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Wind of change blasts through energy market

21 Feb 2012 - Comunicate de presa

An article from “The Diplomat” – Print Edition

The Diplomat – Bucharest talked to the major players on the wind power scene to see how the new rules are shaping their plans, and what challenges and opportunities lie ahead. The first wind turbine installed in Romania was the Iridex-Ecoprod one. It was placed in the Industrial Park Ploiesti and had a production license from December 2005. And the first wind turbine in commercial operation was the one in Baia, Tulcea County, with a production license from February 2006,” remembers Andrei Dinga, of Holrom Renewable Energy at the Wind Power Romania, event put together by Green Power Conferences, of the beginnings of the adventure of investing in a wind turbine.
From that time things have constantly changed. The market has been occupied by top international names in this industry with investments of several billions euro. The list includes firms such as E.ON, Enel, Monsson, Verbund and Iberdrola.

Windy spring for Verbund

The Austrian company is developing on the local market a 200 MW project in two phases. “Phase one will be 100 MW and will be finished in March, while for the second part preparations are more or less ongoing and works will start in March or April depending on the climate. We expect to finish this phase in March 2013,” Mark Suer, head of renewable project management at Verbund Romania, tells The Diplomat – Bucharest. According to Suer, one important challenge for the company in terms of local operations is the legal framework. “We started the project when we had a complete legal framework available and then we decided to invest a lot of money in these projects. It is also very important to have the right partner as the field is quite complex and a lot of people have different interests. You have to have a reliable partner, who knows the culture, to guide you through,” says Suer.
Regarding the legislative changes in force since October last year, the Verbund official says the absence of some definitions and overcompensation issues are the most pressing.
“The new regulations are lacking some key aspects, such as for instance the definition of a 125 MW plant, and my impression now is that there isn’t a clear answer,” says Suer. “Also, the interesting part is the overcompensation, which is a very smart solution from the authorities to check if everything that was assumed related to wind farm investments is correct and if there are differences in the end to reduce the subsidies. Even if I do not like it, it is a fair approach. But, I don’t know how they will do it practically.”

Three issues for Enel

Enel Green Power Romania (EGP) has an installed capacity of 174 MW. The company’s wind farms and projects are located in Agighiol, Corugea, Valea Nucarilor (all in Dobrogea) and Moldova Noua (the Banat area).
Carlo Pignoloni, country manager of EGP Romania, tells The Diplomat – Bucharest that to finance the local projects the company inked an a loan agreement with the Danish government’s Export Credit Agency (EKF) and Citigroup (as agent and arranger), for a 12-year financing of EUR 112 million, while the European Investment Bank is another partner for the firm’s projects here in Romania. Even for the Italian giant, things haven’t run so smoothly.
“I would rather talk about the long lead of authorizations, instead of delays. Surely land rights are the most important issue, due to the ownership issues. Secondly, the EIA process is taking a significant amount of time. That said, we cannot say that the permitting process here in Romania takes longer than in other European states,” says Pignoloni.
He adds, “As I have said before, we already have wind farms connected to the grid. The main issue in this respect is the grid itself because it has to be upgraded to allow proper access from green energy producers. There is a need for additional investments and these have to be properly planned along with the grid owner, in order to be implemented on time.”
On the support scheme recently approved after a long process that started in 2008, Pignoloni tells The Diplomat – Bucharest that three main issues remain. “First, the IRR (Internal Rate of Return) monitoring must be implemented using well defined parameters that take into account all renewable generation issues. Furthermore, we’re concerned about the lack of a mechanism hedging the sale of Green Certificates in case of excess supply of those certificates,” says Pignoloni.
“The third issue, which is equally important, is that the disconnection of renewable generators from the grid at dispatched orders will affect the production when the source is available, while according to the EU directive 28/2009 for the promotion of renewable sources, such sources should be used at their maximum availability, obviously under safe grid conditions.”

E.ON targets greenfields

The main objectives of E.ON Group in Romania – since taking over the former state-owned companies Distrigaz Nord and Electrica Moldova in 2005 – are optimizing its activities and strengthening its position on the local energy market, company officials told The Diplomat – Bucharest. In 2010, in view of ERO corporate governance, a new company, E.ON Regenerabile Romania, was integrated, the purpose of which is to develop a range of energy production projects from renewable sources.
“The company is already involved in the development of several wind energy projects, mainly located in Moldavia. E.ON Regenerabile Romania has been developing wind energy projects, employing a rather conservative ‘greenfield’ approach, consisting of selecting, developing and monitoring projects from the very beginning of the project definition stage; out of the interesting development pipeline, the selected projects may involve an installed capacity of up to 200 MW,” company representatives told The Diplomat – Bucharest.
However, they say the implementation of such capital intensive projects largely depends on the economic conditions in Romania, as well as on the regulatory framework for these activities.
A welcome signal in this respect is the adoption of the support scheme for renewable energy producers, which is a good incentive for investors in this field; however, there are certain areas of the regulatory framework that may be considered, on a case by case basis, unclear, insufficiently defined or liable to be amended.
“Romania’s investment potential in renewable energy production projects is estimated at about EUR 5 billion for the next few years, but these investments require a stable, fair and predictable legislative framework, and also a friendly business environment,” say company representatives.
While investments in this market rely on medium- and long-term financial projections, any modification of the support scheme in the next two or three years, as the authorities have announced, will not bring the necessary funds to Romania for such projects, add the E.ON Group officials.

Monsson Group has more in store

Monsson Group has a portfolio of projects with a total capacity of 2,400 MW. Among them, a combined 750 MW of projects have already been sold to various companies, such as Continental Wind Partners, CEZ, ButanGas and Petrom, according to Sebastian Enache, executive manager of Wind Power Energy, a member company of Monsson Group.

“Currently, 80 percent of our projects are in Dobrogea, which is the area of Romania with the best wind energy potential. Furthermore, after extensive campaigns and long-term measurements we determined the best areas in Banat and in Moldova, where we developed the other 20 percent of projects,” says Enache. And things aren’t stopping here.

“Most of the projects are in the final stage of approvals. We want to build around 200-300 MW per year. So, recently, along with Vestas Denmark we started the construction of the Pantelimon wind park, in north Constanta County, which will have an installed capacity of 150 MW. Monsson Group aims to make all 50 wind turbines operational this summer,” Enache tells The Diplomat – Bucharest.

In his opinion, the crisis has made banks want more guarantees and more security, while making less money available. Also, he adds, in recent years the number of approvals has hiked, approvals have become much harder to secure because of project congestion while the land issue is getting more and more complicated.

“No matter how strange it may sound, it has happened several times that land owners have five heirs, out of whom two have gone in Spain, one to Italy and one was deceased. Consider the complexity of such a problem and how long it would take to solve,” says Enache.

Read the entire article here : http://www.thediplomat.ro/articol.php?id=2489

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