After the new law 220 came into force in November 2011, a lot of investors have been looking at the the Romanian market, especially for wind and solar power (Photovoltaic) plants. The promotion scheme as adopted by the government by law is indeed very generous but looks somewhat complicated to many as it is not a straight forward FIT (feed-in tariff) but a combination of feed-in and green certificates.

Many investors are asking us about a PPA and when we tell them that there is no PPA available for let’s say 20 years, they get confused and uncertain about the possible investment opportunity. That is logic if you do not know how the system works.

First of all, a producer of green energy becomes a priority producer when he applies for it at the ANRE, the national energy authority. This certificate can be obtained only after the plant has been constructed. Once the producer received this qualification, then the distributor has to take the energy from the producer by law. This means that every producing plant with this certificate is sure that the distributor will take his energy with only one exception: when for technical reason the operations of the RPS (Romanian Power System) are in danger. Only then the plant can be shut down, temporarily of course. Usually the grid operator will balance the system and see that these situations do not occur.

So while there is no PPA, the plant does have a contact with with the distributor or TSO for plant above 50 MWe, that allows him to deliver the energy. In that contract the conditions are specified.

For each MWh produced and delivered to the GRID, the producer of electriccity thorugh wind energy receives 2 green certificates (and 1 after 2018). Also these certificates are sold on the market. The OPCOM operates this market and at this moment certificates are sold at 56.15 EURO each. It is also possible to sell them with a long term contract to a large consumer. This can be the distributor or an industrial company that is marked as large consumer. To the latter category belong cement industry, steel, fertilizer and other industries. The price then is an agreement between two parties: the producer and the large consumer and is not disclosed (not public). It is believed that prices range between 35-45 EURO for a long term contract. These contracts however are rare and not easy to be obtained by a single producer. The best way is to sell them on the OPCOM market.

Price development.

How the price will develop, no-one knows. What we do know is that the electricity prices in general will increase over the next few years while the price of green certificates is likely to come down to 27 EURO in a couple of years.

While a MWh (Megawatt Hour or 1000 Kilowatt hour) of electricity now sells between 35 and 60 euro, such depending on the time related to the market demand, experts believe that it could go up to 70 EURO average in a couple of years time bringing the prices into a 60-100 EURO range.

In Romania the price of the Green Certificate is guaranteed by law and therefore the GC’s cannot be sold under 27 EURO each while the maximum is set to 55 EURO. Because this price in indexed – Romania has its own currency- they currently sell at 56.15 EURO.

The green certificates, as said before, are currently sold at 56.15 EURO each. This is on the OPCOM, a market where sellers (producers of green energy) and buyers (large consumers) meet each other. For each MWh cunsumed, the law obliges the consumer to purchase green certificates at a rate calculated each year until 2020, when 20% of the electricity needs to come from green sources (Large Hydro Power not included) If a consumer did not buy the number of green certificates that he has to according to the quota, then he pays a penalty of 100%. This assures that the green certificates are actually sold as no-one wants to pay double when he can buy at the normal market price.

The problem arises when there are more green certificates than needed to cover the quota. This will happen when there is more green energy produced than needed. When that point has been reached then the surplus of green certificates will basically not be sold on the domestic market. But the law 220 foresees in a possibility to sell the green certificates abroad as it in fact is a certificate of origin and therefore represents one Megawatt of clean produced electricity. Experts believe that the domestic market will be saturated around 2017-2018 while the price will slightly go up again in 2018 when the 2 GC’s for wind energy will be limited to only 1 per MWh.

In the end we believe that green energy should pay itself by the sales of energy and not by temporary local measures. Moreover we think that Europe should decided on a European system rather than leaving it to each member State how to promote RES in order to reach the European target of 20% by 2020. This leads only to a patchwork of tariffs and laws and does not provide investors a transparent system. What Europe did with the ETS (carbon credits) they also should do with the green energy promotion schemes.

(Tariffs in Europe)

In a couple of years the European Grid will have connected West to East and North to South meaning that I can sell (green) electricity that is produced in the Black Sea area through a company in Spain on the Dutch Market. This implies the need for a European tariff system rather than local governments deciding on promotion schemes which then are changed time after time when the economic situation or local interests tells them to do so.

Markus Vrieling is Portfolio manager at RESbroker and panel member at Green Power Conference 2012 in Bucharest.

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The Green Certificates Mediafax is talking about are the EUA’s, the Carbon Credit Allowances that are assigned to Romania and controlled by the UNFCCC.

Romania risks to lose hundreds of millions of euros following a pending suspension of the country from trading green certificates, since irregularities were found in the national inventory of carbon emissions, press agency Mediafax reports. The final decision will be announced Monday after the meeting of the Compliance Committee of the Kyoto Protocol in Bonn today. The cause of imminent suspension of Romania is “public distrust in the ability of Romanian authorities to manage the problems estimating emissions of greenhouse gases nationally,” an export told Mediafax. Romania has not managed to sell such certificates since 2008.

Confusing though is that both the EUA’s and the production certificates for renewable energy are called Green Certificates.

The first are sold on the international markets the second only can be sold in Romania to (large) consumers and distributors. Also the prices are different: the EUA’s are currently sold at EURO while the Romanian Green Certificates are sold at 55 EURO.

So the good news for investors is that this has nothing to do with the payment scheme for renewables that was recently approved by the European Commission.

NER300.com is an unofficial, independent portal dedicated to renewable energy and grid integration projects wishing to access this instrument. The NER300 funding is intended to accelerate the deployment of low carbon energy across Europe and support the EU’s medium and long-term climate goals.

The Directorate-General for Climate Action (“DG CLIMA”) was established in February 2010, climate change being previously included in the remit of DG Environment of the European Commission. It leads international negotiations on climate, helps the EU to deal with the consequences of climate change and to meet its targets for 2020, as well as develops and implements the EU Emissions Trading System.

DG CLIMA develops and implements the EU Emissions Trading System (“EU ETS”) and promotes its links with other carbon trading systems with the ultimate aim of building an international carbon trading market. Furthermore, it monitors the implementation of Member States’ emission reduction targets in the sectors outside the EU ETS.

The law changes the government’s obligatory purchase of electricity produced from renewable energy generators at high, fixed prices, which has led to a jump in projects totalling over 6,000 megawatts — well above the country’s grid capacity.

• Aims to avoid power-grid crash, protect power prices
• Targets boost in biomass energy
• Industry says new bill to block new wind, solar projects

The centre-right government says that Bulgaria needs only 2,000 MW of new green energy generation to meet a target, which it committed to the European Union, of supplying 16 percent of its energy consumption from renewable energy sources by 2020.

The government aims to put a cap on wind and solar projects to keep electricity prices in the EU’s poorest country at affordable levels and avoid public discontent. Power and heating bills eat up much of Bulgarians’ incomes.

In a bid to unclog the system, the new law demands that investors pay a connection fee of 50,000 levs ($36,820) per planned megawatt when signing a preliminary contract.

It also calls for the preferential price to be fixed at the time that the wind or solar energy park is built, and not when a preliminary contract is signed, as the initial law draft envisioned. It also decreases the obligatory long-term purchase power contracts to 20 from 25 years for solar energy and to 12 from 15 for wind.

Under the new law, the energy regulator will set annual preferential feed-in tariffs, which pay per unit of electricity produced from low-carbon energy by the end of June each year.

The government said the measures would scare away speculators and also encourage investors to speed up projects and not wait for solar panels and wind turbine prices to drop.

“CLOSING DOORS”

Wind and solar energy associations criticised the changes, some of which were made in the last minute in parliament, saying they will effectively block the growth in renewable energy and will put at risk projects that have already been started.

Dozens of Austrian, Spanish, U.S. and German companies have rushed to build new wind and solar energy plants, raising the wind farm capacity to 336 MW last year from 103 MW in 2008 and solar to 10 MW from 1.4 MW two years ago.

“We have lost two years, hoping that this government will support renewable energy development. What we see now is that the new law is closing the door for new projects,” said Nikola Gazdov, chairman of the Bulgarian Photoltaic Association.

A senior official from the ruling GERB party indicated that the preferential price for electricity from photovoltaic installations is likely to be cut by 30 percent in June, while the cut for wind will be smaller.

Gazdov said investors do not oppose the cut in the feed-in tariffs, but the lack of predictability and the fact they would have to build an installation before they know at what price the power will be purchased.

The new law establishes better incentives for green energy from biomass and waste disposal, which unlike solar and wind will create more jobs, officials say.

There are no biomass energy plants in Bulgaria at present.

The relatively new company – RESBroker started 2 years ago as an activity of LAMAR Company – has not only a high rating on Google, it also has hundreds of visitors a day.

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The European Commission gave green light for the acquisition of joint control by ERG Renew of Italy and OOO Lukoil Ecoenergo of Russia of a newly created company constituting a joint venture – JV CO – by way of purchase of shares. ERG Renew operates in the generation and wholesale supply of electricity from renewable sources, mainly in the wind sector.

Lukoil Ecoenergo is active in the renewable energy sector. JV CO will operate in the generation and wholesale supply of electricity from renewable sources in Romania, Bulgaria, Ukraine and Russia.

European Commission approves Romanian Green Certificates renewable energy support scheme

New research by Sandbag Climate Campaign shows the expected oversupply of carbon permits in the ETS growing to 1.9 billion tonnes through until 2020.  This will likely depress carbon prices yet further, delay lowOcarbon investment and fail to halt the growth in Europe’s carbon emissions.

The report ‘Buckle Up  Tighten the cap and avoid the carbon crash’ provides a comprehensive analysis of the environmental performance of Europe’s ETS so far, and finds that the oversupply of permits to industrial installations has created a dangerous legacy.  Europe is offOtrack on intended abatement by the equivalent of a whole year’s worth of emissions covered by the scheme: a combination of oversupply carried over by industry some 672Mt and then basing the future cap on this over-allocation  pushing it up by 1.2Gt) has set the ETS on track for an oversupply of 1.9 billion permits that will increasingly undermine Europe’s flagship climate policy, threatening to derail it if left unaddressed.

The Romanian electricity distributor Electrica S.A. plans to build two wind farms of 50 MW in the southeastern localities of Chirnogeni and Frumusita.

With an investment of EUR 160 million, Electrica wants keep up with other distributors that already invested hundreds if not thousands of millions in wind farms in Romania. The most well known probably is CEZ with its wind farms in Fantanele and Cogealac with a total capacity of 600MW installed. But others such as Enel and Iberdrola are also trying to catching up.

Electrica however apparently under estimated the permitting process and now announced a delay of at least a year for the projects due to the difficulties with obtaining authorizations.

Developing a wind farm is never an easy job and takes in Romania on average 2-3 years but it also might take longer. And even then Romania is not the slowest. According to the EWEA, Romania is quite average considering that some projects in Spain even took 9 years to develop.

The permitting process in Romania is rather complicated. A recent study by the ALMA RO Association showed that one needs over 80 different permits and authorizations in Romania.

Electrica is not the first that faces delay’s with the development of a wind farm in Romania. Most projects take longer than initially planned due to unexpected issues that comes up during the development and construction.

Moreover Romania still did not apply the law 220 on renewables that provides a favorable payment scheme for electricity generated by wind, PV (Solar), Small Hydro (SHP) and Biomass. The law was first published in 2008, modified and republished in 2010 and just now presented to the EU Commission. Brussels should have given its consent for the scheme before it was send to parliament. In the mean time it is said that the ANRE officials were sent to Brussels for instructions and only on the 8th of June this (2011) year the file was sent to Brussels for approval.

Once again an example that Romanian Government still does not understand how the European Union, that they joined in 2007, works?

Read more: Work Book Renewable Energy and the report Perspectives of Investing in Wind Energy in Romania