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EUROPE: Easterly Wind Picks Up

Claudia Ciobanu

BUCHAREST, Aug 24 2009 (IPS) - The natural conditions in Romania and Bulgaria make these countries some of the best placed in Europe for producing wind energy. Interest in investing in wind power is high in both countries, but legislative ambiguity and the limited capacity of national electricity grids are delaying the building of new wind parks.

Romania has the largest wind potential in south-east Europe, according to a study by Erste Bank last year. Its geographical and climatic conditions could eventually sustain an installed production capacity of 14,000 MW from wind. Even according to more modest estimates, wind power could potentially account for 10 percent of the energy produced in the country.

Bulgaria could have a wind power production capacity of 3,400 MW in a few years, according to the European Bank of Reconstruction and Development (EBRD). Unlike Romania, Bulgaria is at the moment highly dependent on energy imports, taking most of the fossil fuels it uses from Russia.

Apart from fossils and hydropower, Bulgaria is currently making use of a partially obsolete nuclear plant (Kozlodui), and planning to build another such plant in the north (Belene). Wind power could produce as much energy as these nuclear plants.

Southern Romania and northern Bulgaria, as well as areas along the Black Sea coast in both countries have the most favourable conditions for wind energy production. Among the companies interested in investing in wind power in these countries are Italian ENEL, Spanish Ibedrola and the U.S.-based AES Corporation.

Both countries have taken on the European Union (EU) objective of getting 20 percent of energy from renewable sources by 2020. But given that both Romania and Bulgaria have high hydroelectric capacities, the EU target could be achieved on the basis of hydropower, without replacing fossil fuels with renewables.

Even so, EU environmental legislation and the strong interest among foreign investors in exploiting wind power have been putting pressure on national authorities to act on promoting wind energy.

Bulgarian authorities seem to be moving faster, though Romania has more wind power potential.

Around 200 MW of wind farms are already installed in Bulgaria, and another 200 MW is in the pipeline, says Yordan Mihaylov, managing partner at MASS Energy Systems LLC, a company investing in renewable energy parks in Bulgaria and other countries. EBRD noted in a 2008 analysis that “Bulgaria’s advantage, apart from the existing wind potential, is the supportive government with a pro-active regulatory approach.”

“I would say that the Bulgarian legal framework is in a much better position than the Romanian one at the moment,” Mihaylov told IPS. “Currently, the Bulgarian government issues 15 years contracts for 100 percent purchase of the electricity (produced by wind parks) at subsidised rates.”

Most producers are likely to get a high percentage of their production subsidised at high rates, says Mihaylov. “There are still many gaps in the contracts that are issued, but I am happy to say that the government is working on fixing them.”

On the other side of the border in Romania, less than 100 MW production capacity has been installed so far. Applications for projects adding up to 17,000 MW capacity have been filed by investors with the national electricity authority, but barely a fraction of this will materialise.

Some of the proposals are not serious, and so authorities are right to turn them down, says Radu Voinescu, managing partner at Boeru Voinescu Group, a leading wind energy consultancy in Romania.

Another reason for low acceptance of wind park proposals is that the national electricity grid can sustain at most 2000 MW wind power, says Voinescu. Wind power needs special adaptations of the grid to store energy for the times when the wind is not strong enough.

Expanding and adapting the electricity grid will need billions of euros, and political will to support renewables.

Unlike in Bulgaria, in Romania the purchase price for renewable energy has been left mainly to the market, making it tougher for producers to estimate profits and plan for the long term.

“Since 2008, we do have a law promoting renewables, through the use of green certificates and feed-in-tariffs (an incentive structure for renewables which means the state pledges to buy energy from renewables at above- market prices),” Voinescu told IPS. “But the methodological norms for implementing the law do not exist yet, and investors are left with many unanswered questions. Feed-in tariffs are not clarified in the law, so they remain just an option for the future.”

“The Romanian government has chosen to attract mainly big investors,” says Anka Zaion-Cicovski, international development representative of the French renewables company Valorem Energie. “Here, the purchasing tariffs are guaranteed for only one year, thus limiting the possibility for independent green electricity producers to access the market.

“The risk perceived by our financial partners is higher, and this makes project financing more complicated in Romania as compared to other countries such as France or Germany, where the feed-in tariffs are guaranteed for at least 12 years.”

“Our politicians do not seem to be very interested in investing in the expansion of the national electricity grid (to take on more energy from renewables),” adds Radu Voinescu.

“But such an investment in infrastructure is exactly the type of investment that a country must take on in times of economic crisis. Romanian authorities have an obligation to invest in energy infrastructure and in education, without which the country has no future.”