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Viewing cable 06BUCHAREST638, ROMANIA'S RENEWABLE ENERGY MARKET SHOWS INCREASING

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Reference ID Created Released Classification Origin
06BUCHAREST638 2006-04-18 16:29 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Bucharest
VZCZCXRO6617
RR RUEHAG RUEHDA RUEHDF RUEHFL RUEHHM RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPB RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBM #0638/01 1081629
ZNR UUUUU ZZH
R 181629Z APR 06
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC 4198
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC 0371
UNCLAS SECTION 01 OF 03 BUCHAREST 000638 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR EUR/NCE - WILLIAM SILKWORTH 
FOR OES/PCI - LYNN LEWIS 
 
E.O. 12958: N/A 
TAGS: ENRG SENV PREL TRGY EINV ETRD EAGR EU RO
SUBJECT: ROMANIA'S RENEWABLE ENERGY MARKET SHOWS INCREASING 
PROMISE 
 
REF: STATE 36153 
 
1. (SBU) SUMMARY.  Romania's small but growing market for 
renewable energy will provide new opportunities not only for U.S. 
exporters and investors, but for cooperation with Europe in the 
energy field.  In conjunction with its European Union (EU) 
aspirations, Romania has set aggressive targets for increased 
renewable energy production.  After accession, in 2007 or 2008, 
Romania will gain access to additional EU financial support for 
renewable energy projects.  U.S. companies should act quickly to 
gain a foothold in the Romanian market before European 
competitors, well-versed in EU funding rules and regulations, 
dominate the field.  END SUMMARY. 
 
MARKET OVERVIEW 
--------------- 
2. (U) Romania's renewable energy sources include hydropower, 
biomass, wind, solar and geothermal.  Hydropower, primarily from 
large plants, dominates the field, meeting over one quarter of 
Romania's total electrical energy needs.  Other renewable sources 
currently account for about one percent of output. 
 
3. (U) A sampling of recent and future investments in Romania's 
renewable energy market include the following: 
 
-- In March 2006, the Port of Constanta finished accepting bids 
for the construction of 12 wind turbines.  A winner will be 
announced soon.  An American firm is in the running for the 
contract. 
 
-- A group of German companies and Sibiu County are discussing a 
EUR 138 M plan to build a bio-diesel refinery and develop nearby 
farms for rapeseed production.  The county will contribute land 
to the project. 
 
-- The Romanian company Rompetrol recently announced that it will 
produce 60,000 tons of biofuels by the year 2007.  The cost of 
the project is approximately EUR 16 M. 
 
-- GOR officials revealed that an undisclosed Dutch company is 
interested in launching a EUR 70 M bio-diesel refinery project. 
 
-- In November 2005, a Hungarian company signed a EUR 36.5 M 
contract with one of Romania's state-owned power companies to 
convert a power plant in Zalau, Romania to biomass. 
 
-- A September 2005 press report indicates a German company is 
interested in building a manufacturing facility in northeast 
Romania to produce wind turbine power plants. 
 
-- In August 2005, the Portuguese company Biomart launched a EUR 
47 M project to build a bio-diesel refinery in the town of Lehliu 
Gara, Calarasi County. 
 
The European Bank for Reconstruction and Development's USAID- 
funded website on renewable energy projects 
(http://www.ebrdrenewables.com/sites/renew/de fault.aspx) tracks 
the latest developments in Romania's (and the region's) renewable 
energy market. 
 
TARGETS AND INCENTIVES 
---------------------- 
4. (U) In coordination with the European Union, Romania has set a 
target of 33 percent of gross domestic electricity consumption 
from renewables by 2010.  Romania's gross consumption for 2005 
was almost 50 million megawatt-hours (MWh).  Although hydropower 
(mostly large units above 10 megawatts (MW)) currently provides 
on average 28 percent of the nation's electrical output, Romania 
must focus attention on other renewables to meet the 33 percent 
goal.  To date, Romania has done so through its "Green 
Certificate" program. 
 
5. (U) Green Certificate Program:  In 2003 and 2004, the GOR 
passed legislation establishing targets and incentives for 
electricity produced from all renewable energy sources except 
large hydroelectric dams.  (For hydro, only dams 10 MW or less 
and rehabilitated after 2004 may participate.)  Starting in 2005, 
all electricity distributors must purchase at least 0.7 percent 
of their electricity from renewable energy sources or pay fines. 
This target will gradually increase to 8.3 percent in 2010.  As 
an incentive for renewable energy production, the GOR issues 
Green Certificates (GC) to renewable energy producers for each 
megawatt hour.  Producers then sell their certificates to 
distributors on a centralized GC market.  (The electricity is 
 
BUCHAREST 00000638  002 OF 003 
 
 
sold separately on the electricity market.)  The extra income 
from GC sales compensates the producer for the higher cost of 
renewable energy production.  To protect both producers and 
consumers, the government sets a minimum and maximum price for 
each GC.  For 2005-2012, they are EUR 24 and 42.  The GC market 
opened in November 2005 and is still rather new and volatile. 
More detailed information about the program can be found at 
www.opcom.ro, the website of Romania's electricity market 
operator (OPCOM).  Additional information is also available at 
www.anre.ro (the national energy regulatory authority) and 
www.transelectrica.ro (the government-owned distribution 
network). 
 
6. (U) In addition to Green Certificates, the GOR also exempts 
renewable energy from excise taxes.  Minister of Economy and 
Commerce Seres recently reiterated that the GOR contemplates 
keeping the excise exemptions in place after accession.  The GOR 
has other forms of EU-approved state aid that can cover 40 
percent of eligible investment costs, but has yet to use them. 
 
7. (SBU) In May, Romania will probably find out whether it joins 
the EU in 2007 or 2008.  As an EU member, the country will gain 
access to billions of euros in structural funds.  According to 
Romania's Ministry of Economy and Commerce (MEC), some of these 
funds will be used for both R&D and working projects in the 
renewable energy field.  MEC is currently creating a database of 
potential projects and hopes to have a system in place by the end 
of 2006 to match projects with financing.  By 2007, it should 
know how much EU funding will be available for these projects. 
An MEC official informed EconOff that there is significant 
interest from EU-based companies in Romania's energy field. 
These companies know how to work with EU structural funds and are 
waiting for Romania's accession to more aggressively move into 
the market.  He advised U.S. companies to move quickly to gain a 
foothold prior to accession. 
 
OPPORTUNITIES FOR U.S. COMPANIES AND INVESTORS 
--------------------------------------------- - 
8. (U) Hydro, biomass and wind energy are the most promising 
renewable energy resources in Romania.  Romania has numerous 
rivers and mountainous terrain, its vast forests and agricultural 
lands are largely untapped or underutilized, and wind resources 
are particularly abundant along the Black Sea.  The western parts 
of the country are well-suited for geothermal heat applications. 
Solar production is virtually non-existent but could receive more 
attention in the future.  As energy prices increase, particularly 
for gas, and conventional sources decrease, energy-intensive 
sectors will look to alternative sources of supply. 
 
9. (U) Potential investors in Romania's renewable energy market 
must keep a close eye on EU energy policies, targets and trends. 
With membership fast approaching, EU policies will be the main 
driver for the foreseeable future.  For example, Romania has 
adopted the EU targets for the substitution of conventional fuels 
by alternative fuels in the road transport sector (5.75 percent 
by 2010; 20 percent by 2020).  While the market for biodiesel 
production will likely be very difficult, ethanol is a different 
matter.  There are numerous biodiesel projects involving Western 
European manufacturers, but very few with ethanol.  U.S. 
companies may have the edge in experience here.  Furthermore, 
Romanian refiners will have difficulty meeting the 5.75 percent 
target with bio-diesel only because diesel fuel properties begin 
to suffer above the five percent level.  They will have to turn 
to gasoline blending, which means ethanol. 
 
10. (U) Regarding specific sectors and strategies in the 
renewable energy market, one GOR official suggested that outside 
investors look at public-private partnerships, particularly for 
biomass projects.  For such projects, local governments could 
supply the land.  This same official also commented that the 
mayor of Panciu, a city in Vrancea County (eastern Romania), is 
looking for a partner to develop a wind project.  Another 
official, from the Ministry of Environment, suggested approaching 
Romania's 300 or so mid-sized cities (20-30,000 inhabitants) with 
an integrated environmental plan that meets their energy and 
waste disposal needs.  Such projects may be eligible for U.S., EU 
or multilateral financial assistance. 
 
COMMENT 
------- 
11. (U) Although small, Romania's market for renewable energy 
will grow rapidly in the coming years as energy distributors 
scramble to meet GOR and EU mandated targets.  In fact, demand 
for Green Certificates is far outstripping supply and alternative 
 
BUCHAREST 00000638  003 OF 003 
 
 
energy producers are receiving a premium for their GCs.  However, 
U.S. companies and investors will face stiff competition from 
their European competitors, who are already making their presence 
known in Romania.  Market entry will be more difficult the longer 
U.S. investors wait.  Finally, at a political and strategic 
level, U.S. investment and support in the alternative energy 
sector can help forge closer ties with our European allies and 
contribute to the continent's energy independence, a strategic 
goal shared by both Washington and Brussels. 
 
12. (U) AmEmbassy Bucharest's reporting telegrams are available 
on the Bucharest SIPRNet website: 
www.state.sgov.gov/p/eur/bucharest. 
 
TAPLIN