Greece, Bulgaria, Romania make cautious steps towards renewable energy goals

by Tsvetomira Tsanova

As a whole, the three member states have really good wind and solar power potential which has already been recognised by many investors and project developers. Yet, the financial crisis in Greece and unfavourable regulatory changes in Bulgaria are putting a significant strain on the local renewable energy markets. Furthermore, Romania and Bulgaria share a common challenge – ageing infrastructure and grid bottlenecks, which if not totally discouraging for investors, are at least a significant obstacle to a smooth project development process.

Greece eyes solar power as way out of crisis

In 2011 solar and wind power accounted for 5.5% and 1.0%, respectively, of total power generation in Greece. Newly installed PV capacity in the country nearly tripled to 426 MW last year, data from the Hellenic Association of Photovoltaic Companies (Helapco) show. At the same time, installed wind power capacity for 2011 surged by 23% on the year to 1,626.5 MW, according to the Hellenic Wind Energy Association.

Growth for the past few years has been fuelled by the existing feed-in tariffs (FiT) and also, as an alternative, government subsidies that cover 40% of a project’s costs. The FiTs for solar power were cut in February 2012, following a global trend motivated by falling equipment costs. Combined with the country’s abundant solar resources, the tariffs remained appealing.

Now the future of the renewable energy sector is unsure due to the financial crisis in Greece, one of the hottest topics globally. The crisis hit a key aspect of new energy project development – the ability to calculate the income from a power facility for a certain period of time – so lack of financing is currently hampering numerous wind and solar power projects. The worsening financial situation has resulted in more cautious capacity building projections for the coming years. In the May 2011 issue of US audit and consultancy company Ernst & Young’s “all renewables” indices Greece occupied the 10th place, while it plunged to 21st in the August 2011 indices. A year later in the August 2012 issue of the ranking the country occupied the 18th spot.

However, as part of an ambitious plan which has already secured Brussels’ blessing, the Greek solar power sector may turn from a victim of the crisis into a savior from it. The plan, called Helios, envisages the construction of a solar power complex with a capacity of up to 10,000 MW to significantly boost Greece’s solar generation and allow it to export clean power to other European countries. The project will require an investment of up to 20 billion euro, the government estimates, with revenues to help repay Greece’s debts.

Helapco chairman, Alexander Zachariou, told SeeNews renewables in an interview earlier this year that there still exist major issues to be worked out such as identifying the investors for the Helios project, setting the price at which the electricity would be sold and the target countries that would buy the generated power. Asked about the feasibility of the Helios solar complex, Zachariou said: “It is an ambitious plan which is definitely more realistic than the Desertec project.” Desertec is a 400-billion-euro initiative to develop solar and wind plants in the North Africa and Middle East region to supply 15% of Europe’s power by 2050.

installed capacity

Bulgarian wind and solar market struggles amid regulatory changes and falling FiTs

Wind and solar power facilities in Bulgaria brought 1.8% and 0.2% respectively of the total power generation for 2011, according to Eurostat data. The country’s installed wind power capacity at the end of last year was 550 MW, and there were 220 MW of operating solar power plants. Data provided by the Bulgarian Wind Energy Association (BGWEA) show that there were over 1,700 MW of wind projects with preliminary grid-connection contracts at the end of 2011.

Following Bulgaria’s accession to the EU in 2007, interest towards green energy in the country expanded significantly, but investor enthusiasm cooled down after the introduction of the Law on Energy from Renewable Sources in 2011 and certain amendments to it from the spring of 2012.

When the law came into force in 2011, a specific provision struck sector firms and organisations — the law stipulated that FiTs for green energy projects would be fixed at the time of completion of construction. Industry associations then warned that as a result of that requirement investors would not be able to calculate revenue and pay-back time before actually building the plant, and that will cause serious problems with debt financing.
A year later, in April 2012, a Law for Amending and Supplementing the Law on Energy from Renewable Sources was promulgated in the State Gazette. One of the changes referred exactly to the time of setting the FiT. Since the amendment’s coming into force, the tariffs for renewable energy installations in Bulgaria are to be determined when a facility is being commissioned, making it even harder to predict whether the project’s construction time will manage to fit within one tariff window.

Image by BGWEA

Image by BGWEA

To top it all, the FiTs were cut for the one-year period between July 1, 2012 and June 30, 2013. The reduction for solar photovoltaic (PV) installations is more than 50%, while wind power is to be purchased at rates that are some 22% lower. Another law was also passed in July allowing the State Energy and Water Regulatory Commission to revise the rates when it discovers an over 10% change in any of the price-forming elements, instead of waiting for a year for the next price revision period.

According to Sebastian Noethlichs, executive director of BGWEA, Bulgaria’s renewables market is clearly suffering from lack of political support on the government level and consequently a very unstable and obstructive regulatory framework. Noethlichs told SeeNews that despite all he remained fundamentally optimistic for the future. “Even in Bulgaria, the EU’s country with the lowest electricity prices, wind energy now produces below retail costs. Renewables are and will remain the one and only source of energy that keeps on getting cheaper from year to year. Pair this fundamental advantage with the energy independence, decentralisation of the grid and the environmental benefits and you will see that even the most populist and reactionary government will eventually have to admit to simple realities and get on board with renewables.”

In Ernst & Young’s “all renewables” indices Bulgaria took the 35th position in May 2012, compared with the 32nd in May 2011. In August 2012 it came 36th in the ranking after the massive FiT cuts in July.

power output

Romania’s attractiveness grows, solar sector makes first steps

Around 1.5% of power generation in Romania for 2011 came from wind power, while the share of solar power was insignificant. The country closed last year with 1,006 MW of installed wind power capacity and no solar. By the end of 2012 the situation with solar energy is expected to change as the sector is slowly growing. One of the first steps in that direction was the establishment of the Romanian Photovoltaic Industry Association (RPIA) in the spring of 2012.

In contrast to Bulgaria and Greece, Romania’s way to promote renewable energy generation are the so called green certificates. Solar park operators receive six green certificates for each MWh produced, while wind farms get two certificates per MWh. These green certificates can be traded in a regulated market, separately from the output they account for. According to data from RPIA, the price of one green certificate is between 27 euro and 55 euro, subject to indexation.

As a whole, Romania’s renewable energy market does not suffer from lack of interest, which is especially true of wind power. The country’s Dobrogea region along the Black Sea coast is already home to hundreds of wind turbines and more are coming. In May 2012 Romania’s Economy Ministry said that 1,200 MW of wind farms are to be developed in Dobrogea with turbines from Chinese wind turbine maker Sinovel Wind Group (SHA:601558). Earlier during the year, Eolica Dobrogea completed for Spanish Iberdrola Renovables an 80-MW wind farm in the area. Czech utility CEZ (PRG:BAACEZ) also expects to put online total wind power capacity of 600 MW in southeastern Romania by end-2012.

Among the EU member states in SEE, Romania holds the highest ranking in Renewable Energy Country Attractiveness Indices of Ernst & Young. In the May 2012 edition of the indices the country was on the 14th place, an improvement from the 21st place in May 2011, while in August 2012 it climbed to the 13th spot. Romania also took the 11th spot in the wind energy indices for May 2012, compared to 18th a year earlier.