Romania's PV market: an overview
by Zoltan Nagy, General Director of the Energy Efficiency Regulatory Department at the Romanian Authority for Energy Regulation (ANRE)
European Union is renewable energy policy is set out in two main documents: Directive 2009/28/CE of the European Parliament and Council, of 23 April 2009, and the chapter on Energy and Climate Change from the Europe 2020 Strategy. The objective of the latter is to have 20 per cent of the EU's energy supplied by renewable sources by 2020. Each member state has drawn up a National Renewable Energy Action Plan in order to reach its specific targets. The binding target established by the 2009/28/EC Directive for Romania was 24 per cent.
To meet this target, Romania developed a support scheme based on the Green Certificates system, governed by law no. 220/2008 and its subsequent amendments (law no. 139/2010, the Emergency Ordinance no. 88/2011, law no. 134/2012) and authorized by the European Commission through decision no. 4938/13.07.2011. To enforce law no. 220/2008, the National Authority for Energy Regulation (ANRE) has drawn up additional regulations. The support scheme took effect on November 1, 2011.
Targets for 2020
Ensuring that 24 per cent of total energy consumption comes from renewable sources by 2020 relies on three main renewable categories: electricity, thermo power and transport fuels.
However, the support scheme only applies to electricity. The annual mandatory quota for electricity from renewable energy sources covered by the support scheme is 12 per cent for 2012, 14 per cent for 2013 and 20 per cent for 2020.
The National Renewable Energy Action Plan (PNAER) was based on law no. 220/2008 which granted four Green Certificates for every MWh produced from a solar energy source. However, soon after the PNAER was drawn up, this law was superseded by law no. 134/2010 and Emergency Ordinance no. 88/2011 which increased the number of Green Certificates to six. This means the targets established by the PNAER regarding installed solar capacities (260 MW by 2020) can be easily surpassed and, instead, a capacity of 1,500-2,000 MW can be reached by 2017.
New energy law no. 123/2012
The new energy law no. 123/2012, enacted in July, obliges producers, suppliers and consumers to trade energy only on the centralized market, in a transparent, public and nondiscriminatory manner. Basically, it requires energy market players to carry out transactions only through the Electric Power Market Operator in Romania (OPCOM).
However, a producer's license issued by ANRE is required to use an OPCOM platform, so companies developing solar projects can access these platforms only after obtaining this license. This system has made it impossible to find financing sources for solar projects. The majority of financiers require long-term agreements for the sale of energy, the so-called Power Purchase Agreements (PPA).
To resolve this blockage, which risks delaying hundreds of projects, OPCOM has started to develop a new platform for long-term contracts which could allow access to companies that don't have yet a producer's license and need a PPA to obtain financing. Meanwhile, ANRE is analysing the option of using secondary regulation to allow the signing of negotiated bilateral contracts by certain categories of power market participants.
There are several important players on the solar energy market: ANRE, Transelectrica (the Romanian power grid company) and OPCOM, which are all state-owned, and suppliers to the eight regions of Romania, each operating in one region: Electrica Transilvania Nord, Electrica Transilvania Sud and Electrica Muntenia Nord, which are state-owned, and private firms Enel Muntenia, Enel Dobrogea, Enel Banat, E.ON and CEZ.
Legal steps to developing a solar energy project
Investors developing a PV project need to take five main legal steps. First and foremost, they need construction authorization from the local authority, which includes all the approvals, licenses and permits required by the certificate of urbanism.
Secondly, they must obtain the technical connection approval (ATR) from the electricity distributor, which reserves the capacity in the network for at least 25 years. The ATR requires a solution study to identify all the plant's grid connection possibilities, from which the electricity retailer will choose the best solution and grant the ATR. Before the ATR expiration date, the beneficiary must sign a connection contract with the electricity distributor.
Afterwards, the investor must obtain the establishment permit (issued by ANRE), which is compulsory for plants with more than one MW of installed capacity. Without this authorization, constructions of the plant cannot start. The producer's license, which entitles the holder to capitalize the electricity market, is issued by ANRE and is another requirement for developing a PV project. The last step is the accreditation support scheme issued by ANRE, through which the renewable energy producer will benefit from GCs issued monthly by Transelectrica.
Green Certificates system in Romania
To boost renewable energy production, Romania decided to apply the mandatory quota system combined with Green Certificates trading.
Electricity producers using renewable sources receive a specific number of certificates (depending on the renewable source and technology used) for each generated and delivered MWh into the National Power System (SEN). For solar energy, six GCs are granted, and the support scheme is applied for 15 years.
Energy law no. 220/2008 obliges electricity suppliers to acquire the GCs. Based on the total electricity consumption and total number of GCs issued, ANRE determines the annual GC quota, which should be met by each supplier for the amount of electricity supplied to final consumers. Failing this, they are required to pay a penalty of 110 Euro/ GC purchased.
The cost of one GC is 27-55 Euros, with the exact value and the total penalty in the event of failure being annually indexed by ANRE in line with the Euro zone inflation rate. GC sales are made through either negotiated bilateral contracts or the GC centralized market, organized by OPCOM. All negotiated bilateral contracts should be reported to OPCOM.
Overcompensation, excess of GCs
Through the support scheme approval, the European Commission forced the Romanian authorities (ANRE) to monitor both the support scheme and investments in the production of energy from renewable sources.
Furthermore, in the event of overcompensation, they must reduce the number of GCs according to the renewable source categories or specific technologies where overcompensation is detected.
Taking into account technical and economic indicators, overcompensation comes about if the cost-benefit analysis, conducted for all production capacities using the same technology, shows an internal rate of return (IRR) of more than ten per cent of the adjudged technology value at the moment of the authorization of the promotion system.
In the event of overcompensation in the solar field, the number of GC should be reduced until the IRR reaches 11.6 per cent.
The relevant monitoring methodology required the first overcompensation analysis to be done in the first quarter of 2012, influencing facilities that will start producing electricity after January 1, 2013.
Although ANRE has completed the first overcompensation report, it cannot be applied due to law no.134/2012, which prevents the number of GCs being reduced by January 1, 2015, except for solar energy, where the number of GCs can decrease after January 1, 2014 in the event of overcompensation.
In terms of PV projects, interest on the Romanian market has grown since the number of GCs increased from four to six through law no. 139/2010 and also since the support scheme was approved.
Right now, in Romania, we have 20 licensed projects with a 17.63 MW capacity, 312 projects with grid connection agreement and 1,621 MW capacity and 110 projects with connection contracts and 601 MW. This visibly high interest in the PV field can also be influenced by investment costs, which is steadily declining.