Constraining factors for development of alternative energy

Belarus: Edict № 209 of 18 May 2015 On usage of renewable energy sources introduces new rules in the field of alternative energy in Belarus.

The new Edict introduces quotas for renewable energy sources. The plan is to cut the overall electrical capacity of plants in the field of alternative energy. The procedure for setting and allocating quotas is to be defined by the Government of the Republic of Belarus.

Negative changes refer to the mechanism for establishing a coefficient for the renewable energy sources rate. As far as is known, incentive coefficients are differentiated on the basis of the nature of the energy source. Under the new Edict, coefficients are to be differentiated not only with respect to the nature of the source but also with respect to electrical capacity, demonstrated life of equipment on the day of introducing the plants into service as well as other characteristics of the plants. The basis will be as follows: the rate for new plants will be higher, and the rate for plants already in use will be lower. This second category of plants was popular only among few Belarusian investors in the field of wind energy.

Under the new Edict, subjects that are not members of the “Belenergo” state electric power production association can declare a reduction of the coefficient for their projects. In this regard, it has to be concluded that the declared rate is going to be taken into account during allocation of renewable energy quotas by the competent agency. Along with that, the regulation holds particular risks for effective stimulation of renewable power generation. First of all, the norm might lead to limitations of rights of subjects who are not members of “Belenergo” since reduction of the coefficient for members of “Belenergo” is not assumed. Besides, the system of quota allocation can be negatively influenced if the declared level of coefficients is important during quota allocation. In this case, project selection can be reduced/limited to a mechanism similar to tender under the principle of selection of candidates that offer the most attractive conditions for project realisation with the lowest level of requested coefficients. Absence of precise criteria for the quota allocation established by legislation can lead to difficulties in establishing a transparent project selection mechanism. Not only is a risk of abuse by the competent agency seen here as problematic. A bigger risk is that projects with a lower declared rate and other relatively more favourable figures but without a proper economic and technical basis/foundation could be chosen. Also changing are the conditions which refer to the duration of a no-change rate guarantee. Thus, electrical energy output will be acquired with due regard to the multiplying coefficient for 10 years only if plants are put into service in time. If the period for putting plants into service is exceeded, a reduction of the guaranteed 10-year period for purchase of energy output is foreseen for the period of failure to meet the launch deadline declared by the candidate. Then, the promotional rate is set at the level of functioning multiplying coefficients at the time of putting these plants into service but not higher than the rate declared by the candidate. However, the new Edict does not regulate cases when deadlines are violated as a result of action or inaction by state bodies. Therefore, investors have to take into consideration sanctions for plants being put into service late. These sanctions are seen as a risk of reduction of the guaranteed period for purchase of electrical energy (down to its absence) as well as reduction of the purchase promotional rate. As a result, the driving mechanism for developing renewable energy might lose its importance. In turn, this could put in question the ability of investors to raise funds for projects in the sphere of renewable energy.

Drivers for development remain only for subjects that produce renewable energy for supplying power for their own economic activity.

As to plants put into service before 20 May 2015 or which are created under investment contracts concluded and registered before 20 May 2015, these are regulated by the rules set earlier on the guaranteed purchase period and multiplying coefficients.

New quota rules are also not applied to legal entities and self-employed entrepreneurs which produce alternative energy solely for the purpose of supplying power for their own economic activity, as well as to creation of plants for use of renewable energy sources on the basis of investment contracts with the Republic of Belarus, concluded before 10 May 2015.

The new Edict comes into force on 21 August 2015.

Bnt attorneys-at-law is highly experienced in project support in core areas of alternative energy in the Republic of Belarus. Our quality management system certified according to ISO 9001:2008 standard proves the high level of our advice with respect to client needs. If you have any questions, please do not hesitate to contact our experts, who are always ready to support you.

Source: National legal Internet portal of the Republic of Belarus (NLIP) 19.05.2015 1/15808.

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