Vladyslav Sokolovsky: “We need victory not only on the military front, but also on the energy!”

In recent years, Ukraine has managed to achieve significant results in the development of renewable energy. Only at the beginning of 2022, the volume of investments in the industry reached $12 billion, and according to experts’ forecasts, the pace would only increase if it were not for a full-scale war. Are there prospects for “green” energy now, how is it possible to get out of the crisis and how can the Solar Energy Association contribute to this? We spoke with Vladyslav Sokolovsky, Chairman of the Board of ASEU and Managing Partner of Sokolovsky and Partners LLC, to find answers to these questions, which now more than ever concern representatives of the energy industry.

Good afternoon, Vladyslav! Russia’s military aggression undoubtedly had an impact on the energy sector, in particular on RES. Have priorities and attitudes to “green” energy changed in Europe?

Russia’s unprovoked armed attack on our country became the catalyst for Europe’s accelerated refusal to import gas, oil, and coal from the Russian Federation. In the next two to three years, the Europeans are going to completely stop buying Russian fossil fuels and additionally spend more than 200 billion euros on this. Part of this plan will be doubling the share of renewable sources in energy and bringing it to 45% (the pre-war plan was 40%). To speed up the “green” reconstruction, the European Commission proposed to make the installation of solar panels mandatory for all office and public buildings as early as 2025, and from 2029 for new residential buildings in all EU countries. Therefore, the answer is unequivocal – “no”.

What can Ukraine offer to Europe in “green” energy?

On March 16, Ukraine officially joined the united energy system of continental Europe ENTSO-E, and we can already export electricity produced from renewable sources to the EU. The Sun, with its almost 6,400 MW capacity, together with other “green” generation, can become the main source of sales of “clean” electric energy in the EU. This is a win-win strategy – everyone wins. We will receive additional financial income. Europe — “green” electricity and reduced dependence on gas from the Russian Federation. There are some technical and legal issues, but they are being resolved.

The REPowerEU plan envisaged an additional 20 million tonnes of renewable hydrogen by 2030, taking into account 10 million tonnes of imported hydrogen. The EU is not giving up on its goal. Ukrainian solar stations have the opportunity to participate in this, generating electricity for the further production of “green” hydrogen.

Therefore, Ukraine has every opportunity to show its green energy shoulder to the EU by increasing the production of solar electricity.

The renewable energy sector in Ukraine is currently going through difficult times. What problems did the “greens” face?

They are known to everyone who works in the industry. Some problems are “hangovers” from previous years. Debt from the “green” tariff, delays in the implementation of auctions, and “imbalances”. The war became an additional serious challenge for RES. Approximately 60% of large solar power plants are located in the south and southeast of the country. That is why they suffered the greatest losses from the invaders. According to preliminary estimates, up to 40% of power plants in these regions were affected. Also, the financial indicators of the still operating stations are affected by dispatch teams on generation restrictions caused by the need to ensure the reliability of the power system. The volume of solar station system restrictions for March-May 2022 is 573 GW*h. In financial terms, this equals approximately 80 million euros or 2.5 billion UAH. The situation is critical and the number of problems is increasing.

If so, what steps should be taken to overcome these challenges?

Above, we have already mentioned the sale of “clean” electricity to the EU. In part, this will be able to solve the financial problems of the stations. As an option, it is possible to establish a mandatory percentage of RES in the total volume of exports, which will be sold by the “Guaranteed Buyer”, and then be settled with the generation of RES. Also, it would be nice to provide green energy companies with special conditions for accessing the market “one day in advance”. Accordingly, the burden on GarPok from payments under the green tariff will decrease.

Now we are talking about solving the problems of “living” RES generation enterprises. But it is necessary to remember the most affected: destroyed and damaged SPPs. There are proposals: to create a specialized fund for the reconstruction of war-ravaged areas, to cancel loan payments, and introduce special reduced taxation. So, there are many tools to help…

Does the Solar Energy Association participate in the search for answers to the challenges you voiced, in particular in the legal sphere?

Of course! Here are our “extreme” suggestions.

— We actively participate in the search for legal ways to compensate the members of the Association for the losses caused by the war. This is indeed problematic, but realistic – due to the state and private assets of the aggressor frozen in the West.

I am sure that entrepreneurs will be able to compensate for property damage, losses from business interruption, and lost profit only in courts and, most likely, in international ones.

Existing legal instruments can be used, or new ones developed, first of all, in EU countries, the USA, and international organizations. For example, the Canadian Parliament has completed the ratification of the relevant legislative changes. Next, we await the adoption of similar legal instruments in the USA and the EU. In any case, the first step of a Ukrainian enterprise whose property is damaged or destroyed should be the correct legal recording of this fact. In ASEU, we have developed an appropriate algorithm for fixing for our members and are helping to implement it.

— We also proposed a special mechanism for insuring property that may be destroyed during hostilities. It provides for a significant reduction in the cost of insurance services for RES market companies.

— The association cooperates by providing its vision on bills related to RES, for example, with members of the Committee of the Verkhovna Rada of Ukraine on Finance, Tax, and Customs Policy. We supported draft law No. 7428-2 in the part that should establish the cash method of VAT taxation for the so-called load reduction service.

The problem is that now SES, in the case of providing a load reduction service, i.e. executing the command of  “Ukrenergo” to reduce generation, must charge VAT even before receiving payment from NEC. Therefore, the payment of this tax is an additional burden on the RES producer in cases where the company cannot refuse NEC “Ukrenergo” to provide the service. The said draft law should solve the problem of VAT payment. And also – the question of the exclusion of these services from income tax until the moment of their payment by NEC “Ukrenergo”. The bill should be adopted by the Verkhovna Rada soon. ASEU is aware of the main problems of the industry and helps to solve them to the best of its ability.

In June of this year, you were elected Chairman of the ASEU Board. How do you see your future activities in this public position?

I have been on the board of the Association for four years and I am not bad at understanding the needs of its members. In public activities as the head of the Association, the knowledge acquired at the Faculty of Electrical Engineering and Automation of the Kyiv Polytechnic Institute and the Faculty of Law of the National University named after T. Shevchenko. I have been practicing energy law for more than 20 years, so I am well aware of the current situation in “solar” energy. Together with the board, the executive director, I will focus my time on helping the members of the Association.

War is a challenge, both for the country and for renewable energy. Companies – members of the association faced huge problems of a financial, technical, and legal nature. I have already talked about the most serious issues and ways to solve them above. And now we have to think about life after our victory. In the coming decades, the world will need to increase the production of renewable, primarily solar electricity.

ASEU, as an association of entrepreneurs working in “green”, “solar” energy, will make every effort to ensure that Ukraine “does not lag behind” in this process.

It is necessary to win not only on the military front but also on the energy front!


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