More support needed on Ukrainian bioenergy

06.04.2021 05:32:59

Author: Aura Sabadus

2021/03/31

LONDON (ICIS)--The Ukrainian energy ministry's decision to halt auctions for biofuel plants could bar the country from taking advantage of its unrivalled potential, the head of the board of the Bioenergy Association of Ukraine told ICIS.

Georgii Geletukha said the country could increase its annual bioenergy production from 3.4 milllion tons of oil equivalent (mtoe) in 2019 to 20mtoe by 2050, which would amount to an estimated 28 billion cubic metres, or nearly the country's current annual gas consumption.

The output could be mainly used in the heating sector but also for exports, he said.

Bioenergy production has been increasing incrementally by an estimated 16% year on year between 2010-2019 due to the vast amounts of agricultural land in Ukraine. Of its total 32 million hectares, 4 million hectares can be used to cultivate willow, poplar or miscanthus, which are critical species for the production of biomass and biofuel.

However, in order to ramp up output, producers would require a functional support mechanism and a government strategy that would allow them to build capacity.

Currently, only 200MW of electricity capacity is operating on biomethane, but Geletukha said more capacity would be needed if Ukraine was serious about switching to greener energy.

He said the state was expected to hold an auction this year for the installation of 60MW but the ministry of energy decided to suspend the tender amid concerns over mounting debt linked to feed-in tariffs.

MOUNTING DEBT

Thanks to generous incentives promised for renewable energy, wind and solar capacity has increased in the last three years, soaring from less than 2GW in 2018 to just over 6GW in 2020.

However, payments fell short of the promised levels as regulator NERC has been reluctant to reflect the costs in transmission tariffs, leading to piling debt of Ukraine hryvnia 24bn (€733m).

Geletukha said the government was looking to encourage renewable producers to sell their output on a market basis but explained the option could only be valid in a functional market.

Currently, electricity prices are distorted by a cross-subsidies system for households. This means producers of renewable energy would be selling at a loss if using market mechanisms.

"How can a new biomass plant compete on the market with an old coal-fired plant whose costs have been amortised?" Geletukha said.

ROADMAP

According to Geletukha, the association had also been preparing a roadmap for the creation of a bioenergy market and has made proposals for changes to the heating sector to encourage the sale of cleaner and potentially cheaper biofuels for heat production.

However, proposals have so far failed to attract attention both from the government and heat producers, he said.

Speaking to ICIS, Oleh Savytskyi, board member of Ukrainian climate organisation Ecoaction, said the expansion of the biofuel sector did not depend so much on vast investments as it does on political will.

He said current biogas installations could be easily connected to the distribution grid and fed further into the transmission system. This in turn would allow Ukraine to make use of its gas grid network which may become underused if Russia stops transiting natural gas to Europe via this route.

"We have several big biogas installations which are not connected to the gas distribution network. What you need is to have a pipeline from the nearest gas distribution network and have a unit to put away the impurities. This can be fed to the distribution network," he explained.

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