1

Investment in Renewable Energy in the ECIS

Christoph S. HenrichSustainable Energy Consultant

Environment and Energy PracticeUNDP Bratislava Regional Centre

Europe & CIS Region

09 December 2013 – Zagreb, Croatia

2

Renewable Energy Policy and Legislation

Renewable Energy Potential and Deployment

Barriers to Renewable Energy Investment

Good Countries for Investment in Renewable Energies

Conclusions

Topics of the presentation

3

Adopted RE legislation and policy in the countries covered

Project Specific Feed-

in tariff

Policy implemented

Policy not implemented

Region Country Feed-in Tariff Feed-in Premium Quota Obligation Tender and Auction Priority Grid Access Tax Rebates and GrantsLow Interest Loans and

Loan Guarantees

KazakhstanKyrgyzstanTajikistan

TurkmenistanUzbekistan

AlbaniaSerbiaCroatia

Bosnia & HerzegovinaMontenegroMacedonia

TurkeyBelarus

MoldovaRussian Federation

UkraineArmenia

AzerbaijanGeorgiaEstoniaLatvia

LithuaniaRomaniaBulgariaPoland

Czech RepublicSlovakiaHungarySlovenia

Central Asia

Western Balkans

and Turkey

CIS

Caucasus

European Union

Ukraine

Croati

a

Czech Rep

ublic

Belaru

sSe

rbia

Bulgaria

Latvia

Hungary

Macedonia

Slova

kia

Slove

nia

Monteneg

ro

Lithuan

ia RSFB

iHTu

rkey

Estonia

Albania

Armen

ia

Azerbaij

an0

100

200

4

Wind

Small Hydro Biomass

Solar

Feed-in tariffs for specific RE technology in € / MW-h

Belaru

s

Hungary

Latvia

Ukraine

Monteneg

ro

Lithuan

ia

Croati

a

Slove

niaSe

rbia

Turke

y

Macedonia

Bulgaria RS

Slova

kia FBiH

Czech Rep

ublic

Armen

ia

Estonia

Azerbaij

an0

50

100

150

FBiH

Ukraine

Latvia RS

Croati

a

Lithuan

ia

Bulgaria

Macedonia

Monteneg

ro

Belaru

s

Turke

y

Slove

niaSe

rbia

Czech Rep

ublic

Hungary

Belaru

s

Slova

kia

Estonia

0

100

200

300

400

500

Slove

nia

Croati

a

Macedonia

Turke

y

Monteneg

ro

Czech Rep

ublicLat

via

Belaru

s

Bulgaria

Slova

kiaSe

rbia

Ukraine

Hungary

Lithuan

ia RSFB

iH

Armen

ia

Estonia

0

50

100

150

200

250

-

20.00

40.00

60.00

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

-

200.00

400.00

600.00

800.00

-

10.00

20.00

30.00

40.00

Biomass Solar

Small Hydro PowerWind

Technical RE potential in GW installed electricity capacity

Source: Several National Sources and UNDP calculations

6

Some favorable RE legislations adopted Among the highest feed in tariffs and promotion for 20 years

Complimentary Grid access

Several tax exempts for RE investment

Quota Regulation with Tradable RE Certificates in place

Legally binding RE target

Grants ,Soft Loans, Loan Guarantees and Tax Rebates available

Regional highest feed-in tariffs for solar power in FBiH

Republic Srpska has an optional feed-in premium implemented

Republic Srpska offers priority access to the grid, FBiH offers priority access to the grid for installations smaller than 150 KW

Very high feed-in tariffs

Legally binding RE target

Several tax exempts for RE investment and existence of many funding possibilities

Belarus

Romania

Bosnia & Herzegovina

Ukraine

7

Deployed Solar and Wind Energy Capacity in MW

Poland, Turkey, Romania, Bulgaria and Czech Republic perform the best in Renewable Energy deployment

0

500

1000

1500

2000

2500

Czech Republic

Bulgaria Slovakia Ukraine Slovenia

Solar PV 2012

Solar PV 2005

0

500

1000

1500

2000

2500

Wind Capacity 2012

Wind Capacity 2005

Source: Several National Sources and UNDP calculations

8

Deployed Biomass Capacity in MW

RE legilsation may be a necessary condition for RE deployment but does not automatically explain for differences in RES utilization

0

200

400

600

800

1000

Poland Czech Republic

Hungary Slovakia Lithuania Romania

Biomass 2012

Biomass 2005

RE promotion scheme is necessary to make investment in RE attractive

RE deployment is not tied to a specific selection of a promotion instrument

Favorable legislation has to be designed to satisfy investor requirementsSource: Several National Sources and UNDP calculations

Market Distortions and Access to the Market

Subsidies for fossil fuels and monopolistic energy markets

Grid Access and Inadequate Infrastructure

Prioritized vs. Non-discriminatory grid access

Concessions, Permits and Licenses

Complicated, bureaucratic and intransparent license and permit processes can increase transaction costs, delay returns and discourage investment.

Capital Scarcity

Some countries show low rankings in World Bank indicators “Getting Credit” and “Risk Premium on Lending”

Barriers to RE Investment

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Political Instability and Country Risk

Regional average of “Country Risk” indicator by OECD is 5.5

Governance and Transparency

Transparency in governmental institutions, as license granting or tariff setting, is indispensable to attract private investor’s engagement

Cost of Information and limited experience with RE

High information costs due to cost and time intensive pre-feasibility and feasibility studies of a plant’s wind speed or water flow, represent a major barrier for RE investment

Barriers to RE Investment

10

11

Good countries for investment in RE power generation

Favorable feed-in tariff lastly amended in 2013

Priority grid access for RE power plants

Brief Investor Guides for RE technologies available

Via Directive 96/92/EC legally binding RE target

Among the highest (and for SHP the highest) feed-in tariffs in the region

Significant improvement in construction permit processes (increase of 145 ranks)

Large investment in the recent years strengthened national RE market

Via Directive 96/92/EC legally binding RE target

Ukraine

Serbia

Croatia

Favorable feed-in tariffs in the region

HEP ODS bears the grid connection costs

Showed significant deployment of wind power plants in the last years

EU member legally binding RE target

Turkey

Favorable feed-in tariff legislation adopted

Priority grid access for RE power plants

Small scale power plants are exempt of power generation license

With specific targets Turkish Government shows commitment to RE expansion

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Challenging countries for investment in RE power generation No RE promotion scheme adopted

Not listed in the “Ease of Doing Business” indicator

Vertical integrated state owned energy market

No RE target

Turkmenistan

Project specific feed-in tariff

High “Risk premium on lending” and high “Dealing with Construction Permits” indicators

Despite complementary grid access, vertical integrated state owned energy market

No RE target

Tajikistan

Kyrgyzstan

No practical adoption of feed-in tariff legislation

High “Country Risk” and “Ease of Doing Business” indicator

Vertical integrated state owned energy market

No legally binding RE target

Uzbekistan

Project specific feed-in tariff

High “Country Risk” and “Dealing with Construction Permits” indicators

Despite priority access, vertical integrated state owned energy market

No RE target

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Conclusions Except of Turkey and Ukraine, only EU countries showed significant growth in RE deployment

- Adopted but not applied RE promotion- Subsidizing of traditional energy sources and electricity prices- Ongoing market liberalization- Complicated and cost intensive licensing - Unfamiliarity with RE investment

Positive Outlook

- Tremendous technical RE potential in the region

- Some countries already started tackling market barriers

- Growing demand for energy security in the region

- Increasing competitiveness of RES

- Some of the promotion schemes were recently adopted

- Decreasing cost of information

Thank you for your attention!

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Christoph S. HenrichSustainable Energy Consultant

Environment and Energy PracticeEurope & CIS Region

UNDP Bratislava Regional CentreEmail: christoph.henrich@undp.org