* Government to lower generous subsidies for renewables
* Sudden changes, lack of detail unnerve investors
* Drop in investment a blow to struggling economy
By Luiza Ilie
BUCHAREST, March 22 Plans by Romania's
government to cut support for renewable energy producers have
surprised investors and could undermine one of the few economic
growth areas in the European Union's second poorest state.
Lured by profit-generating "green certificates",
foreign-owned firms have ploughed billions of euros into wind,
solar, biomass and hydro power projects, helping offset the
impact of government budget cuts and the euro zone debt crisis.
But while the renewable glut has brought down wholesale
power prices in many countries, subsidies have led to rising
prices for consumers as the costs are passed down.
Even before violent protests over high power prices toppled
the government in neighbouring Bulgaria last month, Romanian
officials said they would cut the number of certificates they
hand out free to investors in solar and biomass projects.
Now, just a year after launching the plan, government
officials say they will also cut the upper range of the price
renewable producers can earn from selling the certificates on to
other companies, catching many investors off guard.
"We will change the green certificates law," Energy Minister
Constantin Nita told a conference earlier this month. "Renewable
energy investors must ... understand we are trapped in a vice."
But details on timing, price, and other crucial issues have
been lacking. That has spooked energy firms who, after building
2,100 megawatts of wind projects in three years - more capacity
than Romania's two nuclear reactors - are scaling back.
Romania's Wind Energy Association now expects up to 400
megawatts more wind power to come online this year, compared
with a previous estimate of 1,500 megawatts.
That would slow investments that have brought in 3.4 billion
euros ($4.4 billion) over the last three years, the equivalent
of more than half of Romania's total foreign investment or 2.5
percent of this year's gross domestic product (GDP).
"This throws us into an area of major uncertainty," said
Ionel David, director of the Romanian Wind Power Association.
"The market is frozen right now. And this won't hurt just
renewables, word will get out to investors in other fields."
Other governments are having second thoughts about the cost
of renewables, too. Spain, one of the world's leading renewable
energy developers, has slashed renewable incentive schemes.
But Romania's move could put a further drag on the country's
efforts to resume its race to catch up with living standards in
It will also deal a blow to Romania's efforts to improve its
dilapidated infrastructure and meet commitments to Brussels to
shut down a third of its old power production sites by 2020.
"There is a massive investment need in the energy sector,"
central bank Governor Mugur Isarescu told Reuters last month.
"Renewable energy has a cost, but it is a necessary effort for
the Romanian economy."
Under the renewables scheme, the government gives producers
the certificates that they then sell on to power suppliers and
other companies who are required by law to buy them as a way of
showing they are supporting the green drive.
The renewable investors profit again when they sell the
energy they produce.
Belgium and Sweden also use green certificates to subsidise
renewable projects, rather than feed-in tariffs which guarantee
developers a fixed price for every kilowatt hour of electricity
generated, irrespective of demand.
Green certificates have helped boost Romania's total
installed power production capacity by up to roughly 10 percent
- all in renewables - since 2009.
That has brought healthy income to foreign-owned energy
firms such as Czech CEZ, Italy's Enel,
Energias de Portugal, Austrian Verbund and
others who have rushed to install turbines in the arid landscape
of the southeastern Romanian region of Dobrogea and elsewhere.
But, once deemed too generous by the EU, the certificates
accounted for nearly half of a 10 percent hike in households'
power bills in January and have driven up consumer prices.
And it is Romania's 19 million people, whose wages average
350 euros ($450) a month, who will foot a final bill that power
regulator ANRE estimates will reach 10 billion euros by 2020.
SLOWING, NOT STOPPING
In Dobrogea, where the wind averages 7 metres per second,
scores of turbines loom at a CEZ wind park, Europe's largest on
land, over the villages of Fantanele and Cogealac.
Many houses sport new red shingled roofs and new windows.
CEZ pays rent to about 100 landowners, and has helped upgrade
the local clinic, a church, school and kindergarten, even roads.
Here and elsewhere, wind energy investments have created at
least 3,000 jobs, often in rural areas with high unemployment
and few opportunities to escape.
CEZ managers say there is still plenty of scope for more
projects before the grid runs out of room.
But investors say that until the government clarifies its
plans, the renewables boom will be put on hold.
"It's the uncertainty rather than the level of subsidies
that is causing problems," said Matthew Vogel, managing partner
of renewable energy and agriculture developer Alternatif
Investments, which decided last year not to invest here.
"It is important that the government, if changes are to be
made, can regain the confidence of investors," he said.