In 2021, investments in renewable energy projects in Central and Eastern Europe may double
On the photo: Sustainable Energy Forum SEF&CISOLAR 2020
The process of decarbonization of the global economy has passed the point of no return. On December 7, Tesla ended its stock market trading session with a market capitalization of more than 600 billion US dollars, surpassing not only all car manufacturers but even such a “pillar” of Wall Street as Warren Buffett’s Berkshire Hathaway (as of December 7, Berkshire Hathaway had a market capitalization of 543 billion US dollars). Just a week before, Tesla shares soared by one and a half times – from 398 to 600 US dollars. The main driver for such rapid growth was the news of Tesla’s inclusion in the S&P500. This event is significant for the world economy.
The largest funds investing in Tesla and other electric vehicle manufacturers, as well as renewable energy companies, are playing the long game in these industries, which means that the world economy witnesses irreversible transformations.
According to an updated forecast by Goldman Sachs published in September, more than 16 trillion US dollars will be invested in renewable energy projects globally by 2030.
One of the most attractive regions for green generation investments today is Central and Eastern Europe.
The main factors for this are large natural potential, availability of unused areas, as well as the prevailing share of traditional energy sources, including thermal and nuclear power plants, which in light of the global trend of decarbonization of the economy shall be replaced by renewable sources.
However, in many countries of the region, the development of renewable energy has slowed significantly due to the economic crisis, deficiency of the law, and corruption. Ukraine is one of them, but experts are confident that the renaissance in the field of green generation will begin in the Ukrainian and other Eastern European markets in the second half of 2021.
Today investment bankers distinguish seven main trends in the global economy, which are to be the basis for the startling development of renewable energy in the post-Covid period, as Vitaliy Daviy, the Director of IB Center Europe (the company organizing SEF&CISOLAR 2021), stated during his speech at the 12th Forum and Exhibition of Sustainable Energy of Central and Eastern Europe SEF&CISOLAR 2020, (held in Kyiv on October 20-22). In particular:
1. China, as the main industrial engine in the sphere of renewable energy, is recovering rapidly, with production and supply chains resumed.
2. Most countries are implementing packages of economic support for business and new projects aimed at forming a carbon-free economy.
3. The cost of electricity storage equipment will continue to fall, opening up huge opportunities for competitive production of green electricity.
4. Many countries have relied on offshore wind farms, with a huge potential for these projects.
5. The EU, China, and the United States have relied on the development of green hydrogen production, which is possible only with the extensive use of renewable energy sources for electrolysis.
6. Reduction of prices for solar modules and components, the basis of which is technological advances and production growth.
7. Decentralizing electrical grids, as the main trend, is impossible without renewable energy sources and energy storage technology.
On the photo: Vitaliy Daviy, CEO IB Centre Europe, Founder SEF&CISOLAR
“Today, the shares of the companies representing the electric transport industry, renewable energy, and pharmaceuticals show the greatest growth in the stock market, with these trends gaining momentum, as evidenced by the fact that the world’s largest investment funds play the long game in these positions”, said Vitaliy Daviy.
In 2021, investments in renewable energy projects at the global level may double compared to 2020, according to IB Center estimates, with the acceleration of the industry also observed from the second half of 2021 in Ukraine.
The European Union has declared decarbonization as the basis of its economy. The other countries will inevitably follow the same path, including Ukraine, which has to comply with EU directives, according to Kostiantyn Hura, the Acting Head of the State Agency for Energy Efficiency of Ukraine.
The Head of the State Agency for Energy Efficiency has stressed that the energy capacity of Ukraine’s GDP is one of the highest in the world: 2.5 times higher than in Poland and 3.3 times higher than in Germany. Therefore, there are simply no options for the country, other than a green transition.
On the photo: Kostiantyn Hura, the Acting Head of the State Agency for Energy Efficiency of Ukraine
“To implement the energy strategy, we need to raise up to 20 billion euros. As for the energy efficiency sector, the market volume is 50-70 billion euros. The task of the state is to create such conditions when business works and invests in these areas,” said Kostiantyn Gura.
The challenges, which the world economy faces in the context of the pandemic, are also having an adverse effect on the renewable energy sector. In Ukraine, the situation is further complicated by a new energy market model launched last year and corrupt practices by individual market participants. As a result, there was an imbalance of payments in the industry, with the debts of the Guaranteed Buyer State-owned Enterprise to renewable energy companies accumulated.
On the photo: Hennadii Ivanov, Deputy Director of the Guaranteed Buyer State-owned Enterprise
During his speech at SEF&CISOLAR 2021, Hennadii Ivanov, Deputy Director of the Guaranteed Buyer State-owned Enterprise, noted that the company’s debts to the green energy in 2020 had partially been repaid, and the State Enterprise hopes that in 2021 there will be implemented a set of measures to stop the debt growth, with the source for repayment of all debts to market participants identified.
The commercial accounting system is not operating properly, as Yurii Gnatiuk, Director of the Energorynok State-owned Enterprise, explained. During the operation of the early market model, significant debt is known to have accumulated. However, during the year of operation of the new market model, many mistakes were made, with no measures taken to improve the situation. Also, the technical conditions of the industry are quite low, according to Yurii Hnatiuk. It happens due to blackouts, uncontrolled scheduling, as well as lack of maneuvering and storage capacity.
On the photo: Yurii Gnatiuk, Director of the Energorynok State-owned Enterprise
“I suggest combining experience which will show that the state does not deal with this issue, with the business community successfully purchasing software packages, assisting manufacturers to make qualitative forecasts and making money in this sphere. As for debts, we are to reimburse all the funds to the market participants in early 2021,” said the Head of Energorynok.
Solar and wind energy is the basis of the renewable energy sector in the region. However, within the scope of the growing trend of decarbonization of the economy, and the use of waste resources, investors’ attention to the bioenergy segment is also growing.
The bioenergy industry has grown more than 3 times within the period of 2010-2018 – an increase of 31% per year, according to the Bioenergy Association of Ukraine. By 2035 we will be able to observe a 5-fold increase in the industry’s development, as Heorhii Heletukha, Chairman of the Board of the Association, said during his speech at SEF&CISOLAR 2020. Today biomass constitutes 77% of all RES in the total supply of primary energy. By 2050, bioenergy will account for 42% of the total energy balance of Ukraine, according to the forecast of the Bioenergy Association of Ukraine.
On the photo: Georgiy Geletukha, Chairman of the Bioenergy Association of Ukraine
“We have devised a roadmap for developing bioenergy in Ukraine by 2050. According to its indicators, to reach 42% of the biomass in Ukraine by 2050 we are required to build up to 5,200 MW of biomass power plants, up to 49,650 MW of thermal power plants, which will replace gas and other fossil fuels in volumes up to more than 22 billion tons of oil equivalent, as well as to reduce greenhouse gas emissions by 60 million tons. This step requires investing 21-35 billion euros, depending on the equipment. Up to 188,000 new jobs can be created in the industry,” Georgiy Geletukha noted.
Market participants also consider solar energy to be a great potential for development, but an important prerequisite for further growth is to increase the technological level of electricity metering.
The introduction of new mechanisms of the accounting and billing system can become a powerful driver of market development, according to the founder of the Atmosfera Group Oleksii Badika. Thus, these mechanisms should be transparent and should encourage all market participants to develop. The expert also suggested taking into account Net Metering, the American system, which can simplify the accounting procedure.
On the photo: Founder of the Atmosfera Group Oleksii Badika
“Net Metering is the next step, after the green tariff, to stimulate developing the segment of small solar power plants, as well as the opportunity to use the infrastructure of the power system to optimize the balance of generation consumption and improve the economic performance of mini-SPP. We believe that Net Metering is able to re-launch the market of small stations for own consumption and make such projects available and popular, as well as give a powerful impetus to the development of a new idea of micro and mini-distributed energy,” said Oleksii Badika.
Nadiia Petruchenko, Business Development Director of SPP Development Ukraine, in her report at the SEF&CISOLAR forum pointed out that in the format of the instability of government decisions and systems when seeking answers to important questions, companies should pay sufficient attention to efficiency and productivity criteria in 2021.
On the photo: Nadiia Petruchenko, Business Development Director of SPP Development Ukraine
“To ensure the successful implementation of the project in tough market conditions, EPC should have its own logistics, a full-fledged staff of specialists, as well as a high credit rating in banks. Such a company should be able to purchase and deliver all the equipment for the project in time and at its own expense. This is an indicator of its relationship with suppliers. An effective EPC company should be able to provide credit for the project. That is an indicator of its credit stability. The company should be able to fully put the project into operation, show its financial model, its prospects, provide refinancing, if necessary, show a possibility of further implementation or resale of the project and generally cooperate with the investor comprehensively,” underlined Nadiia Petruchenko.
On the photo: Oleksandr Symonov, Marketing and Sales Director of Odeskabel PJSC
Oleksandr Symonov, Marketing and Sales Director of Odeskabel PJSC, spoke of the reliability of sustainable energy projects. The company sells 80% of PVC cables but for more than 20 years the whole of Europe has been using cross-linked polyethylene solutions (we are talking about 1 kV cables), according to Oleksandr Simonov. European cables have a great technological advantage – both by the size (have smaller dimensions) and by the fact that they are more heat-resistant. Therefore, the main trend in Ukraine will be the growth of demand for this type of product, with Odeskabel actively developing its production.
Today an increased productivity of solar modules while reducing their cost is the main driver for the rapid development of solar energy in the global market. One of the leaders in this race is Longi Solar which at SEF&CISOLAR 2020 presented a line of high-performance modules Hi-MO4 and Hi-MO5.
The updated Hi-MO4 module has a size of 2,094 mm, with the size of the M6 plate of 166 mm. Such optimized module size significantly increases its efficiency, according to Longi Solar Technical Manager Monica Ju. In addition, the company has managed to significantly reduce the weight of the glass used to cover the modules.
On the photo: Monica Ju, Longi Solar Technical Manager
“The ultra-high power module was designed by the company to significantly reduce the total LCOE (Levelized Cost of electricity). This fact significantly improves the investment attractiveness of projects. The design should be based on ensuring the reliability of the modules. Therefore, the statement the larger the size of the module, the better is not correct,” said Monica Ju during the presentation.
PERC plates in solar modules are still the most cost-effective technology, Longi Solar's manager stressed.
Denys Kosoi, CEO of ETL Group, presented a new point of view towards the development of the market and renewable energy projects. He considers that the main costs for EPC in Ukraine are equipment, materials, construction costs, design documentation, approval, and connection to grids.
On the photo: Denys Kosoi, CEO of ETL Group
“As for solar modules, their cost has decreased more than 2 times over the last 8 years, with the power density of the module per square meter increasing one and a half times over the last 10 years. The power of inverters has increased 11 times over the last 11 years. If you consider the analysis over the last 10 years, the cost per unit of product (module or inverter) has decreased by almost 4 times, with the cost of transportation decreasing 3.5 times. At the same time productivity has increased by +220%. Over the last 2 years, the cost of equipment has decreased by 25%, transportation can save 17%, with productivity increasing by 15%. These tendencies enable to reduce the cost of the project by 24%”, said Denys Kosoi.
According to Avenston CEO Dmytro Lukomskyi, the global LCOE for solar energy has fallen by 82% since 2010, suggesting that solar energy is increasingly competitive with traditional energy, as well as affordable.
On the photo: Dmytro Lukomskyi, CEO of Avenston
“Favourable factors operate during the construction of the SPP project for own needs, namely: inexhaustible solar energy, high profitability (payback period of 5-7 years), affordable construction cost, low repair and maintenance costs, reduction of power supply costs and no need to coordinate the SPP with the state regulatory body,” Dmytro Lukomskyi explained.
The slow development of renewable energy in Ukraine has led to changing business models and the sales structure of many players due to systemic and market problems.
In particular, according to the CEO of Photomate LLC Anton Abramov, last year the sales structure of the company (representing the line of Huawei investors) changed significantly. In 2020, more than half (54%) of all Photomate sales were made in Poland. In Ukraine, this indicator was 16%. For comparison, in 2019 the share of Ukraine in the sales structure was about 70-80%.
On the photo: Anton Abramov, CEO of Photomate LLC
“We are going to sell equipment for about 300-350 MW by the end of 2020,” said Anton Abramov.
The stimulus for accelerating the construction of new renewable energy facilities will be the digitalization of the industry and the use of artificial intelligence, which in turn will completely change the industry.
Such technologies are already used by Huawei, for example, the power system is supported by AI Boost technology in inverters. Most of the new inverters will be protected against the AFCI arc, as Huawei Senior Production Manager Oleksandr Alokhin said.
On the photo: Oleksandr Alokhin, Senior Production Manager, Huawei
“We believe that this is the best solution, as in the struggle for efficiency and compactness, most manufacturers have already reached the limit, but it is smart features, safety features, where you can really develop further. And the use of these functions has become possible due to artificial intelligence and neurons,” said Oleksandr Alokhin.
During his presentation, Yevhen Prydatko, CIS Business Development Manager, Jinko Solar, shared the latest achievements in the production of high-performance modules. One of the bestsellers of the company is the modules of the Tiger PRO line. These are modules with a capacity of up to 585 watts. One of the main differences of this module is Tiling Ribbon, according to the expert.
On the photo: Yevhen Prydatko, CIS Business Development Manager, Jinko Solar
“Our engineers have been able to develop a module with almost no distance between the cells, and the cells, like tiles on the roof, are superimposed on one another. Thus, we have achieved increased efficiency of the module and, accordingly, the efficiency of the module affects all other indicators in the project, including the Levelized cost of electricity, financial performance, payback, and the cost of BOS (balance of system) of the project,” Yevhen Prydatko said about one of the achievements of Jinko Solar.
Oleksandr Kubankin, CEO of Solars Ukraine, reminded all market participants of the mission which unites everyone – promoting alternative energy sources.
On the photo: Oleksandr Kubankin, Director of Solars Ukraine