KYIV

Ukraine’s green energy future showed a rare sign of health as Elementum Energy, a subsidiary of VR Capital, and Ukraine Power Resources, a U.S. renewable energy projects developer, opened the first part of their $150 million Dnistrovska wind park in Ukraine’s southern Odesa region.

Last week’s “picnic under the windmills,” featuring Ukrainian pop star Ruslana alongside VR Capital’s president and founder, Richard Deitz, thrown to celebrate the wind farm’s opening, suggested a thriving industry.

The $60 million wind farm in Bessarabia boasts the most powerful turbines -10 in total- to be commissioned in Ukraine to date, with a capacity of 4 MW each. The second, 60 MW phase of the project is scheduled to be commissioned in the second quarter of next year. During its operating life, the Dnistrovska wind park is expected to generate 146 GWh of electricity per year and avoid annual CO2 emissions of 108,000 tonnes.

In reality, Ukraine’s renewables sector is in chaos, marred by excessive -and undeliverable- promises, setbacks caused by the COVID-19 pandemic and a spiralling debt load that’s seen the government owe mostly foreign green energy producers close to $1 billion.

Still, for investors, it remains an untapped market, because of its wind potential and a much lower population density than most of the European Union, offering plenty of available land to build commercially viable renewables projects. A report by the International Energy Agency showed that the share of renewables in total power sector spending was above 45 percent last year. 2020 marked a record year for wind power installations, with wind capacity almost doubling compared to 2019.

“We have a vision that Ukraine will supply green hydrogen through the pipelines to Western Europe, Deitz said at the event, according to Interfax-Ukraine.  “And Europe will depend on Ukrainian hydrogen instead of Russian gas.”

Still, Dietz admitted the path to successful green energy investments in Ukraine remains rocky. He has frozen four projects totalling 260 MW because of a lack of stability and constant changes in the government’s messaging, according to Ukraine Business News.

Ukraine set up special tariffs for renewable energy companies in 2009, seeking to lure investors with a high guaranteed price for the solar and wind energy that they produced. But these high tariffs have become a burden for the state and created a problem of mass non-payment in the country, as the pandemic plunged the economy into recession. The government failed to meet its scheduled payments to wind and solar producers, opening the possibility of legal action.

For foreign investors, restoring trust is essential if Ukraine is to come even close to meeting its renewable energy potential. Companies such as Norway’s NBT, which is hoping to become the largest Norwegian investor in Ukraine, attracting close to 1 billion euros in foreign direct investment, say Ukraine’s wind energy potential is immense. NBT will this summer start building the first part of its Zophia project, a  75 wind-turbine farm with 338 MW of capacity in the southeastern Zaporizhia region.

“Every project that is successfully financed and implemented in Ukraine will create trust from international investors, leading to reduced country risks and cost of capital,” NBT officials Magnus Johansen and Ingrid Sara Grimstad Amundsgård wrote in the Kyiv Post “This is the main reason why the Ukrainian government should comply with its obligations toward renewable energy investors.