Investors in renewables anxiously expect the legislative changes proposed by the Government and by the market regulatory body ANRE to Law 220/2008. Although the ministry has mention – informally, indeed, but publicly – several deadlines for clarifying the situation, including a deadline closely before remission of this publication to printing, they were not respected, to the dismay of investors. The market soaks with green certificates, and investors found a way to survive oversupply: selling at discount, in a true-born pre-Revolution style, that is “under the table”.
Investment of nearly 8 billion euros slowly fall into bankruptcy and insolvency, due to a non-functional green certificate support scheme. The situation is not new, it dragged on for several years now, and pressures from large consumers and electoral reasons made it impossible to improve the situation, as this would lead to an increase – modest, indeed – in invoices.
“We expect the government’s proposal for resolving the financial deadlock impacting on the renewable energy as a result of legislative and regulatory interventions in the past three years”, declared Claudia Brânduş, head of Regulatory Affairs – East Europe and Egypt, Enel Green Power and the new chairman of the Romania Wind Energy Association – RWEA.
She argues that the impact on industry is significant and “to show this, it is almost finished the second phase of a study on the 2015 financial statements of wind energy producers”. The results will be published towards the end of September.
Investors associations have launched several proposals to the Ministry of Energy and ANRE, but the government has ordered its own impact study and is still negotiating the steps to be taken to unlock the market. Until then, investors in renewable remain on hold, barely breathing.
“Currently, we do not know which proposals were accepted and which not. We look with great interest for the draft of the emergency ordinance announced by ministry officials. We believe it is the last chance to correct this huge imbalance in green certificates market. The fact is that a major intervention is necessary in this area now, next year will be too late, the entire sector will collapse,” says Martin Moise, Senior Vice President of Renewable Energy Producers Organization in Romania – PATRES.
ANRE officials recognized the problems in the market, including the need to increase the green certificates mandatory quota for 2017, from 8.3% to 12.5% – otherwise, Romania would risk to no longer reach its renewable energy targets for 2020. The market is flooded with green certificates, which investors have no counterpart to sell. And they refer to the discount option into the energy prices, in order to get rid of them.
In a previous interview with this reporter, a senior official of ANRE acknowledged that there is a black market for green certificates, but any measures to increase the mandatory quota would translate into higher energy prices.
“If the green certificates quota will growth, it would unlock the market, and it is true – prices would increase, but we are talking about 3 lei per month per household. This in not very much, and still that annoys large energy consumers, although they are exempt (from paying the green certificates) and would be only marginally affected -, and they lobby against the market recovery from this chaos,” says an investor.
Meanwhile, two solar parks went bankrupt or insolvent. And many other projects expect with their latest resources to see what measures the government will take.
“All countries are building on average over 1,000 MW in renewable energy projects annually, except Romania. Here, the yield reached 25% of initial estimates (100 lei / MWh, from 400 lei, the initial estimate) and return on investment is over 40-50 years. We expect a renewables market of bankruptcies and insolvencies. The market is in deadlock both from a legal and a financial standpoint,” said Sebastian Enache, Director of Development Monsson for energynomics.ro.
But how many projects went bankrupt?
“According to the data centralized by Transelectrica, in regard to green certificates issued, at the end of December 2015 there were registered producers of energy from renewable sources (those to receive green certificates) with a total capacity of 5.145 MW. At the end of July 2016, there were only 4.699 MW registered, “said Martin Moise.
Which means a decrease of about 8.7%.
Ironically, meanwhile the investors credit the state by paying in advance taxes for the value of certificates they cannot sell!
“On the green certificates market the debacle continues. Now, there are available for sale over 9 million green certificates. And from the beginning of the year till now there were issued another 7.6 million GC! These over 9 million green certificates have a notional value of 1.2 billion lei, although not being covered by the mandatory quota, they are worthless papers on which real taxes are still applied, “said Moise.
The only solution is to sell them through agreements on bilateral market, but this is the prerogative of “discount” agreements and of large firms. On the open market operator, OPCOM, about 1% of certificates were traded: from January to August were traded on the centralized market (CMGC) about 7,800 units, according to an analysis energynomics.ro.
“Everything is traded on bilateral agreements because you can get along. The discount is included in the price of energy… the discount is up to 40%,” says one investor.
“On CMGC one doesn’t know his counterpart. When bids are submitted no one knows where they come from. Instead, in the bilateral agreements area, as there are only selling offers, the supplier may choose. One’s certificates thus become greener than others. Now, there in the bilateral trading, 99% of transactions include a preliminary agreement,” the source said.
In addition, fierce competition between providers allow such transactions, prices go down to 132 lei per MWh, under a normal market price of 160 lei (about 17.5% higher).
The system is designed poorly, but the cause of all evil is poor coverage of the sales – now this is at 60% of the certificates issued, and investors require an increase to 95%, except the previous stocks, the sources say.
Fortunately, the materials for green projects are getting cheaper globally, and these green projects may become effective even without subsidies ,in the next three to four years. Until then, the paradox lingers on: renewables made energy prices to drop, followed by the cutting of subsidies, while the indirect subsidization was maintained for polluting industries, like coal, whose cost price starts from 200 lei per MWh – higher than the market price. But miners, as you know, were always an intensely targeted electoral group and election year 2016 seems to be no exception
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This article can be read in printed edition of energynomics.ro Magazine, issued in September 2016.
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