Understanding Solar Power Investments in Romania

Transcription

1 Understanding Solar Power Investments in Romania White Paper Series Contributing Authors: Douglas A. Marett and Thomas Bosse Grue + Hornstrup A/S Nupark Holstebro Denmark Tel h.dk

2 1. Brief Introduction to Romanian Power Sector Romania began to deregulate it s power sector in 1998 from a state owned system, regulations in the early years were followed by substantial changes in 2006 and The current liberalized market is under primary regulation by the National Authority of Energy Regulation ( ANRE ) and the National Authority for Regulation of Public Community Services ( ANRSC ) i. In 2000 the electricity administrator Romanian Power Market Operator ( OPCOM ) was established and currently ensures the impartial viability of wholesale trading within the Romanian market ii. Romania has a generation capacity exceeding 20 GW iii, and a gross electricity generation of 60.6 TWh in 2010 iv. In 2011 the amount of renewable electricity dispatched to the national grid was 27.9% v. targets correspond to the long term strategy of the EU Commission's Energy Roadmap 2050 which reflects a renewable energy share of 55-75% in gross final energy consumption, and to 97% in electricity consumption. vii When addressing the Romanian national target for renewable energy sources in final consumption for 2020 and the actual renewable energy generation in 2011, Romania will need to increase such renewable energy generation by 35% by the end of The Romanian national strategy has anticipated the following levels of new installed power generation capacity for renewable energy as indicated below viii. GW Wind Biomass Solar Hydro Table 1: RE-Power Capacity (National Strategy) This need and perspective to increase the share of renewable energy generated in Romania is one of the main drivers of the Romanian Green Certificate regulation. Electricity Prices in Romania The whole sales price of electricity in Romania fluctuates based on base, peak, and off-peak loads. Trading in 2012 (Jan. to Sep.) via OPCOM indicates that daily base load prices (hrs 1-24) ranged from 45 to 73 EURs/MWh, with peak load (hrs 7-22) prices ranging from 50 to 82 EURs/MWh. Figure 1: Electricity Delivered by Generators by source National Renewable Energy Strategy In the EU Renewables Directive (2009/28/EC) Romania has pledged a target of 24% renewable energy for final energy consumption. In 2010 vi Romania achieved 23.4%. At the national level the Romanian energy strategy for the period of (and revised to 2035), as approved by the Government Decision No 1069/2007, establishes the level of national targets concerning the shares of electricity generated from renewable energy sources in the final consumption of electricity at 35% (2015) and 38% (2020). Romania s national Figure 2: Electricity Price Romania (OPCOM 2012) Page 2 of 5

3 2. Romanian Green Certificate Scheme The Green Certificate ( GC ) program in Romania was established under Law 220/2008, with amendments in 2010 and 2011, and endorsed by the European Commission in July Law 220/2008 took full legal effect in Romania in October Law 220/2008 applies to specific project based renewable energy installations offering GCs for a defined time span, and for the following renewable energy technologies. Type GC / MWh Time (yrs) Small Hydro (<10MW) Wind Energy Biomass (+1) 15 Biogas & Landfill gas 1 15 Geothermal 2 15 Solar 6 15 Table 2: Green Certificate allocation scheme and time frame Transmission and System Operator is the entity issuing the GCs to producers on a monthly basis. GCs do have an expiry date of 16 months after issuance. The GC allocation may be adjusted by ANRE in individual cases where they receive investment aid, or in the broad case that producers using a technology are achieving a higher IRR exceeding 10% of the benchmark set by ANRE and taking effect at the start of each year xi. The Value of Green Certificates OPCOM effectively administers the centralized (clearing exchange) and bilateral trading of GCs. Under Law 220/2008 the GCs can fluctuate under a trading market mechanism with a legally set price band of 27 EUR/GC (min.) and 55 EUR/GC (max.). The price is indexed on an annual basis based on inflation within EuroStat. The GC trading market is for the time being restricted to Romanian suppliers and producers, however Law 220/2008 allows for an opened door of trading within a future harmonized inter-eu Green Certificate system. Up to 80% of GCs trade on a bilateral basis, with the remaining traded on the centralized market at OPCOM xii. New beneficiaries may enter the GC scheme until the 31 st December 2016, and this is currently interpreted as specific installations generating electric power by the date with all approvals in place. The revised Law 220/2008 sets a mandatory quota allocation starting at 10% in 2011 and up to 20% in 2020, with an approximate 1% raise annually. This quota is based on the GCs issued per MWh of final consumption of energy in a given year. ANRE estimates the actual percentage to be 11% in 2012 ix, this approximately corresponds with currently available information issued by OPCOM. x A driving legal force of Law 220/2008 is that each supplier as well as each producer which has the obligation to purchase GCs, must meet their portion of the mandatory national quota for purchasing GCs, otherwise face a fine of 110 EURs per non-purchased GC. ANRE is the authority who regulates the number of GCs each supplier and producer must purchase each year. Transelectrica who is the Romanian 1 The range is dependent on if the small-hydro plant is new (receiving 15 years and 3 GCs) or its existing age (receiving as low as 3 years and 0.5 GCs). 2 For new wind power receiving 2 GCs until 2017 and 1 GC from New power generation, with +1 GC for high efficiency cogeneration Figure 3: Centralized GC Trading (OPCOM 2012) The Volatility of Green Certificates There is little risk that Law 220/2008 will be revoked or revised in the future, as it is also endorsed by the European Commission as a part of Romania s obligation to meet EU and national renewable energy goals. Should the current Law stay as is, there is foreseen to be a major swing in supply (downward) in 2018 when GCs from wind power are cut in half. GCs from wind power currently makes up 74% of the supply xiii. Future success with thus depend on the new capacity entering the Green Certificate Scheme until the end of Page 3 of 5

4 3. Solar Power in Romania Solar power generation capacity has historically been low in Romania, however since 2010 the interest in solar power has increased substantially due to the Green Certificate Scheme and lower technology investment costs. In 2008 a capacity of 0.45 MWp was installed in Romania, which increased to 1.90 MWp in 2010 xiv. The number of solar power producers/installations participating in the Romanian GC scheme is currently 12, with a combined installed capacity of 2.17 MWp. xv Information is vague as to the planned installed capacity for the future, but several sources indicate that Transelectrica is processing or granted supply permits for 137 MWp to 800 MWp of solar power capacity, the majority of these installations are of the < 4MW size. xvi Solar Power Potential The solar power generation potential in Romania is one of the higher levels in Europe. The average daily solar power generation potential is between 3.2 and 3.4 kwh/kwp in Romania depending on location, in comparison to London, UK with 3.0 kwh/kwp and Copenhagen, Denmark with 2.8 kwh/kwp. Example Solar Power Plant in Romania An investment into a capacity of 1 MWp in Romania will have the potential to deliver the following amount of power and potential revenues. Unit Value Installed Capacity MWp 1.00 Power Generation ( losses) MWh/yr 1,050 Green Certificates GCs 6300 Potential Annual Revenues 4 EURs 399,000 Table 3: Estimated annual output & annual revenues Mitigating Investment Risks There are several identified risks related to investing in solar power projects in Romania, and the majority of these risks can be mitigated as follows: According to Doing Business xvii Romania ranks in the top 35% of countries in starting a new business, and the top 40% in ease of business. Business risk can be mitigated by working with companies with a long history in the Romanian renewable energy sector who operate at the level of international standards. Monitoring and Reporting under the Green Certificate Scheme is comprehensive and on a monthly basis, thus it is important to have professional and experienced local management and oversight. There is a deadline of participating in the GC scheme by the end of 2016, therefore it is recommended that any solar project investment start by the end of 2015 to allow for permitting and project implementation. Figure 4: Solar radiation in Romania There are two types of solar power investments currently taking place in Romania: 1. Stand-alone solar power installations established on cleared land and usually consisting of higher capacities (>0.4 MWp). 2. Roof-top solar power installations installed on commercial and private buildings with lower capacities (<0.9 MWp). ANRE may adjust GC issuance impacting investor returns in the future, but will not remove an installation without cause. A positive note is that in 2012 ANRE has not adjusted the GC allocation for solar power. In the case of any future adjustment then the expected impact on investment is an IRR of no lower than 12.7%. Currently the GC trading market is still gaining traction, and ANRE s regulation of GC quota obligations of power producers is also developing. This means that the next year or two may have high volatility in trading volume. 4 Electricity price of 50 ERUs/MWh and GC price of 55 EURs/MWh. Page 4 of 5

5 The success of G+H s professional approach, and cooperation with our Romanian partners, has lead to the establishment of a number of high profile renewable energy and energy efficiency projects in Romania. Some examples are as follows: Sawdust 2000 (Biomass Romania) The establishment of centralized biomass heating plants for five towns in Romania Geothermal energy in Oradea and Beius The establishment of centralized geothermal heating plants for two towns in Romania Figure 5: Biomass Romania - Vatra Dornei ( ) Profile: Grue + Hornstrup A/S ( CVR no ) Founded over 30 years ago, G+H is a Danish engineering company who provides innovative solutions to private companies and government institutions worldwide within the fields of energy & environment, energy management & automation, and civil engineering. Internationally, our Energy & Environment Group has a solid engineering background and market knowledge, and has assisted our clients in assessing over 100 Green Project investments worldwide through due diligence and feasibility efforts. Since 2000 G+H has directly participated in the development and implementation of over 30 Green Projects in renewable energy, energy efficiency, and the chemical sectors in Asia, Eastern Europe, Middle East, and Africa. In working with our corporate partners around the world G+H provides clients with a proven track record of quality engineering, technical solutions, and regulatory and financing expertise. Ensuring the successful results that our clients demand. Experience in Romania Since 2000, G+H has worked with the Danish and Swedish governments, European technology suppliers, international energy companies, and international banks to assess and address the feasibility and viability of a large number of potential renewable energy and energy efficiency projects throughout Romania. On behalf of our clients G+H monitors our clients existing investments in these Romanian sectors. Energy efficiency improvement at Holboca CET Iasi II Power Station Ensuring energy efficiency reducing CO2 emissions at the combine heat and power station Energy efficiency improvement of the district heating system in Drobeta Turnu-Severin - Ensuring energy efficiency reducing CO2 emissions at the combine heat and power station REFERENCES i Musat & Asociatii, Energy Chapter 23 ii Company iii ANRE The Energy Sector in Romania, Present and Future April 2012 iv Total gross electricity generation - Eurostat v ANRE Report on Results of Monitoring the Romanian Electricity Market December 2011 vi Renewable energy for final energy consumption - Eurostat vii Energy Road Map 2050, COM(2011) 885 Final viii ANRE The Energy Sector in Romania, Present and Future April 2012 ix ANRE The Energy Sector in Romania, Present and Future April 2012 x Green Certificates issued July 2012 xi Emergency Ordinance no. 88/2011 xii Green Certificates issued, traded on centralized market and on bilateral market 29 th August 2012, OPCOM xiii Transelectria Certificate verzi pentru luna 7 anul xiv Photovoltaic Barometer April 2010 & April 2012 xv Transelectria Certificate verzi pentru luna 7 anul xvi South-East European PV Market Review Sep 2012 see-industry.com and IBCOENERG Planned Project In Romania Solar PV Market May 2012 xvii Doing Business The World Bank and International Finance Corporation, 2012 Page 5 of 5