Romania approves cut to green energy support

By bne IntelliNews June 5, 2013

bne -

Romania's government adopted a decree on June 4 cutting subsidies for renewable energy projects, as it continues its bid to curb electricity price increases.

The move is part of Romania's push to join the likes of Germany, the UK, the Czech Republic and Spain in reducing subsidies, which it says are overcompensating investors. Years of high incentives for renewable energy have put pressure on budgets, fostered corruption and caused power pieces to spike.

Romania's support scheme, in place for only one year, gives renewable power producers green certificates for each megawatt generated. Not only are suppliers obliged to purchase a chunk of the power they sell from renewable energy projects, but conventional energy producers and distributors have to purchase the green certificates, before passing on the costs to consumers. Green certificates accounted for nearly half of a 10% rise in household power bills in January, according to Reuters.

However, under the newly approved legislation, Bucharest will postpone the issue of over half of the certificates to projects until the end of 2017. Until then, wind energy projects will only get one green certificate instead of two, small hydro power plants one instead of three and solar projects two instead of six.

The previous generous incentives scheme saw investors piling into Romania, however, with Bucharest having been mulling a cut since the start of the year, that has halted. Analysts say the decree, due to come into force on July 1, will deprive producers of hundreds of millions of euros in revenues, according to AFP.

However, Prime Minister Victor Ponta insisted that the new scheme will still allow well planned projects to remain profitable. "We had to find a compromise allowing investors in renewable energy to continue to make profits but not to the detriment of the other industries or of households," he said following a cabinet meeting.

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