Andreea Stanciu and Bogdan Chirita, Ernst and Young
December 21, 2010 | 0 Comments
Bucharest, Romania – Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.
Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.
Here is the firm’s assessment of Romania.
In line with EU requirements to develop E-RES (electricity from renewable energy sources) production capacities, Romania has set itself an ambitious target to generate 33% of total electricity consumption from renewable sources by the end of 2010, increasing to 38% by 2020.
Romania has operated a tradable green certificate (GC) system since 2005, requiring power suppliers to purchase GCs equivalent to the portion of renewables in the total supply mix, subject to a minimum quota of 6.28% (2009). All technologies are awarded 1 GC per MWh, with the GC price allowed to fluctuate between €27-€55. Historically, GCs have traded at upper limits given the low level of renewable energy produced.
In 2008, the Romanian Government passed Law 220, which differentiates between technologies by offering 2-4 GCs/MWh. In June 2010, the RES Law was revised (139/2010), with the most significant change being the increase in the number of GCs offered to solar, from 4 to 6 GCs. However, while both laws have been enacted, neither can yet be applied since they remain under review by the EU Commission, and the Secondary Regulations required to apply the laws cannot be released until EU approval is received. The reasons for delay are not clear.
Romania’s renewable market has seen significant developments since 2008 and many of the best wind locations have already been secured by key industry firms such as CEZ, Iberdrola and RWE. However, uncertainty over the stalled legislation continues to be an obstacle for investment in major renewables projects, therefore it is hoped that this much-awaited legislation will be applied in the near future since it will introduce extremely favorable incentives for potential RE investors. However, the country will also need to overcome the challenges of a bureaucratic authorization process and of a transportation system in need of development.
Romania is considered to have some of the best wind conditions in Europe, with an estimated annual potential of 23TWh. Under Law 220/2010, energy producers will receive 2 GCs/MWh up to 2018 and 1 GC thereafter for a total of 15 years.
Despite an installed capacity of only 14MW at the end of 2009, the Romanian Wind Energy Association (AREE) aims to achieve a total 650MW by the end of the year, with potential to increase this to 5GW by 2020.
CEZ’s €1.1b Fantanele-Cogealac project is key to achieving this target. Poised to be Europe’s largest wind complex with a capacity of 600MW when fully commissioned, the first few dozen turbines have already been connected to the grid. Earlier this year, Iberdrola was granted a licence to connect up to 1.5GW to the network, while many other key players such as Enel, Energias de Portugal, RWE, and Verbund are already establishing a project pipeline in excess of 1GW.
While access to the Black Sea provides Romania with some offshore wind potential, existing projects such as Fantanele are already located near the coast, therefore grid congestion issues may delay large-scale offshore developments.
Despite a strong annual solar energy flux of 1,000-1,300 kWh/ m2/year and a potential generating capacity of 1.2TWh per annum, Romania’s installed capacity to date is less than 500kW. It is hoped that the decision to award 6 GCs per MWh for solar PV generated power under Law 139 will stimulate investment in the sector. The country is already seeing increased investment by solar panel producers, creating the foundations of a strong domestic supply chain.
Romania’s small-scale hydro potential is estimated to be 3.6TWh, with a current installed capacity of approximately 374MW at the end of 2009. The country’s hydro potential is significantly higher when large-scale projects are taken into account; however, it is hoped that the incentive of 3GCs/MWh for hydro facilities less than 10MW under Law 220 shifts investor’s focus toward small-scale hydro developments.
Biomass and geothermal
Romania has significant biomass and geothermal resources; however, both are primarily used for heating rather than electricity generation. Law 220 offers 3GC/MWh to both technologies, which may increase investment going forward.