With traditional European markets fading (or at least trying to fade, in Germany’s case), developers and manufacturers are scouring the globe for prospects in new and emerging markets. While many developers are turning to more obvious growth markets such as Japan or India, some more ambitious developers are turning to an often-overlooked bastion of solar hope: Romania. GTM Research provided a deep dive into the booming Japanese solar market earlier this year, and will be releasing reports covering the Latin American and Middle East/ North African solar markets later this year, but will focus on the growth prospects of the Romanian PV market in this market highlight.
Romania has nearly identical irradiance levels as Germany, a fact that may surprise many in the PV world.
Figure 1: Solar Irradiation Map
While Romania is relatively new to the renewable energy scene, there have been impressive developments in the market of late. These developments have been driven primarily by policies put in place to promote EU emission-cutting goals. For example, in 2009, less than 15 megawatts of wind capacity was connected to the grid, but due to an aggressive renewable energy law passed in April of 2009, nearly $2 billion has been invested to develop over 1 gigawatt of new wind in the past three years. There haven’t been many major solar installations to date, mainly due to a lack of proper support and policy clarity, but after an emergency order adjusting the renewable energy law in 2011 (which was ratified in April of 2012), the solar market in Romania has exploded.
Solar installations qualify for six “Green Credits” per megawatt-hour of electricity produced. These green credits operate as a renewable energy credit, similar to systems in New Jersey and Massachusetts. The current floor for these green credits is $34.7 per megawatt-hour and the current roof is $70.7 per megawatt-hour, meaning that each solar system will receive a funding of an incentive of at least $208 per megawatt-hour produced for fifteen years. For large systems, this is nearly twice the incentive available in Germany.
Many large companies in the solar sector are starting to take notice, and people are rushing to take advantage of the current incentive scheme before the government cuts back. Romania’s largest PV project is the 2-megawatt system developed by Romanian developer Fomco Solar Systems Srl (using Chinese-made ZNShine modules). Table 1 shows a select number of the projects that have been announced in the month of October alone. These projects demonstrate the level of international attention being drawn to Romania right now, with developers from Korean and Chinese firms to Portuguese and Spanish firms.
Table 1: Selected October Project Announcements
Hareon Solar Technology: 122 megawatts
Aion Renewables: 80 megawatts
CEED & ePD: 48 megawatts
Samsung Group: 45 megawatts
EDP (total of four): 38 megawatts
Espero: 20 megawatts
Source: GTM Research
It is important to note that most of the recently announced projects have not signed a PPA with a utility, but given the generous financial support available, the developers will certainly be able to offer aggressive PPA rates. However, according to the Romanian PV Industry Association (RPIA) and the Romanian grid-operator Transelectrica, over 520 megawatts of projects have been approved for grid connection and an additional 1,200 megawatts have applied for grid connection contracts. Under a business-as-usual scenario (assuming the government doesn’t take action to slow development), GTM Research expects roughly 50 megawatts of capacity to come on-line in 2012, and an additional 320 megawatts of capacity to come on-line in 2013, from a previous level of less than 5 megawatts in 2011.
GTM Research analyst Andrew Krulewitz says that “this smells a lot like the Czech Republic. I think that the government will overcommit itself financially, and will likely have to ratchet back its commitments in the not-too-distant future.” (Andrew recently covered the boom-bust cycle in the Czech Republic.)
It is unlikely that the Romanian government will be able to afford a sustained gigawatt-scale market, and it is likely that the government will scale back the program in the near future despite promises not to reduce Green Credit levels before 2014. In fact, the government is already discussing reducing the number of green credits per megawatt-hour of electricity from solar from six to four. However, we could be wrong, and Romania could indeed be truly committed to developing a strong downstream industry.
In a broader context, we have seen similar developments occur time and time again. Poorly managed programs in Ontario, Spain, Italy, and the Czech Republic have led to booms followed by a bust or market uncertainty. These scale-backs can lead to industry fallout and bankruptcies. Each time, we at GTM Research wonder, “How do we not learn from the past?”