The information contained herein cannot be reproduced without the prior permission of the Cambridge Programme for Sustainability Leadership 2010 Cambridge Programme for Sustainability Leadership.

ANNEX IV: INVESTMENT GAP ANALYSIS FOR RES-E IN ROMANIA1

TABLE OF CONTENTS

I. DESCRIPTION OF THE ROMANIAN ELECTRICITY SECTOR

II. RSE-E PRODUCTION, EXISTING POLICY AND OPPORTUNITIES FOR INVESTMENT

II.1 Description of the Romanian green certificate system

II.2 Green certificate system design

II.3 RES-E potential

II.4 RES-E targets

II.5 Financing RES-E investments

III. RES-E BARRIERS

III.1 Network capacity constraints

III.2 Legal uncertainties regarding rights/obligations and costs of grid connection

III.3 Green certificate issues

III.4 Licensing

III.5 Political and social aspects of large-scale RES-E generation

IV. APPENDIX

IV.1 Generation capacities

IV.2 The Romanian electricity grid

IV.3 The wholesale market in Romania

IV.4 The retail market in Romania

IV.5 The fuel mix

IV.6 The present RES-E market design

IV.7 Renewable Potential in Romania

1 In the preparation of this report inputs were received from the following experts Anamaria Stroia, Regional Environmental Center;

Country Office Director Romania and Felicia Alexandru, Senior Political Officer, British Embassy Bucharest

I. DESCRIPTION OF THE ROMANIAN ELECTRICITY SECTOR

Romania has a maturing electricity market with dominant state ownership in generation and transmission, and more foreign involvement in supply and distribution. The total amount of electricity generated in 2010 was 56 TWh. The Romanian transmission system is well connected to its neighbouring states. Transboundary capacities are auctioned in a transparent manner. Romania traditionally is a net exporter but it is very much dependent on the production of large hydro units (essentially weather dependent). Further details on the Romanian electricity market are in the appendix.

The generation capacity of Romania is predominantly based on coal and large hydro units, providing 70% of total installed net generation capacity (16 160 MW in 2011). Thermal units are fairly old and inefficient: their capacity-weighted average age is 32.7 years (calculated since the year of commissioning). Very little thermal capacity has been built in the last 20 years. Romanias single nuclear plant, Cernavoda was put into operation in two phases (December 1996 - first unit and December 2006 - second unit) with total capacity of 1412 MW in gross terms.

The Romanian Energy Strategy published in 2007 assumes the upgrading and retooling of both thermal and hydropower plants and aims at reducing energy dependency on imported fossil fuels by using a balanced energy mix. This goal is supported by the promotion of:

renewable energy sources;2

use of indigenous coal but using clean coal technologies, preferably with carbon capture and storage facilities;

nuclear energy - two further units in Cernavoda (Romania still has uranium resources).

After a sharp decrease due to the collapse of heavy industry in the 1990s, electricity consumption started a sustained growth until 2009 that brought a 9% contraction by 2010. In 2011 consumption started to increase again by 5.7%. The NREAP assumes a 1.84% annual growth up to 2020.

In Romania the wholesale electricity market is organised both at regulated and negotiated prices, and both bilaterally and via trading platforms. In the first dimension, 30% of the wholesale market is organised at a regulated price. Regarding the framework for transactions, bilateral contracts are dominant, only 17% of transactions occur through centralised markets.

The retail market has been fully liberalised since 2007 but the options to switch suppliers are limited. Five of the 8 DSOs are owned by foreign companies (CEZ, ENEL and EON), the rest are state owned. Retail prices will become liberalised in 2013 for industrial consumers and in 2017 for households, according to the last negotiations of the Romanian Government with the IMF, the European Commission and the World Bank.

The Romanian Transmission System Operator (TSO), Transelectrica, is responsible for electricity transmission, system and market operation, grid and market infrastructure development. It is a joint stock state-owned company founded in 2000 and since 2006 listed on the Bucharest Stock Exchange.

2 Adjacently, Romania plans to build a 1000 MW storage pumped hydro unit for balancing purposes.

II. RES-E PRODUCTION, THE EXISTING POLICY AND OPPORTUNITIES FOR INVESTMENT

Existing policy

Romania has implemented the RES Directives (2001/77/EC and 2009/28/EC).

Since 2005 RES-E generation has been subsidized by a system of green certificates.

In 2010 the total installed RES-E capacity was 6592MW, mostly hydro (98 %)

The green certificate system has resulted in limited uptake of RES-E production until 2010. The institutions of such a tradable certificate system have been established.

In 2010 the Romanian government prompted by its more ambitious 2020 target reformed the system and increased the support level for all technologies.

Investment support

Two sources of public support are the EU funds and the Environmental Fund.

Until recently, developers were rather unsuccessful in attracting bank finance due to the lack of a convincing operational support system and thus they mainly relied on equity sources.

The new system is likely to change this situation, and even though the rules of the harmonisation of investment and operation support are not yet known, regulatory intervention is planned.

Targets, opportunities and potential

The RES-E indicative target for 2020 is 42.6 % (the present share is 30.8 %) according to the National Renewable Energy Action Plan (NREAP) but the legal target established by Act 220/2008 is 38%. The majority of RES-E production in 2020 will be based on hydro (large and small) and wind.

Romania has a good PV potential (better than Hungary, the Czech Republic or even Bulgaria). The 2020 PV target in the NREAP (260 MW) seems to underestimate this potential, given the generous support PV has been granted under the new green certificate regime.

There is also good potential for wind, which is already attracting a large volume of investment.

The hydro potential of Romania is similarly significant but already exhausted for large scale installations. The small scale technical potential is estimated to be 6000 GWh annually (NREAP).

The biomass and geothermal potential is not a real issue for electricity generation as Romania envisages mostly heat usage from these resources.

In 2011 total installed RES-E capacities amounted to 7211 MW, dominated by large hydro installations above 10 MW (84%). Wind, small hydro and to some extent biomass started up in the last few years. Production data reflects these trends with the exception of large hydro generation that fluctuates with the water flow of the rivers, mainly the Danube that was exceptionally low in the second part of 2011, leading to a situation where Hidroelectrica was unable to comply with its supply contracts.

Figure 1: RES-E installed capacities between 2005-2020, MW3

Figure 2: RES-E gross electricity generation between 2005-2020, GWh4

37,8%

35,1%

29,9%

30,9% 31,2%

36,0%

30,8%

33,8%

36,7%

40,0%

41,9%42,8% 42,6% 42,6% 42,7% 42,6%

0

5000

10000

15000

20000

25000

30000

35000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gro

ss e

lectr

icit

y g

en

era

tio

n,

GW

h

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

Sh

are

of

RE

S-E

in

th

e g

ros

s c

on

su

mp

tio

n,

%

Large hydro

Small Hydro

Wind power

Solar photovoltaic

Solid biomass

Geothermal

Biogas

Share of RES-E

NREAPFact

EU target

in 2010:

33%

3 Source: ANRE (Romanian Energy Regulator) annual reports and National Renewable Action Plan 4 Source: ANRE (Romanian Energy Regulator) annual reports and National Renewable Action Plan

II.1. Description of the Romanian green certificate system

Romania acceded to the European Union in 2004, consequently it had to implement Directive 2001/77/EC, which sets a RES-E target for 2010. Romania has also implemented the new European Renewable Energy Directive (2009/28/EC).

Romania has introduced a system of green certificates in 2005 with the aim of increasing renewable electricity production. Green certificates are issued by the transmission and system operator S.C. Transelectrica S.A. to producers on a monthly basis, for each kWh of green electricity produced and delivered to the suppliers and/or final consumers. The system covers all renewable technologies with a capacity limitation on hydro (10 MW). Suppliers are obliged to acquire a given quantity of these certificates each year, based on their sales to final consumers. Electricity generated by small scale units (up to 1MW) will be eligible to feed-in tariffs, pending the approval of the European Commission.

Act 220/2008 - as subsequently amended in 2010 (Act 139/2010) - on the promotion of renewable energy sources transposes the provisions of Directive 2009/28/EC on the use of energy from renewable sources. It defines the mandatory quota for renewable energy and requires the gradual increase from 8.3% in 2010 to 20% in 2020 (new quota in

Table 1).5 The 2010 amendment ended a two year long regulatory vacuum and related investment uncertainty as the financial clauses of the 2008 law (that entered into force in November 2008) were not applicable. The law in its amended version finally entered into force on November 1st 2011, after approval of Emergency Ordinance no 88/2011 that modified the 2008 law according to the provisions of the Authorisation Decision of the EC, and after ANRE issued the regulation regarding the accreditation of generators to benefit the support scheme (Order 42/2011).

In 2010 the regulatory reform of the promotion system left the framework intact, several important parameters, however, have been modified.

The quota obligation has been upgraded to match EU ambitions even though actual green certificate (GC) generation lagged behind the old (lower) target quotas as well in the period 2005-2011. GCs issuance, nevertheless, is steadily closing the gap (

Table 1). ANRE expects a RES-E share of around 6% for 2012 which is still well below the 12% target.

Table 1 The old and the current green certificate purchase requirement between 2005 and 2020 (% of final consumption), the actual RES-E production share and the GC quota

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Old quota

0.7 2.2 3.74 5.26 6.78 8.3 8.3 8.3 9 10 10.8 12 13.2 14.4 15.6 16.8

Current quota

8.3 10 12 14 15 16 17 18 19 19.5 20

RES-E share

0.02 0.05 0.1 0.31 0.58 1.56 2.5 6**

GC quota*

0.0002 0.0005 0.001 0.0031 0.0058 0.0156 0.03746 0.11**

*Number of GC/MWh of final consumption established yearly by ANRE based on realised data

5 The quota for 20202030 will be determined by the ministry but should be at least 20% per year. In July 2011 the European Commission found the proposed scheme in line with the 2008 Environmental Aid Guidelines rules concerning operating aid for renewable energy sources. However, RES-E projects with installed capacity above 125 MW that are eligible for support must be reported to the European Commission.

**ANRE estimations for 2012

1. The universal rule of 1 GC for each MWh has been differentiated according to technology favouring the more expensive solar (6 GC) and wind investments (2 then from 2018 1 GC). In addition, it differentiates among small hydro plants according to implicit efficiency.

2. The original price range of 24-42 /GC (until 2008) has been increased to 27-55 /GC, yearly adjusted by ANRE according to the Eurozone inflation rate.

3. The penalty increased from 63 /GC (2005-2007) and 84 /GC (2008-2010) to the current 110 /GC.

The Romanian government and ANRE passed legislation that coordinates investment subsidies and support via green certificates to ensure that investors do not get oversubsidised (EGO 88/2011). Accordingly, ANRE monitors on a yearly basis the costs and revenues of producers and at the same time also the investments costs. Then it compares these cost figures to the reference values used for the authorisation of the support scheme by the EC. If the resulting internal rate of return (IRR) is more than 10% higher than the one approved by the EC, then ANRE will propose that the government reduces the number of green certificates for the respective technology. The reduction will be applied only for new capacities commissioned after the reduction measures are approved by government, starting 1 January 2013.

II.2. Green certificate system design

The period of eligibility to receive green certificates is differentiated (Table 2). As a main rule, new units are eligible for 15 years, whereas imported wind units are eligible only for 7 years and small hydro units already in operation face reduced eligibility as well. Some small hydro operators choose to operate outside the GC system and to enter after refurbishment. As a general rule, during the test period each MWh receives 1 GC and governmental investment support is corrected for in the number of GCs set by ANRE on a case-by-case basis. Those operators of RES systems that have already received green certificates before the quota system was introduced by Act 220/2008 will have a reduced eligibility period. The reduction is equal to the period of time during which they received green certificates.

Table 2 Eligibility rules, periods and awarded green certificates per technology

It is important to note that the application of the support scheme for some of the technologies is still waiting for the approval of the European Commission, e.g. in the case of geothermal, biogas from landfills and sludge and biomass from energy crops. This means that before the approval they cannot receive the proposed support indicated above.

Certificates are traded independently from electricity through the centralized market operated by the Romanian electricity market operator (OPCOM) or under bilateral agreements. The price of the certificate is set in the market but regulation for the period of 2008-2025 sets both a price floor (27 EUR/MWh) to protect RES generators and a price cap (55 EUR/MWh) as well to protect consumers from excessive prices. As actual RES-E generation in the past remained lower than the annual quota, the market price for GCs equalled the price cap, i.e. 55 EUR/MWh.

The penalty for not acquiring the preset amount of certificates is 110 EUR/MWh and it is indexed to EU Eurozone average inflation annually. Penalties are transferred to the Environment Fund to finance power generation from small scale (up to 100 kW) renewable sources installed by individuals. The penalty is based on the GC quota i.e. the ratio of issued GCs to net final consumption. This quota is calculated ex-post for each year by ANRE (by March of the following year). If the RES-E realised quota is higher than the legal target (there was no such year so far) then ANRE recalculates the GC quota reducing the number of GCs to the level of the legal RES-E quota.

II.3. RES-E potential

The future deployment possibilities of renewable energy/electricity production are often framed with various concepts of renewable energy potential such as theoretical, technological, realisable and/or economic. It is therefore difficult to provide potential estimates at the country level that are a) comparable across countries and b) constitute effective limitations on the 2020 horizon. Therefore we employ technology specific proxies: for PV and wind data on natural conditions (European wind velocity and solar irradiation maps), for other technologies (biomass, geothermal and hydro) we provide estimates (if available) from official governmental documents (NREAP, strategies etc.), including their underlying assumptions (if stated).

Romania has a good PV potential, especially in its South-East region. The 2020 PV target of the NREAP (260 MW) is quite conservative, especially considering the generous support PV has been granted under the current green certificate regime. The same region also has above average wind potential, which is already attracting a large volume of investment. The hydro potential of Romania is similarly significant but already exhausted for large scale installations. The small scale technical potential is estimated to be 6000 GWh annually (NREAP). The biomass and geothermal potential is not a real issue for electricity generation, as the NREAP forecasts mostly heat production from these resources.

II.4. RES-E targets

With its 35.24% achieved share Romania meet the RES-E indicative target of 33% in 2010 set by the 2001/77/EC Directive.6 According to the Romanian Renewable Energy Plan (NREAP) the RES-E indicative target by 2020 is 42.62%.7 The following two figures demonstrate the installed capacities and gross RES-E generation in the period of 2005-2010 and the projected figures stated in the NREAP between 2011 and 2020. The 2020 projection shows that Romania has chosen a fundamentally wind based capacity expansion. Large hydro capacities are maintained (possibly renovated), accompanied by new pumped hydro developments and the gradual expansion of small hydro capacities. Solid biomass, biogas and PV play a minor role in the 2020 planned portfolio, jointly on parity with small hydro capacity (860 MW versus 729 MW).

6 The European Commission quotes a 27.5% RES-E share that is below the 33% target. The reason for the deviating figures is that although actual production in 2010 was 35.24% of final consumption due to good hydrological conditions and the consequent high hydro production but the EC corrected for this fluctuation and used an average volume. 7 Act 220/2008 as amended in 2010 set the target to 38% (2020) which has been upgraded again by the NREAP (42.62%).

II.5. Financing RES-E investments

Until recently, banks have been reluctant to provide financing to RES-E projects due to the lack of a clear and attractive incentive programme. Even investors who were granted investment support from public sources could barely convince Romanian banks to co-finance their projects. The most active banks in renewable financing are BCR Erste and UniCredit Tiriac Bank. Banks prefer financing wind power projects in the Dobrogea region due to their strong track record. For loan approval the most critical factors are: distance to a substation (cost considerations), access to the energy grid, unchallengeable land ownership and the stage of the permitting process.

Public funds are available for RES-E investment support. The Ministry of Environments Environment Fund finances up to 50% of the total investment costs but maximum 7 mEUR. The fund is primarily designed for small investors, as an important investor would be less tempted to go through all the bureaucracy to get this aid. Second, EU structural funds administered by the Ministry of Economy target mid-sized projects by financing up to 50-70% of the total cost but maximum 20 mEUR per project. The allocated volume of support from Structural funds is 260 m EUR in the current programming period (2007-2013).

Finally, large-scale renewable projects may also be eligible for loans from international financial institutions, such as the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). However, most of the major projects that have been started in the last few years in Romania were financed from the investing multinational companies own funds.

The involvement of EBRD can be summarised as follows:

36.9 million loan in 2010 to EDP Renovveis, a major European wind developer to finance the construction and operation of Pestera (90 MW) wind farm, located in the Dobrogea region,

110 million loan to S.C. Hidroelectrica S.A., the state owned energy giant company to finance the rehabilitation of 6 units of Stejarul Bicaz Hydro Power Plant (HPP) with a total installed capacity of 210 MW,

56.4million loan in 2011 to EDP Renovaveis for the construction and operation of Cernavoda (138 MW) wind farm, located in Dobrogea region, and

plan to provide a loan up to 92 million in 2012 to a privately owned power development company incorporated in Cyprus (EPGE) to finance the construction and operation of 80 MW Chirnogeni wind farm located in the Dobrogea region.

The EIB provided a 200 mEUR loan to construct and operate a 347.5 MW wind park at Fantanele, Dobrogea region in 2011.

III. RES-E BARRIERS

Grid integration

Network capacity is an effective constraint on RES-E penetration.

Cost sharing in practice entails case-by-case elements and system security - which can be a reason for rejection - is not defined.

Green certificate issues

The revision of the support level brings uncertainty for investors.

The lifespan of green certificates diverts trading away from centralised platforms.

Other barriers

Licensing is complex and lengthy.

Social knowledge on the impact of the current support level is limited but likely to be a major regulatory driver in the near future.

III.1. Network capacity constraints

The 3300 MW limit on the network capacity to integrate wind acts as an effective barrier to the potentially over 17000 MW investment, especially considering the already operating 1000 MW. Transelectrica claims that new lines to stretch this limit would require 500 mEUR by 2021.8 The best wind resource is the Dobrogea region where the grid is historically weak. The considerable share of grid contracts and emitted connection permits (ATR) are believed to be of a speculative nature: actors obtain grid permits with the aim of selling them to real investors. Provisions to own the land did not prove to be enough to guarantee actual investment after receiving the grid connection contract.

III.2. Legal uncertainties regarding rights/obligations and the costs of grid connection

By law, network operators are obliged to connect RES-E to the grid (guaranteed access). The grid connection contract is a pre-condition for connection and operators due to the lack of specifying regulation - can use the argument of security of the grid to postpone connection. Additionally, grid operators are obliged to reinforce the grid if needed to integrate RES-E generation (shallow cost approach) but the cost can be partly imposed on the producers in cases where min. 60% of the grid development benefits a single RES-E producer. No normative methodology is applied, however, so grid operators allocate costs on a case-by-case basis. As such, the connection tariffs announced by ANRE often do not provide a good estimate of the actual connection cost.

III.3. Green certificate issues

The favourable changes in the support system are likely to create a rapid increase in RES-E generation that from the investors perspective brings the risk of regulatory change. The law requires ANRE to monitor the IRR of RES-E producers and cut them if deemed to be excessive (deviate more than 10% from the pre-set technology specific average rates ranging from 10.9 to 11.8%). Monitoring is concluded on a yearly basis.

8 Platts, Energy In East Europe 2011

The new regulation limits the lifespan of green certificates to 16 months with the aim of increasing turnover and preventing hoarding. However, the remaining lifespan, affecting the value of the certificate traded on the centralised market is revealed to the buyer only once the transaction is completed. OPCOM only operates the marketplace for GCs, it is not a counterparty so does not bear any responsibility for delivery or product characteristics. Once the lifetime of the certificate expires, OPCOM announces it to ANRE and the holder before cancelling it. As a consequence, the trading of certificates is likely to shift further towards bilateral contracts (in 2011 more than 70% was traded bilaterally), hence reducing the liquidity of the centralised market.

III.4. Licensing

Licensing is a quite complex and lengthy process. No survey exists on each RES-E technology but wind projects, for instance, require 80-85 permits, depending on the area where the turbines will be located. Total lead time can reach 2 to 3 years. Most delays have been registered especially with County Councils issuing urbanism certificates. In some cases, the companies solved the situation by suing the public institutions and obtaining a Court Decision. Significant delays were also registered when obtaining construction permits.

Developers of generation projects over 125 MW need to submit the proposal for assessment and approval to the European Commission before applying for GC eligibility from ANRE.

III.5. Political and social aspects of large-scale RES-E generation

The main worry of Romanian public authorities relates to the fact that the boom in supported wind and solar energy will increase end user electricity prices. This impact of RES-E expansion was not yet realised by customers in Romania. The intensive lobby efforts for RES were much stronger than the few voices emphasising a forthcoming dramatic increase of the price of electricity. According to ANRE simulations the price effect increases from 2.5 EUR/MWh in 2011 to around 30 EUR/MWh in 2017 and stabilises at 20 EUR/MWh in 2020. In 2011 the support for renewable electricity production translated into a 3% increase in pre-tax residential electricity price and a 3.5% increase of the end user price.

IV. APPENDIX

IV.1. Generation capacities

Table 3 Installed dispatchable net generation capacities in Romania (2010 and 2011 January data, MW)9

MW 2010 2011

Nuclear 1 300 1 300

Coal 5 811 5 227

Gas 1 061 758

Mixed fossil 2 699 2 560

Hydro 5 908 5 931

Wind 16 384

Biomass 0 8

Total 16 795 16 160

Table 4 Installed capacities of RES-E between 2003-2011, MW10

Installed capacities, MW 2003 2004 2005 2006 2007 2008 2009 2010 2011

Biogas 0 0 0 0 0 0 0 0 0

Geothermal 0 0 0 0 0 0 0 0 0

Solar photovoltaic 0 0 0 0 0 0 0 0 1

Solid biomass 0 0 0 0 0 0 8 23 25

Wind power 0 0 0 2 8 11 14 116 680

Small Hydro 0 0 0 0 0 379 387 395 429

Large hydro 6 248 6 279 6 371 6 284 6 355 6 053 6 026 6 058 6 075

Total 6 248 6 279 6 371 6 287 6 363 6 443 6 435 6 592 7 211

Table 5 Gross RES-E electricity generation between 2003-2011, GWh11

Gross electricity generation, GWh 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 011

Biogas 0 0 0 0 0 0 0 0 0

Geothermal 0 0 0 0 0 0 0 0 0

Solar photovoltaic 0 0 0 0 0 0 0 0 1

Solid biomass 0 0 0 0 0 0 26 118 183

Wind power 0 0 0 1 7 10 14 290 1 149

Small Hydro 0 0 0 0 0 552 774 1 273 920

Large hydro 13 259 16 513 20 200 18 344 15 936 16 322 14 783 18 992 13 680

Total 13 259 16 513 20 200 18 345 15 943 16 885 15 597 20 673 15 933

Note: all quantities were delivered in the network (net generation)

Export/import capacities

Romania has good interconnection capacities to its neighbouring countries. In recent years it could facilitate transborder flows (export and import volumes) amounting to up to 10% of total generation. The Romanian TSO, Transelectrica oversees the capacity allocation and use of interconnectors to neighbouring countries for the purpose of international trade. Available transfer capacities are agreed on by neighbouring TSOs, based on expected production, network load and necessary security criteria. Key information on cross-border capacities, together with the organisation modes of capacity auctions are summarised in Table 6.

9 Source: Transelectrica (Romanian TSO)

10 Source: ANRE (Romanian Energy Regulator)

11 Source: ANRE (Romanian Energy Regulator), annual reports

Table 6 Cross-border capacities and types of (explicit) auctions12

From Romania To Romania type of auction Yearly Monthly Daily Intraday

Hungary 700 700 coordinated RO TSO RO TSO HU TSO RO TSO

Bulgaria 600 600 coordinated BG TSO BG TSO RO TSO RO TSO

Serbia 700 500 split no no

Ukraine 200 400 by RO TSO no no

NTC value (MW) Crossborder capacity auctions

The electricity systems of Moldova and Romania are not synchronized so now all exchanges can be made in island operation. There are plans for the Moldovian system to enter in ENTSO.

IV.2. The Romanian electricity grid

The Romanian TSO, Transelectrica is responsible for electricity transmission, system and market operation, grid and market infrastructure development. It is a joint stock state-owned company founded in 2000, by splitting off the former vertically integrated National Electricity Company. Since 2006 it has been listed on the Bucharest Stock Exchange. In 2010 the state owned 74% of its shares.

IV.3. The wholesale market in Romania

The wholesale electricity market is organized both at regulated and negotiated prices, and both bilaterally and via trading platforms. In the first dimension, 30% of the wholesale market is organised at a regulated price (Figure 3). Regarding the framework of transactions, bilateral contract dominate, only 17% of transactions occur at centralised markets.

Figure 3 Distribution of wholesale market transaction, 2010 (GWh and %)

50223; 53%

28942; 30%

4386; 5%

8696; 9%2965; 3%

bilateral negotiated

bilateral regulated

CMBC

DAM

BM

Notes: CMBC Centralised Market for Bilateral Contracts; DAM Day Ahead Market; BM Balancing Market

IV.4. The retail market in Romania

Although since July 2007 the retail market is fully liberalised (every consumer is free to choose its supplier), as of October 2011 the consumption of the consumers who switched or renegotiated their

12 Source: NTC values ENTSO-E; allocation modes Transelectrica website

contract was only 56% of the total.13 In the regulated segment, the market actors are the incumbent supply companies in the traditional distribution areas (Error! Reference source not found.). The state owned Electrica is the biggest supplier (39%), the rest of the market is shared among three foreign companies. In the liberalised segment 59 actors compete for the consumers. The biggest player has a market share of 14% and there are 30 actors with a market share of less than 1% (denoted as Altii) (Error! Reference source not found.). As far as prices are concerned, the IMF which is providing financial assistance to Romania jointly with the EU - during its recent mission (February 2012) allowed Romania to delay price liberalisation (selling at market prices instead of regulated prices) for households scheduled originally for 2015 until 2017. This does not affect the 2013 deadline for industrial consumers.14

IV.5. The fuel mix

Power generation in Romania is characterised by stable nuclear (since the completion of Cernavoda in 2007), shrinking fossil-fuel based and fluctuating hydro production (Table 7). In recent years, Romania has been a strong net exporter in the South-East European region (mainly Bulgaria, Hungary and Serbia), and but this position changed in 2011 when hydro production dropped due to the extremely low water flow of the Danube. Net consumption fell almost 7% from 2008 to 2009 due to the economic recession.

Table 7: Electricity mix between 2005 and 2011, TWh

2005 2006 2007 2008 2009 2010

Net electricity generation

Coal* 19.66 22.66 22.61 23.34 19.36 18.54

Natural gas* 7.91 9.50 9.50 8.01 5.88 5.58

Nuclear 5.11 5.12 6.98 10.31 10.81 10.68

Large hydro (>10 MW) 20.20** 18.34** 15.94** 16.32 14.78 18.99

Other RES - 0.001 0.007 0.56 0.81 1.69

Other non-RES* 1.72 1.44 0.91 0.67 0.98 0.52

Total 54.60 57.06 55.95 59.21 52.62 56.00

Net export 2.90 4.29 2.08 4.45 2.47 2.91

Export 5.24 5.28 3.38 5.37 3.15 3.85

Import 2.34 0.99 1.3 0.92 0.68 0.94

Transmission loss 0.98 0.99 0.92 1.00 0.99 1.12

Distribution loss 6.47 6.35 6.49 6.70 6.66 7.13

Net consumption 43.20 44.78 44.87 45.91 42.86 44.26

* Data available only for dispatchable units. ** Including small hydro

IV.6. The present RES-E market design

RES-E producers, once they have received their production licence from ANRE, have to request - from ANRE eligibility for the GC system and register with the TSO. The TSO issues GCs on a monthly basis for electricity fed into the national grid or through an isolated grid system (existing in remote areas such as in the mountains or in the Danube delta). ANRE by March 31 each year controls the compliance of suppliers and applies penalties, if necessary.

13 Source: ANRE, Romanian Energy Regulator, annula reports 14 Source: Platts: Energy in East Europe, 2011

Figure 4 Romanian green certificate market

Source: OPCOM

The GC market is growing both in terms of the number of participants (buyers and sellers) and also in terms of installed capacity, mainly due to the entry of many wind producers into the market (Table 8 and Table 9).

Table 8: Number of producers registered at the CGCM

Table 9: Installed capacity at the CGCM

As the volume of generated green certificates has been significantly lower than the quota set by ANRE in the past, the price of GCs equalled the price cap, i.e. 42 EUR then 55 EUR.

IV.7. Renewable Potential in Romania

Distribution of the potential of renewable energy sources (energy strategy presentation)