On September 8, 2022, the Supreme Court of Ukraine satisfied the cassation appeal of the Member companies of the Ukrainian Association of Renewable Energy regarding the legality of the application of the formula for calculating the imbalances of electricity producers from renewable sources: the change in the formula for calculating the imbalances by the Guaranteed Buyer, which entered into force in January 2021, was recognized as illegal. According to the court's decision, the calculation of imbalances should be carried out according to the “old” formula, which does not take into account the errors of the Guaranteed Buyer's trading strategy.


As is known, the production of electricity from renewable sources (RES) depends on natural factors and does not have an even schedule, and for the deviation of the actual volumes of electricity production from the forecast - the so-called imbalance - producers of electricity from RES pay fines. However, starting January 16, 2021, a new formula for calculating the responsibility of RES producers for the imbalance began to apply in Ukraine. The “new” formula obliged RES producers to compensate the Guaranteed Buyer's underachieved income, which arises as a result of its trading strategy and the state of the electricity market, which is regulated by the NERC (National Energy Regulating Comission). That is, RES producers had to compensate for the difference between the price of electric energy, which was formed on the day-ahead market, and the price on the balancing market, which is few times lower, for the entire amount of electric energy, which was not sold by the Guaranteed Buyer to the balancing market, and which in some months was more than 50% of the forecast.


As a result of the effect of this formula, in some months of the 2022, the amounts of fines for imbalance for RES producers were greater than the revenue they received from the sale of electricity.


Oleksandr Kozakevych, head of UAКE, notes: "Numerous appeals from RES associations with clarifications regarding the lack of legal grounds for changing the formula were rejected by the Regulator, as well as the previous formula, the legality of which was confirmed by the decision of the same Regulator. It should be noted that the procedure for changing the formula began a few months after the signing, of the Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy in Ukraine (which also was signed by the Head of Regulator), one of the conditions of which was the guarantee of the immutability of the legislation affecting on the economic condition of RES producers."


Therefore, the only way to resolve the disputed issue was to resolve it in court. RES producers, members of UARE, filed a lawsuit in court and challenged the formula for calculating imbalances. The court of first instance upheld the claim in favor of the RES producers, but this decision was overturned by the appeals court. However, last week the Supreme Court ruled in favor of RES producers and declared the “new” formula for calculating imbalances illegal.


Taking into account the court's decision, the Association is convinced that the amounts of shares of compensation for the cost of settlement of the Guaranteed Buyer's electricity imbalance, determined using an illegal formula, should be recalculated.


We call on the Regulator to implement measures to settle the issue of compensating the costs of RES producers incurred as a result of the application of the illegal formula as soon as possible.