Saturday, April 25, 2009

Strong winds draw investors to Romania, Bulgaria

By Luiza Ilie and Anna Mudeva
BUCHAREST/SOFIA, April 24 (Reuters) - Reliable winds, generous subsidies and a wide-open sector have drawn wind energy investors to Romania and Bulgaria, making them the European Union's most promising markets, analysts say.

However, not all the projects will pan out as concerns over complicated bureaucracy and limited electricity grid capacities collide with more general worries over the the global credit crunch, which is forcing many firms to curtail investment plans. Already Czech power giant CEZ is well into building Europe's largest onshore wind park in Romania, a two-stage 600 megawatt project worth 1.1 billion euros.

Projects accounting for thousands of megawatts and billions of euros have been put forward by major power players such as Portuguese EDP and Spanish Iberdrola Renovables for Romania and Japan's Mitsubishi Corp, Swiss Alpiq, U.S. firm AES Corp. for Bulgaria.

"When Bulgaria and Romania joined the EU, the interest increased in them because suddenly new countries with limited risks showed on the investors' radar screens," said Malina Stroumina, an analyst at British Emerging Energy Consulting.

"The markets in Europe have become very crowded and everybody has looked for a new frontier which is not yet full of thousands of projects."

But concerns linger over the EU's poorest members that may dampen the interest of investors who have in the past complained about insufficient transparency and tangled paperwork.

In addition, for both Romania and Bulgaria there is the problem of connecting new wind power plants to the national grids whose demand far outweighs current capacity.

"No one has really built wind plants in Romania yet, there is a lot of talk about some big ones being built, but there's not a lot of best practice that you can look to," said Charlie Hodges, analyst with New Energy Finance.

LAGGING BEHIND
Investors are drawn to the Black Sea neighbours, where they find a sympathetic ear from governments, eager for renewable power plants to bring them closer to EU goals while at the same time replacing outdated communist-era energy infrastructure.

Companies are applying for wind power projects worth 18,000 megawatts in Romania, which has a subsidy programme based on green certificates, and power grid operator Transelectrica has so far issued technical approvals for 3,000 mw.

"Romania is one of the least developed, most attractive on paper emerging markets in the whole world," Hodges said.

"It's these two things, the potential and the generous support system ... If you were to compare a pound spent in Germany maybe with a pound spent in Romania, you might get a bigger bang for your buck in Romania."

In Bulgaria, the total capacity of planned renewable energy projects, including wind, solar, hydro and biomass is about 8,000 megawatts. The Bulgarian government stimulates renewable energy projects by paying subsidies per kilowatt hour.

Bulgaria also has the advantage of a pegged currency exchange rate which insulates investors from the volatility seen in Europe's other emerging markets.

Eastern Europe, which relies mainly on coal and nuclear energy for its electricity production, is lagging behind its western neighbours in meeting EU renewable energy goals.

The bloc wants 20 percent of its energy sourced from renewables by 2020, from under 10 percent now. It also wants to reduce dependancy on Russian gas imports, particularly after recent tension over gas supplies between Russia and Ukraine.

Poland has the biggest wind energy capacity of all EU east European nations, with 472 megawatts, but observers say investors are looking further east, where returns for first comers could outweigh building costs.

Already, Bulgaria has surpassed the Czech Republic, ranking second with 158 megawatt. Romania ended 2008 with only 10 megawatt installed capacity, but the economy ministry estimates at least 150 megawatts by the end of this year. (Reporting by Luiza Ilie; Editing by Keiron Henderson)

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