Ukraine seeks foreign investors in $18 billion renewable energy market

Ukraine is trumpeting offers of breaks on tax and duties to lure foreign investors in renewable energy as it pushes to reduce dependence on Russian gas. The government in Kiev wants 11 percent of Ukraine’s power to come from renewable resources, mainly biomass, by 2020, Deputy Economic Development Minister Yuliya Kovaliv said in a speech in Berlin on Oct. 23. Ukraine needs foreign investors to help it reach its target in a market worth about 16 billion euros ($18 billion), she said.

Foreign direct investment in the country is recovering, rising to $904 million in the second quarter from $352 million in the first, according to the National Bank of Ukraine. That compares with a net outflow in the first half of 2014 as the conflict with Russia escalated. Ukraine’s ambitious target for renewable energy reflects the need to cut Ukraine’s dependency on Russian gas for heat and power, Kovaliv said in an interview. “We must press forward, developing those resources is essential to energy independence,” she said. “Incentives for foreign investment in renewable power are attractive in this process.”

Ukraine’s earliest onshore wind and solar projects counted on loans from development banks including the European Bank for Reconstruction and Development. Kovaliv said Ukraine is offering added inducements for clean energy investors alongside feed-in tariffs, including exemptions on VAT and import duties that expire in 2019.

Ukraine is focusing its clean energy policy on bioenergy, including pellet-fired thermal power, in a drive to reduce 10 billion cubic meters of gas in power generation by 2020, according to a February statement of the State Agency for Energy Efficiency. The gas-saving target, outlined in a National Renewable Energy Action Plan, is equal to a quarter of the nation’s total gas consumption of 42 billion cubic meters in 2014. Reaching the target rests on a significant expansion of foreign investment.

The nation has about 3,650 MW in thermal power capacity from biomass, according to the state agency. Ukraine can set aside about 4 million hectares of agricultural land for energy crops without any risk to agriculture for biomass, the agency said.

©2015 Bloomberg News

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