Abstract
The study examined the experience of financing renewable energy projects in Ukraine. Renewable energy is one of the tools to enhance decarbonization and meet the obligations taken within the Association Agreement between Ukraine and the EU, and under the Paris Agreement. Ukraine has factors impeding the investments, resulting in a high cost of capital. Overall, there are five main options of financing theoretically available: lending, primarily with the aid of international financial institutions; funding of renewable energy projects by municipalities; voluntary associations of citizens; securities; irrevocable financial assistance. The future instruments include securities and a recently announced mechanism to finance renewable energy projects in the frame of the Green Deal. The most expansive spread option for funding renewable energy projects was lending with the help of international financial institutions. Due to the bilateral electricity market transition of Ukraine in 2019, Ukraine failed to found a model for sustainable financing of electricity from renewables, resulted in the accumulation of significant debt with the feed-in tariff payment. This fact hinders the planned and potential future investments until a sustainable model of financing is found.
Highlights
Ukraine has signed the Association Agreement between Ukraine and the EU, which contains a clause recognizing the priority of environmental protection, development of green economy, and increasing production through modern technologies (Article 360)
The agreement came into force in September 2017, while Ukraine is reforming both the financial system and creating a regulatory environment attractive for investments, including in renewable energy projects, which are one of the financial elements of the green economy (UNEP, 2016)
A review of the existing credit programs for financing RES projects in Ukraine showed that more regional credit programs in the field of RES are needed, which could reimburse interest on the loan and be financed by increasing local tax revenues in a decentralized environment
Summary
Ukraine has signed the Association Agreement between Ukraine and the EU, which contains a clause recognizing the priority of environmental protection, development of green economy, and increasing production through modern technologies (Article 360). The agreement came into force in September 2017, while Ukraine is reforming both the financial system and creating a regulatory environment attractive for investments, including in renewable energy projects, which are one of the financial elements of the green economy (UNEP, 2016). These tasks are challenging - according to the insurance company Euler Hermes Global, Ukraine has the lowest possible ranking (D4, high risk for enterprise). World Bank ranks Ukraine as 64th out of 190 countries in terms of Ease of Doing Business 2020 report (World Bank, 2020), which is significantly worse compared to other Eastern Partnership countries
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