If carefully administered by politically astute regulators, feed-in tariffs or Renewable Energy Credits for solar power installations can jump-start vibrant and efficient solar markets, as in the cases of Germany or California, and to a lesser extent, New Jersey.

On the other hand, poorly administered feed-in tariffs as we've seen in Ontario, Spain, Italy, and the Czech Republic result in overheated markets followed by a bust and a panicked retreat from the subsidy.

Late last year, Scott Burger of GTM Research analyzed the potential of Romania as the next big solar growth market.

Romania had adopted a renewable energy credit program, akin to the New Jersey or Massachusetts SREC regime. In Romania, solar installations qualified for six “Green Credits (GCs)” per megawatt-hour of electricity produced. Late last year, the floor for these green credits was $34.7 per megawatt-hour, while the roof was $70.7 per megawatt-hour. Burger calculated that each solar system would receive 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."

At that time, GTM Research analyst Andrew Krulewitz said, “This smells a lot like the Czech Republic. I think that the government will over-commit itself financially, and will likely have to ratchet back its commitments in the not-too-distant future.” (Andrew has covered the boom-bust cycle in the Czech Republic.) Burger wrote, "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."

As is often the case, GTM Research got it right.

According to The Romanian Photovoltaic Industry Association (RPIA), Romania's government looks to temporarily cut the number of green certificates awarded to PV systems to four GCs per megawatt-hour of electricity generated, not six GCs as originally planned. PV systems would still accrue the remaining two GCs, but would not have access to these GCs until 2017. According to reports, certificates are currently trading at about $67.

The typical dynamic in a case like this is to expect a fevered rush to install highly incentivized projects before the July deadline.

Here are a number of the projects announced in Romania in October of last year:

  • 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

GTM Research's Scott Burger concludes, "Four GCs will sustain a market in Romania, and I would bet we see further cuts in the future. We'll still see a boom in 2Q13, no doubt."