ICIS Power Perspective: Romania considers changing the RES support scheme for new installations

This story has originally been published for ICIS Power Perspective subscribers on 18 May 2018 at 15:44 CET.

Romania is considering changing the current RES support scheme of Certificates of Origin (CoOs, “green certificates”) to a payment system to RES producers. The type of payments is yet to be defined as the Romanian national regulatory authority ANRE has proposed changing to a Feed-in-Tariff (FiT) or Feed-in-Premium (FiP) system, but the Minister for Energy has proposed a UK-style ‘Contracts for Difference’ (CfD) set-up.

Background

• The existing CoO scheme has benefitted early producers, with recent entrants finding the certificates market oversupplied
  • Under CoO, renewable energy producers in Romania are given free CoOs for each MWh of electricity they supply for 15 years
  • Simultaneously, electricity suppliers in Romania must purchase a fixed number of green certificates per MWh of electricity they sell – to fulfil pre-set quotas
  • Under the existing scheme suppliers who must buy certificates can pass on some of this cost to their end consumers, but this was capped at €11.10/MWh in 2017
  • CoOs issued early during the scheme were mostly sold bilaterally on long-term contracts between producers and suppliers according to ANRE
  • RES production has grown but power demand and therefore demand for certificates has remained close to flat, creating oversupply in the certificates market (please see Figure 1 below)

Figure 1: Solar and wind capacity and generation has grown between 2005 and 2014 then flatlined

Source: Transelectrica, IRENA

• Romania reformed the CoO scheme several times since its introduction in 2005
• In September 2017, ANRE created a regulated market where unsold certificates must be traded, and where the minimum and maximum price is regulated
• Whilst the minimum price looks attractive, €58.80/MWh in 2017 for solar producers, oversupply in the market meant producers, especially smaller ones, were not able to find a buyer – according to a source at ANRE, the scheme does not have a ‘buyer of last resort’
• The scheme is closed to projects commissioned after 31stDec 2016

New schemes proposed:

• ANRE proposes a switch to either a FiT or FiP scheme, according to a contact at the body
  • Details are not confirmed, and further discussions between ANRE and the Industry Committee of the Deputies Chamber have been delayed, according to the same source
  • A source at ANRE expects a transition to a new scheme will “take some time”
  • In the meantime, ANRE proposes to lift the end-consumer cost pass-through cap to 14.00/MWh in 2022 to prop up demand on the spot market
• The Energy Minister, Doru Visan stated that the Ministry of Energy is considering a CfDs scheme, similar to in the UK
  • Low-carbon producers receive a top-up from the government but producers must pay if the market price for power rises above the set threshold
  • Such a CfDs scheme would also be open to nuclear capacity, which could support two new nuclear units which are planned but have not yet received a final investment decision

Analysis

• Romania is on course to reach its binding renewable target for 2020 without any additional capacity – it reached 25% renewables in final energy consumption in 2016 – 1 percentage point above the target (please see Figure 2 below)
  • Since 2005 total installed capacity of renewables has almost doubled, from 6.3GW to 11.3GW by 2015 but has flatlined since (source IRENA)
  • Generation from RES has grown from 15.2TWh in 2005 to 25.4TWh in 2016 – flat power demand means the share of RES rise from 27% to 43% (source IRENA)
  • Romania’s domestic target for the share of RES in total power demand is 55% by 2030 and 78% by 2050
  • To reach its 2030 target, RES generation must rise by 7.4TWh per annum, assuming power consumption remains flat at 2016 levels
  • A 7.3TWh growth in RES generation could be met with a doubling in wind capacity, from 3.0GW in 2016 to 6.2GW, assuming a load factor of 26%
  • It is likely that RES capacity will remain flat until a new support scheme is introduced
  • Nuclear capacity is 1.3GW with a further 1.4GW planned but not yet with a final investment decision – however the new units would be mostly replacing the existing, ageing, capacity, leaving total nuclear capacity in 2030 flat to 2016

Figure 2: The share of RES generation in total power consumption has grown rapidly since 2011

Source: Eurostat

• Across Europe, CoOs as a support scheme has been losing popularity in recent years
  • At the moment only three countries accept new installations to CoOs schemes: Sweden and Norway that coordinate a common CoO market and Belgium (links to the ICIS Power Perspective support schemes of Belgium, Sweden and Norway)
  • Poland no longer accepts new installations to its CoO scheme except for electricity produced by biogas and biomass (link to the support scheme)
  • The Power Perspective map contains all support schemes for new RES installations across Europe

Anise Ganbold is Senior Analyst – EU Power Markets at ICIS. She can be reached at anise.ganbold@icis.com

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