From pv magazine 05/2022
As the invasion of Ukraine continues, governments across Europe are seeking to sever ties to Russian energy. New renewables capacity is needed now more than ever.
A survey run by US renewables transaction infrastructure provider LevelTen showed that more than 30% of developers in Europe are doubling down on efforts in countries in which they are already present, while less than 9% are scaling back investment in light of the Russia-Ukraine war. However, proximity to the conflict acts as a deterrent for some.
“What we’re seeing is that some developers are a bit shy to do investments in the countries bordering Ukraine and Russia,” says Frederico Carita, developer services manager at LevelTen. “But some developers are saying business as usual – this depends on the risk profile of the company and the country itself.” The key is if developers are new to a region or not.
According to LevelTen, the war has sent European PPA prices sky-high. The Polish market was a particularly interesting one to watch due to its auction scheme, which allows developers to bid by volume and leave exposure to very high merchant and/or PPA prices. The latest auction in December allocated 870 MW of solar and the new year was off to a good start.
“Now, the photovoltaic sector in Poland is facing new challenges,” says Ewa Mageira, the president of the Polish Photovoltaic Association. “We are getting signals that suggest problems with timely implementation of projects. Many Ukrainians employed in the PV sector are returning to their homeland to take up arms.”
According to Mageira many auction winners are likely to miss the deadline for the first generation of energy from new installations. Fortunately, amendments are being negotiated to allow for an extension from 24 to 33 months, putting solar on par with wind installations. Renewables will see a boost from Russian sanctions, yet both Poland and Hungary are looking for ways to increase domestic coal-based power production.
Hungary restarts
Hungary has broken rank with the EU and rejected energy sanctions against Moscow. Good news, however, came in March that the nation’s energy regulator was seeking to procure around 864 GWh of renewables.
However, according to Hungarian renewable energy specialist Ferenc Kis, the response was tepid with only 20 projects submitted, down from over 200 bids in 2020 and 2021 and fivefold oversubscribed capacities. The trend of ever-decreasing prices was reversed.
“There are numerous reasons behind this, and I would be hesitant to relate them to the Ukrainian war,” Kis says. Instead, he points to this being the first auction in Hungary to require a battery storage component with a capacity at 10% of the planned power production unit. “At the same time, a more regulated and likely more transparent bid-bond scheme was introduced by the DSOs, and the first announcements of MW-scale corporate PPA contracts have signaled that the next chapter of the solar market is starting.”
In Hungary, the first merchant plant was recently commissioned by Netherlands-based Photon Energy. The developer already has plans for new merchant projects in its key European markets – Romania, Hungary, and Poland, and despite the war, business is proceeding.
“So far, we cannot see a direct impact on our work, however we can see that the recent increase in raw material prices is reflected in our investment cost, but this was already observed before the war,” says Martin Kysly, the company’s spokesperson.
Romanian optimism
In Romania, the war in Ukraine seems to have had little impact on the solar sector. “On the contrary, I would say the confidence of investors was slightly boosted as everyone has realized that Romania must invest in renewables as quickly as possible,” says Mihai Balan, executive director of the Romanian Photovoltaic Industry Association.
Balan notes that previous expectations for at least 3 GW of renewables to be added by 2026, with solar accounting for around 2 GW, now seem conservative. The reason behind such optimism is a combination of recent positive developments, including the removal of the ban on PPAs after almost 10 years, 1:1 quantitative compensation for prosumers with installations up to 200 kW, and the country’s first renewables tender for the deployment of 950 MW of capacity.
“We believe that more than 65% out of this capacity will come from solar, because of its shorter deployment time and given the obligation to have these projects connected to the grid by 2024,” Balan says.
In the meantime, nothing has changed in the field according to Balan, and the industry is on track to bring the first 100 MW of solar this year, which will include the first utility-scale PV projects in Romania in seven or eight years.
In early April, US power electronics manufacturer Enphase confirmed its plans to begin producing micro-inverters in Timisoara from the first quarter of 2023.
Supply concerns
Meanwhile, in neighboring Moldova, the appetite for solar continues to grow. In early April, the energy regulator launched an auction to deploy 230 MW of large-scale renewable energy projects, including 70 MW of solar.
“This time we saw a huge interest, especially in ground-mounted PV that was allocated within hours,” says Vitali Zveaghintev, the founder of Zaw Energy Srl. However, most developers in Moldova are looking to build solar outside of any support schemes.
According to Moldovan energy policy analyst Sergiu Tofilat, there are plenty of entrepreneurs in the country willing to invest in renewables, but their major concerns are not related to the war in Ukraine.
“Developers are more concerned about some legislative loopholes we have here. For instance, our TSO has issued approvals for more than 1 GW, which is more than Moldova’s peak consumption. Most of those who have received approvals do not plan to build any projects, but just want to resell them.” Zveaghintev confirms that the interest in renewables has increased on the back of the rising electricity and gas prices. But he also explains the troubles developers are facing, including the interrupted supply of metal support structures and high voltage equipment from Ukraine.
“The fact that no cargo ships are coming to the Black Sea is a big issue and all deliveries that we were getting via the Odessa port are now being directed over Greece, Holland, or Turkey by trucks. This is impacting not only us as EPCs, but also potential investors,” Zveaghintev says.
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