16.03.2026
The Ukrainian energy market has received one of the most significant packages of regulatory changes in recent years. Law No. 4777-IX, signed by the President of Ukraine, not only adjusts the support model for renewable generation but also lays the legal foundation for the development of energy storage, new models of active consumption, and more flexible use of network infrastructure.
However, the true value of these changes will be determined by how they are implemented in secondary regulation and market practice, note Avellum Managing Associates Inna Erbelidze and Rostyslav Mushka.
In an interview with the Energy Club media department, they professionally explained what opportunities the new law opens for investors and businesses and what legal challenges energy market participants should prepare for.
– The Law replaces the contract-for-difference model with a “market premium” mechanism. From legal and financial standpoints, is this mechanism sufficient to make new RES projects bankable (attractive for bank lending)? What risks does such a contract pose for an investor?
– In our opinion, the new support model improves the conditions for financing RES projects, in particular due to the relaxation of certain conditions for participation in auctions and a reduction in the size of performance guarantees. At the same time, it does not, by itself, make projects unconditionally bankable, as the payment discipline of the “Guaranteed Buyer,” the actual stability of settlements in the market, and the risks of failing to meet the deadlines for commissioning and connection will remain decisive for creditors. Additionally, it should be noted that support is tied to actual market sales of electricity, and for solar generation, the Law provides for time restrictions, which will also affect the project’s financial model.
– 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 assess these requirements? Won’t they become a “legal barrier” that makes such hybrid projects economically unfeasible?
– Since the supporting documents to the draft law, as noted by the Main Scientific and Expert Department, did not provide draft economic and technological justifications for the proposed provisions with relevant calculations, it is difficult to give an affirmative assessment of such requirements.
However, a clear regulatory logic can be seen in the establishment of strict criteria for the SPP+ESS category: the legislator is trying to support not formal hybrid projects, but those that actually provide system flexibility and allow for the shift of electricity supply away from solar peak hours. At the same time, the proportionality of specifically these thresholds — 80% of ESS capacity, 2 kWh per 1 kW, and daytime support restrictions — raises questions, as they could significantly narrow the circle of participants in the relevant auction category and affect the economics of the projects. Therefore, the risk here is that excessively strict criteria may limit competition if they are not properly justified by system needs.
– 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 key way to legally protect an investor is not to rely solely on the fact of “flexible connection” itself but to demand maximum certainty in the Technical Specifications (TS) and the connection agreement. If these documents do not clearly define what capacity is guaranteed, when and on what grounds restrictions on the non-guaranteed part are allowed, how they are recorded, and when full capacity must be ensured, then “flexible connection” may indeed turn into a mechanism of constant supply limitation. At the same time, a final assessment of this tool should be made after the NEURC adopts the secondary legislation.
– 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?
– Yes, the Law significantly simplifies the legal structuring of such configurations, as it directly permits the combination of generation, consumption, and energy storage systems within a single connection point, and also clarifies the licensing rules for energy storage activities. In practice, this simplifies the implementation of models for an enterprise’s own electricity supply using generation and ESS, configurations with a shared connection point at an industrial site, as well as specific models of electricity supply from an ESS operator to a consumer without a supply license. At the same time, the practical scope of such opportunities should be evaluated taking into account the future update of secondary regulation, primarily regarding commercial metering, contractual structure, and NEURC decisions.
– 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?
– The Law actually eliminated one of the conflicts related to the activities of business entities on the simplified taxation system as active consumers, namely the problem of offsetting in self-generation agreements, which previously conflicted with the Tax Code requirement for simplified tax payers to conduct settlements exclusively in monetary form.
However, the question still remains open as to whether “simplified taxpayers” can sell electricity as active consumers at all, since from the perspective of the Tax Code, such activity may be qualified as the supply of excise goods, which is prohibited for single tax payers.
Regarding ESCO, the Law indeed creates better legal prerequisites for models with RES and energy storage systems, as alternative energy projects and projects for installing ESS have been included in the relevant energy service regulatory field. However, the practical scale of such projects will depend on financing, standard contractual models, and the market’s readiness to work with such structures.
– 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)?
– 4777-IX certainly removes some of the key internal legal obstacles to the circulation of guarantees of origin in Ukraine, in particular regarding the registry regime and the legal nature of the GoOs themselves. However, it is premature to say that it eliminates the last barriers to full-fledged trade of Ukrainian “green” value in Europe: this requires not only internal changes but also full technical integration of the system, completion of AIB/EECS procedures, and, most importantly, mutual recognition of Ukrainian GoOs at the EU level.
– 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?
– From a legal point of view, this change certainly improves the conditions for electricity sales for gas turbine and cogeneration units, as it gives more freedom in choosing the contractual model and counterparty and reduces regulatory restrictions on the sale of electricity under bilateral agreements. This can positively affect the predictability of cash flow and, accordingly, the investment model of such projects.
But this novelty, by itself, does not mean an automatic or significant acceleration of the return on investment, as not only the rules for selling electricity but also the price of gas, the unit’s operation mode, the terms of a specific bilateral agreement, the buyer’s solvency, and the general market situation remain decisive for gas generation.
– 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?
– The cancellation of the “90% of the gas tariff” model does not mean an automatic review of existing tariffs. However, the Law explicitly gives a producer of heat from alternative energy sources a choice between two approaches: either to declare a tariff at the level of the current tariff for heat from natural gas for the relevant category of consumers (and if there is no such tariff, at the level of the average weighted gas tariff), or to choose tariff formation according to the general procedures (methodologies) approved by the Cabinet of Ministers or the NEURC.
Practically, this means that the producer needs to submit a new tariff calculation to the authorized body and go through the established procedure. The final algorithm, however, will largely depend on how these changes are reflected in secondary regulation and tariff methodologies.
– 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?
– The final text of the Law contains a number of novelties, the practical meaning of which will largely depend on further regulatory refinement. Therefore, the market should pay the greatest attention not only to the changes themselves but also to how they will be detailed in bylaws and implemented in contractual practice — in particular in the field of flexible connection, energy storage, guarantees of origin, and active consumption models.
Law No. 4777-IX sets a new logic for energy market development — more market-based, technologically flexible, and oriented toward the integration of new energy solutions. However, the main test for this reform is only beginning.
Ahead lies regulatory detailing, the formation of new contractual models, and the first investment decisions that will show whether the new legislation can transform from a regulatory framework into a real driver for the development of Ukrainian energy.
