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Solar power plants can be build in any regions of Ukraine

Home » Blog » Solar power plants can be build in any regions of Ukraine

Dmytro Lukomskiy, The Director of Business Development at Rentechno: «Projects can be implemented in all regions of Ukraine, for example, in the Kyiv’s area»

Dmytro Lukomskiy representing the Rentechno company explains why business has showed an interest in solar energy only now and what the investor intending to invest in solar projects needs to know.

What do I need to start the project of a solar power plant construction?

— Firstly, you need to determine the capacity of the power plant. The projects are demanded with up to 100 kW and above. Recently, we have counted the cost of the project with the capacity of 3.5 MW — it was about €10 million. Secondly, you need to decide whether it will be the ground project or the rooftop power plant type. The first, despite the higher «green tariff» (46.5 cents), requires the higher expenditures to install supporting metal. In addition, you may experience difficulty with your plot of land. Land that will be allocated for the construction can no longer be used for other ones, for example agricultural needs. Roof projects, however, have a lower «green tariff» (44.5 cents), but at the same time they allow efficient use of the territory. Finally, it remains to determine the most convenient point of connection to the network and platform for the implementation of the project.

Experts point out the grand potential of the Crimea, what other regions can also be used in such projects?

— For the present, we do not consider the peninsula as the priority area for our projects. It has already been announced about such a quantity of renewable energy projects in the Crimea that it raises a question: does the peninsula need so much energy? In addition, due to the aging network of the peninsula and in order to realize large projects there, the investor probably requires additional costs for the network modernization. Projects can be implemented in all regions of Ukraine, for example, in the Kyiv’s area. Here is a very good electrical system, and there should not be a problem to find the access point. We evaluated the solar irradiation in different regions of Ukraine — the difference between the southern and northern regions comes up to 15-20%. But technically, this difference can be levelled.

What is the state’s approach to what is happening in the industry?

— Over the last two years there has been an interest of the state, but everything announced by the government looked more like unrealistic promises. Investors, however, expect positive signals. So far the biggest obstacle is to get the «green tariff», because NERC does not issue it at the stage of the project but only at the stage of construction. In September 2010, Activ Solar implementing a large project in the Crimea was the first company to obtain the «green tariff». Other market participants did not quite understand whether steps would be taken towards all the companies or only the players who have the ability to lobby their interests. Once at the end of last year the rate received a 30 kW station in Vinnitsa region (Vinnitsaenergoservis project), we hope that the business will go on much faster.

Experts call the year 2011 as a year of intensification of projects in solar energy. What is this confidence based upon?

— The Law «On Electric Power Industry» has rules that protect domestic producers. In particular, a separate requirement is that the solar power project may get the «green tariff» only if each module is 30% of Ukrainian raw materials. In fact this rule has cut off all possible solar panel suppliers, except the only Ukrainian producer — Kvazar PJSC. At the end of the last year, the entry into force of this requirement was postponed until January 1st, 2012. In fact, investors were given a year — during this time a dozen of solar power plants could appear in the country.

After the entry into force of this provision the plant of solar panel production will have to be built. How much would this construction cost?

— We counted several options and came to the conclusion that the most appropriate one is to build a plant with an annual capacity of 25 MW. CAPEX could be around €3.5 million plus working capital. In order to be implemented the project will need about one year as an average. And in order to obtain certificates of compliance required to sell products abroad, we have to carry out the test work for several month. So, for a while the plant will either idle or work exclusively for the domestic market.

What are the most promising markets for the sale of products, since in Europe a lot of competition is among existing producers?

— The countries are of great interest where there is governmental support of the industry. Now Germany, which was the engine of the solar energy development in Europe, reduced the value of «green tariff». A similar decision was taken by Spain and some other countries. Primarily, these measures were caused by the global financial crisis and in some cases — the achievement of target share of renewables in the energy of the states. Until recently, Bulgaria was a promising market, but today almost all suitable land there has already been disassembled for projects. I think that the most promising market in the coming years will be the Middle East. For example, Saudi Arabia or Syria where the Ukrainian specialists have recently participated in the construction of plants for the production of solar cells. The construction of such a plant can be recouped in about five years.

Implementation of the project often depends on the decisions of local authorities, who do not always go to meet investors...

— I think it’s not so much the reluctance to go forward, but the ignorance of local officials. They often just do not know what the alternative energy is and they are afraid to give the nod to the project. They almost never answer «no», and ask the time instead in order to get understanding how it works and how it is beneficial. Therefore, we often have to deal with local authorities in an educational way. Nevertheless, there are some territorial features too. For example, in the western regions of the country officials’ interest in renewable energy is significant. In the eastern areas the officials are more passive.

Is it difficult to attract funding for these projects?

— The hardest thing is to find the original investor who is willing to partially finance such projects. And to draw the missing funds in the form of loan or equity is much easier. Basically, the sources of our project’s funding are the western organisations. Of course, as in any other business the country risks remain. And the main question asked by foreign investors: «What is the guarantee that the „green tariff“ will be paid?» But the fact that by this time about 70 projects in alternative energy have already received «green tariff» speaks for itself. Above all, Ukraine has special programs to stimulate projects in alternative energy. The example — a program USELF EBRD with the basic capacity of €50 million and an additional capacity of €20 million. But taking into account the cost of a single project, far not everyone interested will be able to get the credit with such a program.

Is solar energy really the most expensive of all types of alternatives? How can I reduce the payback period?

— Without «green tariff» the payback period of solar power is more than 10 years. But nowadays practically all around the world the equipment and components prices are decreasing and the cost of 1 kWh is gradually decreasing. So the price parity in comparison with conventional sources is possible, but this requires time. Also keep in mind that the main prospect of solar energy is to increase the conversion efficiency of the solar radiation. Currently, the average efficiency of the solar cell is 14-17%. Even for conventional silicon technology it is realistic to achieve an efficiency of about 20%, which means that there is room to grow. And it is very important that this growth can be rapid. For example, the Kvazar factory in the past decade has increased the efficiency of its production by almost half and continues to work in this direction. The same trend could be observed in the world’s leading manufacturers of photovoltaic products.

Sevgil Musaeva | «Vlast deheg», March 2011, (№ 299)


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