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Wayward wind  

Wind energy is attracting massive investment, but uncertain laws, land ownership disputes and low capacity on the power grid are holding back development

After a long time in the wilderness, renewable energy has finally become fashionable in Romania.

Last year the country produced twice as much energy from alternative sources compared to 2006, but the figures do not make for green friendly reading.

Only 0.07 per cent of Romania’s power was generated by renewable energy resources in 2007.

From this 84 per cent came from modern hydro power and the rest from wind energy. These two types have the highest potential to develop in Romania.

Now wind energy projects are gaining momentum. Italian power group Enel, Spanish Iberdrola Renovables, the Portuguese Martifer Group and Polish investment fund Continental Wind Partners (CWP) are a few companies which have announced the development of projects.

Meanwhile Gaz de France, Czech Republic’s CEZ, Austrian-owned Petrom, Spanish group Bogaris and even Romanian state hydro power company Hidroelectrica are prospecting local opportunities in wind energy.

Dobrogea in the south and Moldavia in the east have the most suitable wind map to develop farms. No major project has become operational, but by the end of the year this should change.

Continental Wind Partners has received the permit to connect to the national grid from the electricity transmission state company Transelectrica for a project of 345 MW in Dobrogea. Now the Polish company is under negotiation to sell this project. Petrom, Gaz de France, E.ON and CEZ are reportedly interested in buying CWP’s wind farm.

The value of the CWP deal could reach about 60 million Euro, given the sale price of similar projects – but this is far from the cost of the realisation of the project.

Investors are buying permits and necessary licenses to start such a development, with the actual investment in wind turbines standing at between one and 1.5 million Euro for each MW of installed power capacity, so a 345 MW project would require an investment of over 0.5 billion Euro.

CWP also has a second 255 MW wind project under development and other smaller projects in Dobrogea. “We are starting to consider developing projects in Moldavia and are looking for financing from energy companies,” says Fabrizio Cagnasso, director at CWP.

The most important deals in wind energy were those conducted by Iberdrola Renovables and Enel. Iberdrola has recently bought 50 wind farm projects in southern Romania for 300 million Euro and the total capacity of the projects is 1,600 MW, more than the operational two reactors at the nuclear-power plant in Cernavoda, Constanta county.

Meanwhile Enel acquired Blue Line, a company which is developing wind projects for an installed power of 200 MW in Dobrogea. None of the turbines in these projects are yet active.

The Portuguese firm Martifer intends to reach a 400 MW installed power by 2012 and 150 MW by 2010. Nuno Alemao, managing director Eviva, part of Martifer, says the company has one wind farm for 90 MW which it expects to build by the end of 2008.

Blocking the wind

However wind energy in Romania encounters many problems from obtaining the permits to scouting the land and proper legislative regulation.

The race for plots has forced the prices to rise, especially in Dobrogea.

“The land prices in Dobrogea have exploded even though not all the region has good weather conditions for wind farms,” says Radu Voinescu, expansion manager at Bogaris Energy. This Spanish company has a few projects in Dobrogea and Moldavia, two of which are on-going and designed to produce a total of 200 MW installed power. To produce almost 100 MW installed power, Bogaris needed to buy around 400 hectares of land.

Voinescu adds that it takes years until a company can acquire all the land plots necessary to develop a wind farm, due to the fragmented land ownership in Romania, where people own an average of three hectares per person.

Grid: not for everyone

Another large obstacle for an investment plan in wind energy is the low capacity of the power grid company Transelectrica’s ability to integrate such projects.

The grid company has received requests to link up 4,000 MW of installed capacity, of which it can only take 1,500 MW for wind. Permits have already been issued for 900 MW of installed power capacity, so there is little space left.

An electricity producer has two possibilities to connect to the grid. Either it joins to Transelectrica or directly to the electricity distributor. A wind farm with an installed power capacity higher than about 100 MW can only connect to Transelectrica’s grid, because only the state company has the capability to absorb such power.

But many smaller projects in Dobrogea could connect to the regional distributor, which is owned by Enel.

For example, Bogaris has asked Enel for permission to connect to its grid. But the Italian energy company, which has its own wind projects in Dobrogea, may be reluctant to give connection permission to potentially competitive wind projects.

Upgrade necessary

In the future, Transelectrica has to modernise its electricity transmission grid to absorb the 10,000s of MW of projects announced. At the same time, the state company cannot start investing until it sees that these private investors are serious.

“The [future of the] wind projects in Romania [is] still uncertain,” says Stelian Gal, CEO of Transelectrica. In Dobrogea especially, the state company has to invest a large amount of money in the grid due to both the wind projects and the construction of another two nuclear reactors at the plant in Cernavoda which will have about 1,500 MW.

Transelectrica, along with the regulatory authorities in energy, are preparing a strategy expected to be adopted in the next month by the Government.
“This will give a clear image to investors in the energy sector about what requirements they should fulfill, how much electricity Transelectrica will be able to absorb and how much the investments in the grid will cost,” says Gal.

The strategy will also stipulate how much electricity investors should produce from wind, biomass, solar or any other type of conventional and un-conventional source of energy.

Transelectrica evaluates the cost of the permit for connecting to the grid based on factors such as the quantity of electricty which the producer intends to generate, where the production facility will be situated and the quality of Transelectrica’s own grid in that area.

Gal explains that for an investor to be sure he or she will receive the connection permit to the grid, the company should plan the project according to Transelectrica’s requirements.

An investor has to choose between paying Transelectrica directly to invest in the grid or to make its own extension. For example, if a project needs a transformation station to connect to the grid to absorb a large amount of electricty, the developer can choose whether to pay Transelectrica to build the station, or undertake the construction itself and give this to Transelectrica to adminsitrate.

But the state company’s CEO says the Government is considering abolishing these conditions, so renewable energy developers no longer have to pay for Transelectrica’s investments in the grid.

Therefore the Government can argue that it supports the development of renewable energy. Now small developers find it difficult to pay for the extension of the electricity grid, if it is needed, which in some cases costs more than the project itself.

Even if the electricity grid needs to be extended, another problem is to convince the land owners to sell their property to Transelectrica to install its electricity lines. With a motorway project, owners of land are forced to sell their property to the state to make way for the road or risk expropriation. This is not the case with the transport of energy.

“The current legislation does not allow us to buy the land for the purpose of public use if the owner does not agree,” Stelian Gal says. If the landowner has no intention to sell his property, the only wind being absorbed could be in the courtrooms.

By Ana Maria Nitoi

The Diplomat Bucharest

July 2008

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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