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Market News

 May 17, 2009
Romania: Renewable Energy Market Profile

 Summary

Romania’s preparations to join the European Union as well as its integration in 2007 have also implied an increasing interest in promoting and using renewable energy. Although the renewable energy market has unquestionably increased over the last three years attracting big names like General Electric, CEZ, Martifer, its demand is still expected to grow offering business opportunities to American companies active in this industry.

Primary energy resources

Romania benefits of primary energy resources and hence is not so heavily dependent on imports. The energy import dependency is below the EU average.

Oil

Romania has the largest oil reserves in Central and Eastern Europe and is a mature oil producing country. Oil reserves in Romania are estimated at 73.7 million tons with an annual production that has been falling from 14.7 million tons in 1976 (peak production recorded) to 5 million tons in 2006.

Natural Gas

Romania contains proven natural gas reserves of 184.9 billion cubic meters. Although it is Central and Eastern Europe’s largest producer of natural gas, Romania’s production has fallen significantly in recent years, which transformed Romania into a natural gas importer, with supplies coming from Russia along the southbound Progress pipeline. In 2006, the domestic production covered 69% of the total natural gas consumption.

Coal

Coal reserves in Romania are predominantly lignite and hard coal.

Energy production Electricity generation is primarily based on coal and renewable sources (mainly hydro generation) with a significant contribution also from natural gas and nuclear energy.

Energy Market Structure Since the fall of communism, institutional, regulatory and structural reforms and privatizations have been carried out in the Romanian energy sector with the main goal of fully liberalizing the market (status achieved on July 1st, 2007)  

Priorities and targets  

  • Up to EUR 15 billion investment in the energy sector over the next 5 years;
  • Promotion of renewable and nuclear energy;
  • Energy independence by the year 2015 (ideal energy mix: 1/3 hydro; 1/3 nuclear; 1/3 thermo);
  • Increase production capacity from 56-60 to 100 TWh (by revamping old capacities and building new ones).

Alternative Energy

Like other industrialized countries, Romania is seeking to derive more of its energy needs from renewable sources. There are regulatory and market motivations driving investment in this sector, conditioned by the fact that Romania’s physical attributes are favorable for solar and wind technologies. Entry into the EU brought Romania the obligation to comply with EU directives on renewable energy.

In addition, Romania’s desire to increase its energy security has coincided with private investor interest in alternatives to property products. These factors led the Romanian Government to introduce incentives for alternative energy, one of which "Green House" offered subsidies in the form of a rebate for 90% of the cost of purchase and installation of ’green technologies’ in construction. This program was understood to extend to small scale alternative energy. However, the program was suspended at the end of 2008 and then re-launched in 2009 with a lower subsidy and more specific application to institutional - rather than residential or commercial - construction projects.

Alternative Energy Potential

According to statistics compiled by Romanian Energy Research, Romania has the following potential for the production of renewable energy. Hydroelectric and wind power appear to offer the most room for development.

Legal Framework

The Romanian government transposed the Renewable Energy Directive that targets to have more than one third of the total electricity need coming from renewable by the year of 2020.

A quota system with tradable green certificates: on a monthly basis, the transportation and system operator shall issue green certificates to producers for the quantity of renewably generate electricity effectively produced and delivered by them to the grid and/or to consumers. Producers of wind electricity receive two green certificates, until 2015, and one green certificate, as of 2016, for each 1MWh delivered to the electricity grid. For the 2008-2014 period the trading value of green certificates shall be limited between 27 euros - 55 euros/certificate.

Types of Alternative Energy

Hydro Energy

Nearly all the renewable energy produced in Romania so far is generated from hydropower, particularly production from large-scale hydropower by the state-owned company Hidroelectrica, which enjoys a monopoly status and is also considered the cheapest electricity producer in Romania.

According to the latest assessments (source: Romania’s Energy Strategy for 2007-2020), the hydropower potential technically developable of the main rivers amounts to about 36 TWh/year, out of which 30TWh/year is economically developable.

Even though Hidroelectrica holds monopoly of large-scale hydropower production, there are business opportunities to develop small hydro projects in Romania (<10 MW). In 2004, Hidroelectrica received clearance from the Romanian Government to launch a program for selling 150 micro hydro power plants. So far they have divested successfully 87 micro hydro power plants for more than €60 million. The remaining 63 are expected to be put on sale this year. If interested in such business opportunities, please see http://www.hidroelectrica.ro/index_ro.html

Solar Energy

During the communism period, there was a wave of solar project development in the country, but due to poor quality equipment and inadequate installations, a deep dissatisfaction for solar projects resulted. Regardless to that experience with solar, Romania has potential for solar energy projects development (i.e. solar potential is estimated at 950-1,250 kWh per square meters, and is above 1,200 kWh per square meters in more than half of the country).

The use of solar energy in Romania is still mostly in the inception phase with a few experimental "solar farms", which were set up across the country, including the Danube Delta, the Apuseni mountains and parts of the Black Sea coast.

Wind Energy

2008 was definitely the year of wind energy. In 2008, the major deal in the energy sector was Czech energy company CEZ’s acquisition of a wind project with total capacity of 600MW located in Dobrogea.

The boom of this industry was the result of: Investors’ need to find other business opportunities due to a decrease in the real estate market, and Western European investors’ need to identify new markets with wind potential (i.e. Germany, Greece - already saturated)


Extracts from: Romania: Renewable Energy Market Profile, US Commercial Service, May 2009 www.export.gov