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Renewable energy output at record-high, yet subsidies slashed as of this year
The production of renewable energy hit a record-high at the end of 2013, when the capacity of projects already connected to the system topped an aggregate 3,757 MW, by 60% more than at the end of 2012, shows data released by Transelectrica.
Renewable energy projects installed between January - November 2013 had a combined capacity of over 1,400 MW which added to the 2,335 MW already available in the system.
Therefore, 2013 will stay in the history of the Romanian energy sector as the year with the highest number of renewable electricity projects installed.
Photovoltaics witnessed the most spectacular jump with 740 MW at the end of November 2013, 15 times more than the 49 MW installed in photovoltaic panels at the end of 2012.
As far as wind projects are concerned, they reached a capacity of 2,459 MW, compared to 1,822 MW at the end of 2012.
Also connected in the system are small hydro-power plants with a capacity of 505 MW, compared to 405 MW in December 2012, and biomass power plants with a capacity of 53 MW, up from 40 MW in 2012.
But the momentum gained by investments in renewable energy will face headwind this year, following the Government's decision to reduce subsidies provided in the form of green certificates assigned to new projects. According to Government Resolution No. 994/2013 published in the Official Journal of December 16, the new projects that join the system as of January 1, 2014 receive fewer subsidies.
Why were the subsidies reduced
After the boom registered in 2013, the further development of this market would have also entailed a spectacular growth in the bills charged on end consumers.
This is because the scheme for the support of renewable energy means awarding green certificates to the producers who then sell them on a dedicated market, thus collecting an additional income to the actual price of energy. The suppliers of end customers are obliged to buy a certain number of green certificates and translate the cost of purchasing certificates into the final bill.
As a result, end-users, specifically the household and industrial consumers, are actually paying these subsidies. And as renewable energy projects multiply, the bills surge too.
2020 target already achieved
Romania set this scheme in place because it undertook to have by 2020 a share of 24% of its final gross energy consumption coming from renewable sources, compared to 17% - back in 2005. Officials of the National Energy Regulatory Authority (ANRE) announced as early as November 2013 that Romania has already attained this target and recommended that the subsidies be cut down.
The scheme promoted by Romania until last year was EU's most generous, providing the assignment of two green certificates per MWh delivered in the grid for wind energy producers; the photovoltaic sector received six certificates, and the holders of SHP - three green certificates.
These subsidies, applicable since 2011, attracted like a magnet thousands of projects, so that this market saw an impressive development: the green energy sector was the only one where billions of euros have been invested in recent years. According to the Wind Energy Producers Association, investments in the sector exceeded 4.5 billion euros.
Back to the impact of subsidies on the end price, this boom led to a spectacular growth in bills, and people found themselves paying in addition to the actual price of energy, yet another 10% for green certificates. For industrial consumers, the share of green certificates is even higher, since power consumption is considerable higher too.
How the cut in subsidies operates
To appease the rise in bills, the Government decided on July 1, 2013 to defer the assignment of green certificates for the period 2017-2020.
Thus, photovoltaic projects receive just four green certificates per MWh, compared to six certificates before. Wind projects qualify for just one certificate and micro-hydropower plants for two out of three certificates, as under the previous legislation.
In addition, the new projects that join the system after January 1, 2014 receive fewer subsidies right from the beginning. According to Government Resolution No. 994 of December 2013, new photovoltaic parks only get half the subsidies so far, specifically three of six certificates.
For wind farms, the number of certificates is cut down by 0.5 certificates until 2017 and by 0.25 certificates as of 2018. Therefore, new investors will receive only 1.5 green certificates until 2017 and 1.75 certificates as of 2018.
Also, small hydropower stations receive by 0.7% fewer green certificates per MWh, ie only 2.3 certificates for new facilities.