Rapid scaling up of renewables is crucial for decarbonization efforts in the power sector, general industry and the entire economy. Investments in RES (renewable energy sources) have been on an upward trend in recent years but progress is not fast enough. In EBRD countries of operations, regulatory frameworks still need improvement to enable an accelerated pace of investment. In Romania, since 2006, cumulative EBRD climate related finance exceeded 2.7 billion euros in 151 projects. This portfolio is estimated to lead to important carbon emissions reductions, water savings and waste reduction annually.
Mihaela Mihăilescu, Deputy Head for Romania at EBRD
The sector has experienced renewed momentum recently after previous projects experienced regulatory interventions which led to a prolonged period without new developments of renewable energy projects. The renewed activity builds upon the EU-wide commitment enacted in Fit for 55 and REPowerEU to achieve at least 42.5% of final energy consumption from renewable sources by 2030. This supports Romania in achieving its ambitious plans to increase the share of renewables in total electricity consumption from 24.3% in 2019 to 36.2% by 2030 through the addition of 11.9GW of new renewable capacity (based on the updated draft NECP submitted by the Romanian government in November 2023).
According to the EBRD Energy Sector Strategy 2024-2028 and based on information provided by International Energy Agency, electricity from solar and wind is expected to increase fivefold between 2021 and 2030, while generation from unabated fossil fuels is seen as decreasing by more than 40%. By 2050, electricity generation from wind and solar is expected to account for more than 70% of total power generation.
The EBRD is a leading provider of green finance, having committed to make at least 50 per cent of its financing in the green arena by 2025, a target it has met for the past three years in Romania. The acceleration of the decarbonization of the energy sector is at the core of our green strategy, in line with the United Nations Sustainable Development Goals. Recent world events, from the Covid pandemic to more recent price shocks, have slowed SDG advances in the energy sector in some countries, and the UNSDG 2022 report noted that “achieving energy and climate goals will require continued policy support and a massive mobilization of public and private capital for clean and renewable energy, especially in developing countries.”
In terms of financing, the scale up of renewable energy sources (including solar) at the EBRD can be achieved through:
- investing directly in utility-scale renewable energy generation (including when coupled with storage), across all well-established, emerging or less established technologies (including solar and also offshore wind, waste to energy); for example, in 2022 the EBRD supported the construction of Poland’s biggest solar photovoltaic (PV) plant via a 45.3 million euros loan. The Zwartowo plant will have a total capacity of up to 285.6 MWp and is expected to lead to carbon dioxide (CO2) emissions savings of at least 138,000 tons per year.
- financing, through financial institutions, facilities that support renewable energy projects, such as Green Economy Financing Facilities, bonds with climate related features, Green Economy Transition (GET) eligible transactions, equity funds, and promote public-private partnerships; such projects were already signed at regional level and also in other countries such as Greece, Poland, Croatia, Bulgaria and Estonia.
- using blended finance (combining loans with grants, concessional loans or guarantees such as InvestEU) to scale up renewables and to support innovative green technologies. One example of using such an instrument was the 2023 senior secured loan aimed to finance development, construction, and operation of a 30 MW portfolio of three solar power plants in Croatia.
- Through the EBRD Green Cities urban sustainability program, using its focus on energy resilience, including renewables and district energy grids. In December 2022 EBRD signed a solar district heating project to introduce a renewable energy source in Pristina. This will connect neighborhoods not currently served by the existing network, replacing individual heating systems using solid fuel and greenhouse gas (GHG)-intensive lignite.
The EBRD plays an important role offering investment support and engaging in policy dialogue with authorities to advance market reforms and to pursue holistic and well-sequenced policy engagements to develop and reform energy markets and regulatory frameworks. The work is delivered considering country-specific characteristics: low-carbon pathways for the power/energy sector as a key operational/policy framework to drive the energy transition, regulatory frameworks and support schemes for established and emerging technologies, covering small-scale and distributed renewable generation sources; competitive price discovery processes and mechanisms; improving the functioning of markets to facilitate arrangements allowing for the uptake of renewable energy by end users (for example, corporate power purchase agreements (PPAs), municipal PPAs, cross-border PPAs and self-consumption regulation).
In Romania, more recently the EBRD provided technical assistance support to the Ministry of Energy to draft a new Electricity Law. It is currently assisting with the development of a Contracts for Difference (CfD) support mechanism – drafting primary and secondary legislation and amendments of existing laws needed for the implementation of the CfD framework, proposals for rules and requirements for a CfD tendering process and recommendations on measures to ensure adequate long-term funding and creditworthiness of the CfD Counterparty.
As well as investments in renewables, an important focus is also placed on the upgrade and expansion of power networks and storage solutions to integrate renewable energy sources, through:
- Investing in modernizing and expanding power networks (including transmission and distribution) to facilitate electrification, integrate renewables, grow decentralized energy sources, foster energy efficiency, and improve loss reduction
- Promoting policy engagement and financing that enable investment in energy storage, flexible/dispatchable generation sources
- Investing in the digital transformation and development of digital skills for the energy sector (smart grids, smart meters, the integration of electric vehicles (EVs), active participation in the energy markets of energy consumers/demand response).
- Investing in the expansion and upgrade of network infrastructure, including cross-border, to support the transportation of electricity and energy vectors and regional energy systems integration
- Financing energy-storage solutions to leverage intermittent resources efficiently (for example, batteries, pumped-storage hydroelectricity, and other storage technologies)
- Developing reforms, regulatory frameworks, market rules and regulations, and market platforms (energy exchanges) that promote well-functioning energy markets and support investment
- Financing infrastructure for the increased electrification of the economy (for example, EV charging stations).
EBRD is the largest institutional investor in Romania, having invested around 11 billion euros through more than 500 transactions since our set up in the country. Close to 80% of the Bank’s investments in Romania are towards the private sector. The past three years marked an increase in our operations in the country, a trend that we expect to continue in the future, focusing our efforts on three pillars outlined in our country strategy for Romania: (1) sustainable infrastructure and regional development, (2) financial intermediation and further development of capital markets and (3) improved productivity by helping private companies expand and improve workforce skills.