Understanding the New Energy Laws in Ukraine

On June 30, 2023, the Verkhovna Rada (the Ukrainian Parliament) adopted new laws titled “On Amendments to Certain Laws of Ukraine Regarding the Restoration and ‘Green’ Transformation of the Energy System of Ukraine.”

The Essence of the Guarantee of Origin Scheme (GOOS)

Amidst a plethora of new regulations, one particular aspect stood out: the creation of a Guarantee of Origin Scheme for renewable electricity in Ukraine. This Guarantee of Origin Scheme, or GOOS (despite its unwieldy acronym), allows Ukrainian renewable electricity producers to sell the green component of the power they produce on the open market.

For those unfamiliar with the concept, renewable energy generation comprises two parts – the energy product (be it electricity, gas, or heat) and the zero-carbon value of that product. This zero-carbon value is expressed in various ways. In most jurisdictions, the owner of the generation can sell the carbon value of that generation, separate from the actual energy and any subsidy they might receive. This can be through international carbon markets or a Guarantee of Origin Scheme.

Carbon Offsetting vs. Guarantees of Origin

Carbon offsetting, as discussed in a previous article, is primarily a voluntary, unregulated trade with its inherent risks. A Guarantee of Origin Scheme ensures that the power produced is certified as renewable by the jurisdiction in which it’s generated and can be traded in regulated markets.

Market Trends: The Rising Value of GOO Certificates

Historically, carbon credits have traded at higher values than GOO certificates. However, this trend is shifting as major electricity consumers in the EU and USA aim to achieve net-zero targets, which they can’t meet solely through direct renewable energy generation.

In European markets, GOO certificates have reached values as high as 2 EUR, while in American markets, their Renewable Energy Certificates have peaked at $5. As net-zero regulations tighten globally and product shortages emerge, these prices are expected to climb.

Benefits for Ukraine’s Renewable Energy Producers

Ukraine’s new laws offer two significant advantages for renewable energy producers. Firstly, they provide a new revenue stream for renewable electricity producers. Secondly, they pave the way for biomethane producers. Initially, Ukraine will need to negotiate with the EU and other jurisdictions with GOO schemes to permit the sale of their certificates. The legislation aims for this, and the EU has a vested interest in leveraging Ukrainian renewable energy to help its member states achieve net-zero targets.

Moreover, with the EU’s new legislation requiring importers to pay equivalent carbon taxes as domestic producers, Ukrainian importers will likely purchase GOO certificates to showcase their low-carbon credentials and mitigate EU taxes.

The Potential for Biomethane in Ukraine

More crucially, Ukraine needs a GOO scheme for biomethane. Currently, biomethane producers in Ukraine face challenges selling to the EU due to the absence of a GOO scheme that separates the carbon value from the physical gas. A biomethane GOO would catalyze the growth of the Ukrainian biomethane industry, enabling developers to plan and investors to see tangible income streams.

The Role of the National Energy and Utilities Regulatory Commission (NEURC)

The new electricity GOO scheme proposes that The National Energy and Utilities Regulatory Commission (NEURC) oversee the issuance, circulation, and cancellation of guarantees of origin, as well as manage the Register of Guarantees of Origin. If a Biomethane GOOS is in the works or already exists, it could potentially be managed by the same regulator using a similar regulatory framework.

Looking Ahead: Ukraine as Europe’s Renewables Gas Powerhouse

Developers and investors are eagerly awaiting these changes. With the right legislation, Ukraine has the potential to become Europe’s renewable gas powerhouse.