ROMANIA PHOTOVOLTAIC MARKET

Handbook for Investments 2

012/2013

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ROMANIA PHOTOVOLTAIC MARKET: HANDBOOK FOR INVESTMENTS 2012/2013

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TABLE OF CONTENTS

TABLE OF CONTENTS ....................................................................................................... 3

FOREWORD .................................................................................................................... 7

1 Methodology and limitations ................................................................................ 9

Methodology ............................................................................................................. 9 1.1 Limitations ............................................................................................................... 10 1.2

2 EXECUTIVE SUMMARY ........................................................................................ 11

3 ROMANIA POLITICAL AND ECONOMIC ENVIRONMENT ........................................ 14

Basic country data ................................................................................................... 14 3.1 Political Climate and Ruling Party ........................................................................... 19 3.2 GDP and Economic Growth ..................................................................................... 19 3.3 Labor market and unemployment rate ................................................................... 21 3.4 Electricity Imports and Exports. Electricity prices for business and households .... 22 3.5 Industrial Output and Private Consumption ........................................................... 24 3.6 Foreign direct investments (FDI) ............................................................................. 25 3.7 Taxes ........................................................................................................................ 26 3.8

3.8.1 VAT ....................................................................................................................... 27 3.8.2 Income and Corporate Taxes ............................................................................... 27 3.8.3 Property Tax......................................................................................................... 28 3.8.4 Transfer Tax ......................................................................................................... 28 3.8.5 Types of corporation in Romania ........................................................................ 28 Inflation ................................................................................................................... 30 3.9

Monetary indicators ................................................................................................ 32 3.10 Banking and Credit Market ..................................................................................... 33 3.11 Monetary Indicators ................................................................................................ 34 3.12 Ease of doing business in Romania ......................................................................... 36 3.13

4 ROMANIA PHOTOVOLTAIC ENERGY MARKET ...................................................... 38

General electricity market information .................................................................. 38 4.14.1.1 Electricity Consumption and Production ............................................................. 39 4.1.2 RES targets ........................................................................................................... 40 Country attractiveness index for renewable investments ...................................... 41 4.2 Porter 5 Forces analysis ........................................................................................... 42 4.3 photovoltaic market ................................................................................................ 45 4.4

4.4.1 Why invest in photovoltaic energy in Romania? ................................................. 46 4.4.2 Romania solar resource potential ....................................................................... 48 4.4.3 Overview of Romania photovoltaic market ........................................................ 49 4.4.4 Market prices for photovoltaic energy projects in Romania............................... 51 4.4.5 Photovoltaic modules supply in Romania ........................................................... 52 4.4.6 Market prices for photovoltaic modules supply in Romania .............................. 53

ROMANIA PHOTOVOLTAIC MARKET: HANDBOOK FOR INVESTMENTS 2012/2013

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4.4.7 Key development photovoltaic projects in Romania ........................................... 54

5 EUROPEAN RENEWABLE ENERGY POLICY LANDSCAPE ......................................... 59

RES Regulations and EU Directives .......................................................................... 59 5.15.1.1 Precedent EU regulations .................................................................................... 59 5.1.2 Most recent EU renewable energy policy developments.................................... 60 PV LEGAL Project ..................................................................................................... 60 5.2

6 ROMANIA RES LEGAL AND REGULATORY FRAMEWORK ...................................... 63

Main laws and regulations ....................................................................................... 63 6.1 Applicability of the promotion system .................................................................... 64 6.2 Support scheme ....................................................................................................... 64 6.3 Trading green certificates ........................................................................................ 66 6.4 Fulfilling annual mandatory quota of green certificates ......................................... 66 6.5 Zoning, planning and construction related authorizations ..................................... 67 6.6

6.6.1 Zoning plans procedure ....................................................................................... 67 6.6.2 Building permit (construction license) procedure ............................................... 67 Environmental related authorizations..................................................................... 68 6.7

6.7.1 Natura 2000 Network .......................................................................................... 68 6.7.2 Clean Development Mechanism (CDM) and Joint Implementation (JI) .............. 69 Energy law authorizations ....................................................................................... 70 6.8

6.8.1 Power Generation Licensing ................................................................................ 70 6.8.2 Grid Interconnection ............................................................................................ 72 6.8.3 Power Off-Take .................................................................................................... 72 6.8.4 Green certificates and purchase price of electricity ............................................ 74 Guarantees of origin (GREEN CERTIFICATES) .......................................................... 77 6.9

Future market pricing mechanisms ......................................................................... 77 6.10 Key Co-financing opportunities ............................................................................... 78 6.11

6.11.1 Romania Sustainable Energy Financing Facility (RoSEFF) .................................... 78 6.11.2 Romanian Environmental Fund ........................................................................... 81

7 KEY ORGANIZATIONS AND INSTITUTIONS ........................................................... 83

Government ............................................................................................................. 83 7.17.1.1 The Ministry of Economy, Trade and Business Environment (MECMA) ............. 83 7.1.2 Romanian Energy Regulatory Authority (ANRE) .................................................. 83 7.1.3 Ministry of Environment and Forestry (MoEF) .................................................... 83 7.1.4 Ministry of Agriculture and Rural Development (MARD) .................................... 84 7.1.5 Green Certificates Market Operator (OPCOM) ................................................... 84 Electricity generation and electricity distribution Companies ................................ 84 7.2

7.2.1 Transelectrica ....................................................................................................... 86 7.2.2 Electrica S.A. ......................................................................................................... 87 7.2.3 E.ON Moldova ...................................................................................................... 89 7.2.4 ENEL ..................................................................................................................... 90 7.2.5 CEZ ........................................................................................................................ 91 NON-GOVERNMENT ORGANIZATIONS .................................................................... 93 7.3

7.3.1 Romanian Photovoltaic Association (RPIA) ......................................................... 93 7.3.2 ENERO .................................................................................................................. 94

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7.3.3 Romanian Wind Energy Association (RWEA) ...................................................... 95 7.3.4 APERO .................................................................................................................. 96 7.3.5 American Chamber of Commerce – RES Group .................................................. 97 Key photovoltaic companies operating on Romania market .................................. 98 7.4 Lobby groups ......................................................................................................... 100 7.5 Stаkeholder Аnаlysis ............................................................................................. 101 7.6

8 RISKS ABOUT RENEWABLE INVESTMENTS IN ROMANIA .................................... 103

Risks Associated with the Renewable Energy Industry in Romania ..................... 104 8.18.1.1 Regulatory Risk .................................................................................................. 104 8.1.2 Competition within the Renewable Energy Industry ........................................ 104 8.1.3 Public Attitudes towards Renewable Energy Projects ...................................... 105 8.1.4 Emerging Market Risk ........................................................................................ 106 8.1.5 Insurance Risk .................................................................................................... 106 8.1.6 Force Majeure Risk ............................................................................................ 106 Risks Associated with the Investor’s Finance Arrangements ................................ 107 8.2

8.2.1 Asset Sale Risk.................................................................................................... 107 8.2.2 Borrowing Risk ................................................................................................... 107 8.2.3 Foreign Exchange Risk ....................................................................................... 107 Risks Associated with the Development of Renewable Energy Plants ................. 108 8.3

8.3.1 Variability in the Source of Renewable Energy ................................................. 108 8.3.2 Development of the Project and Construction Risk .......................................... 108 8.3.3 Capital Cost Risk ................................................................................................. 108 8.3.4 Permits ............................................................................................................... 109 8.3.5 Land Options ...................................................................................................... 109 8.3.6 Construction ...................................................................................................... 110 8.3.7 Dependency on Suppliers .................................................................................. 110 8.3.8 Technology Risk ................................................................................................. 111 8.3.9 Operation and Maintenance Risk ...................................................................... 111 8.3.10 Market Price of Electricity ................................................................................. 112

9 SWOT ANALYSIS ............................................................................................... 113

10 CONCLUSIONS .................................................................................................. 118

11 LIST OF ABBREVIATIONS ................................................................................... 121

12 REFERENCES ..................................................................................................... 123

13 DISCLAIMER ...................................................................................................... 125

14 APPENDIX I. SOLAR MAPS OF EUROPE AND ROMANIA ...................................... 126

LIST OF MAPS, CHARTS AND TABLES

Map 1: Where is Romania on the European map ................................................................. 14 Map 2: Romanian Road Network ........................................................................................... 15 Map 3: Romania regions administrative map ........................................................................ 17

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MAP 4 Historical Regions of Romania .................................................................................... 18 Map 5: Solar resource map of Romania ................................................................................. 47 Map 6: Solar irradiation and solar electricity potential for optimally inclined photovoltaic modules in Romania, JRC PVGIS 2008 .................................................................................... 48 MAP 7: Natura 2000 areas in Romania .................................................................................. 69 Map 8: Electricity grids network of Transelectrica ................................................................ 86 Map 9: Districts covered by Electrica S.A. .............................................................................. 88 Map 10: Districts covered by E.ON ........................................................................................ 90 Map 11: Districts covered by ENEL ........................................................................................ 91 Map 12: Solar irradiation and solar electricity potential for horizontally mounted photovoltaic modules in Romania, JRC PVGIS 2008 ............................................................ 126 Map 13: Solar irradiation and solar electricity potential for horizontally mounted photovoltaic modules in Romania, GeoModel Solar s.r.o. 2011 ......................................... 127 Map 14: Solar irradiation and solar electricity potential for optimally inclined photovoltaic modules in Europe, JRC PVGIS 2008 ............................................................... 128

Chart 1: Real GDP growth for the period 2000-2012 (including estimates) .......................... 19 Chart 2: Romanian GDP growth compared to EU-27 for the period 2002-2011 ................... 20 Chart 3: Unemployment rate in % from 2000 to 2011 .......................................................... 22 Chart 4: Electricity imports and exports for the period 2000-2011 (in million MWh) including estimations ............................................................................................................. 23 Chart 5: FDI for the period 2000-2011 (in million EUR) ........................................................ 25 Chart 6: Corporate tax income in selected CEE and SEE countries ....................................... 29 Chart 7: Inflation Rate per year for the period 2004-2012 .................................................... 31 Chart 8: Structure of Romanian electricity market ................................................................ 39 Chart 9: Share of renewables in gross final consumption of electricity 2011 ....................... 39 Chart 10: Romanian RES targets for 2020 in % according to NREAP ..................................... 40 Chart 11: Solar indices February 2012 by E&Y analysis, ........................................................ 41 Chart 12: Photovoltaic modules supply in Romania in % by countries for 2012 ................... 53 Chart 13: Cumulative developments of PV plants in Romania in MWp from 2000 to 2020, including estimates ................................................................................................................ 57 Chart 14: RoSEFF Structure .................................................................................................... 79 Chart 15: Market Shares by Sales of the Distribution System Operators in Romania in 2011 ........................................................................................................................................ 84 Chart 16: Districts covered by CEZ ......................................................................................... 92

Table 1: Electricity prices for business and households ......................................................... 24 Table 2: Support schemes for RES generation in the EU countries ....................................... 45 Table 3: Market prices for photovoltaic projects in Romania for 2012 ................................. 51 Table 4: Market prices for photovoltaic modules supply in Romania in 2012 ...................... 54 Table 5: Selected operational, under construction and planned photovoltaic projects in Romania .................................................................................................................................. 56 Table 6: Green certificates for electricity from renewable sources in Romania ................... 75

©2012. All rights reserved. Inea Consulting Ltd., Bulgaria; Last Edited on 23.07.2012.