UABIO calls to change the procedure for holding auctions for biogas and biomethane projects

According to the statement of the Bioenergy Association of Ukraine, the main problem is the instability of payments by the State Enterprise ‘Guaranteed Buyer’, but there are others.

Therefore, the UABIO team sent a letter with proposals to the relevant committee and the ministry.

In particular, the Association notes the following problems:

• Lack of a clear strategy for repaying existing debts and ensuring the stable financial condition of the State Enterprise ‘Guaranteed Buyer’.
• The low level of starting prices set for bioenergy projects – 12 euro cents per kWh.
• The model of contracts for difference, which provides for the producer to return the difference between the market and auction price if the market price is higher. This practice significantly complicates financial planning and increases risks for investors.
• The timeframe given to the winners of the auctions to draw up technical specifications for grid connection is too short – only 6 months – which significantly limits the opportunities for projects that are at the initial stages of development.
• Taxation of CO₂ emissions for biofuel plants. Ukraine still continues to apply the CO₂ tax for bioenergy plants, although in the EU countries such a tax has been abolished due to the carbon neutrality of biofuels.

Accordingly, the UABIO calls for the following changes to be considered:

• Guaranteed stable payment to electricity producers. Full repayment of the debts of the State Enterprise ‘Guaranteed Buyer’ or its replacement with another institution, for example, NPC ‘Ukrenergo’.
• Revise the level of starting prices and increase quotas. For biogas projects to be economically attractive, the starting price should be increased to at least 15 euro cents per kWh for plants over 2 MW and 18 euro cents per kWh for small biogas plants.
• Transition to the market premium model (FIP). The producer does not have to return the difference if the market price exceeds the auction price.
• Increase the timeframe for issuing technical specifications for auction winners from 6 to 12 months. This will expand the range of potential participants and make it possible for companies at the early stages of project development to participate in auctions.
• Cancellation of the CO₂ tax for biofuels, as this is in line with European standards and will help increase the competitiveness of projects.

The letter of the Bioenergy Association is available here.