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A Dixi Group expert: the lowering of power grid connection fees will be felt by large players only

28 November 2019

The cheaper cost of connecting to power grids will be visible for power plants with the capacity of over 1 MW

The reduction of power grid connection costs for businesses is positive news, but only the owners of large generating plants, e.g. those with the capacity of over 1 MW, will feel this change. This is the opinion which Dixi Group expert Andrii Bilous expressed in his commentary to Ukrainian Energy.

“For a 1 MW power plant, the standard connection fee in a rural locality (based on the average fee for all regions of Ukraine) would have been UAH 150 thousand in 2019 and would be only UAH 125 thousand in 2020,” the expert said.

However, Mr. Bilous noted the positive effect from the very fact of cheapening and the possible effect from the revision of fees on Ukraine’s Doing Business ratings. He believes that the effect on ratings will be insignificant, because this indicator contains many elements: procedures, transparency of tariffs, security deposit, reforms, costs and other.

“To be sure, the lowering of connection fees is only one of the expense components forming the notion of “cost”, which on top of that is calculated as the portion of per capita income. In other words, if per capita income grows while expenses remain the same, the rating based on this indicator automatically improves,” the expert explains.

It is worth reminding that the National Energy and Utilities Regulation Commission (NEURC) has lowered the power grid connection fees for 2020.

The NEURC expects that the lowering of power grid connection fees will boost Ukraine’s rankings in the World Bank’s Doing Business rating.

In particular, the standard connection fee in cities in 2019 ranged between 0.62 thousand UAH per kW and 2.73 thousand UAH per kW. Beginning from 2020, the lowest fee will be 0.31 thousand UAH per kW and the highest 1.95 thousand UAH per kW.

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