Romania: the spring of renewables

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Generous incentive schemes and a favorable regulation are attracting increasing investments in PV and wind power capacity, but the situation may change quickly.

by Fabio Pezzuto

Constantin Nita, minister delegate for energy of the new Romanian government, seems to know exactly what are the targets he's been charged with. "All those who wish to invest in energy", said at the opening of a new E.ON Business Service Center in Cluj, "will have all the necessary support from the Government".

And investments, even from abroad, have already started to arrive. According to the National Authority for Energy Regulation (ANRE) installed wind energy capacity soared from 462 MW in 2010, to 982 MW in 2011, and in 2012 such capacity is expected to have doubled. One of the more proactive company is Enel Green Power, that in just two years has reached a total installed capacity in Romania of around 500 MW.

The development of the PV sector has been slower than that of wind power, but now is scaling up. In the third quarter of 2012 installed PV capacity increased 55%, from 335 MW to 522 MW. Exemplarily, Eurowind Energy A/S, after inaugurating last September at Pufesti one of the largest PV plants built in Romania, confirmed the intention to install 10/30 MW in 2013.

Actually, energy investors didn't fall short of the "necessary support " from previous government. Although there is not a feed in tariff system, Romania's green certificates (GC) support scheme (Law 220/2008) is particularly favorable. The number of GCs varies according to the technology considered (2 per MWh for wind power, 6 per MWh for PV) and are worth between € 28 and € 55 each.

Further amendments to the legislation ameliorated the environment for investments again. A methodology to identify the benchmark Internal Rate of Return (IRR) was introduced to compensate investments and to determine the number of GCs allocated for each technology. Moreover, this number cannot be decreased before 2014 for solar projects and 2015 for other technologies and it was created a last resort guarantee fund mechanism to buy unsold GCs.

However, such as in Italy, incentives burden on final users, especially on industrial ones. Therefore, Romania's GC support scheme may prove unsustainable and investments may be at stake.

According  to Power Engineering International, a professional magazine, Minister Nita will have to reduce, before scheduled terms, both the number of GCs allocated and the maximum value of one GC, that would be lowered to € 30/35. However, the right solution would be adjusting downwards the IRR set under the law and re-considering the 2020 renewable energy targets (24% share of final energy and 43% share of electricity production from renewables).

In addition, growing installed renewable capacity requires the updating of the transmission infrastructure and the development of balancing mechanisms, such as the pumped-storage hydroelectric power station of Tarnita-Lapusesti, that the government wants to build in a Public Private Partnership as it can’t afford the investment (1.4 billion).

It's worth remembering that Romania received a € 20 billion aid from IMF and EU in 2009 and a € 5 billion additional aid in 2011, and it is committed to public sector deficit reduction and to structural reforms. Therefore, the room for public investment is narrow.

To conclude, the new energy law (123/2012), aimed at liberalizing the energy market according to EU's directive, includes a disposition that blocks the closing of Purchasing Power Agreements (PPAs), which acted as guarantee for developers that needed bank loans to build their projects.

Comments

looks appealing

Romania has a delicate energy infrastructure, which is what’s driving the government to adopt hydro, nuclear, coal, oil, natural gas and renewable energy. They’re also struggling under energy dependence on non-EU countries. A low-carbon economy is beyond doubt a prospect worth working towards.
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