Romania - Wind set for bumper year despite financing pains

ROMANIA: More than 900MW of new wind capacity could come online in 2013, the Romanian wind energy association (RWEA) expects, bringing the total over 2.8GW.

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Project sponsors are rushing to bring wind farms online, as an attractive green certificate incentive scheme applies only to plants operating by 2016.

Wind energy producers are now awarded two green certificates for every megawatt hour of electricity produced before the incentive reverts back to one certificate in 2018. Given a certificate shortage, they have also changed hands at the maximum price in a EUR 27/MWh to EUR 55/MWh range.

Recent regulatory developments have set the tone for the market. Francesco Lazzeri, general manager of developer Enel Green Power Romania, sees the approval last July of Law 134, the New Energy Act, as the most important development affecting Romania's energy sector in 2012. "This has helped clarify the regulatory framework on renewables, confirming the number of green certificates and the schedule for the provision of incentives," he says. "Stability of the regulatory framework is key to ensure new investments."

Changed framework

Yet bankers and lawyers advising on wind projects says another piece of Romanian legislation approved last July has complicated wind financing deals by altering the framework for power purchase agreements (PPAs). Under Law 123, power producers may only receive PPAs if they sell the power via bilateral contracts through the centralised power market. "This means that you can only get a PPA once a wind farm is fully commissioned," says Ciprian Glodeanu, a partner at the Bucharest office of law practice Wolf Theiss. "But banks will only give you financing if you have a PPA so financing has been blocked."

Following meetings with the International Monetary Fund (IMF) and the European Commission last autumn, market observers expected some regulatory clarification facilitating PPAs would quickly ensue. However, these and other energy issues were instead set aside in the run-up and immediate aftermath of parliamentary elections in November. Renewable energy associations have once again stepped up their efforts to convince the government of the necessity of simplify the process of obtaining PPAs, a run-of-the mill feature of numerous power markets throughout the world.

RWEA is forecasting that 939MW in new wind capacity could be commissioned in 2013. "A portion of these projects already had financing as PPA contracts were signed before the law came into effect, another part is from multinationals that still may be able to finance projects," says director Ionel David. He notes that PPA problems caused RWEA to cut its forecast from an initial 1.5GW.

romania capacity pieInstalled capacity in 2012 jumped 923MW to 1,905MW, remarkable considering installed wind capacity at the end of 2009 was a mere 14MW.

Utilities continued to dominate the market in 2012. Czech utility Cez completed its 600MW Fantanele-Cogealac project, Europe's largest onshore wind farm. Italian utility Enel's renewable arm saw its Romanian capacity rise 231MW to 500MW. Spain's Iberdrola brought its first 80MW Romanian wind farm online, while Austria's Verbund commissioned its first 100MW. Portugal's EDP Renovaveis says 57MW.

Despite the fast pace of growth and the fact that most projects are located in the northeast part of the country, curtailment has yet to be an issue. New energy minister Constantin Nita has warned that the grid may be unable to sustain the major influx of renewable energy that is planned in coming years. However, transmission system operator Transelectrica has says the grid can handle some 3-3.5GW of renewables before facing problems.

While there is still room for Romania's wind sector to grow, Adrian Borotea, corporate affairs director at the Romanian arm of Czech utility CEZ, believes it does not make sense to push total capacity past 3.5GW. "Power consumption in Romania is not sufficient," he says. "Too much capacity would negatively impact green certificate prices, with a positive impact on consumers but damaging the business case for investors."

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