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REGULATION EVENTS IN EUROPE

At the european level, following the approval of the renewable energy Directive 2009/28/eC, all the Member States were requested to present a “national renewable energy action plan” (nreap) by June 30th, 2010. the nreap is a document in which each eu Member State presents how it intends to reach its binding renewable targets for the year 2020 and the paths towards them. Member States have also been required to provide their sectoral targets (electricity, transport and heating and cooling), the technology mix they expect to use, the transfers between Member States and the specific measures each one intends to implement in order to reach the forecasted trajectory. as the Directive indicates, nreap must conform with the national action plan template adopted by the european Commission in June 2009.

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SPAIN

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The Spanish government has long struggled to deal with a rising tariff deficit and since mid 2009 has shown concern about the cost of the renewable sector.

Following the agreement reached in July 2010 by the Ministry of Industry with two key renewable energy associations (the Spanish Wind energy association and protermosolar), the royal Decree 1614/2010 of 7th December was approved.

The recently approved regulatory scheme on wind is summarized as follows:

  • A temporary 35% cut of the reference premium applicable to the wind capacity ruled by RD 661/2007, only during 2011 and 2012. Cap and floor have not been revised and still remain indexed to CPI-“X”;
  • An amendment to the article 44.3 of the RD 661/2007 clarifying that eventual future revision to the value of the reference premium would only be applied to the capacity that comes on line after 2012;
  • A cap to the annual equivalent working hours entitled to receive the premium value set at 2,589 hours (would only be active if the average of the Spanish wind sector equivalent working hours surpasses the 2,350 in each year). the reference hours are not revisable for the full useful life of the existing and pre-registered wind farms);

Wind capacity pre 2008 (ruled by the RD 436/2004) remains untouched, and will transit to the Royal Decree 661/2007 regime in 2013. the bulk of the Spanish wind assets (those ruled by RD 436/2004) is unaffected by the new regulation.

Apart from Royal Decree 1614/2010, wind energy regime was amended by two other decrees. the first one is royal Decree 1565/2010 of november 19th that modifies the reactive power regime. With this new decree, reactive premiums are lowered but the requirements to receive the bonus are less restrictive, thus more easily achievable. the second decree is Royal Decree-law 14/2010 of December 23th that brings in several measures to reduce the tariff deficit. Among the measures, the decree includes a generation levy of €0.5/MWh applicable to ordinary and special regime generators.

PORTUGAL

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On May 20th, Decree law 51/2010 was approved. this new regulation simplifies the procedure for installing additional equipment in wind farms (overpowering). the decree also obliges wind generators to have equipment installed in each turbine to attenuate voltage drops (fault ride through) and supply reactive energy. Concerning the latter obligation, there is no longer a premium for supplying reactive power, and there will be a penalty if the wind farm does not operate within certain parameters in terms of reactive power.

FRANCE

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After months of debate, the “Grenelle 2” was finally approved on June 29th, 2010. the origins of this bill date back to 2007, when the “Grenelle de l’Environnement”, a national summit to formulate environmental policy was launched. three years later, the “Grenelle 2” is a toolbox of the “Grenelle de l’Environnement” and establishes a new framework for wind energy.

In order to qualify for the guaranteed purchase price, the “Grenelle 2” introduces a minimum threshold of five turbines for wind energy plants. This measure aims at avoiding wind scattered development. The law also requires wind farms to be erected at least 500 meters from habitation.

Another requirement to benefit from the guaranteed electricity purchase price is, since 2007, to be built in predefined zones: in “ZDES” (wind development areas) being these specific areas designated by the municipalities hosting the projects. In articulation with the ZDES, the “Grenelle 2” introduces a new layer requiring wind farms to be also included in the “Regional Development Areas” to be approved by the regions and currently under preparation.

In addition, wind farms will be subject to “ICPE” (Industries Classified for the protection of the environment”) regulation which add new permitting requirements, and put wind farms on the same level than industries with a proven potential risk for the environment.

Finally, the “Grenelle 2” stipulates that at least 500 turbines must be installed each year with a review after 3 years, but does not include specific mechanisms to achieve this goal. this requirement aims to achieve the onshore wind energy target of 19 GW in 2020.

BELGIUM

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New quotas of renewable generation have been approved in Wallonia. new quotas are considerably higher than previous ones and are: 13.50% in 2011 and 15.75% in 2012. Quotas from 2013 onwards are yet to be decided, although the CWAPE (the energy regulator in Wallonia) has recommended the Government to increase them by 2.25 pp a year, up to 33.75% in 2020.

Currently, the Green Certificate Scheme is being reviewed by the Government but no formal documents have been published yet.

POLAND

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The energy law was amended in January 2010. the main aim was to limit speculative action in the reservation of interconnection rights for wind farms. pursuant to the new provisions, the obligation to prepare an assessment of the impact of the installations being interconnected on the grid lies with the grid company. Within this new regulation, the entity applying for the conditions of interconnection must pay in advance the grid interconnection fee of PLN 30 per kW of interconnection capacity. this fee is considered as an advanced payment for the connection costs and can be returned if there are no technical possibilities for connection. Moreover, the grid company has an obligation to issue grid connection conditions (or to reject such conditions due to technical constraints) within 150 days from the day of submission of the complete grid connection application.

Another measure aimed at reinforcing the credibility of the project is the obligation to attach to the application for interconnection conditions an excerpt from the local master plan or, if there is no such plan, the planning permit for the real property to which the application relates.

ROMENIA

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The Romanian Government amended its renewable energy law in order to extend its renewable support. Following the general delays in bringing projects into operation, the Government has decided to extend until 2017 (instead of 2015) the period in which wind generators are entitled to receive two green certificates per MWh. In addition, the 2012 green certificate quota has increased from 8.3% to 12% and will rise by 1 pp every year (except in 2019, in which it will only increase 0.5 pp) up to 20% by 2020.

The amendment also confirmed the minimum trading value per green certificate at €27/MWh and the maximum at €55/MWh and increases the penalty for suppliers who do not comply with their obligation to fulfill the quota from €70 to €110 per missing green certificate.

Lastly, in order to instill more confidence in investors and more visibility to the wind market, the green certificate scheme has been guaranteed until 2025, far beyond the previous 2014 deadline.

The double green certificate support had been established by law 220/2008 (formally enacted and published) but, as a matter of practice, the law is still not applied, as the new system has still not been formally notified to the European Commission.

UNITED KINGDOM

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Following the general election of May, 6th 2010, the new government expressed its willingness to establish a system of feed-in tariffs for electricity produced from renewable sources, while maintaining the renewable obligation certificates (ROCs) at least until 2017. the Government has included this issue in its energy market reform package that was presented in December 2010 and is currently under a consultation process. under the proposal, the Renewable Obligation (RO) system could be phased out in 2017. The RO scheme will be then replaced by a contract for difference, where the support would be calculated on the difference between the wholesale market price and a “strike price” set under the contract. This system is designed to lower a generator’s price risk allowing a steady flow of incomes. other measures presented in this package are the introduction of capacity payments aimed at fostering the construction of reserve plants and the pledge to approve emission performance standards for new coal-fired power plants. To achieve the climate change targets, the Government also announced a floor price for carbon emissions.

The Government has also allocated £ 1 billion for the creation of the Green Investment Bank and appointed an independent commission that is working to launch the new institution in the next months. the Green Investment bank was set to form the cornerstone of the energy policy of the Conservative party, outlined in its Manifesto in the run-up to the general election. The aim of this new institution is to foster renewable projects investment by granting funds to low-carbon initiatives.

ITALY

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The Bersani Decree of 1999 ushered in a Green Certificate scheme aimed at promoting the production of electricity from renewable energy sources. the scheme is based on the issue of green certificates to producers, who also receive a revenue stream selling the underlying electricity. Since its introduction, the scheme has been modified several times, the last major amendment being the one introduced by the 2008 Budget law.

The key features of the new green certificate scheme set by the Budget Law were the following:

  • Renewable nergy generators are eligible for the green certificate system for the first 15 years of operation (extending on the former 12-year period).
  • Increases the mandatory quota from 0.35% to 0.75% per year until 2012.
  • Strengthens the stabilizing role of the GSE (“Gestore dei Servizi Elettrici”), a state energy agency that operates in the Green Certificate market absorbing any imbalances in the market. If there is a deficit, the GSE can sell the Green Certificates in its possession at a price equal to €180 minus the average price of electricity sold in the previous year. alternatively, the GSe can also act as a last resort buyer and acquire green certificates when there is a surplus in the market. When this occurs, the GSe can buy green certificates at a price equal to the average price registered the previous year by the GME (“Gestore dei Mercati Energetici”) in its trade platform.
  • Introduces differentiation by renewable energy source with the use of coefficients applied to net production.

Currently a new renewable energy decree is in a latter phase of approval (it has preliminarily been approved by the Italian Government). If this new regulation is passed, it would represent a massive overhaul of the renewable energy promotion system as the green certificate system would be phased out. the draft of the regulation envisages a feed-in tariff system for facilities up to 10 MW, and commissioned from the January 1st, 2013 onwards. Larger plants would participate in binding process, in which the incentive would be given to winning projects through a competitive process, though with a floor tariff.

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