Photo by Luca Bravo on Unsplash

The Ukrainian parliament could impose a new 3.2 percent excise tax on renewable energy producers, and that is too much for Vindkraft Ukraina and other green energy producers in Ukraine. 

Vindkraft Ukraina had plans to build a 200 MW wind farm in Kherson this year, but those plans are suspended after a new bill in parliament threaten to increase the excise tax on renewable energy producers by 3.2 percent. The increase will lead to additional costs of around three million euros per year for Vindkraft Ukraina, said Carl Sturen, company CEO.

“If a decision on excise tax is made now, it will be necessary to recalculate it (our loans) again, to renegotiate that we cannot fulfill the payment schedules. This is an ongoing process,” said Swedish investor Sturen at a press conference according to open4business

He said that the changing rules forced him to renegotiate with banks all the time. The discussion about increasing the excise tax on renewable energy producers is still ongoing in the Ukrainian Parliament. It comes after a year with lots of challenges for the green energy sector in Ukraine, which is dealing with debt and changing rules. 

One problem occurred last year when the Ukrainian government halted payments of the so-called green tariffs to the renewable energy producers in Ukraine, arguing that the tariffs were too high and needed to be reduced. It led to lengthy negotiations and a new deal, which reduced the green tariffs, and the Ukrainian government promising to pay its outstanding debt to the companies, but the green tariffs have still not been paid in full. 

“Nobody is funding; they are waiting for the law and the memorandum to be fulfilled. Everything is in limbo,” said Sturen, referring to how everyone is waiting and how the changing conditions continue to result in a difficult situation for the companies. 

Vindkraft Ukraina is not alone

The Solar Energy Association of Ukraine has previously been out and criticizing the Ukrainian government for its sector regulations. In May this year, Artem Semenishin, head of the organization, said that “(state company Ukrenergo) systematically applies commands to restrict the production of green energy” and argued that the company and the Ukrainian state aren’t honoring the agreement made last year by lot paying their debt. 

The governments’ talk about increasing the excise tax on renewable energy producers by 3.2 percent has resulted in even more criticism. Some companies had expected that taxes would be stable for the sector after the reduction of the green tariffs last year. 

“Nefco had already in 2020 decided to stop investing in new projects in the renewable energy sector in Ukraine due to the green tariff situation, which hasn’t been solved yet,” wrote Nefco, the Helsinki-based Nordic Environment Finance Corp. in a statement.

“In addition, Nefco believes that introducing an excise tax on renewable energy is a step in the wrong direction. In fact, clean energy should be subsidized, whereas fossil energy should be subject to a CO2 tax. The reason for not investing in new renewable energy projects is, however, based on the green tariff agreements not being fulfilled,” Nefco wrote. 

The crisis back in 2020 about the green tariffs ended with a new deal with a reduction. The green tariffs were reduced by 7.5 percent for wind power production and 15 percent for solar. In exchange, the government promised to pay its debt to the renewable energy producers by the end of 2020.