On 8 June 2023, the National Energy and Utilities Regulatory Commission (NEURC, the Regulator) approved amendments to a number of its resolutions aimed at supporting the development of the biomethane sector in Ukraine. The amendments were made to:
- Gas transmission and gas distribution system codes
- the Methodology for Determining and Calculating Tariffs for Natural Gas Transportation Services for Entry and Exit Points Based on Multi-Year Incentive Regulation (Methodology)
The relevant codes introduce the concept of a reverse compressor station, which is a facility designed to process, compress, and transport natural gas or biomethane from the gas distribution system to the gas transmission system.
According to the updated rules, the gas transmission system operator (GTS Operator) will be responsible for connecting biomethane plants to the gas transmission system through the gas distribution system, including the construction of the necessary facilities, in particular the reverse compressor station. This will ensure the transfer of natural gas or biomethane from the gas distribution system to the gas transmission system.
Biomethane producers could apply to the GTS Operator for connection of their facilities to the gas transmission system, which would allow them to transfer excess biomethane from production through the gas distribution system to the gas transmission system. Such producers will receive technical conditions for connection if the gas distribution system operator (GDS Operator) confirms that there is insufficient free capacity at least one day during the year to accept biomethane into the gas distribution system.
The technical conditions will include the necessary measures for the design, construction and connection of the reverse compressor station, the arrangement of a commercial metering unit, and other technical requirements.
Owners of gas networks and facilities on them that are connected to the gas transmission system must conclude an agreement with the GTS Operator to transfer such gas infrastructure facilities for use or ownership.
According to the resolution, the requirement to install flow chromatographs for gas transmission points with a capacity of less than 3000 cubic metres per hour will be excluded from the Gas Distribution Systems Code. This will reduce the cost of installing such devices for biogas producers, especially in the case of small production volumes. Instead, the transmission points will be equipped with sampling points for determining physical and chemical parameters.
The amendments to the Methodology state that if it is possible to transport natural gas through a certain entry or exit point and there is no established tariff for natural gas transmission services for this site in the regulatory period, or when new types of entry or exit points to the gas transmission system are created at the request of the licensee, the NEURC may set tariffs for such services for these points without specifying or changing the existing tariffs.
In this case, the NEURC sets tariffs for natural gas transmission services as follows:
- For entry and exit points on the interstate connection – at the level of the current tariff for natural gas transmission services for the entry/exit point to the gas transmission system from the respective country (in case of several such entry and exit points – at the level of the highest value)
- For other entry and exit points – at the level of the current tariff for natural gas transmission services for the respective types of points or homogeneous groups of points to the gas transmission system.
These changes are another step towards Ukraine's realisation of its biomethane potential in the production of up to 10 billion m³ per year (according to UABIO). The development of biomethane production will help achieve energy independence, reduce dependence on natural gas imports, improve the environmental situation and attract new investments in the Ukrainian agricultural sector. In addition, the development of this industry will attract investment in the agricultural sector, create new jobs and contribute to the country's economic growth. The regulator emphasises that this decision contributes to the implementation of Ukraine's Second Nationally Determined Contribution under the Paris Agreement and is in line with the strategy of reforming the energy sector in EU member states and Ukraine.
For more information, please contact Asters Partner Yaroslav Petrov and Junior Associate Marko Malinovskyi.
