ERNST & YOUNG SRL

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ALEXANDRU VALERIU BINIG

  |  11.12.2014

2013 Romanian Energy Market - strong negative shift in support for electricity from renewable energy sources

The Romanian energy market has been subject to important transformations during 2013, due mainly to the obligation to implement the EU commitments, but in the context of overall economic stagnation and low confidence on main export markets for Romanian products, which impacted heavily the overall electricity consumption

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ERNST & YOUNG SRL

ALEXANDRU VALERIU BINIG

ALEXANDRU VALERIU BINIG

PARTNER OF BUSINESS CONSULTING SERVICES DEPARTMENT at ERNST & YOUNG SRL

ANRE reported an overall electricity consumption in Romania of about 49.69 TWh in 2013, as compared with 52.36 TWh in 2012. On the background of the overall decrease of the electricity consumption, one could also notice an important shift that is taking place in the Romanian electricity sector in terms of market shares of various technologies. While the input of electricity from renewable energy sources increased from 3.5% in 2012 to 7.1% in 2013 (over 100% increase), the percentage of electricity from solid fuels shrank by more than 10 p.p. of the overall national electricity output, which overall is a 25% year on year decrease.

 

Romanian authorities received the message from the industrial consumers that the decrease of the consumption is a consequence of the increase of energy costs, in the case of electricity mainly due to the impact of the support schemes for electricity from renewables and from efficient cogeneration.

 

The situation in the gas sector was even more dramatic, with the Government and the Regulator embarking in a “liberalization” program agreed with International Financing Institutions leading to a dramatic alignment of the indigenous gas prices to the international levels with direct impact on overall energy bills of many Romanian manufacturers and probably impacting their competitiveness on their globalized product markets.

 

 

Year 2013 has been a year of sudden change for support in regard to electricity from renewable energy sources. Amid the adverse changes of the regulatory framework for renewables in various EU Members States, Romania has been perceived as a last investment haven and around EUR 6 billion of Foreign Direct Investment had been channelled towards power generation assets and related grid connection and reinforcement components. However, the strong reaction from the electricity consumers affected with price increases in the range of 10 Euro/MWh has determined the authorities to adopt sudden changes to the application mechanism of the support scheme, that have affected heavily the profitability of the new renewable power generation businesses, up to the level of affecting their capacity of debt servicing, triggering worry and discontent both with boards of ultinational utility companies and small investors, but also with banks.

 

The Romanian authorities have changed the course of the increase of the purchase obligations in terms of green certificates offered for sale by renewable energy generators, but have also postponed the allocation of green certificates depending on the generation technologies used. The price of the green certificates crashed, with discussions ongoing about eliminating the floor price foreseen in the applicable legislation. Moreover, as of 01.01.2014 the nominal number of green certificates allocated per MWh generated using several technologies has been reduced in a thrive to avoid overcompensation. As per complaints by investors in renewables, at present, the combinations of all these measures has hit hard the profitability of renewable power generation project and one expects major asset impairment reviews, write-offs, withdrawals and bankruptcies.

 

The spectacular penetration of electricity from renewables, with even more spectacular figures expected for year 2014, has also led to a qualitative assessment that Romania is very close to reaching its EU 2020 Agenda objectives (share of renewables in gross primary energy consumption, level of greenhouse gas emissions and energy efficiency improvements
compared to reference level from the past).

 

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