Romania's hydropower sector, waiting for the feed-in tariff

A strategic component of the National Energy System (NES), the hydropower sector is strongly affected by the burdensome taxes, such as those on special constructions, water use or the lease price for low river beds, as well as by the problems caused by an unstable legislative framework or the trading of green certificates. 

The result is the underdevelopment of this energy area, particularly of the field of small hydropower projects, as large projects are rather rare.

In this context, a shift in direction towards a dynamic development of small hydropower plants (SHPs) could occur only after the introduction of the feed-in tariff for projects up to 500 kW was the conclusion of the debates held during the second edition of the Romanian Hydropower Energy Summit, organized by Govnet Conferences on Thursday, February 12, 2015, and attended by Government officials, representatives of the regulatory authorities in the energy field, local and international hydro energy professional, hydropower plants operators, as well as industry-related companies.

However, a specific time frame for implementing the alternative support scheme has not been established yet.

”The methodoloy for calculating the feed-in tariffs for power plants with capacities below 500 kW has been already discussed by our Board and as suggested by the Competition Council, because before approving the methodology and the calculations, the state aid must be approved, we issued a draft for a Government Decision to approve the state aid , but it has not been passed by the Government yet”, explained Zoltan Nagy-Benge, Member of the Board of the National Energy Regulatory Authority (ANRE).

”From our point of view, this methodology is 90 percent ready. Depending on the approval of the state aid, the validity of the support scheme or its budget, we will be able to adapt this methodology to the Government's decision within maximum two weeks”, added the ANRE delegate.

On the other hand, the participants sounded the alarm about the water use tax, considering it accounts for a large share of the cost of electricity, whereas at European level, traditional hydropower markets like Germany, Norway or Austria do not charge any taxes for the water used in the electricity generation.

”We have to regulate the bureaucratic abuses, of which the most important and arbitrarily set is the the tax on the water used, which in fact means the transfer of economic resources from hydropower producers to the Romanian Waters. Analyzing the hydropower system of the “Portile de Fier” I and II, I have found out that the water use tax represents 46 percent of the cost for producing 1MW at the “Portile de Fier” and at “Portile de Fier” II it is nearly 70 percent", commented Rodin Traicu, MP, Member of the Industry and Services Committee of the Chamber of Deputies.

While the challenges faced by investors interested in developing hydro energy projects are well-known, in terms of investment opportunities, apart from the long-awaited introduction of the feed-in tariff or the tenders organized by Hidroelectrica for selling its SHP portfolio, which skips the permitting process, there is cause for some optimism with respect to the balancing market.

"Market evolution depends on the development of the infrastructure for energy storage and balancing of the National Energy System. Building and operating pumped storage hydropower plants with power capacities exceeding 15 MW, as provided by the Ordinance no. 28/28.08.2014, limits unfairly the investment in energy storage systems", explained Dana Dunel Stancu, Head of the Energy Practice at Biris Goran.

"Romania is the only state across the EU that, despite its favorable natural conditions for building and operating pumped storage hydropower plants, has no such power plant, which is very necessary given the current technical conditions of the National Energy System”, stated Adrian Marin, Counsellor at the Ministry of Energy.

Accordingly, Marin highlighted the importance of the 1000 MW pumped storage power project from Tarnita-Lapustesti, considered to be of national interest for balancing the NES, as it is imperative for integrating the power production facilities which use wind, solar or nuclear resources.