1. When all the generated electricity (biogas generation) is sold to the power grid by the "green" tariff will it be possible for the generating company (cattle-breeding complex) to use the same electricity for consumption on their own needs?
Your company (cattle-breeding complex) can physically use the electricity generated by the facility working on the "green" tariff. This might be easily explained by the laws of physics. An electrical current resulting from the generation flows primarily toward the power receivers of the consumer ensuring its power supply. Then, surplus electricity from the accumulated generation (if any) will be outputted to the external power grid.
In this case, the procedure of payment for electricity shall be the following for your company:
- Wholesale Electricity Market will pay for all generated electricity by the "green" tariff equal to $ 1.61 UAH per 1 kW / h, which determines the income amount of your company;
- Power energy that will be consumed by the cattle-breeding complex itself will be purchased at DSO (Oblenergo) and it will cost 1.21 UAH per 1 kW / h what determines expenses of your company.
At the same time, your company (cattle-breeding complex) will possess an additional independent source of electricity generation using biogas.
2. What is the economic benefit from sale of the electricity produced from biogas by the "green" tariff in comparison to use of the same electricity for own needs of the cattle-breeding complex?
The main factors affecting determination of the economic indicators are:
- Generated by the "green" tariff electricity might be outputted to the grid during 24 hours (~ 8000 hours per year), whereas electricity consumption of the company is limited to 8 or 12 hours a day (no more than 4000 hours per year);
- Difference between the price on electricity that company purchases by retail tariff and the "green" tariff price for the generated and sold by the company electricity makes 40 kop./kW·h.
The table below shows that you will receive on $ 1 000 000 more than you could save on own electricity consumption if all electricity generated by 1 MW biogas facility during 4,000 working hours per year will be sold by the "green" tariff:
In this case, you will be exempt from income tax until 2020 (inclusively).
3. What is the biogas project payback period?
Starting from 01.04.2013 entered into force amendments to the Law of Ukraine “On Electricity” which set the minimal rate of the “green” tariff for electricity generated from biogas equal to 161,35 kop./kW·h.
The payback period of biogas projects varies from one to three years.
It should be noted that by far the quickest payback period (one to two years) is for the generation projects using landfill gas collected at the solid domestic wastes (SDW) landfill.
This is due to the fact that the gas collected at SDW landfills is produced naturally and does not require any additional cost for its production.
Payback period for the biogas projects where will be used the other raw materials such as residues from cattle-breeding, poultry, food production is about three years.
Please note that among the renewable energy projects the biogas projects are the most cost-effective.
4. What are present requirements for grid connection of the alternative energy facilities?
According to the new rules for connection of power energy facilities which entered into force in 2013 the power supplying company (DSO, NPC "Ukrenergo") has no right to refuse to the Customer in connection to its power grids.
In this case, the responsibility of the Customer includes:
- Applying for connection;
- Payments for developing of the technical specification.
Responsibility of the power supplying company:
- Development and issuing of the technical specification;
- Development of the design and estimates up to the Customers connection point;
- Implementation of the construction and installation works up to the Customers connection point;
- Commissioning of the Customer’s facility.
Connection of the renewable energy facilities shall be provided with 100% financing from the power supplying company in the following form:
- 50 % - funds that are included in the tariff for electricity transmission;
- 50 % - returnable financial support of the customer.
5. What difficulties may arise in the implementation of renewable energy projects and in obtaining the "green" tariff for electricity?
Indeed, the process of the facility commissioning and then obtaining of the "green" tariff and entering into the agreement on electricity purchase-sale is not simple, and even more complicated by the fact that the renewable energy facility shall be put into operation by the various organizations:
- DSO (Oblenergo);
- NPC "Ukrenergo";
- Inspection of the State Architectural Control;
- Licensing department of the National Commission for State Regulation in the Sphere of Energy ( NERC);
- NERC Department of the generating;
- SE "Energorynok", etc.
It should be borne in mind that each of these organizations has its own constantly updated list of demands to the facility.
Based on the foregoing we conclude that to complete all required approval procedures it is necessary to have the experienced professionals employed by the Customer, or an engineering company experienced in renewable energy projects implementation.
Experience of renewable energy projects implemented by our company shows a direct correlation between the period of implementation of the project and competent passing all the approval procedures. In case of compliance with all requirements the implementation period of the project is about 6 months to 1 year. In case of non-compliance to the procedures the period might be up to 3 years.
6. When will be received payment for the electricity produced from renewable energy sources and sold in the Wholesale Electricity Market?
The state guarantees that producers, which use alternative (renewable) energy sources, shall receive funds for sold electricity in first turn.
Based on the experience of renewable energy projects implemented by our company we can say that payments for outputted to the grid electricity are made daily.
After performing the netting SE "Energorynok" pays to the producer full balance of funds at the end of the current month.
7. Who can become a producer that uses alternative (renewable) energy sources and sell electricity by the "green" tariff to the state?
It all depends on the type of the alternative energy facility.
Solar, wind or small hydro energy might be used by anyone who owns (leases) the corresponding land. Everyone has access to these resources. Restrictions may be imposed only by geographical features of location of the perspective power plant.
If it is planned to use biomass or biogas as an energy source for the power plant, then such project is suitable for those who have access to the necessary resources base (residues from agriculture and forestry, cattle-breeding and solid domestic and industrial wastes, other wastes).
Namely, for the owners of industrial facilities of the following industries:
- Alcohol and beer production;
- Cattle-breeding;
- Poultry;
- Food production;
- Agriculture, etc.