Ukraine Wind Market Outlook 2012 by Ilko Iliev

T E K R A M D N I W E N UKRAI t 2 1 0 2 k o o l Ou

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UKRAINE WIND MARKET: OUTLOOK 2012

This market report offers an incisive and reliable overview of the wind sector of the country. With more than 151 MW installed cumulative capacity for 2011, Ukraine gained position on European wind energy market. It is expected Ukrainian wind market to double its cumulative installed capacity each year by the end of 2015. Top tier companies in wind turbines manufacturing like Vestas and Fuhrländer already opened production facilities in Ukraine. The country represents a stable investment environment amongst Central-East Europe and CIS countries with clear rules and feed-in tariff support scheme. The report provides a complete picture of the market situation, dynamics, current issues and future prospects. You will find more than 70 pages of valuable information in this unique in-depth analysis of the Ukrainian wind market. As 2011 was

challenging year for wind energy industry, the time for taking right decisions during 2012 is limited. Fast changing market environment requires relevant and accurate information. For your convenience we offer opportunity for orders with customized report content. Reasons to buy this market report include:

 Brief overview of the Ukraine political and economic environment  Wind resource potential in Ukraine  Overview of Ukrainian wind energy market development 2007 ÷ 2012  Grid connected wind power plants for 2011/2012  Future market trends and planned wind projects for 2012/2013  Current market prices of fully permitted and operational wind projects  Ukrainian legal and energy regulatory framework for renewable projects  Key companies in wind sector  Review of most relevant financing and supporting incentives  SWOT Analysis At next pages you will see the full table of content of this report. To order this report just fill in and send us the enclosed at the last page order form. If you have any other questions please do not hesitate to call us on ++359 887 342 475 or write an e-mail to orders@ineaconsulting.eu

UKRAINE WIND MARKET: OUTLOOK 2012

TABLE OF CONTENTS

TABLE OF CONTENTS ....................................................................................................... 3 FOREWORD .................................................................................................................... 7 1

Methodology and limitations ................................................................................ 9 1.1 1.2

Methodology ............................................................................................................. 9 Limitations ............................................................................................................... 10

EXECUTIVE SUMMARY ........................................................................................ 11

UKRAINE POLITICAL AND ECONOMIC ENVIRONMENT ......................................... 14 3.1 Basic country data ................................................................................................... 14 3.2 Government structure, Political Climate and Ruling Party ..................................... 18 3.3 GDP and Economic Growth ..................................................................................... 19 3.4 Electricity Imports and Exports. Electricity prices for business and households .... 23 3.5 Taxes ........................................................................................................................ 25 3.5.1 VAT ....................................................................................................................... 26 3.5.2 Income and Corporate Taxes ............................................................................... 26 3.5.3 Tax incentives for renewable energy investments .............................................. 27

UKRAINE WIND ENERGY MARKET ....................................................................... 28 4.1 General electricity market information ................................................................... 28 4.1.1 Electricity Consumption and Production ............................................................. 30 4.1.2 RES targets ........................................................................................................... 31 4.2 Wind market ............................................................................................................ 32 4.2.1 Why invest in wind energy in Ukraine? ............................................................... 33 4.2.2 Ukraine wind resource potential ......................................................................... 35 4.2.3 Overview of Ukraine wind market ....................................................................... 36 4.2.4 Market prices for wind energy projects in Ukraine ............................................. 40 4.2.5 Key development wind projects in Ukraine ......................................................... 41

EUROPEAN RENEWABLE ENERGY POLICY LANDSCAPE ......................................... 45 5.1 RES Regulations and EU Directives .......................................................................... 45 5.1.1 Precedent EU regulations .................................................................................... 45 5.1.2 Most recent EU renewable energy policy developments.................................... 46

UKRAINE RES LEGAL AND REGULATORY FRAMEWORK ........................................ 47 6.1 Main laws and regulations....................................................................................... 47 6.2 Applicability of the promotion system .................................................................... 48 6.3 Support scheme ....................................................................................................... 48 6.4 guarantees of origin (green certificates) ................................................................. 48 6.5 Zoning, planning and construction related authorizations ..................................... 49 6.5.1 Zoning plans procedure ....................................................................................... 49 6.5.2 Construction permit procedure ........................................................................... 50

UKRAINE WIND MARKET: OUTLOOK 2012

6.6 Environmental related authorizations .................................................................... 50 6.6.1 Natura 2000 Network .......................................................................................... 51 6.6.2 Clean Development Mechanism (CDM) and Joint Implementation (JI) .............. 51 6.7 Energy law authorizations ....................................................................................... 52 6.7.1 Power Generation Licensing ................................................................................ 52 6.7.2 Grid Interconnection ........................................................................................... 53 6.7.3 Power Off-Take and Power Purchase Agreement (PPA) ..................................... 54 6.7.4 Feed-in tarriff. Local manufacturing component ................................................ 55 6.8 Future market pricing mechanisms......................................................................... 57 6.9 Key Expected Changes in Ukrainian RES Law .......................................................... 57 6.10 Key Co-financing opportunities ............................................................................... 59 6.10.1 Ukraine Sustainable Energy Lending Facility (USELF) .......................................... 59 6.10.2 Ukraine Energy Efficiency Programme (UKEEP) .................................................. 62 7

KEY ORGANIZATIONS AND INSTITUTIONS ........................................................... 66 7.1 Government ............................................................................................................ 66 7.1.1 The Ministry of Energy and Coal Industry(MECI) ................................................ 66 7.1.2 Ministry of Economic Development and Trade (MEDT)...................................... 66 7.1.3 Ukrainian National Energy Regulatory Commission (NERC) ............................... 66 7.1.4 State Agency For Energy Efficiency and Energy Conservation (SAEEEC) ............ 67 7.1.5 State Environmental Investment Agency (SEIA).................................................. 67 7.1.6 Ministry of Ecology and Natural Resources (MENR) ........................................... 67 7.1.7 Ministry of Agriculture and Food (MAF).............................................................. 68 7.2 Electricity generation and electricity distribution Companies ................................ 68 7.2.1 Capacity of the electricity network ..................................................................... 69 7.2.2 National Electricity Company Ukrenergo (TSO) .................................................. 70 7.2.3 Energorynok......................................................................................................... 71 7.2.4 Distribution System Opeartors (Oblenergos) ...................................................... 72 7.2.5 DTEK ..................................................................................................................... 73 7.2.6 Energy Standard Group S.A. ................................................................................ 75 7.2.7 AES ....................................................................................................................... 75 7.2.8 VS Energy ............................................................................................................. 76 7.2.9 Privat Group ......................................................................................................... 76 7.3 Key wind companies operating on UKRAINE market .............................................. 77

SWOT ANALYSIS ................................................................................................. 79

CONCLUSIONS .................................................................................................... 82

LIST OF ABBREVIATIONS ..................................................................................... 85

REFERENCES ....................................................................................................... 87

DISCLAIMER ........................................................................................................ 89

APPENDIX I. WIND MAPS OF EUROPE AND UKRAINE ..................................................... 90

UKRAINE WIND MARKET: OUTLOOK 2012

LIST OF MAPS, CHARTS AND TABLES Map 1: Where is Ukraine on the European map ................................................................... 14 Map 2: Ukrainian Road Network ............................................................................................ 15 Map 3: Ukraine regions administrative map.......................................................................... 17 MAP 4 Historical Regions of Ukraine...................................................................................... 18 Map 5: Wind resource map of Ukraine, GeoModel Wind s.r.o., 2012 .................................. 34 Map 6: Wind irradiation and wind electricity potential for optimally inclined wind modules in Ukraine, JRC PVGIS 2008 ..................................................................................... 35 Map 8: Electricity grids network of Ukraine .......................................................................... 71 Map 10: Distribution system operators in Ukraine by type of ownership ............................ 73 Map 9: Districts covered by NPP AES Kievoblenergo ............................................................. 75 Map 12: Wind irradiation and wind electricity potential for horizontally mounted wind modules in Ukraine, JRC PVGIS 2008 ..................................................................................... 90 Map 13: Wind irradiation and wind electricity potential for horizontally mounted wind modules in Ukraine, GeoModel Wind s.r.o. 2012 .................................................................. 91 Map 14: Wind irradiation and wind electricity potential for optimally inclined wind modules in Europe, JRC PVGIS 2008 ...................................................................................... 92 Chart 1: Real GDP growth for the period 2000-2012 (including estimates) .......................... 20 Chart 2: Ukrainian GDP growth compared to EU-27 for the period 2002-2011.................... 21 Chart 3: Electricity imports and exports for the period 2000-2011 (in million MWh) .......... 24 Chart 4: Corporate tax income in selected CEE and SEE countries ....................................... 26 Chart 5: Structure of Ukrainian electricity market ................................................................. 29 Chart 6: Share of renewables in gross final consumption of electricity 2011 ....................... 30 Chart 7: Ukrainian RES targets in % according to Energy Strategy of Ukraine up to 2030 .... 31 Chart 8: Cumulative developments of wind power plants in Ukraine in MWp from 2007 to 2013, including estimates ................................................................................................. 44 Chart 9: UKEEP Structure ....................................................................................................... 64 Chart 10: Market Shares by Sales of the Distribution System Operators in Ukraine in 2011 68 Chart 11: Market share of DTEK in electricity sales and distribution in 2011 ....................... 74 Table 1: Electricity prices for business and households ......................................................... 25 Table 2: Support schemes for RES generation in the EU countries and Ukraine................... 33 Table 3: Market prices for wind projects in Ukraine for 2012 ............................................... 41 Table 4: Selected operational, under construction and planned wind projects in Ukraine .. 42 Table 5: Feed-in tarrifs for electricity from renewable sources in Ukraine ........................... 56