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IEA (2025), Policy options to accelerate distributed solar PV in Ukraine, IEA, Paris https://www.iea.org/reports/policy-options-to-accelerate-distributed-solar-pv-in-ukraine, Licence: CC BY 4.0
Globally, government policies and incentives have been the main driver for distributed PV deployment. These instruments can be differentiated between 1) policies targeting investment costs and 2) policies focusing on consumption and the sale of electricity.
Policies targeting investment costs usually take the form of direct financial incentives that aim to reduce initial investment costs and make distributed PV systems more affordable for consumers. They include:
Grants and rebates: a fixed subsidy, usually with a one-time payment.
Tax credits: amounts taxpayers can subtract from taxes, usually based on a percentage of total solar PV system investments.
Accelerated depreciation: Solar PV owners can receive higher tax benefits by depreciating assets more quickly, usually in the first or second year.
Tax exemptions: sales tax, import duty or VAT reduction or exemption from the solar PV system price.
General policies and incentives targeting the consumption and sale of electricity focus on improving the economic attractiveness of solar PV systems over time:
Buy-all, sell-all: All solar PV generation is sold to the utility, usually at a fixed price. The remuneration of solar PV electricity can be above, equal to or lower than the retail rate, while solar PV owners buy all electricity at the retail price to cover their demand. In this model, solar PV owners are like small power plants generating electricity under a long-term power purchase agreement (PPA). The higher the tariff compared to the PV system’s levelised cost of energy (LCOE), the more attractive the scheme becomes, irrespective of the retail tariff.
Net metering: solar PV owners can use the electricity they generate, reducing their consumption from the network. In a net-metering scheme, a solar PV owner receives an 2Anchoraddexpandmore-dots TitleEN Show background color checkUse “Show background color” only in case the following block shows background colorenergy credit for any excess generation exported to the network during a specific time period. This energy credit can be deducted from network electricity consumed on future bills. In general, the higher the retail tariff compared to the solar PV system’s LCOE, the more attractive the net-metering scheme becomes.
Distributed solar PV real-time self-consumption models: solar PV owners can generate electricity for their own consumption and sell excess to the network. In contrast to net metering, energy accounting is done in real time and solar PV owners are paid for each unit of electricity exported, rather than earning energy credits towards future bills. The net billing scheme becomes more attractive, the higher the real-time selling price and retail tariffs are compared to the solar PV system’s LCOE.
Given short installation timelines, policies can result in a boom in distributed solar PV installations from one year to another. For instance, in Viet Nam, solar PV net additions increased more than 20-fold between 2019 and 2020, indicating the importance of the existing feed-in tariff. Generous net-metering schemes doubled net additions in 2022 in Brazil, and in the Netherlands in 2020. The impending phase down of tax credit benefits doubled net additions of residential solar PV in Italy in 2023. In Poland, a grant scheme led to triple the net additions in 2020. However, it is important to note that some of these policies in Viet Nam, Brazil and Italy resulted in boom-and-bust deployment cycles as the level of incentives was reduced. Generous incentives led to a rapid uptake of distributed solar PV which quickly increased the cost of the programme.
IEA (2025), <a href="https://www.iea.org/reports/renewables-2025">Renewables 2025</a>
Accelerating the deployment of distributed solar PV with BESS may require additional incentives to reach the suggested 24 GW of new distributed PV and 5.6 GW of new BESS by 2030. However, this could increase the financial burden for the government budget in the short-term. Balancing the need to incentivise new distributed solar PV installations to improve electricity security and limiting government financial exposure remains a key policy challenge. As such, we propose three policy options for the period covering 2025-2030. These have different implications concerning the amount of distributed solar PV and BESS deployment and of the level of support the government needs to provide.
Implementing existing incentive programmes and encouraging the adoption of solar PV outside major urban areas remain challenging. Many countries have created agencies or programmes to reach areas outside cities. The government of Canada has a Clean Energy for Rural and Remote Communities programme which aims to increase the amount of clean energy used to produce electricity and heating in rural and remote communities in Canada. The programme has a streamlined application process and reporting system and has allocated more than USD 500 million for projects over 13 years. Nigeria’s Rural Electrification Agency has programmes to increase electrification through special tariffs, and licence exemptions for systems under 100 kW capacity.
Additionally, the highest quality equipment should be used in Ukraine to ensure production and longevity. The government should provide a list of pre-selected equipment manufacturers sourced from lists of Tier one suppliers as defined by industry sources. Only solar PV systems from listed manufacturers should qualify for policy programmes and incentives.
BESS = Battery energy storage systems.
Ukraine’s existing policies for distributed solar PV consist of the low interest loans provided by the government, the Green Tariff and the recently introduced net-billing scheme. The 5-7-9% loan programme provides low-cost loans at 5-7% interest rate for commercial and industrial applicants, at 7% for homeowners’ associations, and at 0% for 10 years for households (the government compensates banks for the difference between the current loan rate, around 20%, and the programme’s loan rate), but can only be combined with participation in the net-billing scheme. The Green Tariff currently offers around EUR 135/MWh for electricity produced from solar PV systems in private households, but will cease payments after 2029. Lastly, the net billing scheme specifies that households can sell surplus electricity at the hourly wholesale electricity price, minus distribution system operator (DSO) charges and taxes. Wholesale power prices are between EUR 70 and 210 per MWh, while DSO charges average EUR 41/MWh and range from around EUR 17/MWh to EUR 71/MWh, depending on location, as of the beginning of 2025. The current residential electricity price is around EUR 84/MWh but will eventually increase once subsidies are phased out.
Considering recent deployment trends, existing incentives and current retail electricity prices, we estimate these policies could lead to 3.1 GW of solar PV capacity addition and another 1.4 GW of BESS by 2030 with an estimated government spend of around EUR 1.4 billion through 2030 for financial support.
Reference
Policy
option 1
Policy
option 2
Policy
option 3
Solar PV
Net additions by 2030 (GW)
3.1 GW
24.1 GW
18.0 GW
6.8 GW
CAPEX (EUR/kW)
1 000 EUR/kW
Full-load hours
1 200 FLH/year
Net additions from zero-interest loans
1.52 GW
–
18.0 GW
–
Investment grant intensity
–
60%
–
–
Additional feed-in bonus
–
–
–
EUR 5/MWh
BESS
Net additions by 2030 (GW)
1.4 GW
5.6 GW
5.6 GW
3.0 GW
CAPEX (EUR/kW)
1 200 EUR/kW
Net additions from zero-interest loans
1.4 GW
–
5.6 GW
–
Investment grant intensity
–
60%
–
25%
General
WACC/discount rate
20%
Green Tariff
EUR 135/MWh
–
–
–
Tariff
–
EUR 70/MWh
EUR 135/MWh
–
Wholesale electricity price
EUR 80/MWh
EUR 80/MWh
EUR 80/MWh
–
Although financial incentives and low or zero-interest loans are currently available, initial investment costs for solar PV projects are still high for households and small businesses, limiting a stronger buildout.
Policy option 1 addresses this challenge by proposing the introduction of an investment grant. This direct incentive should cover at least 60% of the total investment costs for small-scale systems (including both the solar PV system and the BESS). In addition, a fixed and stable tariff for selling the entire production of the generated electricity to the energy supplier or another state-owned entity can provide additional financial support and mitigate the risk. As the investment costs are already subsidised, this tariff can be significantly below the typical LCOE and thus even below today’s wholesale market prices. The difference between the tariff and market prices leads to additional savings for the government, reducing the financial burden.
While this policy option facilitates a fast buildout of 24 GW of distributed solar PV and 5.6 GW of BESS, it entails rather high costs for the government, especially in the short-term. We estimate this policy option could cost around EUR 17.5 billion by the end of 20301. It should be noted that the total expenses for policy option 1 decrease over time based on IEA calculations, as the government can gain additional revenue if the tariff remains below wholesale market prices.
The second policy option focuses on improving the existing policies and incentives. Currently, the Ukrainian government offers low or zero-interest loans for setting up distributed solar PV systems including BESS, the Green Tariff, and the net billing scheme. Nevertheless, the low or zero interest loans are difficult to obtain and payments under the Green Tariff are only foreseen until the end of 2029. The net billing scheme might not offer sufficient financial incentives at the current, subsidised retail tariffs, and entails an administrative burden for electricity suppliers and consumers with solar PV systems.
Policy option 2 addresses this challenge by enhancing the existing incentives. The low or zero interest loans should be made more widely available by providing capacity building for local banks and/or transforming local administrations to ‘one-stop shops’ for the loans. Loans should be available to interested parties that both produce and consume energy (prosumers), thus reducing existing administrative barriers. The government could also consider a new feed-in tariff exclusively for distributed solar PV customers beyond 2030 (although in order to qualify for this new tariff, the system must be installed prior to the end of 2030).
This policy option provides a compromise between the other two alternatives. We estimate enhancing the current policies will lead to expenses of around EUR 16.1 billion by 2030, which is around 90% of the cost of policy option 1 and almost 12 times the cost of the reference case. While policy option 2 might not lead to the required expansion, it should result in significant uptake of 18 GW of solar PV and 5.6 GW of BESS by 2030.
This third policy option focuses on providing a system-friendly2, long-term policy strategy. The other two policy options increase government spending significantly (and potentially also system costs) but can lead to fast and strong deployment, which is appropriate given the current exceptional situation.
Policy option 3 suggests introducing a real-time/hourly self-consumption scheme. Although similar to the current net billing scheme, surplus electricity should be remunerated with an extra benefit payment in addition to the wholesale market price. This scheme foresees a direct incentive for BESS which covers 25% of the cost of the storage asset.
This policy option requires the least expenditure of the three, but results in the lowest amount of new capacity, as it provides the lowest incentives. We estimate the expenses from the additional self-consumption benefit would amount to around EUR 55 million by 2030 and the incentive for the BESS to be around EUR 1.8 billion. The total amount is EUR 1.9 billion, around a third more than the reference case. The incentivised deployment would be almost 7 GW of solar PV and 3 GW of BESS by 2030.
Achieving the 24.1 GW of solar PV and 5.6 GW of BESS by 2030 with only a 30% direct incentive would decrease the support costs by around EUR 9.3 billion to roughly EUR 8.2 billion in total.
System-friendliness refers to planning, operating or contracting solar and wind power plants in a way that supports the overall outcomes for the system.
Achieving the 24.1 GW of solar PV and 5.6 GW of BESS by 2030 with only a 30% direct incentive would decrease the support costs by around EUR 9.3 billion to roughly EUR 8.2 billion in total.
System-friendliness refers to planning, operating or contracting solar and wind power plants in a way that supports the overall outcomes for the system.
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