13.03.2026
The Law No. 4777-IX, signed by the President of Ukraine, launches a large-scale reboot of the energy market rules — from a new model of support for renewable energy to the development of energy storage systems, distributed generation, and the trade of the “green” value of electricity. The document not only changes the economics of investments in RES but also forms new legal frameworks for hybrid projects, flexible grid connection, industrial microgrids, and ESCO models.
In an interview with the Energy Club media department, Inna Yakubovska, attorney and head of the energy business support department at “Fedotov & Partners,” explained the opportunities and risks this law creates for investors and market participants, whether the new mechanisms will truly become bankable for bank financing, and which “grey areas” might cause future legal disputes.
– Ms. Inna, the Law replaces the feed-in tariff model with a “market premium” mechanism. From a legal and financial perspective, is this mechanism sufficient to make new RES projects bankable (attractive for bank lending)? What risks does such a contract pose for an investor?
– The introduction of the market premium mechanism for auctions for the allocation of support quotas by Law No. 4777-IX creates a new basis for financing RES projects; however, it is accompanied by certain regulatory requirements that directly affect their bankability and risks.
This mechanism contains a number of factors that are positive in this matter.
Support under the market premium mechanism is provided for 12 years. This allows banks to build long-term financial models for capital recovery. Income predictability and allowable deviations. The business entity sells electricity on the market at free prices but receives a service (premium) from the Guaranteed Buyer. For certain categories, for example, solar energy with energy storage systems (ESS), a maximum bid price has been set — up to 12 euro cents per 1 kWh, which is a significant indicator for investors.
However, despite its potential attractiveness, this mechanism contains several critical risks that are dangerous for future investors.
The market premium agreement becomes invalid if the investor fails to provide a copy of the grid connection agreement or power capacity reservation agreement within 12 months from the date of its conclusion. In such a case, the Guaranteed Buyer has the right to utilize the bank guarantee.
Tight construction deadlines: For solar power plants (SPP), the facility must be commissioned and connected within 18 months. For other types of RES — within 36 months (or 42 months if the contract is concluded during martial law). Failure to meet these deadlines also entails the invalidity of the contract and the collection of financial security.
High financial obligations: To participate in the auction, an investor must provide a bank guarantee of 5 euros per 1 kW, and after winning — ensure contract performance in the amount of 10 euros per 1 kW.
Restrictions have been established for hybrid projects (SPP + ESS): To receive support in this category, hours have been established when support under the market premium mechanism is absent for two consecutive hours during the period from 10:00 to 16:00.
The legislator introduces a bankable mechanism through the Law; however, legal risks largely remain on the investor’s side.
– Strict technical requirements have been established for participation in auctions in the “SPP+ESS” category (battery capacity of at least 2 kWh per 1 kW of capacity, restrictions during daytime hours). How do you evaluate these requirements? Won’t they become a “legal barrier” that makes such hybrid projects economically unfeasible?
– The state is changing priorities: from a simple increase in RES capacity to stimulating the flexibility and stability of the energy system. The requirements for BESS (Battery Energy Storage Systems) are quite strict, but they are compensated by a higher support price and a guaranteed market share through the quota.
The Law sets a fairly high bar for energy storage systems (ESS) within an SPP:
The ESS capacity must be at least 80% of the SPP capacity. The ESS energy capacity must be at least 2 kWh for every 1 kW of generation. But the legislator balanced this by setting an increased price cap at the auction for such facilities — 12 euro cents per 1 kWh.
The requirement regarding the absence of support for two consecutive hours between 10:00 and 16:00 is a key tool for forced shifting of the energy output schedule. Such a requirement encourages the investor to effectively configure the ESS operation so as not to lose income during periods of highest solar activity, since the market premium will be paid only when the grid actually needs energy.
It is inappropriate to consider the proposed conditions a “legal barrier.” The Law requires that the share of such hybrid projects in the annual support quota be at least 10%, which effectively creates a separate niche where competition will be lower, due to the complexity and cost of such projects, than in the general RES category. This innovation cuts off cheap but unstable projects in favor of technologically complex hybrid solutions.
– The introduction of “flexible connection” (with the possibility of capacity limitation) is a long-awaited step for regions with a lack of transmission capacity. But how to legally protect the investor from abuses by regional energy distribution companies (DSOs) so that “non-guaranteed” capacity does not turn into permanent plant shutdowns?
– The Law contains a series of legal safeguards designed to protect the investor from unreasonable restrictions by system operators (DSO/TSO).
The customer has the right to propose a flexible connection themselves as an alternative to expensive reconstruction or construction of external power supply networks. In such a case, the system operator has no right to refuse the customer a flexible connection.
Restrictions on grid access can only be applied in accordance with the concluded agreements. This means that all parameters of the “non-guaranteed” capacity, conditions, and schedules of possible restrictions must be clearly defined in the contract, which gives the investor a legal basis to challenge violations of these conditions by the DSO/TSO.
By definition, the permitted capacity under a flexible connection can be partially guaranteed, i.e., available for use at any period of time. This ensures the minimum necessary level of energy output that cannot be restricted by the operator.
To prevent abuse, technical means for automatic disconnection or load reduction must be installed at the connection point only in case of exceeding the limits.
In summary, it should be noted that the main protection tool is oversight through the Regulator: grid development plans and methodologies for forming the fee for flexible connection are subject to approval by the NEURC, which creates a clear mechanism for interaction between the investor and the grid operator.
– The Law allows for the combination of generation, consumption, and ESS at a single connection point, and also raises the licensing threshold for ESS to 5 MW. Which new business models for industrial enterprises are now becoming completely legal?
– Law No. 4777-IX introduces fundamental changes to the rules for the operation of generation and consumption facilities, effectively legalizing the concept of industrial microgrids. This opens the way for the implementation of new business models that were previously legally grey or blocked by technical requirements.
For example: An energy storage system operator now has the right to provide power supply to other consumers who share a common grid connection point with them at the TSO/DSO networks.
A large plant (ESS owner) can sell surplus stored energy to tenants or neighboring workshops on its site. Such a sale is carried out under a purchase and sale agreement and does not require obtaining a license for the supply of electric energy.
Raising the licensing threshold for ESS at one measurement site to 5 MW will simplify the functioning of businesses, which will be able to install such ESS for peak shaving or for providing backup power without the bureaucratic procedures of obtaining a license from the NEURC.
– The Law allowed active consumers to be on the simplified taxation system and included RES and batteries in the ESCO mechanism. Do you expect a boom in the installation of solar stations at enterprises using the ESCO model without capital investment from the customer?
– Such changes create significant prerequisites for a substantial increase in the number of distributed generation projects at enterprises, as it removes critical legal and financial barriers for the ESCO model and small businesses.
The most important change is the introduction of amendments to the Law “On Energy Efficiency.” Now, “alternative energy projects and energy storage systems” are officially included among energy service facilities, where payment is made through savings on energy consumption costs. An ESCO company installs a solar power plant (SPP) and energy storage systems at its own expense on the enterprise’s territory. The customer does not spend their own capital but pays the investor with a portion of the funds they saved by not buying expensive electricity from the grid. The inclusion of ESS allows enterprises not only to save money but also to ensure energy independence during power outages, which is critical for Ukrainian business today.
Previously, the participation of entrepreneurs on the simplified taxation system in self-generation mechanisms was legally complex due to tax risks associated with bartering or net-billing. The new norm explicitly states that for active consumers — business entities on the simplified taxation system, the contract must provide for the possibility of conducting settlements for supplied and withdrawn energy without applying offsetting. These changes transform an industrial enterprise from a passive consumer into an active market participant that can flexibly manage its balance and monetize its own energy infrastructure.
The combination of the possibility of attracting external investments through ESCO and the removal of tax barriers for single tax payers indeed creates ideal conditions for the mass installation of SPPs at Ukrainian enterprises in the coming years; however, it should be remembered that for the implementation of complex schemes (for example, powering related parties or flexible connection), grid operators will require the installation of automation to prevent overloading or unauthorized withdrawal, and that ESS remain expensive, which may extend the payback period of ESCO contracts.
– The Law removes the registry of guarantees from the scope of the general law on public registries and eliminates tax risks (lack of independent value during transfer). Does this remove the last legal obstacles for full-fledged trade of Ukrainian “green” value in Europe (particularly in the context of CBAM)?
– The adoption of Law No. 4777-IX indeed removes critical legal obstacles and creates the necessary basis for integrating the Ukrainian Guarantees of Origin (GoO) system into the European market. The main changes contributing to this include: simplification of registration procedures, removal of tax and price risks, and mutual recognition with EU countries.
The Law establishes that the creation and operation of the registry of guarantees of origin is carried out without taking into account the provisions of the Law of Ukraine “On Public Electronic Registries.” This allows the NEURC to flexibly and promptly adapt the technical requirements of the registry to the standards of the AIB (Association of Issuing Bodies) — the European association that ensures cross-border trade of guarantees.
The Law clearly defines that guarantees of origin that producers (operating under the feed-in tariff or market premium mechanism) transfer to the Guaranteed Buyer have no value. This removes the risks of tax disputes regarding the “free transfer of an asset” and the need for additional taxation of these operations.
The Law introduces the principle of reciprocity in the recognition of guarantees with EU and Energy Community countries, which removes legal obstacles. Creating a legitimate mechanism for confirming the “environmental value” of Ukrainian energy is a key EU requirement. This will allow Ukrainian exporters of goods (metal, cement, etc.) to use these guarantees to confirm the low carbon footprint of their products, which directly affects the amount of payments within CBAM.
– Gas turbine and cogeneration units were allowed to sell electricity under direct bilateral agreements, bypassing the exchange. To what extent will this simplify the return on investment in gas generation?
– The introduction of the right for distributed generation facilities, which include gas turbine and cogeneration gas piston units, to sell electricity under bilateral agreements on a voluntary basis, bypassing mandatory electronic auctions, is a significant step toward improving the economics of such projects.
Such changes allow for the conclusion of long-term contracts directly with industrial consumers and fixing the price for a long period, which makes the cash flow predictable and facilitates obtaining bank loans.
The Law allowed producers, in particular, cogeneration gas piston units, to power electrical installations for their own consumption and related parties located on the same or adjacent plots.
The possibility of avoiding exchange trading and switching to direct contracts with end consumers allows investors to create closed energy associations. This minimizes the impact of market price fluctuations and allows for faster equipment payback through direct energy sales at more favorable prices to consumers interested in energy supply reliability.
– The “90% of the gas tariff” rule has been canceled. Now tariffs can be economically justified or equal to gas tariffs. What legal steps should existing biomass heat producers take to review their tariffs according to the new rules?
– Based on Law No. 4777-IX, which amended Article 20 of the Law of Ukraine “On Heat Supply,” the procedure for reviewing tariffs for biomass heat producers has significantly changed and simplified. The main change is the abolition of the mandatory 10% discount and granting the producer the right to choose the most advantageous economic model with protection against administrative red tape through a 30-day “silent consent” period.
List of the main legal steps that existing producers must take to take advantage of the new rules:
The producer now has the right to independently choose one of two options for setting a tariff for the needs of the population and budgetary institutions: at the level of the current tariff for thermal energy produced using natural gas for the relevant category of consumers; based on economically justified costs in accordance with methodologies approved by the Cabinet of Ministers of Ukraine or the NEURC.
Next stage: the producer must prepare an application and calculations according to the chosen methodology.
The application and the package of calculations must be submitted to the local self-government body or another authorized body.
Important: be sure to obtain a copy of the application or a description of the documents with a mark indicating the date of their receipt, as this document is legal confirmation of the start date of the review.
The Law introduces a clear deadline for the regulator: the authorized body has 30 calendar days to set a new tariff or provide a motivated refusal. If no decision is made within this period, the tariff is considered automatically set at the level submitted by the producer in their application.
Taking into account that the principle of “silent consent” applies in this case, a copy of the application with a receipt mark becomes the primary legal evidence of the legitimacy of the new tariff in relations with consumers and regulatory authorities.
– Reading the final text of the law, what “grey areas,” conflicts, or unresolved issues do you see? What legal disputes should energy market players prepare for in the near future?
– After analyzing the text of Law No. 4777-IX and related legislative acts, several critical “grey areas” and potential legal conflicts can be identified that may become the basis for litigation.
The Law obliges producers to return funds already received for periods when the facilities were under occupation and did not operate synchronously with the IPS of Ukraine. The determination of the “time of termination and resumption of supply” is entrusted to a Special Commission, whose decisions will be based on “verified information” that can be challenged as subjective.
If an investor fails to provide a copy of the connection or capacity reservation agreement within 12 months from the date of the auction contract, such a market premium agreement becomes invalid. The term “invalid” in civil law usually means that the transaction does not create legal consequences from the moment of its execution. This could trigger demands for the return of all premiums paid during this period.
Thus, Law No. 4777-IX forms a new architecture for the Ukrainian energy market — technologically complex and integrated with European rules. It opens opportunities for the development of hybrid RES projects, energy storage systems, industrial microgrids, and new models of interaction between generation, consumers, and investors.
At the same time, a significant part of the innovations will require detailed regulatory refinement and the formation of application practice. It is on the bylaws, the position of the NEURC, and the first judicial precedents that it will depend whether the new mechanisms will truly become predictable and financially attractive for investors.
As Inna Yakubovska summarizes, the law creates new opportunities for the market but simultaneously transfers a significant portion of the legal and financial risks to the investor. Therefore, the coming years will be a period of practical testing of the new rules, and it is then that it will become clear how effectively they will work for the modernization of Ukrainian energy and the attraction of capital to the industry.
