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Legal Guarantees for Producers of Energy from Renewable Energy Sources in Belarus. Newsletter - TerraLex Connections

30 Декабря 2016

Introduction

Nowadays a development of renewable energy sources (solar, wind, geothermal, natural water flows, fuel wood and other biomass, biogas and other energy sources that do not belong to the non-renewable) is stimulated in Belarus.

Particularly the Law of the Republic of Belarus as of 27.12.2010 № 204-W "On Renewable Energy Sources" guarantees investors the following:

1) state power supply company will purchase all proposed energy produced from renewable energy sources;

2) energy will be paid at special rates, which can be both below and above a market price (tariff) for energy for end users in Belarus; and

3) certain tax and other privileges will be granted to the investor.

Economic efficiency

The rate at which the state buys energy from producers through the power supplying company is defined by the following formula:

The rate = Tariff for end users X Multiplier.

Multiplier depends on:

- conditions of building energy-generating plant within the quota or outside the quota;

- the type of renewable energy; and

- energy-generating plant capacity.

A criterion “building energy-generating plants within the quota or outside the quota” is a key factor in rate determination.


A definition of “a quota” for construction of energy-generating plants from renewable energy sources was introduced in 2015 with the adoption of the Edict of the President of the Republic of Belarus as of 18.05.2015 No. 209 "On the Use of Renewable Energy" (hereinafter “Edict No. 209”).


After the adoption of Edict No. 209 the government annually (on the period of three years) sets the amount of a total capacity of energy-generating plants that are planned to be constructed (“within a quota”). For energy produced by such energy-generating plants the state guarantees the investor to buy the power at the higher rate.


The state is still ready to buy power energy from facilities constructed “outside the quota”, but at lower rates.


Quotas are distributed among investors on a competitive basis taking into account various factors: the effectiveness of the equipment, its capacity, etc. It should be noted that the rates’ ranges are not too significant: e.g., 113.22 MW in 2019 (distributed in 2016).


The necessity to introduce quotas was provoked by the fact that during the years 2012-2015 the sphere of alternative energy in Belarus has attracted a significant number of foreign investors. With the arrival of investors and construction of new energy-generating plants, the state started purchasing considerable volumes of energy at rates well above the market price for consumers. As a result, the expenses to the state on renewable energy purchase have considerably increased.


It is important to consider that rates for green energy in Belarus today are among the most attractive in Europe, even taking into account their decline in the years 2015-2016:


Type of energy

Tariff for end users (Euro*)

Multiplier (for power from 300 kW to 2 MW)

The rate (Euro)

Solar energy

0,11

1,70

0,19

Hydroelectric power

0,11

1,25

0,14

Biogas energy

0,11

1,15

0,13

Any in the construction of plants outside the quota

0,11

0,70

0,08

* According to the exchange rate of the National Bank of the Republic of Belarus as for November 1, 2016.



NB: there are a lot of projects in Belarus that started before setting quotas and which have received benefits in the higher multiplier (on the average 2,7) fixed for 10 years.

Tax and other privileges

All privileges provided can be divided into 2 groups:

a) granted for the construction period; and

b) granted during the operating period.

Privileges for the construction period

General rule says: while importing equipment to the territory of Belarus, the investor has to pay:

- VAT (the overall rate of 20 percent); and

- import customs duties (duty rate depends on the type of equipment).

 

Depending on the legal conditions of energy-generating plants construction, investors are eligible for exemption from:

- VAT, or

- VAT and import customs duties,

while importing equipment for energy-generating plants construction.

Privileges during the operating period

There is essentially only one special privilege granted for the operation period – an exemption from land tax.

However, since energy-generating plants are generally located in rural areas, privileges for producers of energy from renewable energy sources may also include privileges provided for organizations operating in middle, small urban settlements, rural areas (under the Decree of the President of the Republic of Belarus as of 07.05.2012 No. 6 "On Stimulating Entrepreneurial Activity in the Territory of Middle, Small Urban Settlements, Rural Area"), e.g., exemption from property tax for 7 years from the date of registration of the legal entity established by the investor.

Conclusion

Despite the introduction of quotas, the market of renewable energy sources in Belarus is still interesting for investors.

The most significant risk for investors is that the rate can change. Despite the fact the multiplier is unchanged for 10 years, still a tariff for end users may be reduced (e.g., because of the use of and benefit from the Belarusian nuclear power plant), which, at the end of the day, influences the rate amount for the investor. 

http://www.terralex.org/publication/pf849f9f477


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Kонсультант

Александр Антонов

Ведущий юрист

+375 17 388 22 78

aa@revera.by