Thursday, October 7, 2010

Analysis: Energy investors turn to Romanian wind

Wed, Oct 6 2010

By Luiza Ilie

BUCHAREST (Reuters) - Wind energy offers a clearer path to the potentially lucrative Romanian energy market for investors hesitant about partnering the state on conventional power projects.

With coal, gas, nuclear and large hydropower plants largely under state control, investors have found it hard to tap the European Union (EU) member state's energy market as successive governments have stalled reforms, privatizations and public-private partnerships.

But Bucharest has made renewable energy a priority as it tries to meet tough EU carbon emissions goals requiring 20 percent of power generation to come from renewables by 2020.

The subsidies, together with a market of some 22 million people, is enough for some foreign investors and utilities to take on Romania's murky bureaucracy to build wind projects, while other plant plans remain on hold, analysts say.

"New (conventional) power generation has not been built and all plans are stalled, so investors enter the market with wind parks because, by law, the system has to absorb renewable energy," said Doina Visa, an energy analyst at the World Bank in Bucharest.

"This gives them a guaranteed market. Besides wind, there will not be other big investment until energy reform starts."

Romania's wind power capacity is expected to jump to 600 megawatts (MW) by the end of 2010, up from 14 MW at the end of last year, according to Romanian Wind Energy Association estimates.

Czech power group CEZ, which quit two conventional energy projects earlier this year, will account for a big chunk of that total in 2010 when it completes half of its 1.1 billion euro, 600-MW wind park in southeastern Romania.

A number of other power companies, including Italy's Enel, Spain's Iberdrola and German firms RWE and E.ON are willing to dot the dusty landscape of Dobrogea in southeast Romania with wind turbines.

Projects amounting to another roughly 300-MW, including some led by Enel and Energias de Portugal, are also expected to come online by the end of 2010.

"Romania has high wind potential and the certificates granted for each megawatt of wind power are very attractive," said Joanna Kozak of Greenmax Capital Advisors, which has future plans to invest in the Romanian wind market.

"There is still room, very good winds and the implementation of the renewable energy law will attract more investors."

HURDLES

A scheme which gives wind power developers two green certificates for every megawatt hour of electricity they produce has been key in attracting investment.

Under Romania's renewable energy law, electricity suppliers must get an increasing percentage of the power they sell from renewable energy sources and buy certificates to meet the target -- which is to double from 8.3 percent in 2010 to 16 percent by 2015.

Wind power developers gain once by selling the certificates, worth between 27 and 55 euros each to power providers, and again when they sell the electricity produced.

Green certificates have lured investors to Romania despite tangled bureacracy and unfinished legislation needed to put it near the region's wind energy leader Poland, which had 725 MW of installed capacity at the end of 2009.

The Romanian Wind Energy Association estimates some 3,600 MW of wind power could be installed in Romania by 2015, but other estimates are more conservative -- taking into account a tricky permitting process and limited power grid capacity.

"It takes up to two years to get all the permits to install such a project," said Razvan Grecu, senior energy analyst at consultancy firm Candole Partners. "Projects happening now were probably put on paper three or four years ago."

(Reporting by Luiza Ilie; Editing by Michael Kahn and Daniel Fineren)

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