Alternative energy regulation in Ukraine – an inside view

Since April 2009, Ukraine has made efforts to financially stimulate the generation of electricity from alternative sources of energy. Such stimulation has resulted in, first of all, legislative provision for a feed-in tariff (FiT), i.e., the guaranteed obligation of the state to purchase ‘green’ energy from its producers, and also in the establishment of a significant number of tax benefits for producers of alternative energy.

For several years FiTs in Ukraine for electricity produced by ground-mounted solar power plants were the highest in the world, but this was not always economically justified. Following significant changes in the FiT calculation procedure (which were introduced in June 2015), there are prospects that the amount of state aid and the conditions for such aid will not be changed for at least the next few years.

Until 2015 the producers of ‘green’ energy enjoyed more tax benefits than they do now. Amendments made to Ukraine’s Tax Code in late 2014 cancelled tax privileges concerning income and land taxation for producers of electricity from alternative energy sources.

As of today, the alternative energy sector remains attractive for investors despite certain peculiarities of financing such projects in Ukraine, the cancellation of some tax benefits and a decrease in the FiT amount. There is also interest in this sector on the part of communal enterprises, which aim to sort out problems with landfills and wastewater treatment plants or optimize street lighting in cities. So how much could be earned through ‘green’ energy?

As of 16 July 2015, there is a new procedure for calculating the FiT, i.e., the special tariff for the purchase of electricity generated from alternative energy sources (except for blast furnaces and coke gas, and hydropower plants with a capacity of up to 10 MW). In addition, the possibility of making money from the production of electricity from alternative energy sources might be employed by both legal entities (industrial plants) and households. The latter may now be equipped not only with solar power plants, but also with wind turbines with a capacity of up to 30 kW (not exceeding the capacity allowed under the agreement on electricity use).

The new procedure for FiT calculation was established by the Law of Ukraine “On changes to certain acts of Ukraine in relation to provision of competitive conditions of electricity generation from alternative energy sources” dated 4 June 2015, which amended the Law of Ukraine “On electricity”. It is worth mentioning that the FiT for electricity generated at plants commissioned during previous years will continue to be applicable in the amount which was specified for each type of energy object.

The FiT is fixed in euros until 2030, and its amount is specified by multiplication of the retail tariff for consumers of the second voltage type as of January 2009 (UAH 0.5846, at that time €0.05385) by the FiT coefficient for the relevant type of alternative energy. However, now the National Commission for State Energy and Public Utilities Regulation will quarterly (formerly monthly) convert the FiT into national currency on the basis of the average official currency rate of the National Bank of Ukraine. All generated electricity, except for volumes for personal needs, will be paid under the FiT.

Another new development was introduction of the FiT for electricity generated from geothermal energy. Ukraine’s wholesale electricity market is obliged to purchase such “green” energy under the FiT and to make full payment for the cost of electricity, regardless of the installed capacity or volume of supply.

The amount of the FiT depends on the commissioning date of the electricity generation facility, including phase of construction of the power station (launching complex) that produces electricity from alternative energy sources. The certificate issued by the authorized state construction body, which certifies compliance of the constructed object with the project documentation and its operational readiness (for objects of categories IV and V of difficulty), or the registered declaration on operational readiness of the constructed object (for objects of categories I-III of difficulty) serve as confirmation of the fact and date of commission.

Starting from July 2015, the FiT amount of for industrial solar power plants was decreased. This decrease took place due to cancellation of the tariff coefficient (1.8) applied to the peak period.

The FiT for electricity generated from wind power remained unchanged and depends on the single unit capacity of the wind turbine.

The FiT for electricity generated from biogas and biomass was increased. In addition, biomass was legally defined as a non-excavated biologically renewable substance of organic origin, which is capable of biological decomposition, such as waste products, fishery, forest and agriculture (crop and livestock) residue, and residue from technologically connected industrial areas, as well as components of industrial or domestic waste capable of biological decomposition.

As the FiT coefficient has increased, the FiT for electricity generated by hydropower plants is now significantly higher.

The feed-in tariff is as follows (in euros):


Capacity (kW)

à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  à‚  Commission date





2017 ” à‚ à‚ à‚ à‚ 2019

2020 ” 2024

2025 ” 2029

Ground-mounted solar power plant







Rooftop solar power plant







Wind turbine

























Hydro plant















Geothermal energy





Solar power for private household







Wind turbine for private household





If within a power generation installation (including commissioned power stations and launching complexes) that uses alternative sources of energy there are several coefficients (and, respectively, different amounts) of FiT applied, special commercial accounting for each phase of construction (launching complex) and/or station shall be established.

The mandatory local content requirement (share of components of Ukrainian origin used during construction of the power generation facility) was cancelled. As of now, the use of equipment of Ukrainian origin by investors will be stimulated by the relevant premium to the FiT (throughout all term of its validity), if the generation facilities (phases of construction, launching complexes) are commissioned between 1 July 2015 and 31 December 2024. However, such premium to the FiT is not applicable to power generation by private households.

If equipment of Ukrainian origin is used at least on the level of 30%, the premium to the FiT will be 5%. If equipment of Ukrainian origin is used at least on the level of 50%, the premium to the FiT will be 10%.

On 26 February 2016, the procedure for determining the level of use of Ukrainian-made equipment in power generation facilities using alternative sources of energy and establishment of the relevant FiT premium came into effect. Ukrainian origin of equipment shall be confirmed by the appropriate certificate on Ukrainian origin issued by the Ukrainian Chamber of Commerce.

The level of use of equipment of Ukrainian origin in power plants that generate electricity from alternative energy sources is defined as the sum of respective percentages of specific items of equipment. Thus, for blades and towers, this indicator is established at the rate of 30%, for gondolas and main frames at 20%. By using solar photovoltaic (PV) modules of Ukrainian origin, one may expect a FiT premium of 5%, as the specific percentage for PV modules is 40%; for mounting systems for PV modules, inverter equipment, energy accumulation and tracking the percentage is 15%. The Law provides a list of equipment for each type of alternative energy source that qualifies for the FiT premium.

Pursuant to Article 197.16 of the Tax Code of Ukraine, no VAT is applicable to transactions on import to the territory of Ukraine of:

  • equipment which is functioning on the basis of alternative energy sources; energy saving equipment and materials; means of measuring, control and management of energy resources; or equipment and materials for production of alternative types of fuels or electricity from renewable energy sources;
  • materials, equipment or components for manufacturing equipment which function on the basis of renewable energy sources; raw materials, equipment and components for production of alternative types of fuels or electricity from renewable energy sources; energy saving equipment and materials; products whose operation provides saving and rational use of energy resources; or means of measuring, control and management of energy resources.

Pursuant to Article 282 of the Customs Code of Ukraine, the abovementioned goods are exempt from import and export duties. However, such goods are exempt from “import” VAT and import/export duty only if the taxpayer uses them for own production, and if no identical goods with the same qualities are produced in Ukraine.

It is worth mentioning that the list of such goods with specification of codes under the Ukrainian Classification of Foreign Economic Activity Products should be established by the Cabinet of Ministers of Ukraine. However, as of today such a list is not approved and, as a result, it is impossible to apply this tax benefit until the relevant resolution is adopted by the Cabinet of Ministers of Ukraine.

Transactions concerning sale of electricity generated by qualified cogeneration units and/or from renewable energy sources are not subject to excise tax pursuant to Article 213.2.8 of the Tax Code of Ukraine.

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