Romanian green certificate rules ‘will change’ amid oversupply – traders

Romania’s clean power subsidy scheme is plagued by oversupply with some producers forced to get creative in a bid to offload excess green certificates, according to a number of sources with knowledge of the matter.

One market source insisted: “The rules of the green certificates game will change.”

And the market is already braced for a potential crash in 2017-2018 when a number of certificates, the issuance of which has been postponed under legislation, will be released.

Zoltan Nagy-Bege, board member of energy regulator ANRE, told ICIS on Tuesday that green energy producers are already exposed to very weak financial returns from green certificates in 2017-2018 due to oversupply in the market.

Nagy-Bege said: “The certificates will be given out, but the chance for their value to be harnessed [in 2017-2018] is close to zero, since we already have more green certificates than is stated in the mandatory quota.”

A law passed last year postpones the allocation some of the green certificates to renewable producers until 2017 and 2018, depending on the type of generation. This is similar to the “back-loading” approach that was taken to manage oversupply in the emissions market at EU level.

Certificates are given out to renewable energy producers and then sold onto the market. Suppliers then buy the certificates to comply with a mandatory annual quota, passing the cost on into end-users bills.

Earlier this year, the government set the green certificate quota at 11.1% – well below the market’s estimation of 15% ( see EDEM 31 March 2014 ). The measure aimed to cut down consumer costs.

Creative

Data from market operator OPCOM, showed that its most recent green certificate trading session, on 28 May, attracted 275 offers – but just four bids.

This reflected a chronic lack of demand in the sector.

And recent sessions have recorded similar results. Since the second half of March the certificates traded at their minimum price of New Lei 130.69/MWh on the centralised market.

Market participants said the oversupply has driven some producers into a difficult financial situation, forcing them to get creative when negotiating.

Three sources reported that some green energy producers are offering certificates at the minimum price along with the corresponding electricity volumes at a very low price. Others are said to be offering to reimburse buyers 15%-25% of the price of the green certificates.

“The [renewable producers] are desperate and are getting even more so. The rules of the green certificates game will change,” one market source said. A second source said: “It’s a tough time to be a green energy producer.”

The energy regulator declined to comment on the matter on Tuesday afternoon.

Meanwhile large industrial consumers are expecting an exemption from buying a large chunk of the green certificates they are required to purchase as a result of a new government proposal ( see EDEM 23 April 2014 ). The draft bill has not yet passed, because it is awaiting European Commission approval.

According to Nagy-Bege, the text as it stands does not indicate what will happen to certificates that are not bought by large consumers, and ANRE had made a proposal to the government regarding a mechanism for taking over those certificates.

“Either they are bought by other end-users or are paid for by the [state] budget,” he said, pointing out that such a scheme should not affect producers. Sophie Udubasceanu