16:44 09.02.2024

Bioenergy industry suffering millions in losses due to lack of new contracts with Guaranteed Buyer, stopping electricity production since late Jan – UABIO head

5 min read
Bioenergy industry suffering millions in losses due to lack of new contracts with Guaranteed Buyer, stopping electricity production since late Jan – UABIO head

The Bioenergy Association of Ukraine (UABIO) insists on the temporary suspension for biogas and biomass stations of the energy regulator NEURC resolution No. 178 dated January 24 on the conclusion of new contracts with the state-owned enterprise Guaranteed Buyer to preserve its obligations to purchase green electricity, since its standards cannot be fulfilled, and the industry faces bankruptcy because of this, said the head of the association, Heorhiy Heletukha.

"Bio-TPPs and bio-CHPPs are technically unable to fulfill the requirements of the resolution. To conclude a new agreement with Guaranteed Buyer, you need to enter into an agreement with Ukrenergo for a load reduction service. But bioenergy plants cannot provide such a service to Ukrenergo due to nature, this is technically impossible," Heletukha said in a quick interview with Interfax-Ukraine.

He explained that, for example, biogas plants need heat to maintain the reaction temperature, and if the production of electricity is stopped at the command of the dispatcher, the heat generation also stops, as a result of which the bacteria will die and the entire process will be destroyed. Thermal power plants using solid biomass, according to him, also have their own problems – if a reduction in power is required, they will not be able to stop the combustion in the boiler and will be forced to simply release the produced steam into the air.

Heletukha said that compensation for this is not provided, which will incur large additional costs for producers.

"In general, I have never heard of ideas about balancing the energy system with biomass and biogas plants," the industry representative said.

He said that in the two days that renewable energy producers had to sign new contracts with Guaranteed Buyer to maintain its obligations to purchase electricity at the feed-in tariff, such contracts were signed by approximately no more than 5% of bioenergy companies.

In total, according to his data, as of January 24 in Ukraine there were 69 biogas power plants with a total capacity of 158.7 MWE and 23 biomass power plants with a total capacity of 154.2 MWE.

At the same time, Heletukha expressed the opinion that the signatories did this solely in the hope that Ukrenergo, understanding the problem, would simply not give commands for unloading.

In addition, as the head of UABIO noted, signing contracts with Ukrenergo requires the installation of telemetry (metering equipment), which most companies also do not have, since it is impossible to physically install it in two days, and before the adoption of the resolution there was no such requirement.

In this regard, UABIO that the regulation for bioenergy plants is supended for three months, during this time to exclude the requirement for them to provide load reduction services, and also to provide for the enrollment and payment of electricity volumes at a feed-in tariff for such plants from January 27. During this time, the plants will also install telemetry, Heletukha assured, adding that, for example, Smilaenergopromtrans calculated its cost at approximately UAH 300,000.

At the same time, he said that "NEURC recognizes the problem, but does not yet know how to solve it."

Meanwhile, UABIO calculated that losses, in particular, for biogas plants due to the fact that Guaranteed Buyer, since January 27, cannot count the exhausted resource of those producers who have not signed new contracts with it, could amount to more than UAH 16 million per day.

"Let's calculate the biogas industry as a whole. Its capacity is 150 MW. We multiply by 0.75, because we consider our own needs and the instability of generation, and by 24 hours. This is approximately 2,700 MWh per day. With an average tariff of UAH 4.99 per kWh, that's UAH 16.2 million per day including VAT," the head of the association said, sharing his calculations.

He also added that, for example, for the Hals-Agro company, losses amount to UAH 1.5 million per day, direct losses due to the lack of electricity generation at Smilaenergopromtrans amount to UAH 500,000-550,000 per day.

At the same time, he said that this enterprise, having a gas boiler, switched to producing heat from gas provided by NJSC Naftogaz Ukrainy under PSO, and, for example, the Pereyaslivska bio-thermal power plant stopped producing electricity.

"But almost the entire bioenergy sector is now running idle, with the exception of a few companies that managed to conclude contracts before January 27, and their electricity is taken into account and paid for. But how can others work and not receive money? How long will they last? This is a threat to the industry's bankruptcy," the head of UABIO said.

Guaranteed Buyer itself reported on its website that in two days of January 2024 - from 00:01 on January 25 to 23:59 on January 26, it concluded 1,428 agreements with electricity producers from renewable energy sources: 716 additional agreements as part of the alignment of purchase agreements – sales of electricity at a feed-in tariff in accordance with the standard form of the contract in the new edition and 712 agreements on participation in its balancing group.

He said that by the end of the day on January 26, 215 participants in the state-owned enterprise's balancing group found themselves in a situation where, due to the lack of an agreement on the provision of load reduction services concluded with Ukrenergo, Guaranteed Buyer's obligations to sell and buy electricity from such participants were suspended.

They said that the existence of an agreement with Ukrenergo is a new requirement for concluding an agreement for participation in Guaranteed Buyer's balancing group, provided for by regulatory decree No. 178 dated January 24, 2024 and the norms of the law on green transformation 3220-IX dated June 30, 2023. The company continues the contractual campaign with those renewable energy producers who are gradually concluding contracts with Ukrenergo, Guaranteed Buyer added.

As of the end of the day on February 5, Guaranteed Buyer had concluded agreements for participation in his balancing group with 801 participants (there are more than 920 in total).