Getting Electricity: Current Challenges for Business
Nowadays, Ukraine takes one of the last places in world rankings in terms of ease of electricity grid connection. In infrastructure and real estate projects often potential investor’s decision to enter the country depends on this factor.
The main normative act that regulates this procedure for companies is the Rules of electricity grids' connection in Ukraine (the Rules), which were approved, by the National Energy and Utilities Regulatory Commission of Ukraine in 2013.
The Rules establish basic requirements and procedures for connecting electrical installations to the grid. All costs for grid connection shall be borne by the customer, i.e. by the future utility user.
The following challenges can be highlighted with respect to grid connection:
- Lack of approved master plans, which entails chaotic development of territories, without clear understanding and plans for infrastructure development, including capacity of the grid;
- Bureaucratic obstacles in the procedure for the land allocation. Infrastructure development requires existence of new power lines, installation and construction of new transformer substations, etc.;
- Non-transparent mechanism of cost determination for connecting to the electricity grid, i.e. lack of clear criteria for calculating connection costs;
- Operators want to modernize the network at the expense of new users due to the lack of funding (through tariffs) the development of electricity grids;
- Long term of connection (up to 360 days).
Some positive changes could be brought by the new Draft Law No 4310, which would simplify the connection to the electricity grid. The Draft Law was developed by the Cabinet of Ministers of Ukraine and currently is under the discussions in the Parliament. This is a positive signal for investors, as it shows the Governments' interest in solving the abovementioned problems.
Dr. Oleksiy Feliv
Co-Chair of the Chamber Infrastructure Committee