First Solar cPPA contract in Ukraine
Rengy Development and the Starokostyantyniv Dairy Plant (SDP) executed a corporate power purchase agreement (CPPA) for the supply of electricity from a solar power plant. This is the first such agreement in Ukraine, according to publicly available information.
Under the agreement, approximately 20% of the electricity consumed by SDP will be supplied by one of Rengy Development’s solar power plants (SPP). During the summer months, this share will increase to 30%. The solar power plant’s capacity is 1 MW.
The remaining energy needs of the enterprise will be met by the energy trader Renergy (https://renergy.trading). Renergy will also purchase any surplus generation from SDP if the enterprise cannot consume all the electricity generated by the SPP.
All the electricity generated by the solar power plant will be supplied directly to the plant’s internal power grid. To facilitate this, a direct cable line approximately 500 meters long has been laid between the enterprise and the SPP.
“For us, as an energy-generating company, the conditions of a cPPA are more advantageous than supplying electricity to the common power grid. The agreement guarantees us predictable consumption of the entire volume of generated energy, and investments in such a solar power plant are less risky,” commented Andriy Yaroshenko, director of Rengy Development.
For SDP, this contract is also highly beneficial, as the enterprise has significantly reduced its energy costs. This was achieved through savings on the service tariffs of distribution and transmission system operators. No tariffs are charged for the volumes of energy consumed from the solar power plant, as the energy goes directly to the enterprise, bypassing the common power grids.
“Distribution and transmission tariffs account for 30% of our electricity bills, so the savings are more than noticeable,” says Valeriy Kovalchuk, the plant’s chief energy engineer.
In addition to the economic benefits, SDP will also receive a “green” bonus: the presence of a guaranteed “green” energy source at the plant will significantly improve the environmental friendliness of the final dairy products. This will not only positively impact the image of the products among Ukrainian consumers but also enhance the company’s standing with foreign shareholders, as SDP is part of an international group of companies listed on the London Stock Exchange. Such “greening” of assets is considered to have positive effect on market capitalization.
At current market prices, constructing a new solar power plant of this size would have cost the SDP about $450,000.
“We were very fortunate that Rengy Development agreed to build a solar power plant next to us and connect it to our capacities without any investment from our side. Otherwise, such savings and ‘greening’ of our final products would cost us a lot. But it cost us almost nothing,” adds Valeriy Zhuk, First Deputy General Director of SDP.
More about this model of solar electricity supply
Long-term Corporate Power Purchase Agreements are a common model of electricity supply in Europe, North America, and many other countries. Unlike the contract between Rengy Development and the Starokostyantyniv Dairy Plant, similar agreements are also concluded between solar power plants and enterprises that cannot be physically connected, with the transfer of “green” kilowatt-hours carried out through the common grid.
Even when paying for the distribution and transportation of energy, consumers benefit from the environmental purification of the final product and from more stable and lower prices for electricity generated at solar power plants.
“Unfortunately, there are no precedents in Ukraine for concluding such agreements with the transfer of electricity through the common grid, although the legislation allows it,” says Andriy Yaroshenko. “However, we are actively negotiating with several potential consumers to supply energy under this model. We hope to become pioneers in this direction as well.”
The Starokostyantyniv Dairy Plant produces dairy products such as skim milk powder, sweet cream butter, hard cheese, spreads, vegetable-cream products, and others. Products are sold to all regions of Ukraine and abroad: Azerbaijan, Kazakhstan, Moldova, Egypt, Syria, China, Saudi Arabia, Lebanon, the Philippines, Bangladesh, and others. Among the customers of the products are world leaders in the dairy market: Interfood, Nestle, Mondelez, Olam, Lactalis. The enterprise was founded in 1922.
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