Ukrainian Parliament Approves Revolutionary Law Changing Grid Connection of Renewables and Certain Other Related Key Rules

The Law on Amendments to Certain Laws of Ukraine in the Field of Energy and in the Field of Heat Supply to Clarify Provisions Related to the Martial Law in Ukraine (the "Law") on the basis of draft law No. 9381 dated June 13, 2023 also changes certain regulatory aspects related to the renewables projects. On January 17, 2025 the Law was signed by the chairman of Verkhovna Rada and submitted for the president’s signature. Unless vetoed by the president, the majority of the Law’s provisions will enter into force on the date following its official publication by the president.

Once the Law takes effect the necessary secondary legislation must be adopted within the following timeframes:

• By the Cabinet of Ministers of Ukraine – four months from the Law’s date of entry into force.
• By the National Energy and Utilities Regulatory Commission (the "Regulator") – six months from the date taking effect by the Law.

Please find below an overview of the key changes introduced by the Law:

1. Extension of the term of the grid connection agreement and technical conditions

1. Technical conditions for the grid connection of power facilities to the distribution and transmission grids are valid for the term necessary to construct the power facilities but not more than three years from the date of its issuance. Please note that until the Law enters into force under the current rules, the term of the grid connection conditions for solar power plants are two years and for other renewable energy power plants – three years.If the design documentation for connection is approved (if required by the grid connection agreement), the grid connection fee is paid and the documents necessary to carry out construction works are obtained, the term of the technical conditions is extended for as much as six years from the date of the grid connection agreement.
2. If the approved design is absent or the grid connection fee is not paid during the term of the technical conditions, the respective grid connection agreement is deemed terminated.

2. New rules for payment of the grid connection for connecting to the transmission system

1. When an applicant for the technical conditions to the transmission grid obtains the technical conditions, it is obliged to pay the grid connection fee in an amount of UAH equivalent to €10 for each kW of the requested capacity for connection. It is paid as follows:
   1. 50 percent within 30 days after obtaining the technical conditions
   2. 50 percent within 12 months after obtaining the technical conditions unless otherwise determined by the grid connection agreement or earlier termination of the agreement by the connecting company
2. The company entitled to connect its facilities under the grid connection agreement (the "Connecting Company") is entitled to request return of the paid grid connection fee if it initiates the grid connection agreement termination within six months after obtaining the technical conditions.
3. The Connecting Company must prepare the design documentation for grid connection and have it approved by transmission system operator within 12 months after obtaining the technical conditions. If it fails to do so, the grid connection agreement is deemed terminated and the paid grid connection fee is retained by the transmission system operator.
4. Connecting Companies that currently hold technical conditions for connecting to the transmission system must bring their grid connection agreements in line with the rules discussed above within three months after the Law has taken effect and pay the grid connection fee indicated above as follows:
   1. 50 percent within 30 days after obtaining the invoice that is issued by the transmission system operator (the "TSO") not later than 100 days after the Law has taken effect
   2. 50 percent within six months after making the first payment
5. If Connecting Companies with current technical conditions make the above payments, they are obliged to prepare the design for the grid connection and have it approved within nine months after the Law takes effect or initiate the termination of the grid connection agreement (and request already paid fees). Otherwise, the grid connection agreement is deemed terminated.

3. Special rules for extending existing grid connection agreements for RES Producers

If RES Producers entered into grid connection agreements (either TSO or DSO) before the entry into force by the Law, the grid connection agreement and technical conditions are deemed extended for three years from the date when the Law takes effect if the following conditions are satisfied:

• The grid connection agreement was valid as of the date of the Martial Law introduction (24 February 2022)
• On the date of entry into force by the Law the RES Producer:
  • Prepared the design for the grid connection and have it approved by the respective operator
  • Handed over such design documentation to the respective operator
  • Paid the grid connection fee in accordance with the grid connection agreement

4. The electricity producers connected to the transmission grid will be entitled to connect other electricity producers to their grid according to the conditions in the transmission system code; before the Law this was not possible

5. Cable pooling rules

1. The RES Producer and another electricity producer are entitled to connect in one connection point generational installations producing electricity from any energy source which was not possible before the Law.
2. Installed capacity of such installations may exceed the amount of the allowed (contractual) capacity but the capacity of output to the grid must not exceed the allowed (contractual) capacity.
3. The RES Producers and other electricity producers may connect installations of other producers to their grid as per the procedure to be established by the Regulator subject to the satisfaction of the following conditions:
   1. The total installed capacity of installations for production of electricity may exceed the amount of the allowed (contractual) capacity but the capacity of output to the grid must not exceed the allowed (contractual) capacity.
   2. Separate metering of electricity by installations owned by different producers.

6. Grid capacity booking for wind projects

1. Companies willing to connect wind farms with the installed capacity 20 MW and more (the "WPP Developers") may enter into the capacity booking agreement with the TSO on the basis of the standard form to be approved by the Regulator and in accordance with the procedure established by the transmission system code.
2. Under the booking reservation agreement, the TSO books technical solutions for the connection scheme of the generating facilities of the WPP Developer, and the WPP Developer must submit applications for connection of electrical installations and conclude a grid connection agreement within two years from the date of the agreement.
3. Within 20 calendar days from the date of the agreement, the WPP Developer must deposit to the escrow account the capacity booking fee in an amount equivalent to €5 per 1 kW of capacity booked under the capacity reservation agreement in accordance with the official exchange rate set by the National Bank of Ukraine. If it fails to pay the capacity booking fee within the specified period, the capacity booking agreement will be terminated.
4. The connection scheme under which the capacity booking agreement is made is determined by the TSO. The WPP Developer must develop the relevant design documentation in order to determine the final scope of work required for the implementation of the capacity delivery scheme, and the TSO must prepare a technical solution based on the approved design documentation.
5. If the WPP Developer applies to the TSP within the period specified in such agreement with an application for connection of the electrical installations booked under the capacity booking agreement, the capacity booking fee paid under the capacity booking agreement is credited towards the payment for connection of such electrical installations. If it fails to do so, the funds deposited in the escrow account are transferred to the transmission system operator and the capacity booking agreement is deemed terminated.

7. More flexible rules to use battery energy storage facilities (BESS) connected to generation facilities

1. RES Producers have been expressly allowed to withdraw electricity from the grid by the BESS connected to their generation facilities if they don’t have established “green” tariff, or even if the “green” tariff has been established, but respective RES Producers have left the balancing group of the guaranteed buyer, provided that
   1. At any time, the total capacity of the electricity that is supplied from the producer’s networks to the grid or withdrawn from the grid and supplied to the electricity producer’s networks does not exceed the capacity ordered for connection, taking into account the permitted (contractual) capacity of electricity production and consumption (respectively) of the electricity producer’s installations at the place of licensed activity
   2. There is a separate commercial metering of electricity flowing to/from the BESS
2. RES Producers with an established “green” tariff and remaining in the balancing group of the guaranteed buyer may use BESS only for withdrawing electricity from the generation facilities and not from the grid (the effective rules remain unchanged for them).

8. Improvements in the CFD auctions procedure for renewables

The quota of annual support that may be distributed to the companies controlled by one ultimate beneficial owner was increased from 25 percent to 50 percent.

9. Municipalities are allowed to additionally stimulate deployment of renewables in their territories

Local self-government authorities are expressly authorized to provide additional incentives for deployment of renewables upon approval of the program to incentivize development of the distributed generation in their territories. Express rules for connecting renewable power plants to the grid of state and municipal entities

10. Lease of state and municipal lands and other property to producers of electricity from renewables (RES Producers) with the offtake by the property owner/holder

1. The Law expressly allows the leasing out of municipal and state-owned lands or other property to RES Produces to install the respective renewables installation and BESS with the obligation of the property owner or authorized holder to offtake all electricity of RES Producers produced on such lands that will simplify contractual framework and procurement procedures for relevant agreements.
2. The respective power purchase agreements are executed for the term of the lease agreement.
3. Land and property owner/holder is entitled to become a prosumer with all rights under the Law of Ukraine on Electricity Market

11. Contest procedures for the construction of new generation capacity, which among other things envisage the capacity payment support mechanism, expressly cover generation facilities with BESS

12. Settlement of the debts in the power market

1. The Law allocates the excess income from activities of the dispatch (operational and technological) department in 2023 and 2024 for the following purposes:
   1. 45 percent to repay the TSO’s debt generated in the balancing market
   2. 45 percent to cover costs and repay the TSO’s debt to the guaranteed buyer under the service agreement for increasing the share of electricity generation from alternative energy sources with the guaranteed buyer
   3. 10 percent to cover costs and repay debts of TSOs to universal service providers under service agreements to ensure an increase in the share of electricity production from alternative sources with the universal service provider for the purpose of further payment by universal service providers for electricity produced by private households’ generating facilities using alternative energy sources

13. Suspension of certain enforcement procedures

1. Temporarily, for the duration of Martial Law, enforcement actions concerning the following debts of electricity market participants arising February 24, 2022 to September 1, 2024 have been suspended this includes:
   1. The inflation index for the entire period of delay in the monetary obligation
   2. 3 percent per annum of the overdue amount of the monetary obligation or other interest rate established by contract or law
2. The list of debtors and their debts, which include the guaranteed buyer and its debts to RES Producers, with the indication of court case numbers will be published on the Regulator’s official website.

This information does not constitute legal advice and is merely the opinion of the author.

By Maksym Sysoiev, Partner, Dentons