Written by Jens Blomgren-Hansen, partner

The selection of countries below has been based on the countries which we have seen attract attention during the past 12 months. There are undoubtedly other countries of interest and even further countries which are currently developing new renewable energy policies which will make them interesting countries for future foreign investments and their projects as finance objects. We hope to cover such new markets in our future volumes of our newsletter.

It is further noted that as the below overview is very high level, there can, within each country, be variations related to, among others, technology and capacity. Local and regional level policies may further affect the national regime and changes to the regimes may occur from time to time, just as some countries have passed legislation or announced support programmes which for various reasons have not been fully implemented or not become effective. Not all projects within the same jurisdiction may thus be subject to the same regime - or be eligible for the same benefits or regulatory regime in general.

The below table and information shall thus only be seen as inspiration and should not be relied on for investment or other business decisions.

Whereas lately "hot" renewables markets as Spain and the Czech Republic have cooled off significantly with the recent uncertainty as to the changes to the tariff regime and possible retroactive measures by way of cuts in the guaranteed tariff or new taxes, other markets such as Romania, Sweden and Norway seems to be taking off.

Political certainty, or at least a reasonable risk/reward, and financing are undoubtedly still the order of the day. We can thus only hope that the EU Commission's recommendation to ensure political stability and avoid retroactive measures as set forth in its report from November 2010 will in fact become the order of the day, just as we await to see what form of finance assistance will be offered by the EU going forward. 

The Romanian Energy Market

Written by Jens Blomgren-Hansen, partner

Romania has been through a reasonably steady economic development since the fall of the "iron curtain" and whereas a continued GDP growth is expected a slight growth in energy consumption is also expected for the short- to midterm outlook, in spite of a minor expected fall in the total population during the same period.

Romania has been a net exporter of electricity for a number of years. The total production capacity was approximately 54TWh in 2010 and is expected to grow to around 60TWh in 2015, whereas the total energy consumption was only approximately 50TWh in 2010 and is expected to rise to around 53TWh in 2015.

The steady growth in production capacity which was seen from 2000-2008 took a hit during the financial crisis. However, a number of upcoming projects, new legislation giving some clarity to the legal framework needed for new projects and an expected come back of the financial markets makes the market believe that we will again see an increase in capacity in the short- to midterm outlook. However, it should be noted that the Romanian economy is still fragile and various regulatory impediments and red tape still create a downward risk for the short- to midterm outlook.

Romania has a fairly diversified power mix today. Traditional coal, oil and gas fired power plants make up for about 50% of today's generation capacity whereas the remaining capacity come primarily from hydropower and nuclear power.

Whereas the EU, through EBRD, has provided financial support for the renovation of the large 2.3 GW Turceni thermal power plant, the Czech utility company CEZ decided to pull out of the 400 MW Galati gas fired power plant project in July 2010 and was followed by GDF Suez, RWE and Ibedrola in January 2011, leaving the Galati project little chance of being realized.

Romania has as many other European countries and in line with the EU requirements set ambitious targets for its renewable energy consumption. The goal for 2010 was that 33% of the electricity consumed should come from renewable energy sources (including nuclear power), and the goal is 38% for 2020. The primary support from legislators towards new capacity is thus targeted to support renewable energy capacity.

As the country does have very favourable conditions for renewable energy production, it does seem obvious to support such investments. However, so far many potential investors and financiers have been hesitant to invest in Romania or simply stayed away due to delays and uncertainty related to the needed legislation, the high level of corruption and the bureaucratic processes involved in applying for the needed permits and authorisations.

Whereas the country has already taken advantage of the opportunities for large scale hydropower projects, the potential for small scale hydropower projects largely untapped. Romania further has significant geothermal and biomass resources which are today primarily used for heating rather than electricity production.

With a solar influx 1,000-1,300 kWh/m2 p.a. the potential for solar PV capacity is evaluated to be minimum 1.2 TWh p.a..

However, the by far most promising resource comes from wind energy. With the wind regime found in not the least the eastern areas of the country, the wind energy potential is estimated to be around 23 TWh p.a.. The Romanian wind energy association also hopes to achieve 5 GW of installed capacity by 2020, a goal which seems within reach with the already known projects and project pipelines from, among others, CEZ, Enel, Energias de Portugal and RWE.

It seems fair to conclude that almost no matter what form of renewable energy that may have your interest, it may be worthwhile your time to keep an eye out for Romania in the years to come.
 

New Amendments to the German EEG to Secure Continued Capacity Growth

Written by Jens Blomgren-Hansen, partner

The German parliament passed a revision to the German Renewable Energy Source Act (the "EEG") on 30 June 2011 and the Federal Council (Bundesrat) approved the same on 8 July 2011.

The amendments to the EEG did not have the purpose to limit the investments in new renewable energy capacity and thus costs to the German state as was thought by some international spectators. In contract the amendments came in connection with a decision to abandon nuclear power by 2022 and intend to secure a continued growth in the renewable energy capacity in order to reach the ambitious goals of not less than 35% of renewable energy in electricity supply in 2020, not less than 50% by 2030, not less than 65% by 2040 and not less than 80% by 2050, e.g. more aggressive goals than earlier set forth, and goals that are now codified in the latest version of the EEG.

The most significant changes relate to wind power and the attempt to ensure a more flexible electricity market.

On-shore Wind

Tariff: The already existing guaranteed feed-in tariff system remains almost unchanged. The tariff for wind turbines commissioned in 2012 amounts to EUR 89.30 per MWh for a period of five years with an extension of up to 15 years based whether the production from the turbine (wind park) matches the reference production. Thereafter the tariff falls to a base rate of EUR 48.70 per MWh.

Degression: The guaranteed feed-in tariff is subject to an annual degression which has been increased from 1% p.a. to 1.5% p.a., e.g. if the guaranteed tariff for 5 + (up to) 15 years will for the full period be 1.5% lower than for projects commissioned in the preceding calendar year.

System Services Bonus: The system services bonus is further still offered for wind turbines commissioned prior to 1 January 2015, if such wind turbines fulfil the technical requirements set forth in the Ordinance on System Services for Wind Energy Plants (SDL bonus). The SDL bonus amounts to EUR 4.80 per MWh.

Repowering Bonus: The EEG further offers a limited repowering bonus for repowering of projects commissioned prior to 31 December 2001. However, as repowering bonus aims to promote the repowering of projects which are considered problematic to integrate in the system, the repowering bonus carries certain conditions.

Compensation claims: As a mean to better control the grid, wind turbines must be equipped with technical means to control the feed-in (including a full short down). Compensation claims for losses due to a required part or full shut down are generally capped at 95% of the loss. However, the 95% only applies up to 1% of the annual output of the wind turbine.

Off-shore Wind

Degression: Off-shore wind parks will also be subject to a degression of the guaranteed tariff. However, the start of the degression period has been moved from 2015 to 2018, but the annual degression been increased from 5% to 7%.

Tariff: The tariff (including a EUR 20 per MWh "sprinter bonus" paid for installations commissioned prior to 2016) amounts to EUR 150 per MWh for a period of 12 years from commissioning. The initial remuneration period may further still be extended based on the distance from the mainland and the water depth.

Compression model: An optional compression model is offered. If the compression model is opted for the initial tariff remuneration increases from EUR 150 per MWh to EUR 190 per MWh. However, the period for such increased tariff remuneration is only 8 years instead of the 12 years. Any extendable time period based on the distance to the mainland and water depth is further only remunerated with EUR 150 per MWh.

Financing: The German development and reconstruction bank, KfW has further established a EUR 5 billion off-shore wind finance programme. KfW can thus take a significant risk stake in the financing of such wind parks alongside the commercial risk takers.

The Electricity Market

In order to incentivise the market driven electricity trading, the option to opt in and out of the guaranteed tariff scheme which was introduced in 2009 has been amended. With the latest amendments the owners can still opt in and out, but now they still receive a subsidized contribution while selling their electricity in the open market. The subsidized contribution to be paid will be calculated as the difference between the average market prize in the preceding month and the guaranteed tariff which the installation would have been entitled to, had the electricity not been sold in the open market.

Future events re energy

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