What goes around, comes around – wind and other renewable energy projects return to activity in Romania

Looking back over my 25 years of working as a commercial lawyer in Romania, I notice how there are cycles of economic and investment interest in particular sectors of the economy. Ten years ago, my colleagues and I were busy with the “first wave” of renewable energy projects (we worked then on successful wind projects alone with an aggregate installed capacity approaching 200MW). That “first wave” brought a great deal of investment into Romania but, in the early months of 2013 many, if not most, new investments were effectively halted by changes made to the support scheme, subsequently compounded by other legislative measures which made it more difficult to develop and commission a successful renewable energy project on a greenfield site. Eight years later, renewable energy investments are back: so far this year, we have dealt with the sale of unbuilt wind projects with an aggregate capacity of 50MW. What has changed and what are the prospects for a more successful outcome to this second wave of renewable energy investments than we had in 2013?

On one level, global warming and the move to “carbon-neutral” are now accepted international issues and there is EU funding to help communities that have worked in the coal industry to re-train in renewable energy. Romania is still blessed with abundant potential sources of renewable energy but energy security and independence have become more important, particularly given the regional political developments to the south and east of Romania. Whatever the reasons may be, Romanian government policy is now to increase the proportion of Romania’s energy from renewables from 24% (2020) to 30.7% by 2030. New projects will therefore need to be developed and commissioned if this target is to be met.

The changes made to the support scheme for renewable electricity sources in 2013 have already been mentioned. That system of requiring energy suppliers to purchase quotas of “green certificates” issued to renewable electricity producers remains in place for projects commissioned before 1 January 2017. Renewable energy projects commissioned since then however have only the power which they generate to sell on the electricity markets.

On the face of it, the absence of a support scheme for new projects since 2016 may make the current interest in renewable energy projects appear unlikely, but the technology has matured since the “first wave” in 2010-12 and it is now reasonable to expect a renewable energy project to be able to compete with electricity from other sources on an even footing. I certainly saw projects proposed during the “first wave” which appeared remotely unlikely to be feasible without the support scheme (e.g. involving the construction of cable routes of tens of kilometers from the generation site to the grid access point). The development of a market for energy from renewable sources which does not depend on artificial support schemes appears to offer a much more sustainable environment for projects, being less susceptible to short-term political interference. We are now seeing projects which remained unbuilt in 2013 being “dusted off”, often with the redesign of the original plans to include a more powerful and efficient generating plant.

Even if today’s projects need to survive and prosper purely based on the electricity which they produce, it should be noted that there are legal provisions that can assist renewable energy projects. Producers of electricity from renewable sources of energy benefit from guaranteed access to the grid, subject to the safety of the national grid. Guaranteed access may involve work to reinforce the grid, but this will be identified in the solution study, technical connection approval, and connection agreement for a project, so developers can assess in advance what work and expense will be involved.

Although interest in renewable energy projects has now reignited, there remains another step that could be taken to assist in making new projects bankable. Off-market bilateral power purchase agreements (PPAs) continue to be prohibited, with all energy transactions being performed using the platforms operated by the OPCOM market. Having a bilateral off-market PPA in place gives a degree of certainty to developers of renewable energy projects. There have been many voices in the industry calling for off-market PPAs to be permitted and whilst the Romanian government has expressed its intention to support renewable energy by permitting off-market PPAs, the necessary steps to issue regulations that will allow off-market PPAs have not yet been taken.

Even if Romania is now seeing a rise of interest from investors in renewable energy projects, it is great to be hoped that there will be no repetition of the political actions of 2013 and that willing buyers and willing sellers of electricity will soon be able to conclude off-market PPAs. If the former support scheme caused the market to “overheat” in 2012-13, it is hard to see how the removal of this restriction on off-market PPAs could cause problems in 2021, particularly considering the need to ensure that the EU 2030 climate target is reached. Hopefully, this time around we shall see the sustainable development of the Romanian renewable energy sector, without a repeat of the mistakes made in the “first wave” a decade ago. On to 30.7% renewable energy by 2030!

Source: What goes around, comes around – wind and other renewable energy projects return to activity in Romania