The proposal of Mr Nita and a different solution to reduce the cost of Renewable Energy for industrial consumers and households

Part 1: The actual situation and Mr Nita’s proposal

There are many people out there who have a negative opinion about the minister of Energy Constantin Nita. I personally have a very positive one for him as person, even if I don’t agree with lots of the things he says. He knows what he does and says and he has a plan that he implements, using arguments that “are nice to hear” by the population.

Since the day he became minister, he is constantly trying to change everything in the Romanian Renewable Energy sector, “so as to protect the people and the factories in Romania”. This initiative was strengthened after what happened in Bulgaria during February, no one would like the same to happen to his country as well.

The actual situation

Right now the situation in the Renewable Energy market is the following:

• There are circa 2.000 MW of wind projects connected to the grid.
• 90 MW of photovoltaic plants are connected and another 60 MW are expected to be connected during the following weeks.
• 28 MW of all Bio technologies (Biomass, Biogas etc) are connected
• Some 95 MW of new microhydro projects also are connected
• Almost 4 billion Euro was invested so far in the above mentioned projects, representing circa half of the foreign investments that entered in the country during 2009 – 2012.
• ANRE is the independent institution which functions very well and monitors the market
• Theoretically speaking, every trader of energy has to buy green certificates and then charge the end consumer.
• In reality if you take 20 electricity bills of similar clients, you will see 20 different results in calculation and the charging of the certificates.
• The market for green certificates is OPCOM.
• Except the traders, no one else can buy green certificates (for example some big consumers of energy have their own trading company)
• If you want to produce renewable energy and sell your certificates at a lower price than the OPCOM one for many years of time, you cannot find someone to do this. Everyone will tell you that he will have to follow the OPCOM price (minus a deduction for the service that the trader is offering)
• So if OPCOM price is high, officially there is no solution to change this.

The proposed measures

Minister Nita considers that this situation includes a high cost for the end consumer, industrial one and households, and he insists that he wants to protect the people. A Government Emergency Ordinance was published for this reason on 02.4.2013, you may find it here.

The available time for all market players to present their opinion on this document is 30 days. Everyone in the industry is negative and rejects either all the document, or 90% of it.

So let us see what the proposed measures are:

1. Instead of receiving the green certificates that were agreed and accredited, the producers should receive less. The rest will be “deposited in a basket for 3,5 and 4,5 years”. So 1 certificate for wind projects is blocked, 2 for photovoltaic ones  and 1 for micro hydro.

    

   • Like this the total number of certificates to be bought will be reduced by almost 50% (taking into consideration that wind projects represent 90% of the total installed capacity in the country)
   • The blocked certificates will be unblocked in 2017 (photovoltaic and micro hydro) and 2018 (wind). More information and regulations about these certificates are supposed to be provided by ANRE at a later time. In practice, in 2017 the government that will be elected after the elections of December 2016 will probably decide for these certificates.
   • So now people will pay for half of the certificates and in 3,5 years they will have to pay for double number of certificates, except if the certificates will be canceled then.
   • This is a measure that is suggested to be retroactive for all existing projects.
2. Industrial consumers with over 150.000 MWh consumption per year will have to pay only half of the certificates.

    

   • The rest of industrial consumers and the households will pay the total cost.
3. ANRE should publish two reports per year for overcompensation of a technology instead of one.

    

   • The government should be able to decrease the subvention scheme for a technology (based on ANRE proposal) twice per year, even twice during the same year.

Positive changes:

• The proposal allows the investors to sign Power Purchase Agreements (PPA) so as to sell their energy at a fixed price and like this to be possible to have a pre-agreed cash flow in their business plan. This is allowed only to projects up to 5 MW.
• (All the market players ask for this to be modified and be unlimited for all private investors and blocked for State companies)
• The guarantees asked by the companies issuing the Connection Terms (Aviz Technic de Racordare). Right now anyone may get these terms, without having 1 Euro for the project, blocking the country’s grid for months. It is correct for this investor to prove his financial capacity too, the country’s stability should be protected.
• (But there should be established a tangible measure, not to let this article free to interpretations)

Overall:

• There are many more measures included in this document, which influence the sector completely. Based on them, the Government will be able to interfere at any given moment and change everything, transforming the above mentioned investments into “Non predictable investments”.
• So the sector will be less attractive, the investors will go to the courts against the Government, “the population will be protected” (until 2017 when it will have to pay for double certificates) and in 2020 Romania will not reach the target for Renewable Energy and the population will pay huge penalties again.

What the Renewable Energy sector and the Business Associations say about the proposed law:

• It breaks multiple European laws and principles
• In all countries that a government tried to change everything retroactively, the courts decided against this action and charged the State with very high penalties
• (In the following days official announcements are expected on this issue, with detailed explanations why the proposed Emergency Ordinance cannot be accepted by the Industry).

Solutions?

On Monday: A different proposal to protect the population without hurting the Renewable Energy sector