Is the Tariff Greener on the Other Side? - An Analysis of the Ukrainian Green Tariff Changes and the Threat of Investment Treaty Claims

When Ukraine introduced the green tariff in 2008, it did not expect that a boom, like the one in the recent years with unprecedent growth in the renewables energy generation sector leading to investments amounting to ca. 3 billion USD and 5.2 GW of power generation capacity, would occur. Together with the introduction of the green tariff in 2008 in the Law of Ukraine “On the Electric Power Industry”, the government also provided for an obligation to maintain the green tariff until the end of 2029 and reinforced its aims in the subsequent Laws of Ukraine “On Alternative Sources of Energy” and “On the Energy Market.” Yet, last year, the Ukrainian government, making an U-turn, stated that under the current circumstances the green tariff had become financially challenging to maintain and commenced negotiations with renewable energy producers on possible decreases of the green tariff. Upon the announcement of the Ukrainian government, several foreign investors threatened that they would initiate investment treaty claims under the Energy Charter Treaty leading to mediation proceedings and the signing of the 10 June 2020 Memorandum of Understanding. Nevertheless, on 21 July 2020, the Parliament of Ukraine passed the Law of Ukraine “On Amendments to Certain Laws of Ukraine on Improving the Conditions for Supporting the Production of Electricity from Alternative Energy Sources” which might have a negative impact on investors in the renewables energy sector and increases the chances of claims under the Energy Charter Treaty against the State. This article therefore discusses the recent changes in the Ukrainian green tariff regulations and the potential of investor-State arbitrations against the Ukrainian State due to these changes