for agreeing to be voluntarily disconnected from the network when security of electricity supply is at risk, as happened for example during the gas crisis in the cold winter of December 2016/January 2017.
Greece notified to the Commission its intention to prolong the flexibility mechanism until March 2021, and the interruptibility scheme until September 2021. The Commission assessed the two measures under the Guidelines on state aid for environmental protection and energy 2014-2020.
The Commission found that the prolongation of the two measures is necessary for a limited period of time, in view of the on-going reforms in the Greek electricity market. It also found that the aid is proportionate because the remuneration of beneficiaries is fixed through a competitive auction, and thus avoids overcompensation. On this basis, the Commission approved the measures under EU state aid rules. More information will be available on the Commission's competition website, in the public case register, under the case number SA.56102 and SA.56103.
EPO-IEA study: Rapid rise in battery innovation playing key role in clean energy transition
Electric vehicles now main drivers of battery innovation
Advances in rechargeable lithium-ion batteries focus of most new inventions
Asian countries have strong lead in global battery technology race
Accelerated innovation needed to drive forward Europe’s clean energy transition in order to meet the aim of the European Green Deal
Improving the capacity to store electricity is playing a key role in the transition to clean energy technologies. Between 2005 and 2018, patenting activity in batteries and other electricity storage technologies grew at an average annual rate of 14% worldwide, four times faster than the average of all technology fields, according to a joint study published today by the European Patent Office (EPO) and the International Energy Agency (IEA).
The report, Innovation in batteries and electricity storage – a global analysis based on patent data, shows that batteries account for nearly 90% of all patenting activity in the area of electricity storage, and that the rise in innovation is chiefly driven by advances in rechargeable lithium-ion batteries used in consumer electronic devices and electric cars. Electric mobility in particular is fostering the development of new lithium-ion chemistries aimed at improving power output, durability, charge/discharge speed and recyclability. Technological progress is also being fuelled by the need to integrate larger quantities of renewable energy such as wind and solar power into electricity networks.
The study also shows that Japan and South Korea have established a strong lead in battery technology globally, and that technical progress and mass production in an increasingly mature industry have led to a significant drop in battery prices in recent years – by nearly 90% since 2010 in the case of Li-ion batteries for electric vehicles, and by around two-thirds over the same period for stationary applications, including electricity grid management.
Developing better and cheaper electricity storage is a major challenge for the future: According to the IEA’s Sustainable Development Scenario, for the world to meet climate and sustainable energy goals, close to 10 000 gigawatt-hours of batteries and other forms of energy storage will be required worldwide by 2040 – 50 times the size of the current market. Effective storage solutions are needed to drive forward Europe’s clean energy transition in order to meet the aim of the European Green Deal: to make the continent climate-neutral by 2050.
“Electricity storage technology is critical when it comes to meeting the demand for electric mobility and achieving the shift towards renewable energy that is needed if we are to mitigate climate change,” said EPO President António Campinos. “The rapid and sustained rise in electricity storage innovation shows that inventors and businesses are tackling the challenge of the energy transition. The patent data reveals that while Asia has a strong lead in this strategic industry, the US and Europe can count on a rich innovation ecosystem, including a large number of SMEs and research institutions, to help them stay in the race for the next generation of batteries.”
“IEA projections make it clear that energy storage will need to grow exponentially in the coming decades to enable the world to meet international climate and sustainable energy goals. Accelerated innovation will be essential for achieving that growth,” said IEA Executive Director Fatih Birol. “By combining the complementary strengths of the IEA and the EPO, this report sheds new light on today’s innovation trends to help governments and businesses make smart decisions for our energy future.”
Rise of electric vehicles boosting Li-ion innovation
The report, which presents the major trends in electricity storage innovation between 2000 and 2018, measured in terms of international patent families, finds that lithium-ion (Li-ion) technology, dominant in portable electronics and electric vehicles, has fuelled most of the battery innovation since 2005. In 2018, advances in Li-ion cells were responsible for 45% of patenting activity related to battery cells, compared with just 7% for cells based on other chemistries.
In 2011, electric vehicles overtook consumer electronics as the biggest growth driver for Li-ion battery-related (See graph: Number of IPFs related to applications for battery packs). This trend highlights the ongoing work of the automobile industry to decarbonize and develop alternative clean energy technologies. Ensuring batteries in electric vehicles are effective and reliable is crucial to encouraging their take-up by consumers post-2020, after which stricter EU-wide emissions targets will apply to fossil fuel vehicles.
The share of inventions from European countries is relatively modest in all fields of Li-ion technologies, but it is twice as high in emerging fields compared with more established ones, for example generating 11% of inventions in both Lithium iron phosphate (LFP) and Lithium nickel cobalt aluminium oxide (NCA), which are both seen as promising alternatives to current Li-ion chemistries.
Improvements to battery packs for electric cars have also produced positive spill-over effects on stationary applications, including electricity grid management.
The report also shows that patenting activity in the manufacturing of battery cells and cell-related engineering developments has grown threefold over the last decade. These two fields together accounted for nearly half (47%) of all patenting activity related to battery cells in 2018, a clear indication of the maturity of the industry and the strategic importance of developing efficient mass production.
In addition, other storage technologies, such as supercapacitors and redox flow batteries, are also rapidly emerging with the potential to address some of the weaknesses of Li-ion batteries.
Asian companies in the lead
The study shows that Japan has a clear lead in the global race for battery technology, with a 40.9% share of international patent families in battery technology in 2000-2018, followed by South Korea with a 17.4% share, Europe (15.4%), the US (14.5%) and China (6.9%). Asian companies account for nine of the top ten global applicants for patents related to batteries, and for two-thirds of the top 25, which also includes six firms from Europe and two from the US. The top five applicants (Samsung, Panasonic, LG, Toyota and Bosch) together generated over a quarter of all IPFs between 2000 and 2018. In Europe, innovation in electricity storage is dominated by Germany, which alone accounts for more than half of international patent families in battery technologies originating from Europe (See graph: Geographic origins of European IPFs in battery technology, 2000-2018).
While innovation in battery technology is still largely concentrated in a limited group of very large companies, in the US and Europe, smaller companies, universities and public research organizations also play a significant role. For the US, SMEs account for 34.4% and universities/research organizations for 13.8% of IPFs filed. For Europe, the figures are 15.9% and 12.7% respectively, contrasting with Japan (3.4%/3.5%) and the Republic of Korea (4.6%/9.0%).
Notes to the editor
About international patent families
The patent analysis in this report is based on the concept of international patent families (IPFs). Each IPF represents a unique invention and includes patent applications filed and published in at least two countries or filed with and published by a regional patent office, as well as published international patent applications. IPFs represent inventions deemed important enough by the inventor to seek protection internationally, and only a relatively small percentage of applications actually meet this threshold. This concept can therefore be used as a sound basis for comparing international innovation activities, as it reduces the biases that may arise when comparing patent applications across different national patent offices.
About the EPO
With nearly 7 000 staff, the European Patent Office (EPO) is one of the largest public service institutions in Europe. Headquartered in Munich with offices in Berlin, Brussels, The Hague and Vienna, the EPO was founded with the aim of strengthening co-operation on patents in Europe. Through the EPO's centralised patent granting procedure, inventors are able to obtain high-quality patent protection in up to 44 countries, covering a market of some 700 million people. The EPO is also the world's leading authority in patent information and patent searching.
About the International Energy Agency
The International Energy Agency (IEA) is at the heart of global dialogue on energy, providing authoritative analysis, data, policy recommendations, and real-world solutions to help countries bring about secure and sustainable energy for all. Taking an all-fuels, all-technologies approach, the IEA advocates policies that enhance the reliability, affordability and sustainability of energy. The IEA is supporting clean energy transitions all over the world in order to help achieve global sustainability goals.
Luis Berenguer Giménez
Principal Director Communication / Spokesperson
Tel.: +49 89 2399 1203
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