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Renewable Energy: Romania And Legislative Instability
de Rubin Meyer Doru & Trandafir The Romanian Digest Miercuri, 7 august 2013 http://www.hotnews.r…icleId=15334553 The Romanian business environment is currently in turmoil due to the recent series of legislative acts amending Romanian law in the field of energy, specifically renewable energy. This is keeping investors far from Romania and has driven already established investors away. The most recent legislative amendment, nominally in force since July 1, 2013, in the form originally adopted by the Government, the Emergency Ordinance 57/2013 (“EGO 57”), has not been discussed in the Parliament which postponed discussing it to September 2013. However, like many earlier laws in this field, many of the recently enacted provisions will not be enforceable, at least until they receive a proper approval from the European Commission. Although coming down hard on renewable energy obtained from certain energy sources such as wind, solar and hydro , the new legislation, when enforceable, could bring about an advantage for biomass, bioliquids, biogas and waste fermentation. This is especially true, considering Romania’s great resources and capacity for biomass. Background Romania has implemented a support system for the production of energy from renewable energy sources based on green certificates awarded monthly to electricity producers based on (i) the types of facilities used, (ii) the sources of energy engaged, and (iii) the actual production from the respective month. This support scheme had received the approval of the European Commission in July 2011 under the State Aid Case SA.33134. Any amendment to the approved support scheme also has to be put before and approved by the European Commission, in order to avoid constituting illegal State Aid under Article 108 of the Treaty Regarding the Functioning of the European Union. The list of laws in this field that have been enacted but were not enforced, or at least did were not enforced immediately after passage, begins in 2008 with the famous Law 220/2008. This law deals with the establishment of a support system for the production of energy from renewable energy sources which, although passed and nominally in force in October 2008, was only enforceable after October 2011. This is due to the fact that the law was passed before the support scheme gained approval of the European Commission. The approval was only obtained in 2011 and all the relevant supporting legislation was enacted from then on. Law 220/2008 was later amended in July 2012 by Law 134/2012, approving and amending the Government Emergency Ordinance 88/2011, the act responsible for the actual enforcement of Law 220/2008. With the enactment of Law 134/2012, it seems the Romanian Legislature failed to learn from its previous mistakes. Law 134/2012 is still not enforceable even today, one year later, due to the fact that most of the measures provided thereunder have not been approved by or even put before the European Commission. The Most Recent Amendments The most important amendments brought about by EGO 57 concern (i) the suspension of granting a certain number of green certificates until 2017, (ii) the possibility for the Romanian Government to change the support scheme at any point in the calendar year, and (iii) a maximum of electricity certified by the green certificate support scheme per annum. In addition to the amendments above, EGO 57 contains many other amendments affecting different sources of electricity or different aspects of the business. It provides that the electricity generated by photovoltaic power plants located on plots of land which, were in the agricultural circuit as of July 1, 2013 shall not qualify for green certificates. This provision is redundant in light of the relevant construction and urbanism laws in Romania, which stipulate that photovoltaic power plants can only be erected on buildable land, which should be intra murros and rededicated from the agricultural circuit. Therefore, theoretically, there should be no photovoltaic power plants located on agricultural land. It is true, however, that cases of photovoltaic plants on agricultural land exist in Romania, mostly due to the incompetence of local authorities, an inconsistent interpretation of the construction and urbanism law or local influence. However, there are other remedies to this situation which are more efficient than continuously amending the legislation in the field of energy. The most controversial amendment has been the postponement from July 1, 2013 to March 31, 2017 of granting a number of green certificates for every megawatt hour (“MWh”) produced and delivered by the electricity producers from the following renewable sources: (i) one green certificate for new hydro-electric power plants, with a maximum capacity of 10 MW; (ii) one green certificate for wind power plants; and (iii) two green certificates for solar power plants. EGO 57 does not mention how these green certificates will be recovered by producers after 2017. It only says that the process will start on April 1, 2017 for solar plants and hydroelectric power plants and on January 1, 2018 for wind plants and will last until December 31, 2020. The recovery method is not provided, but shall be established by the National Regulatory Authority in the Field of Energy (“ANRE”). The solution chosen by the Romanian Government of postponing granting these green certificates appears to be a desperate stop-gap crisis measure that has not been fully considered. Its intention is to alleviate the burden of the green certificates prices on consumers, specifically on big industrial companies. However, this is solely a stop-gap measure that seems to merely shift this burden into the future. If the consumers and industrial companies cannot cope with the green certificates system now, what guarantee is there that they will be able to cope with it later and to a greater extent? Nonetheless, the sudden postponement has done damage to the industry, as the producers will no longer be able to fulfill their financing commitments, profit and income estimates have completely shifted, and new investors are already looking elsewhere to more stable legislations. However, as the electricity produced from refurbished hydroelectric power plants and biomass is not affected by the postponement, this provision clearly incentivizes entry into this domain. The first exception is most likely targeted at offering Hidroelectrica SA an advantage so that it can sell its micro hydroelectric power plants, and the second exception could bring about a welcome development of biomass exploitation in Romania. Significantly, Law 220/2008, as further amended, provides that: (i) electricity produced in new hydroelectric plants with a maximum capacity of 10 MW is entitled to 3 green certificates per MWh; (ii) electricity produced in refurbished hydroelectric plants with a maximum capacity of 10 MW is entitled to 2 green certificates per MWh; (iii) electricity produced in hydroelectric power plants with maximum capacity of 10MW that are not new and not refurbished is entitled to one green certificate for each 2 MWh produced; (iv) electricity produced in wind plants benefits from 2 green certificates per MWh until 2017 and one green certificate per MWh starting in 2018; (v) electricity from geothermal sources, biomass, bioliquids and biogas is entitled to two 2 certificates per MWh produced; (vi) electricity produced from waste fermentation gas and mud fermentation gas from the water treatment plants is entitled to one green certificate for each MWh produced; and (vii) electricity from solar sources is entitled to 6 green certificates per MWh produced. EGO 57 provides for the ability of Romanian authorities, subject to the approval of the European Commission, to exempt a certain percentage of electricity supplied to certain final consumers from the application of the green certificates support scheme, meaning that these consumers will not have to pay for the green certificates applicable to the exempted quantity of electricity. This provision allows the Romanian Government to submit for the approval of the European Commission exemptions regarding big industrial consumers in order to lower the price they pay for electricity. It remains to be seen whether any such submission will be successful. Another controversial provision under EGO 57, applicable since July 1, 2013, deals with trading green certificates. Under this law trading green certificates is allowed only to electricity producers and suppliers, prohibiting middlemen, and only on the centralized markets managed by the commercial operator of the electricity market. This means that any private green certificates purchase agreements concluded after July 1, 2013 are null and void and that any such agreements where the purchasers are not electricity suppliers are useless. Grid operators are now entitled to request financial guarantees for issuing technical grid connection approvals. The amount of the financial guarantees and their method of use will be established ANRE. This provision aims at diminishing the number of technical grid connection approvals obtained for speculative purposes by so-called investors that do not actually intend to develop a power plant or do not have the resources to do so. The Government shall establish by an annual Government Decision the level of the total annual values of the capacities installed in renewable generation power plants each year. The accreditation by ANRE of power units/plants benefiting of the green certificates support system will be limited to these levels. This measure will slow investment in the field. There is no procedure by which the Government is to establish the yearly maximum level, except that it must consider the updated data of the National Renewable Energy Action Plan. Therefore, at this point, this provision seems to create discretionary power in the Government to decide the capacity to be accredited. Any producers unable to receive the accreditation during one year will have to wait until the next year. Finally, the most controversial provision of EGO 57 is the Government ability to change the support scheme for newly accredited electricity producers anytime during a certain year, rather than at the beginning of the next year as previously provided by the legislation. ANRE monitors on a half-yearly basis the producers benefiting from the promotion system by green certificates and drafts and publishes on their own webpage a half-yearly monitoring report within 90 days of the end of the monitored period. If the parameters specific to each technology for producing electricity significantly differ from the ones considered in the computation performed for the authorization of the support system provided by Law 220/2008, ANRE proposes measures to reduce the number of green certificates for the respective technologies that should adjust the internal rates of return down to the values considered in the authorization of the support scheme to the Government within of 30 days of publishing the monitoring report,. The measures of reducing the number of green certificates will be approved by way of a Government Decision within 60 days of the communication from ANRE and will apply to the power plants/units held by producers of electricity from renewable energy sources, accredited by ANRE after the effective date of this Government Decision. A Time for Biomass It is worth mentioning that, in addition to the green certificates mentioned above, for electricity produced in high efficiency cogeneration plants that use geothermal sources, biomass, bioliquids, biogas, waste fermentation gas or mud fermentation gas from the water treatment plants one extra green certificate for MWh is granted. ANRE certifies the plants as having a high efficiency. Additionally, Law 134/2012 provides for one extra green certificate for biomass originating from energetic crops and forest waste. This last provision, as mentioned above, will only become applicable upon the approval of the European Commission. However, once it does, it will mean that electricity from biomass could obtain up to 4 green certificates per MWh which could be a great incentive to investors. Biomass producers that are able to identify close by sawmills and furniture factories will have a great advantage in producing electricity using forest/wood waste effectively. Moreover, producers that identify customers for their thermal energy resulting from cogeneration plants will be able to benefit even more: they will achieve an income from selling the thermal energy, the electricity as well as the 3 or 4 green certificates they receive per MWh depending on the energy source they use. Therefore, using wood waste seems to be a great solution for small and mid-sized communities located inland near forest areas. In order for electricity producers to benefit from the green certificates support scheme for using energetic crops or wood/forest waste, their sources need to be certified by obtaining origin certificates. Origin certificates for wood/forest waste (branches, exploitation waste, round wood, sawdust, wood chipping, etc.) are issued by the central public authority in charge with forests. The procedure for obtaining such origin certificates is provided by the Procedure issued by the Ministry of the Environment and Forests on May 3, 2012, published in the Official Gazette of Romania no. 360/28.05.2012. Origin certificates for biomass deriving from agriculture and related industries, used as fuel or as raw material for the production of electricity are issued by Ministry of Agriculture and Rural Development. The procedure for obtaining such origin certificates is provided by the Procedure issued by the Ministry of Agriculture and Rural Development on May 3, 2012, published in the Official Gazette of Romania no. 162/12.03.2012. Therefore, producers of electricity from biomass have a slightly more burdensome and must identify precise locations and opportunities for their investments, however, the results should be worth the extra effort since Romania has great biomass resources and large areas of agricultural land suitable for energetic cultures. Conclusion EGO 57 certainly provides for a lot of changes that materially affect this field of industry and it was allowed to enter into force in this form. There are hopes that the Parliament will significantly amend EGO 57 as it does not agree with many of the changes enacted by the Government, however, in the meantime, some of these are in force and will be applied. For example, since there is already a lawful monitoring report drawn by ANRE for the year 2012, the Government could already amend the support scheme effective immediately and not wait until January 1, 2014. Therefore, it is understandable that, in this legislative uncertainty, investors are either declining to enter Romania or actively pulling their investments. However, this is not absolute and, looking closer, there are many opportunities for profitable investments in this industry which could be exploited. Continue reading
Real estate Croatia – Villa for sale in Koprivnica (2: inside pictures)
Beautiful, modern and young villa for sale in Koprivnica, Croatia. Movie gives an overview of the interior of villa ‘Bijeli Biser’. More info about the villa… Continue reading
Sen. Udall Applauds Gypsum Biomass Plant
GYPSUM — U.S. Sen. Mark Udall said the Gypsum biomass power plant is a “win-win-win” project when he and state Sen. Gail Schwartz toured the plant’s construction site on Friday afternoon. The Gypsum biomass plant is the first of its kind in Colorado and is on schedule to go online this December. The “woody” biomass plant will produce 11.5 megawatts of electricity per year by burning dead timber collected mostly from the White River National Forest. That main fuel source will be supplemented by other sources, such as wood construction waste that normally goes to the landfill. Of the 11.5 megawatts, 10 megawatts will be sold annually to Holy Cross Energy through a 20-year agreement and 1.5 megawatts will power the plant itself. “When this goes online it will put us over the top of our goal to have 20 percent of our power coming from renewable energy by 2015,” said Holy Cross CEO Del Worley. “This will put us at around 22 or 23.5 percent renewable energy.” Udall, who serves on the Energy and Natural Resources Committee, touted the public-private project as a fine example of how to bolster the economy and help the environment while generating domestic power. “It’s a carbon-neutral, renewable energy source, it mitigates forest wildfire, it creates about 100 jobs in total and it’s going to be profitable,” Udall said. “There’s nothing wrong with profit — profit leads to reinvestment.” Eagle Valley Clean Energy LLC — a subsidiary of Evergreen Clean Energy Corporation — is the company behind the Gypsum plant, which will get the bulk of its fuel from West Range Reclamation LLC. West Range is a forest and land management company in Hotchkiss that was recently awarded a long-term stewardship contract with the U.S. Forest Service. West Range will receive $8.66 million through the 10-year contract. “The stewardship contract is at the heart of this,” Udall said. “It’s a beautifully fulfilling relationship.” Environmental health Schwartz said Colorado is 37th in the nation for utilizing biomass power but it is the No. 1 producer of biomass fuels. “We have 4 to 6 million acres of standing dead timber in our state,” she said. “We have 175,000 slash piles in Colorado that we will burn anyway. This biomass plant will help clean our forest and mitigate wildfires as well as create jobs and electricity.” Udall said the biomass plant is a market-based solution. “[Eagle Valley Clean Energy] is bringing value to forest slash and waste,” he said. Udall said the plant is carbon-neutral because the wood fuel contains carbon that is already in the environment. “It’s circulating, unlike coal, which is mined,” he said. Udall added that the biomass plant is “state-of-the-art” in terms of its filtration and monitoring systems for pollution. Dean Rostrom, a principal of Eagle Valley Clean Energy, said electrostatic precipitators will filter almost 100 percent of the ash from the burning wood fuel before it makes it into the air. “That smoke stack will look about the same when it’s operational as it does today — you won’t see anything coming out of it,” Udall said. Rostrom confirmed Udall’s statement that the company uses the latest technology to control emissions. “We exceed all air permit requirements,” he said. The Gypsum plant will burn about 250 tons of wood a day. More biomass? Rostrom said he thinks “it makes a lot of sense” to build more biomass plants in Colorado but there are several factors that have to align. “It’s a balancing act between an economy of scale and environmental sensitivity,” he said. “To date, most biomass proposals in Colorado have been 100 megawatt operations but they would consume too much [to be environmentally balanced].” Pam Motley of West Range Reclamation said it is important to find markets that are close to the wood source. “So much of the cost of wood is transporting it,” she said. “Markets need to be within 100 miles or it’s not economical and it’s not as carbon neutral because you’re trucking it so far.” That’s one of the reasons that makes Gypsum’s plant a good fit for the area — its proximity to the White River National Froest. “With modern mega-fires becoming a growing problem that threatens Colorado communities, our precious water supplies and our way of life in the West, we need to use every tool we have to reduce wildfire risks,” Udall said. “The Gypsum biomass power plant shows how we can reduce wildfire risks, create jobs and generate renewable energy sources. This biomass power plant also underscores the urgency for renewing the U.S. Forest Service’s Stewardship Contracting Authority by passing a farm bill. If Congress does not stand with me and act, job-creating public-private partnerships like this will grind to a halt.” Continue reading
