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Renewable crisis in Romania: EUR 2 bln thrown out the window over legal changes, says Eric Stab
Romania has attracted around EUR 7 billion worth of investments in the renewable sector between 2008-09 and 2013, but the losses in the sector are to the tune of billions of euros, according to Eric Stab, the president of the Foreign Investors’ Council, quoted by business-review.eu.
“Based on the information available, out of those EUR 7 billion, there were already something like EUR 2 billion that were written off.
Basically, money that unfortunately has already been thrown out of the window as a result of all those changes. There is undoubtedly a need to restore trust amongst the investors’ community and I am not speaking only about energy investors,” Stab told BR. He is also chairman and CEO, country president Romania and Poland at Engie, the French utility. The company has in Romania two wind projects with a combined capacity of 100MW.
The executive warned that more troubles lie ahead for the renewable investors, because the deferred green certificates will start to get on the market next year. Some renewable players might not be able to cope with the financial pressures and might go into insolvency.
“This is the reason why action is now required. There is indeed a major concern at the moment amongst the investor community that things can get worst because from next year some of those frozen or deferred green certificates, which is the support scheme for renewables, will come back to market, which means that the supply of green certificates will increase significantly.
If nothing is done on the demand side, indeed, the whole market will be swept away with those green certificates and the consequence of that is that it might indeed see chained insolvencies in this sector, especially for all those investors that have a relatively high level of debt leverage, meaning all those who went to see the banks to get a significant share of financing for those investments,” added Stab.
The head of the FIC underlined that it “would be very sad to see a collapse of this sector” and that Romania might miss its Europe 2020 targets regarding the share of renewable energy in the total output if authorities don’t do anything.
The biggest investments have been made in the wind sector, which has close to 3,000MW in combined capacities. The solar sector comes second with over 1,000MW.
Some of the biggest associations in the local renewable sectors claim they are extremely worried after the energy regulator ANRE has proposed a lower quota of the total amount of energy consumption that benefits from the green certificates.
In a joint letter submitted to the top brass in the Parliament and government, the Romanian Wind Energy Association (RWEA), the Renewable Energy Producers Organization in Romania (PATRES) and Romanian Photovoltaic Industry Association (RPIA) say that the proposed quota of 8.3% for next year is below this year’s level, while according to the renewable law it should have climbed to 18 percent in 2017.
“If the mandatory quota for renewable energy is not recomputed so it grows significantly compared to the level of 2016 (12.15%), for ensuring the minimum income for the operation of the parks and or the reimbursement of financing for making the investments, the only result will be the total destruction of the renewable energy industry, which could see the country miss its 2020 targets. As even the ANRE has stated in the computations for the proposed 8.3 percent quota, less than 50 percent of the green certificates issued in 2017 will be sold, and if we take into account the surplus of around 6.5 million green certificates that don’t have a buyer, this figure will fall to 30 percent,” according to the letter.
The associations further state that the wind sector posted a loss of around EUR 500 million in 2014.
The players warn that the 8.3 percent quota for 2017 will bring bankruptcies in the industry and the investors might decide to sue Romania so as to recover their money.
“Not even the alternative proposal will not save industry, but on the contrary considering that through the constant delay in the issuance of green certificates on the back of lack of demand, the effect is the same which is the massive bankruptcy of the industry that will have grave consequences for the economy through lost revenues to the state budget, the loss of jobs and the increase of electricity prices and the loss of Romania’s role as an energy exporters.
In May, Romania had 2.931 MW worth of wind installations enrolled in the support scheme, according to data provided by Transelectrica, the grid operator. Solar capacities reached 1.313MW, while small hydro plants had 316MW. Biomass projects reached close over 100MW.
The associations said that the renewable sector has attracted around EUR 7 billion worth of investments.
The green certificates are sold on the energy market OPCOM. In the June trading session, 681 green certificates were sold on the market, which closed at RON 132 per certificate.
The prices of a green certificate are regulated. The floor price for this year stands at EUR 29.3, while the ceiling is EUR 59.8.