Implementation of the National Energy and Climate Plan by 2030

The experts of the National Resources and Energy industry group of BDO in Ukraine are monitoring these changes and assisting businesses in navigating the new market realities. 

In June 2024, the Cabinet of Ministers of Ukraine endorsed the National Energy and Climate Plan (NECP), which is projected to extend through 2030.  

This document outlines Ukraine’s primary objectives in the energy sector, encompassing infrastructure rehabilitation, renewable energy source development, and the implementation of energy storage technologies. The NECP encompasses five key areas: decarbonization, energy efficiency, energy security, electricity, and gas (biomethane, hydrogen, oil). 

• Introducing auctions for ancillary service providers

In June 2024, the National Energy and Utilities Regulatory Commission (NEURC) adopted the Resolution “On Approval of Amendments to Certain NEURC Resolutions”.  

Specifically, the amendments enable the negotiation of five-year contracts in the field of ancillary services, thereby ensuring sufficient reserves for frequency and active power regulation within the power system.  

These changes will create a more favorable environment for investors and stimulate the development of renewable energy in Ukraine.

• Regulation on wholesale energy market integrity and transparency (REMIT)

One of the priority tasks is to adapt Ukrainian legislation to the requirements of the EU’s Third Energy Package. This includes reforming the electricity and gas markets, ensuring the independence of the regulator, and creating competitive conditions for market participants.

A key step in this direction is the implementation of Regulation (EU) No. 1227/2011 (REMIT) on the wholesale energy market integrity and transparency. This will prevent market abuse and manipulation, as well as increase its transparency. 

On March 27, 2024, the NEURC approved the Regulation on Wholesale Energy Market Integrity and Transparency. The Regulation establishes guidelines for the handling and disclosure of insider information, as well as requirements for individuals involved in transactions with wholesale energy products. These measures are in place to prevent abuse and manipulation in the market.    

• Stimulating the development of the biomethane sector 

Following the enactment of the Law on Amendments to the Customs Code of Ukraine on Customs Clearance of Biomethane, in September 2024, the Ministry of Finance of Ukraine issued Order No. 380 dated August 1, 2024, which stipulates the necessary documentation for customs clearance of biomethane. 

This helps unblock biomethane exports, which has a positive impact on the country’s economy and energy independence. The first produced biomethane has already been pumped into Ukrainian underground gas storage facilities for further export.

• Changes in taxation of energy equipment

In July 2024, the Verkhovna Rada of Ukraine adopted draft laws No. 11258 and No. 11259. These laws stipulate the exemption from customs duties and value added tax (VAT) on energy equipment imported into Ukraine. The exemption includes power generating equipment, wind and solar generation equipment, and batteries (other than low-power batteries). These regulations will be in effect until early 2026 and apply to both individuals and businesses.

• Approval of the Strategy for Digital Transformation in the Energy Sector

On December 31, 2024, the Cabinet of Ministers of Ukraine approved the Innovation Digital Development Strategy of Ukraine through 2030.

The strategy includes several key elements, such as the implementation of programs in the energy decarbonization, green energy transition, hydrogen exports, energy storage, microgrids and smart grids, and green metallurgy projects. These initiatives necessitate large-scale retraining of existing employees in the energy sector and other related sectors, and training of a new generation of experts to design, implement, and operate new projects in the energy and related sectors. 

Another urgent task according to the strategy is to modernize the material and technical support of scientific and educational institutions used to train specialists in the energy sector and other areas of green transformation, and to create international partnerships in this area. 

The National Research Foundation’s existing grant programs provide funding, including grants of up to EUR 50,000 or EUR 100,000 for research projects by Ukrainian researchers relevant to the decarbonization and modernization of the Ukrainian energy sector.

• Amendments to the accounting of alternative energy sources 

On December 4, 2024, the NEURC amended its Resolution No. 2624 dated December 27, 2023, which concerns, inter alia, the availability and processing of information on electricity facilities and electrical installations of consumers using alternative energy sources for electricity generation in the central information and telecommunications platform Datahub. 

Ukraine is taking proactive steps to increase the share of renewable energy in its energy portfolio. The country’s legislative changes are designed to stimulate investment in renewable energy projects, streamline grid connection procedures, and establish mechanisms to support the production of green energy. 

Particular attention is paid to the development of distributed generation and micro-generation, which will increase the resilience of the power system and reduce dependence on large power plants.

Amendments to the Distribution Systems Code in 2024 created new opportunities for consumers, enabling them to install generating units for their own consumption and sell excess electricity.    

Additionally, we acknowledge Ukraine’s ambitious initiative to establish itself as a leading European hub for hydrogen production by 2050. The Hydrogen Strategy outlines a comprehensive plan that includes the generation of green hydrogen from renewable sources, its efficient transportation to the European Union, and the development of the necessary infrastructure.

• National Renewable Energy Action Plan until 2030 

The National Renewable Energy Action Plan until 2030 establishes the primary strategies for the sector’s advancement in 2025-2030. It is a component of the National Energy and Climate Plan until 2030, focusing on the renewable energy. 

The document sets a target of at least 27% renewable energy in total final consumption by 2030. 

• Support quotas and launch of “green” auctions

The Cabinet of Ministers of Ukraine by its Order No. 757-r dated August 13, 2024, established:

  
o   additional annual support quota for business entities that produce electricity from alternative energy sources for 2024;
o    schedule of auctions for the allocation of the support quota for 2024;
o    the maximum price offer of the auction participant for 2024 for electricity facilities or construction stages (start-up complexes) of electricity facilities that produce electricity from:  

In November, the government set a quota for 2025 that is higher than the quota set for the pilot auctions, in particular, for:

o    solar energy — 33 MW,    
o    wind energy — 250 MW, 
o    other types of alternative energy sources — 47 MW. 

• Law “On the Basic Principles of State Climate Policy” 

On October 8, 2024, the Law “On the Basic Principles of the State Climate Policy” was adopted, establishing the strategic directions and principles of the state policy in climate change. The document defines the terms and concepts used in climate policy and integrates the provisions of international agreements, including the UN Framework Convention on Climate Change. 

The law provides for: 

o    Reduction of greenhouse gas emissions. 
o    Adaptation to the effects of climate change. 
o    Ensuring sustainable development and environmental safety. 
o    Development and implementation of the National Energy and Climate Plan. 
o    Creation of a system for monitoring, reporting, and verification of greenhouse gas emissions. 
o    Implementation of mechanisms to stimulate emission reductions. 
o    Ukraine’s participation in international climate initiatives and programs.
o    Cooperation with other countries in the field of technology and experience exchange.

• Increase in the tariff for electricity transmission services

The NEURC has increased the tariff for electricity transmission services, effective from January 1, 2025, to UAH 686.23/MWh, which is 30% more than in the previous year. 

• Strengthening state control in the energy sector

Amendments were made to the action plan for state control of business entities in the energy and utilities sectors for 2025. 

This should improve the quality of services and compliance with regulatory requirements by market participants.

• Prospective directions for the energy sector in 2025

o    Development of micro-generation. Simplifying the procedures for connecting home and industrial solar power plants to the grid. This will reduce the load on the centralized power system and ensure energy independence of the regions.
o   Creating strategic gas reserves. This will help avoid energy crises in winter and reduce dependence on imports.
o   Infrastructure modernization. Allocate funds to modernize energy infrastructure, including power lines, substations, and gas transportation systems. This will ensure the resilience of the energy system to cyberattacks and physical damage.
o   Electricity market reform. Continued implementation of the Law “On the Electricity Market”, which provides for the full opening of the market, elimination of distortions in pricing and ensuring competition.
o   Implementation of “green” tariffs. Ukraine continues to move towards decarbonizing its economy. Legislative changes provide for support for renewable energy sources (RES) through auction mechanisms for feed-in tariffs. This will reduce dependence on imported energy and stimulate investment in solar, wind and bioenergy. 

Expected results:  

• Increasing Ukraine’s energy security and independence.
• Further integration of the Ukrainian energy system into the European energy space.
• Expanding investment programs and increasing the share of RES in the energy balance.
• Increasing the competitiveness of the energy sector.
• Reducing the negative impact of energy on the environment.

The legislative changes in the energy sector of Ukraine in 2024 and 2025 are aimed at achieving three key goals:  

• integration into the European energy market, 
• ensuring energy security, 
• transition to green energy.  

Implementing these reforms will require significant investment and political determination. However, the implementation of these reforms will allow Ukraine to become part of the European energy space, reduce its dependence on energy imports, and ensure a stable energy supply for citizens and businesses.

The success of these changes will depend on the effectiveness of public administration, the support of international partners, and the readiness of society to transform. 

BDO in Ukraine provides comprehensive support to market participants at every stage of their transformation, offering solutions that ensure stability and facilitate sustainable business development.
 

We offer a full range of professional services, with a focus on addressing the challenges and needs specific to the industry. 

• Audit of financial statements. 
• Tax consulting and accounting outsourcing — resolving transfer pricing issues, analyzing tax risks, preparing for tax audits. 
• Valuation and financial modeling — determining the value of a business, assessing the market value of assets, assessing war damage. 
• Consulting services — Due Diligence, optimization of business processes, development of investment projects, corporate finance. 
• Business process automation — development and implementation of software for automating accounting and reporting. 
• Sustainable development services (ESG) — ESG reports, strategy integration, labor protection and environmental safety. 
• Implementation of Microsoft products and cybersecurity services.

BDO in Ukraine is your reliable partner ready to help your business adapt to market changes, improve operational efficiency and support the development of the energy sector.