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The right way? The Green way - Doing Business | DOINGBUSINESS.RO

  |  12.11.2012

The right way? The Green way

Energy as strategic sector needs more than ever, a predictable business environment. During years, national strategy in energy has changed too many times

Of course, adjustments should be done to cope with reality, but too often changes are scaring away the investors.

 

The strategic call for investors

 

Romania needs a well prepared national strategy, to involve both state and investors, and to remain unchanged for few good years. This would prove not only realistic and successful, but it would have big chances to be followed by real investments. After setting its priorities, state should not interfere too much, but only follow  its interest and of course, support investors’ efforts via proper, specific legislation.

Renewables are the only investments that happen lately in the electricity sector.

 

For any new investment, in addition to a proper legislative environment, you need also to have room within end-user electricity prices. Still, regulated tariffs are low and do not allow new investments in production; the reality is proving that. Not even with bonus for efficient cogeneration, such projects for power plants are not on the table.

 

What it is imperatively needed in 2013 is an increase of distribution caps, with two advantages – sources to finance investments into grid and increase of investors’ trust. Grid regulations to welcome renewables and efficient cogeneration should be improved, also prioritization in dispatching. Market regulations should be revised following new Electricity and gas law.

 

The price matters

 

What is the cheapest option for consumers? The latest development of renewable resources is a good answer. Reaching EU quotas is binding for any member state. If we talk about green electricity, cheapest option for consumers is the wind one, which receives the smallest supporting scheme. In terms of electricity itself, renewables are competing for the market price with all other classic technologies, difference in investment being covered by green certificates. On markets, the electricity price is set by marginal producer, the most expensive to cover the electricity demand. If we have a look on centralized markets, we notice that thermal power producers are the marginal ones. So, we need either to replace them with cheaper electricity production, new and more efficient, including renewables and efficient cogeneration or to refurbish them, at high costs, emissions problems and questionable results.

 

Romania, among other countries, faces the need to reduce the exposure to volatile energy prices. However, the renewable energy projects are estimated to transfer a higher final power price to end-consumers, since the energy suppliers transfer the costs of subsidies received by producers in the final price invoiced to end-user. How can price volatility be tackled under such circumstances? According to law 134/2012, contribution to renewable energy is taken out from electricity tariffs and shown separately on invoices for each and every consumer. The number of green certificates per MWh is set and published by ANRE, price of green certificates is published by OPCOM, so the entire process is transparent.

 

The competitive markets mechanisms for electricity prices didn’t change; it is the equilibrium point where demand equals offer. Commodity price volatility came for the last two years especially due to hydro dry period, requiring replacement with more expensive thermal production. Partially, this price increase was offset by renewables, which strangely have decreased electricity prices, forcing thermal units to bid lower.

 

“For any new investment, in addition to a proper legislative environment, you need also to have room within end-user electricity prices.”

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