Small Hydro in Ukraine: To Invest or not to Invest?

FNI Report 12/2011. Lysaker, FNI, 2011, 28 p.

The vast and unexploited renewable energy potential and the introduction of green tariffs in 2009 have made Ukraine an attractive location for investors within the renewable energy sector. The Green Tariff system offers developers and investors the highest feed-in tariffs in Eastern Europe, and thus far covers alternative energy production from biomass, biogas, wind power plants and hydropower plants. Ukraine has a history in both large- and small hydro production. Whereas the potential of the country’s big rivers is now to a great extent exploited, this is not the case for the smaller watercourses. Ukraine is well endowed with small rivers, approximately 60,000 of which can be classified as ‘very small’. Most of these are located in the western part of the country, near the Carpathian Mountains. However, despite the natural potential, foreign investors should be aware of the potential risks and hurdles. The country has a huge problem with corruption, and the process of obtaining licenses is not straight forward. On the whole, it can be worthwhile exploring the possibilities of small hydro production in Ukraine for those who can deal with a high level of risk and uncertainty. If not, one would be better advised to look for investment locations elsewhere.