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Alternative energy market heats up in Ukraine

November 4, 2009

A Bill adopted in April to stimulate the production of power from alternative sources has kicked in. On Friday, Ukrenergy Holding announced that it was building a small hydroelectric station (HES), although such projects were not unheard-of during soviet times. Earlier, the Donbas Thermo-Electrical Company (DTEC) announced that it was constructing a wind-powered electrical station. However, experts say that rates for electricity from alternative sources are nearly twice as high as for power from traditional sources.

Korlea Ukrhydropower, a subsidiary of Ukrenergy Holding (52% owned by Ukrinterenergo, and 48% by Korlea Invest Holding AG, which belongs to Vasyl Danyliv), will build a small hydroelectric station (HES) on the Teresva River in Zakarpattia Oblast. The Cabinet of Ministers has already allocated the company a piece of land covering 17.8 hectares, according to Friday’s Resolution #1234. The total capacity of the HES will be 24 MW (6 MW from each of the substations) with an annual potential volume of up to 100 million kWhs, says Korlea Invest. The cost of the project will be over EUR 110 million. Construction is expected to begin at the end of this year and to be completed in 2013.

When the Ukrenergy Holding project is completed, it will be the first “mini” HES built in Ukraine since the country became independent, said Serhiy Tytenko, a member of the Verkhovna Rada’s Fuel and Energy Complex Committee. “In the mid-1960’s, there were some 1,600 mini-HESs in Ukraine, but today only 10 of them are still operating,” he said. Power Consulting Group President Oleksiy Sheberstov says that the reduction in the number of small HESs happened after a number of large stations and atomic energy stations were built, as the minis could not compete with them.

Still, once “green” rates began to kick in in Ukraine, it became more attractive to produce power from alternative sources. The Law “On providing incentives for the use of alternative sources of energy” adopted in April allows companies that generate power from wind, sun, water and biomass to sell their electricity at a higher price than power generated by traditional means. Rats for hydroelectric power are UAN 1.05/kWh for Class II users, whereas the rate for thermoelectric power is only UAH 0.58/kWh.

Ministry of Fuel and Energy spokesman Oleh Buhayev says that a number of alternative energy projects are currently being reviewed in Crimea and Zakarpattia. For instance, DTEC and Luhansk Power Union have announced the construction of a wind power generating station. DTEC explained that their goal is for 25% of the company’s total electricity to be wind-generated.

Although alternative energy has more profitable rates, because of the smaller production volumes, compared to heat generation, similar projects are not very common in Ukraine yet. According to Mr. Tytenko, the return on investment for hydro-electricity is at least 7 years, while the average time for projects using thermal power to turn a profit is around 5 years. Ukrenergy Holding could try to have a shorter ROI by supplying power to Western Europe.

“Power capacities over 20 MW are supposed to be transmitted to Energorynok, [Ukraine’s state-owned wholesale power exchange] but the company could get around this requirement by registering each of its four HESs as a separate legal entity. Then they will be able to transmit power to consumers directly,” noted Mr. Sheberstov.

Tags: alternative energy