Investing in renewable energy projects in Europe Dentons’ Guide 2021

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Welcome

Dentons Europe is delighted to and other countries in our region, present the 2021 edition of our which are no less ambitious in Guide to investing in renewable their implementation of plans energy projects in Europe. Our and measures. We are also publication grows in stature every fortunate to be joined by leaders year, just as renewables become like BloombergNEF, WindEurope, ever more central to Europe’s SolarPower Europe, and energy mix, contributing to the Cummins Inc., who have all modernization and strengthening added so much to this Guide. of the economies in our region. Welcome to the 2021 edition of our With the global drive to a green Guide to investing in renewable recovery, renewables have gained energy projects in Europe. Let it even greater prominence be a small contribution to your as Europe’s leading example plans, whether you are deciding of balanced, yet sustainable on a new project or renewables development, in a world where investment, or are simply looking what matters is not only how to better understand where we are prosperous and rich we are, but also heading across Europe, towards how we can positively contribute a better, greener and economically to the wellbeing of present and viable future. future generations. Colleagues from more than Arkadiusz Krasnodębski 20 jurisdictions have prepared Head of Europe Energy group, a concise overview of renewables Dentons developments at various policy levels – the EU, member states

dentons.com • 3 Foreword

There is no doubt that 2020 was Union, the UK, Japan and South a testing year. The COVID-19 Korea are targeting to reach net pandemic has set off an zero emissions by 2050. unprecedented global health, In perhaps the single most economic and social crisis. important development in climate The record time in which the policy since the Paris Agreement, pharmaceutical industry developed 2020 also saw China commit to several vaccines is one of many peak emissions by 2030, and net highlights of human ingenuity on zero by 2060. The election of Joe display in this crisis, but it is clear Biden should bring the US back that the pandemic will affect our into the Paris Agreement, and the livelihoods throughout 2021 and Democrats’ majority position in both beyond. Yet, 2020 also brought Senate and Congress means that a string of good news, especially the country may be able to prepare for the world’s transition to a its own net zero pledge in time for low-carbon economy. Despite the COP26 in Glasgow at the end of delay of COP26, which will take this year. India, one of the largest place later this year, 2020 may and most active clean energy well go down as a watershed year markets globally, will certainly look for climate progress. to follow, bolstering Boris Johnson’s goal to make COP26 the “net zero Just a year ago, who would have COP.” What are the trends that thought that the vast majority emboldened governments to make of people walking our planet these pledges? Of course, there today may well live to see a are many, but here are a few that carbon-neutral world economy stand out. and the impact of human activity on climate reverse? That is the Clean technologies have continued promise made by governments their march forward, delivering across countries accounting for further cost declines, increasing nearly half of the world economy their performance, and entering as of the end of 2020. The European more markets. It looks like 2020

4 • dentons.com will deliver yet another record for green bond compared to its new wind and solar installations, standard issuance. The transition to which BloombergNEF expects a carbon-neutral economy is capital to reach 200 GW globally, far intensive, and the global investor surpassing any competing community is showing that it wants technologies. Lithium-ion battery to play its part. prices have gone down almost Investors’ and shareholders’ 90 percent over the last 10 years, expectations typically translate helping decrease the cost of into change in the strategies flexibility services in power grids, of the businesses they invest and of electric vehicles. We expect in. Corporate decarbonization EV sales to grow 28 percent over commitments have accelerated 2020, on the back of record growth throughout 2020. Purchase of clean in Europe, despite the crash of power set a new record at around the wider auto market during 18 GW of new capacity in 2020. the pandemic. 537 organizations pledged to join This progress on the technology the Task Force on Climate-related front is now increasingly being Financial Disclosures, and 55 made recognized by, and matched with, commitments to science-based commitments in the financial emissions reduction commitments community. Sustainable debt (as of December 2020). These issuance hit a new record in commitments are unprecedented, 2020, reaching US$732 billion and the months leading up to across bond and loan varieties Glasgow will bring even more. targeting environmental and social So, where do we go from here? investments. Investors are now If 2020 was the year the world came often ready to put a premium on together to agree that the interest sustainable products over others, of the planet, businesses, investors which was best highlighted by and civil society align, and that the lower interest rate offered to the technological challenges of Germany on its first-ever sovereign

dentons.com • 5 reaching net zero can be overcome, Deployment at this scale requires then 2021 must be the year where smooth infrastructure roll-out and we start focusing on execution, social acceptance. Yet, experience especially here in Europe. Without in recent years shows that such a step change in the deployment a consensus is often still missing of sustainable technologies and in key European markets, creating phasing-out of fossil fuel assets, increasingly slow and difficult the EU will miss its new development conditions for climate target of 55 percent projects on the ground. Delivering emissions reduction the systemic transformation that by 2030 against 1990 levels. Europe’s climate ambition calls This level of ambition means for can bring unprecedented that the transition needs to opportunity and accelerate the accelerate and spread to every recovery from the COVID-19 crisis. country and carbon-emitting But to be realized, the political industry in the region. promises must be matched with concrete action to ensure BNEF estimates that Europe needs sustainable investments to install between 566 GW and flow unhindered to the sectors 651 GW of renewables over the and communities where they next decade to reach its climate are needed the most. goals, depending on the role taken by electrification. This is Dario Traum about three times more than what Head of Energy Transitions, was installed in the last decade. BloombergNEF

6 • dentons.com Renewable energy investment, including asset finance and small distributed capacity investment Source: BloombergNEF

US$ billion

Azerbaijan Belgium Czech Republic France Georgia Germany Hungary

Ireland Italy Kazakhstan Luxembourg Netherlands Poland Romania

Russian Federation Slovakia Spain Turkey Ukraine United Kingdom Uzbekistan

dentons.com • 7 Wind industry can power Europe’s green recovery

2020 was anything but safety protocols. With reduced business as usual. Europe took electricity demand and less thermal unprecedented measures to generation, wind covered 17 percent counter the COVID-19 health of Europe’s electricity demand in the crisis that affected all areas of first half of 2020 (it met 24 percent the economy. of demand in February 2020, before COVID-19 kicked in). In the first half of the year, the wind industry supply chain experienced For project financing, the economic major disruptions, particularly fallout resulting from COVID-19 on the manufacturing side. New increased costs of debt in the short obstacles to the free movement term and triggered strains in debt of people and goods impacted liquidity in the lower-rated states operation and maintenance in Eastern and Southern Europe. services and the construction Despite this, the first semester of of onshore and offshore wind in 2020 saw a record €14.3 billion Europe. And electricity demand in raised for the financing of new wind most European countries dropped farms. This is a clear signal: Wind is by as much as 25 percent during the right bet to build back better. the worst period (mid-March Corporate renewable electricity to mid-May), resulting in lower sourcing in Europe also showed electricity prices. continuous growth in 2020, with cumulative contracted volume But the European wind energy of corporate renewable power sector proved resilient: Turbines purchase agreements (PPAs) produced a record amount of growing by almost 50 percent. electricity, governments held auctions, and the industry With its Green Deal, the EU aims to continued to build new wind become climate neutral by 2050. farms applying strict health and It wants wind to account for half of

8 • dentons.com Europe’s electricity by 2050, which The Commission’s guidance entails a huge expansion in onshore on RRPs identifies renewable and offshore wind between now energy as a priority for the RRPs, and then. Investing in wind energy including the building and sector will not only help Europe reach its integration of 200 GW of renewable climate goals, it will be central to its energy capacity by 2030 and the economic recovery. installation of 6 GW of electrolyzer capacity and the production and Wind already employs 300,000 transportation of 1 million metric people across Europe, contributes tons of renewable hydrogen across €37 billion to EU GDP and pays the EU by 2025. €5 billion in taxes each year, supporting local populations We at WindEurope want to see and community projects. Each funding for grids, ports for offshore new turbine installed in Europe wind, renewable hydrogen generates on average €10 million infrastructure and R&I. And, of economic activity. This covers crucially, we need to see more the manufacturing of turbines funding for revenue stabilization and components in 248 factories mechanisms and the de-risking of across Europe, as well as planning, projects by public investment banks construction, logistics, operations like the European Investment Bank. and maintenance, and R&D If European governments fully activities. Expanding wind energy implement their National Energy will also help Europe strengthen and Climate Plans, improving their its global leadership in wind: current approach to permitting and Five of the world’s top 10 turbine making the most out of the EU’s manufacturers are headquartered recovery strategy, the EU will have in the EU. 392 GW of wind capacity by 2030, To access the €673 billion Recovery up from 192 GW today. That would and Resilience Facility (RRF) increase jobs from 300,000 to at the heart of the EU’s €750 billion 450,000. This is an opportunity recovery plan (“NextGenerationEU”), we simply cannot miss. each member state must draft Giles Dickson a recovery and resilience plan (RRP) CEO, WindEurope that specifies how their national envelope will be spent. Each RRP must allocate at least 37 percent of funding to climate-related spending.

dentons.com • 9 EU solar: a strong 2020, but potential still untapped

Solar PV power in the EU has shown markets accounted for 74 percent strong resilience in 2020 despite of new capacity – 5 percentage COVID-19. EU member states points lower than in 2019, so that installed 18.2 GW of solar power the contribution of the other capacity in 2020, 11 percent more 22 EU member states, though still than in the previous year. This was relatively small, is rising noticeably. approximately 12 percent less than All this has contributed to the EU we forecast in our previous EU increasing its cumulative installed Market Outlook, but significantly solar power capacity by 15 percent higher than we estimated in an to 137.2 GW by the end of 2020. adjusted post-outbreak forecast in Looking ahead, we anticipate that late spring, when we thought solar the surprisingly positive 2020 for demand in the EU would shrink. the EU solar sector will be followed Instead, 2020 was the second-best by four years of even stronger year ever for solar in the EU (beaten demand. Our medium-scenario now only by 2011, when 21.4 GW was forecasts additions of 22.4 GW in installed). 2021, 5 percent higher than forecast Our latest (December 2020) last year. For the following two “EU Market Outlook for Solar Power” years, we are even more upbeat, (EMO) shows Germany was once now projecting 27.4 GW in 2022 and again the largest solar market in 30.8 GW in 2023, translating into Europe, installing 4.8 GW. It was 15 percent and 18 percent higher followed by the Netherlands deployment than in our EMO 2019. (2.8 GW); last year’s market leader And in 2024, SolarPower Europe Spain (2.6 GW); Poland, which sees demand cross the 35 GW level, more than doubled annual solar bringing total installed solar PV deployment (2.2 GW); and France capacity to 253 GW. (0.9 GW). These top five solar

10 • dentons.com There are many reasons for solar’s obstacles in the way of solar that recent positive developments make investments much more and optimistic outlook in the EU, difficult, and thus slow down not least its unique versatility long-term growth. This is not the and constantly improving cost way forward if we want to achieve leadership, and policy support climate neutrality by 2050. As we in Brussels and several other have shown for Paris Agreement- member state capitals, which have compatible scenarios modeled created the right market framework in our recent ”100% Renewable conditions for solar’s many possible Europe” report, the volume of solar applications. The crucial topics that the EU must install is at least under discussion to speed up two and a half times higher than the solar growth include ambitions expected NECPs totals by 2030. for the Clean Energy Package 2.0, A close look at the cumulative tackling the gap on carbon pricing, installed capacity reveals that initiatives to tap Europe’s gigantic COVID-19 impacts will delay market rooftop solar potential, and power growth by two years. As it stands grid constraints. All these and now, it will take until 2022 before more are addressed in our total installed solar power capacities EMO 2020-2024. will reach the level we forecast in However, commitment to solar at our EMO 2019. EU member state level must remain To enable Europe’s citizens, a high priority. While most member corporates, and financing states are increasingly seeing total institutions to embrace the solar capacities grow and have lowest-cost and most versatile acknowledged solar in their National power generation technology even Energy and Climate Plans (NECPs) more enthusiastically, member to meet 2030 EU targets, most of states must provide optimal policy these deployment levels are still frameworks for solar to continue to not ambitious enough. The average surprise so positively in the future. 19.8 GW per year solar growth projected in the NECPs for the next Walburga Hemetsberger decade is close to the volume the CEO, SolarPower Europe EU installed during its most severe economic crisis. Moreover, we are seeing market leaders, such as Germany, putting regulatory

dentons.com • 11 Hydrogen: an opportunity for European renewables

The potential for hydrogen Arabia are taking strategic steps produced by low-carbon electricity to encourage not only the use to provide a source of clean of hydrogen but its large-scale energy is massive. It extends from production from renewable transport (trucks, buses and trains, electricity, with a view to export and, in combination with other as well as domestic use. elements, ships and planes) to The opportunity for hydrogen a range of manufacturing industries in Europe is to capitalize on (refineries, production of ammonia the fact that all the ingredients and other basic chemicals, steel, for success are in place: glass and cement manufacture), a supportive policy environment and from storing intermittent and the availability of financial low-carbon electricity to using support from EU and national hydrogen for heating in residential governments; concentrations and commercial settings. Experts of potential industrial users with disagree on which applications strong incentives to decarbonize of hydrogen are likely to be their operations; the presence most important (and the speed of developers of hydrogen at which the costs of the different technology with the potential technologies involved are likely to be leaders in global markets, to decline), but few deny that including in hydrogen production it will play a key role in the (such as electrolyzers) and energy transition. utilization (such as fuel cells); and The development of a hydrogen the availability of infrastructure economy is already widely and related expertise that can be supported, not just in the EU but deployed to connect supply and globally. Governments from Chile demand for hydrogen, both within to Canada and Australia to Saudi Europe (using pipelines) and over

12 • dentons.com longer distances (using ships). step to be taken to scale up production and use from the MW The challenge for hydrogen in to the GW level. In this context Europe is threefold. First, we must hydrogen “clusters” or “valleys,” consider if hydrogen is the right perhaps centered on areas where solution. Hydrogen fuel cell-based there is existing demand for power options often come into hydrogen (currently supplied from their own with heavy weights, high-carbon sources), and the high power requirements, and potential Hydrogen for Climate long-range needs. Freight vehicles, Action Important Projects of for instance, place a premium Common European Interest (Green on carrying capacity and range, Flamingo, Blue Danube, etc.) will where fuel cells can deliver a power play a crucial role. Third, Europe’s density that batteries cannot. hydrogen technology providers Rail applications, too, are a very and potential hydrogen producers promising area, as hydrogen can (including renewable electricity decarbonize lines without requiring generators) will have to hold their expensive construction to electrify own against stiff global competition. them with overhead power lines. For other applications, battery On some estimates, the European electric or clean diesel may market for hydrogen will grow to be the best solution. At more than seven times its current Cummins Inc., we see these size by 2050. Putting the European solutions as complementary. Hydrogen strategy into action As a business working on would need investments of around developing and manufacturing €180 billion to €470 billion and the clean diesel, battery electric European Clean Hydrogen Alliance and hydrogen technology, has been created specifically to we understand that different identify and build up a clear pipeline circumstances simply require of viable investment projects. different solutions. Second, as with The stakes are high, and the size renewable electricity, scale will of the potential prize is huge. drive cost reductions. At present, Denis Thomas almost all of the potential uses of Global Business Development hydrogen have been successfully Leader – Electrolyzers, demonstrated, but there is a major Cummins Inc.

dentons.com • 13 EU regulatory overview

In 2020, the European Commission signs so far are encouraging, started to flesh out the broad if momentum is maintained. outlines of the European Green Deal (EGD) that were first presented RES and climate targets in December 2019. Against the The European Commission’s latest backdrop of the EU’s response to analysis predicts that the EU will the COVID-19 pandemic, the EGD slightly exceed the 20 percent has acquired additional importance. RES by 2020 target set under the The clean energy sector is clearly 2009 Renewables Directive (RED). intended to be a major priority for If all member states successfully the EU’s 2021-2027 budget and to implement their National Energy benefit from some of the additional and Climate Plans submitted under financial firepower available to the 2018 Governance Regulation, EU institutions in the form of the RES should slightly exceed the €750 billion NextGenerationEU 32 percent RES by 2030 target set fund and its Recovery and in the 2018 Renewables Directive Resilience Facility. The scale of (RED II). However, the RED II target the challenge remains huge: does not yet reflect the deeper to put the EU on track to reach reductions in EU greenhouse gas “climate neutrality” by 2050, and emissions (GGE) by 2030 that in the meantime to set credible are now proposed as part of the interim targets for 2030 and EGD. If the Governance Regulation regulatory frameworks that will is amended to require a GGE make them achievable. At the reduction of 55 percent, rather than level of EU policy development, in the existing target of 40 percent particular as regards energy from by 2030, a 2030 RES target of renewable energy sources (RES) 38-40 percent will be required, and and key adjacent policy areas, the the percentage annual RES shares

14 • dentons.com of electricity generation will need to RES electricity generating capacity double, from their current level and associated infrastructure will in (low 30s) to the mid-60s. itself provide employment and other benefits, the fact that EU levels It remains to be seen how far the of private and public investment EU will attempt to achieve these in clean energy R&I activity are increases by raising carbon prices lower than those of other major through the further expansion and economies (including the US, Japan, reform of the EU Emissions Trading China and Korea) gives cause for System, and how far by other concern that Europe risks missing means. The case for sharper carbon out on the manufacturing sector pricing (perhaps rising to at least benefits of green growth. double current EU allowance (EUA) prices of €30 per metric ton) is One area that the European reinforced by the fact that as the Commission has marked out for COVID-19 pandemic took hold coordinated RES-specific regulatory of Europe, the monthly share of action is offshore renewables EU electricity generation from (including, but not limited to wind, renewable energy sources (RES) wave and tidal energy). Not entirely reached its highest level yet: coincidentally, this is an area in 42 percent in March 2020, against which the EU still has an edge in 31 percent from fossil fuel sources, manufacturing, with a much higher as relatively high carbon prices proportion of equipment in offshore (and falling demand) helped to projects than other categories of counterbalance relatively low RES projects being made in the fossil fuel costs. EU. In November 2020, the European Commission published Strategic considerations a strategy for increasing offshore renewable capacity from 12 GW The pandemic has, of course, today to 61 GW in 2030 and elevated the importance of the 340 GW in 2050. (Projected EGD. A key element in the von der increases in onshore wind and Leyen Commission’s mission from solar capacity over the same the outset, its role in promoting timescales are on a similar or EU economic growth is now critical. larger scale in absolute terms, but Here, the European Commission’s represent a much less dramatic analysis is less reassuring. Whilst the increase on the current levels of deployment of vast amounts of new deployment in proportional terms.)

dentons.com • 15 Renewable energy investment, 2016-2020 Source: BloombergNEF

US$ billion

Biofuels Biomass and waste Geothermal Small hydro Solar Wind

16 • dentons.com Installed capacity, 2019 Source: BloombergNEF

Biomass and waste Coal Gas Geothermal Hydro Hydro-Pumped Nuclear

Oil Other PV - Small-scale PV - Utility-scale Solar - Thermal Wind - Offshore Wind - Onshore

dentons.com • 17 It will require systematic use of congestion income) and taking of marine spatial planning account of the support needs of frameworks, including offshore projects in the forthcoming cross-border collaboration, to updating of the 2014 Guidelines develop the sector in a way that on State aid for environmental is both efficient and takes full protection and energy. account of environmental RES are also at the heart of one of sensitivities and other uses of the key EGD strategy documents, the sea. At the same time, the the Commission’s July 2020 European Commission has Communication on an EU Strategy proposed steps towards the for Energy System Integration (ESI). development of a “meshed” Although the starting point of the offshore grid (replacing the current ESI Strategy is energy efficiency “point to point” transmission and the “circular” use of waste infrastructure connecting individual (including waste heat), it then goes generators to national transmission on to emphasize the importance systems, which are then separately of electrifying energy demand connected by interconnectors). that cannot be eliminated or met This would begin with “hybrid” in these ways, using renewable projects that combine export cables electricity, as well as the use from offshore generators with of “renewable gases and liquids interconnection capacity. Revisions produced from biomass, to the Trans-European Energy or renewable and low-carbon Networks (TEN-E) Regulation; hydrogen,” both as energy creation of new “offshore bidding storage vectors and as means of zones” in the context of the decarbonizing applications that market-coupling regime; measures cannot readily be electrified. to facilitate anticipatory investment by TSOs; and Commission guidance The ESI Strategy highlights on sharing the costs and benefits a number of RES electricity-related of hybrid projects, are all planned areas possibly to be addressed to help to drive this agenda forward by the revision of RED II during over the next few years. Also on 2021. These include: introducing the agenda are clarifications and mandatory green public amendments to avoid hybrid procurement criteria; tackling projects being disadvantaged by remaining barriers to high levels of the existing internal electricity RES electricity in power systems; market rules (for example, on use and introducing more specific

18 • dentons.com measures for the use of RES aid guidelines is also mentioned electricity in transport and heat and in this context, as are possible cooling in buildings and industry. reforms to the EU gas These will come alongside possible regulatory framework. revisions to the EU Alternative Finally, alongside and Fuels Infrastructure Directive and complementing the ESI Strategy, investment support for the roll-out the European Commission has of 1 million EV charging points in issued its hydrogen strategy. This the EU by 2030, and revisions of the shows the EU’s determination to EU Energy Efficiency Directive and make exploiting the potential of EU Industrial Emissions Directive. low-carbon hydrogen a major A Network Code on Demand-Side plank of its future energy, climate, Flexibility is also proposed to unlock transport and industrial policies, the potential of “active consumers” which will inevitably have strong of electricity and to support links to future EU and national a renewables-heavy grid. renewables policies. We consider Various regulatory initiatives to the hydrogen strategy and the support “green” gases and other future EU hydrogen economy forms of renewable fuel are also further in the section below. contemplated in the ESI Strategy. These include the revision of the EU Energy Taxation Directive to align the taxation of energy better with the EU environment and climate policies, ensure harmonized taxation of storage and hydrogen production (avoiding double taxation), and work “towards the phasing-out of direct fossil fuel subsidies.” The update of the state

dentons.com • 19 Hydrogen in the EU: policy overview

Low-carbon hydrogen has a key part extra operational optimization options to play in the EU’s net zero future. In and lower curtailment risk. 2020 it started to be fully integrated A key challenge is to scale up into policy-making. Creating an production of low-carbon hydrogen entire new industry in a relatively and reduce the costs of producing short timescale is a major challenge it, whether by electrolysis of water but also a massive opportunity, (green hydrogen), or (for those particularly for the European content to produce low-carbon RES electricity sector. hydrogen using fossil fuels) by reforming natural gas with carbon A silver bullet? capture, usage and storage of

Hydrogen is increasingly seen as an the waste CO2 (blue hydrogen). essential component of the toolkit Although low-carbon hydrogen that will be required to achieve a net has much to offer both the RES zero economy in 2050. If produced and oil and gas sectors in terms by low-carbon means, it offers of value extension, for at least the the convenience of hydrocarbons next decade, and probably longer, without their greenhouse gas its production will require some emissions. Producing it from form of regulated financial support electricity allows energy to be stored in order to be economically viable. on a scale and over time periods Some industrial users will also need that battery technologies struggle support for converting their plants to to accommodate at present. It could use hydrogen. help decarbonize large parts of the economy, including heavy transport, EU and national strategies aviation, space heating and carbon- In pursuit of its targets of 6 GW intensive industrial processes. It could of electrolyzer capacity by 2024 give a renewables-heavy power grid and 40 GW by 2030, the EU’s

20 • dentons.com hydrogen strategy identifies several sees the potential to convert its key areas for action at EU level: strength in natural gas production channeling investment in both R&I into a role as a major source of and commercialization projects blue hydrogen. (including through the European Clean Hydrogen Alliance); boosting Projects demand for low-carbon hydrogen There are significant policy issues (including by developing common to be resolved in developing standards for its production, and these strategies, but government setting up a pilot scheme for carbon and regulatory activity around Contracts for Difference to support low-carbon hydrogen has been its use in industrial context); adapting matched by practical plans on the natural gas infrastructure and the part of a range of industries to scope existing gas regulatory framework for out hydrogen projects – even if hydrogen purposes; and exploring some are still relatively small scale international cooperation with and many are predicated on the potential sources of green hydrogen availability of regulated support. outside the EU (up to another Examples include well-developed 40 GW of capacity outside the EU plans for clusters around ports on the is envisaged as potentially supplying Dutch and British sides of the North EU users by 2030). Sea incorporating blue and green The multi-GW ambitions and broad hydrogen elements; gas network scope of the EU strategy are matched operators proposing a “European by those of a number of member hydrogen backbone;” and numerous states. The German government has plans for individual industrial sites, allocated €9 billion of a €130 billion often using offshore wind power to economic stimulus package to the produce hydrogen. hydrogen sector and its strategy sets out 38 measures to be taken forward in the next three years alone. France, Spain and others have also published substantial strategies. Beyond the EU, the UK aims for 5 GW of production capacity and a “hydrogen town” by 2030 and is working on regulated support frameworks for blue and green hydrogen, while Russia clearly

dentons.com • 21 Azerbaijan

Azerbaijan’s economy has long been dominated by the oil and gas sector, a trend that will certainly continue in the near term. However, new laws and model agreements have now been prepared which, for the first time, will provide a clear framework for RES in Azerbaijan. Significant new wind and solar projects are in advanced stages of negotiation with foreign companies, and there are ambitions to expand the development of RES as part of a broader program of infrastructure renewal.

Share of renewable energy in electricity generation capacity in 2020 – 17 percent* (estimate) Azerbaijan national target by 2021 – 22 percent* Share of electricity generated from renewable sources in the total production of electricity in 2019 – 1.7 percent*

Drivers guaranteed tariffs, rebates on buyers’ obligations, foreign investment and The long-awaited draft Law of other support mechanisms, such Azerbaijan “On the Use of Renewable as scientific research. In addition Energy Sources in the Production to a guarantee on protection of the of Electricity,” is under final review investment and certain tax incentives by the presidential administration. for seven years under existing It will address taxes and duties, legislation, incentives proposed for

* Figures from Azerbaijan’s Ministry of Energy and State Statistical Committee

22 • dentons.com investors in RES projects in Azerbaijan As part of a broader infrastructure include guaranteed offtake (under development effort in the a take or pay contractual regime), aftermath of the recent hostilities guaranteed connection, priority in in Nagorno-Karabakh, it has been dispatching, long-term land leases reported that eight areas with high and the possibility to index payments solar energy potential are being to foreign currency. Draft model evaluated in the Kalbajar, Lachin, contracts, including forms of a power Gubadli, Zangilan, Jabrayil, Fuzuli purchase agreement, connection regions, together with potential wind agreement and state guarantee, have energy resources in the Kelbajar also been prepared and are under and Lachin regions. consideration. In the near future The Ministry of Energy of Azerbaijan rules for holding renewable energy currently estimates a potential RES auctions and on a net metering and capacity of 3,000 MW for wind, calculation scheme will be published. 23,040 MW for solar, 380 MW for The government has also started biomass and 520 MW for small preparing a “Road map on the hydropower. It is a strategic priority of development of the use of the Azerbaijan to significantly increase its offshore wind industry in Azerbaijan.” wind and solar energy capabilities in The World Bank has already estimated the coming years. that the country has the potential for tens of GW of offshore wind power Constraints and risk factors (in particular, floating units). The protracted time schedule for the A number of projects have moved preparation and implementation of forward, including a 240 MW onshore draft laws and model agreements wind project involving ACWA Power relating to RES in Azerbaijan has (for which a PPA, TCA and investment delayed the development of agreement were signed on significant projects and has hindered December 30, 2020), a 200 MW solar the overall development of the project involving Masdar, and a pilot sector. Once the necessary legal project to install solar panels on and regulatory framework is in place, Lake Boyukshor. A number of other particular challenges include the international energy companies have competitiveness of tariffs, issues with signed memoranda of understanding technology transfer and a lack of (and similar) with the Ministry of available financing, particularly in the Energy of Azerbaijan on a range of current low oil price environment. renewable energy issues.

dentons.com • 23 Belgium

Energy policy in Belgium is set both at the federal and regional level. While all policy levels acknowledge and remain committed to the stated RES objectives, Belgium has not been able to meet its 2020 goals and it is currently unclear how it intends to meet its objectives after 2025.

Share of renewable energy in gross final energy consumption in 2019 – 9.9 percent Belgium national target by 2020 – 13 percent, with a long-term goal of 17.5 percent by 2030

Drivers systems of tradable renewable energy certificates in all three regions The largest component of RES (Brussels, Flanders and Wallonia). in Belgian energy generation is The federal government’s hydropower (nearly 50 percent), competence covers matters related followed by thermal energy to energy supply, nuclear plants, (biomass), wind, solar and others. offshore wind farms and large energy The first offshore wind zones were infrastructure projects. commissioned in 2020 (three new offshore wind farms: Mermaid, One notable and encouraging Seastar, Northwestern II), bumping trend of 2020 has been a number Belgium’s wind capacity up to of substantial new corporate almost 2.3 GW. PPAs involving offshore wind farms and offtakers in the Belgian The regulatory framework remains chemicals industry. largely unchanged, including the

24 • dentons.com Constraints and risk factors feasibility study, steps are now being taken to allow for the construction of Belgium failed to meet its 2020 the plant, which will use electrolysis objective of 13 percent, ending up to convert surplus renewable energy at 11.7 percent instead, with the into green hydrogen. The project Flemish region generating the largest will be rolled out by 2022 and the shortfall. Belgium had previously set plant is currently scheduled to go its combined renewable energy target operational by 2025. The parties at 17.5 percent by 2030. Following the financing the project will include the determination that Belgium would Flemish regional investment agency, fall short of its 2020 target, it was a major Belgian dredging company concluded that this was mainly due to and one or more private investors, structural underinvestment by private who are currently being selected by parties in the RES sector. the consortium. In order to achieve its long-term objectives, recent studies point out Response to the that Belgium requires at least an COVID-19 crisis additional 2.3 GW in onshore wind While contingency plans have been capacity and 2.4 GW in solar capacity implemented in Belgium to guarantee between 2019 and 2023, as well the availability of production, as the construction of four or five the period has witnessed an new gas-fired power plants (providing exceptional drop in wholesale prices. in sum 3.85 GW) if its remaining Given commitments to renewables, operational nuclear power plants the COVID-19 crisis is not expected close, as currently intended, by 2025. to cause a downturn in RES The closure of the nuclear power investments in Belgium. plants is subject to ongoing political debate and is expected to remain on the political agenda in 2021.

Hydrogen trends In early 2020, seven major Belgian industrial entities and public stakeholders formed a consortium to construct and operate a green hydrogen plant in Ostend harbor. Following the completion of an initial

dentons.com • 25 Czech Republic

In the first half of 2020, solar PV capacity increased by 23 MW in the Czech Republic, with at least 2,000 MW more to be built before 2030, according to the recent National Energy and Climate Plan. The proposed Modernization Fund could be one of the key drivers of public funding of RES in the next few years.

Share of renewable energy in gross final energy consumption in 2019 – 16.2 percent Czech Republic national target by 2020 – 13 percent, with a long-term goal of 22 percent by 2030

While the Czech Republic has been Drivers ahead of its 2020 RES share target, The Ministry of the Environment of approximately CZK 650 billion the Czech Republic prepared a new (€24.48 billion) of investment is Program Document under the EU needed to attain the overall goals Modernization Fund aiming to use in power generation between resources from the sale of emission 2021-2030, including at least allowances to subsidize projects CZK 33 billion (€1.26 billion) of through nine programs, which RES public subsidies for small will focus in the first wave on local installations (biomass, solar, the development of new heat and wind). Dominating non-fueled RES, modernization RES are biogas (27.7 percent), of heat supply networks, improved solar (24.9 percent) and energy efficiency and reduction biomass (22.5 percent). of industrial greenhouse gases in

26 • dentons.com the EU ETS installations. consumption. So far, it does not The goal is to support the include support for hydrogen development of RES projects projects. in brownfield and industrially The amendment also deals with the polluted sites. issue of overcompensation, especially The Ministry of the Environment for RES projects commissioned has already launched a preliminary before 2016. The appropriateness registration of projects and hopes to of subsidies will be evaluated by get final government approval of the reference to the internal rate of return Program Document by mid-2021. of investment in RES (6.3 percent for If approved, up to CZK 150 billion solar, 9.5 percent for biomass, (€5.72 billion) will be made available 10.6 percent for biogas and to public and private investors, 7.0 percent for hydro, wind and with at least CZK 59 billion geothermal). To determine the (€2.25 billion) allocated to RES. internal rate of return, the Ministry However, the final amount of available of Industry and Trade of the Czech funds will depend on multiple factors, Republic will review performance including the fluctuation of emission at sectoral and, in some cases, allowance prices. individual project level, potentially resulting in adjustment of subsidy Constraints and risk factors levels or in some cases an obligation to reimburse the subsidy received. Following consultations, the government redrafted its proposed Parliament is expected to approve the amendment to the Act no. 165/2012 amendment in the first half of 2021. Coll., the Promoted Energy Sources Act, as amended, which introduces new types of incentives for RES such as (i) a subsidy for the use of biomethane in transport, (ii) auctions for annual or hourly bonuses, and (iii) green bonuses based on own

dentons.com • 27 France

France is seeing steady growth in renewables. In 2020, RES installed capacity reached 55.3 GW, of which 46.5 percent is hydro. 2.4 GW of RES installations were connected to the grid in 2020 (+4.5 percent), with a significant slowdown due to the COVID-19 outbreak.

Share of renewable energy in gross final energy consumption in 2019 – 17.2 percent France national target by 2020 – 23 percent, with a long-term goal of 33 percent by 2030

Drivers and support the production of decarbonized hydrogen. In 2020, the government of France announced a national strategy for The final version of the Multiannual the development of decarbonized Energy Program (MEP) was issued hydrogen. Calls for projects are in 2020, setting objectives for the currently ongoing in relation to growth of renewables on a 10-year the hydrogen supply chain and scale. On this basis, competitive hydrogen use in transport. The procedures launched by the French selected projects will be entitled to state to grant feed-in tariffs or public support. The government Contracts for Difference keep going. is also drafting an ordinance to The average tariff is €59.7/MWh regulate the hydrogen sector, setting for onshore wind energy, and up a mechanism to guarantee €57.4/MWh for ground and traceability or origin of hydrogen, roof-based photovoltaic solar power.

28 • dentons.com As of today, the rate of attainment is obliged to sell up to 100 TWh of of the MEP 2023 targets is more than “historic” nuclear electricity per year 99 percent for hydro, 71 percent to other suppliers. However, since for onshore wind and 50 percent demand exceeds this ceiling every for solar. year, EDF could be obliged to sell the entirety of this electricity in the future. Subsidy-free projects are developing. Finally, decisions are expected on the France has not yet reached possible construction of new nuclear a corporate PPAs “golden age,” but plants, and extending the operational at least a dozen big corporate PPAs life of some “historic” generators. were signed in 2019-2020. The railway company SNCF has notably secured Response to the a 260 GWh annual supply of solar COVID-19 crisis electricity through corporate PPAs. The first three quarters of 2020 Constraints and risk factors were marked by a sharp slowdown in the number of grid connections. The litigation risk against RES projects Nineteen percent fewer onshore wind is still high in France, but several farms were connected to the grid measures have been enacted to than during the same period in 2019. speed up the processes. Notably, However, lots of projects are currently administrative courts of appeal under appraisal. are now the first resort jurisdiction in litigation relating to onshore Lockdown led to an average drop wind farms. in daily electricity consumption of up to 15-20 percent. In this context, In 2021, major reforms are underway alternative electricity suppliers had with respect to the nuclear sector no interest purchasing nuclear and in a context where nuclear electricity from EDF, and argued the electricity is still predominant, they pandemic was a force majeure event will surely have an impact on RES enabling them to suspend the ARENH too. First, the energy group EDF will contract. Disputes arose, with the be reorganized in order to separate courts agreeing the pandemic was its monopolistic activities—mainly a force majeure event. In retaliation, production from nuclear—from EDF terminated the contracts. its competitive ones. Second, the purchase conditions of nuclear electricity will be amended. Under the current scheme (called “ARENH”), EDF

dentons.com • 29 Georgia

Georgia’s electricity market reforms are following the timeline envisaged in its Energy Community Accession Protocol. The energy market will undergo significant changes from July 2021, improving the environment for potential investors to capitalize on the untapped potential from hydro, wind, solar, geothermal and biomass sources.

Georgia aims to increase the share of renewable energy in total energy consumption from 29.5 percent (2019 data) to 35 percent by 2030. The share of wind and solar power plants for 2030 is targeted to hit 18 percent.

Drivers of RES projects. In April 2020, the government approved the Among renewables, the Georgian “Concept Design of the Electricity government’s focus and priorities Market” as the guidelines for future have moved from hydropower liberalization. It outlines measures plants (HPPs), the most established such as free choice of supply technology, towards wind and solar, for consumers and competitive partly in order to reduce reliance on price formation, and places public imported electricity during periods service obligations on some market when HPPs generate less power. participants that are intended to The ongoing reforms to the benefit RES projects. regulation of the electricity sector In July-August 2020, the electricity should facilitate the development regulator adopted new rules for

30 • dentons.com day-ahead and intraday markets, new generation capacity and address balancing and ancillary services, the geographical mismatch between and unbundling of distribution the country’s renewable generation system operators. The day-ahead resources and areas of greatest market will start operating and an electricity consumption. EBRD is imbalance settlement mechanism also making a €217 million loan to will be introduced in July 2021. The refinance the GOGC (Georgian Oil full launch of the intraday market and and Gas Corporation) corporate ancillary services market is scheduled Eurobond following the COVID-19 for 2022. crisis, as part of which EBRD will assess the costs of generating In July 2020, the government hydrogen from Georgia’s abundant adopted a new support mechanism hydro resources and transporting for HPPs with capacity of more it through the nation’s existing gas than 5 MW. During the first 10 years pipe network. of operation, for each September-April period, the Constraints and risk factors Electricity Market Operator (ESCO) will assist HPP operators with market The biggest challenge to generation risk insurance. If the market price for from wind and solar sources is any hour falls below US 5.5 cents integration into the national grid. per kWh, ESCO will cover the By 2025, considering certain difference between the market assumptions, restrictions and price and this minimum price, up to requirements, it will be possible to a maximum of US 1.5 cents per kWh. integrate approximately 665 MW of wind and 260 MW of solar-generated The RES sector in Georgia continues power (50 percent of the potential). to receive steady support from The conductivity of high-voltage international organizations. In power transmission lines to enable July 2020, the European Bank for the export of excess capacity and Reconstruction and Development imports to cover deficits remains agreed to lend €90 million for a challenge. a project to strengthen and improve Georgia’s electricity transmission system (co-funded by Germany’s KfW). A combination of new lines and reinforcement of existing infrastructure should enhance the resilience of the network to deal with

dentons.com • 31 Germany

The share of renewables in the German power mix continued to increase in 2020, reaching approximately 50 percent. To cut its greenhouse gases, Germany decided to initiate a fundamental reshaping of its overall industrial sector. In June 2020, the National Hydrogen Strategy (Nationale Wasserstoffstrategie) was passed, providing for a ramp-up of the hydrogen industry with a particular focus on green hydrogen. Detailed legislation is expected. The Coal Phase-Out Act passed in July 2020 aims at future-oriented sustainable conversion of efficient coal-fired plants, and the ramp-down of less efficient older ones. Parts of the Renewables Energies Act (EEG) were reformed.

Share of renewable energy in gross final energy consumption in 2019 – 17.4 percent Germany national target by 2020 – 18 percent, with a long-term goal of 30 percent by 2030

RES capacity expanded by around 6.07 Ct/kWh for onshore wind and 6.5 GW in 2020, mainly driven by 5.01 Ct/kWh for solar PV. Large-scale 5 GW of solar PV, very low 0.2 GW subsidy-free (merchant) solar of offshore wind and 1.2 GW of PV projects are now appearing. onshore wind. Average remuneration PPA structures are still at a very following RES auctions in 2020 was early stage.

32 • dentons.com Drivers Constraints and risk factors Germany’s energy transition is built • Slow implementation of around the phase-out of nuclear by grid expansion to safeguard 2020 and of coal-fired power by 2038 grid stability. at the latest, alongside continued • Lengthy permitting process. promotion of RES electricity, and energy efficiency. • Lack of charging infrastructure is a fundamental obstacle to the This is now supplemented by the expansion of e-mobility. National Hydrogen Strategy, which aims to create 5 GW of electrolyzer Response to the capacity by 2030 and an additional COVID-19 crisis 5 GW later on. The strategy’s action plan sets out 38 measures for the As part of the COVID-19 emergency first phase from 2020 to 2023. This measures, parliament amended will lead to increased demand for the EEG in May and June 2020. energy produced from RES, with New provisions remove the cap for a strong emphasis on offshore wind. solar PV subsidies, which would The framework conditions have been have ended subsidies for smaller improved: the target for the build- scale solar PV installations once the out of offshore wind by 2030 was national installed capacity exceeded raised from 15 to 20 GW; by 2040 52 GW. By removing the cap, solar a total of 40 GW is to be installed. PV systems up to 750 kWp continue For onshore wind, the distance rule to benefit from the subsidies under (1,000 meters to the next urban area) the EEG. Further, to mitigate a steady does not bindingly apply throughout increase of the EEG surcharge Germany but is subject to federal (by which the compensation for RES state legislation that may provide for generation operators is levied on top shorter distances; preferred building of the power price), the surcharge will areas will increase. be partly covered by funds from the CO pricing regime, which will come With the federal government aiming 2 into effect in 2021. for 65 percent of electricity to be supplied from RES in 2030, and the RES support auction system for new projects now well established, Germany should continue to be an attractive market for investments in renewables.

dentons.com • 33 Hungary

In 2020, Hungary adopted key legislation, strategies and action plans to achieve its climate objectives. Numerous calls for innovative pilot projects are currently in place to support investments in clean, efficient energy solutions. Solar PV generation continues to be the most popular RES technology in Hungary. The ongoing nuclear power plant development of 2,000 MW capacity at the existing Paks site plays a significant role in Hungary’s clean energy policy.

Share of renewable energy in gross final energy consumption in 2019 – 12.6 percent Hungary national target by 2020 – 13 percent, with a long-term goal of 21 percent by 2030

Drivers The RES scheme, called METÁR, is primarily based on a price premium The Action Plan for the National type of subsidy (Contract for Energy and Climate Plan, adopted in Difference) that may be awarded February 2020, envisages a six-fold following auctions. After the increase in installed solar capacity successful first METÁR auction, in the next 10 years (up to around which was more than two and a half 6,500 MW by 2030). In June 2020, times oversubscribed, the second parliament passed the Climate METÁR auction took place between Protection Act, committing to net September 15 and October zero emissions by 2050. 15, 2020. The support to be

34 • dentons.com distributed was capped at aim to help DSOs and TSO to improve HUF 800 million (€2.2 million) and the stability and resilience of the 390 GWh, each per year. Projects up public grid through innovation. to a maximum of 49.99 MW built-in capacity were admitted. A preliminary Constraints and risk factors announcement on the list of While feed-in tariff (FIT) support is applicants confirmed impressive closed to new applicants, several interest, as the second METÁR renewable projects were previously auction was almost five and a half awarded FIT support, which will times oversubscribed, and the expire in the period 2040-2045. lowest bid price was far below As of April 2020, these projects expectations (HUF 16.18/kWh, are exposed to balancing costs approximately €44.94/MWh). due to the introduction of the The official auction results are notion of balancing responsibility. expected in late January 2021. However, until the end of 2025, In the period 2020-2026, the these FIT projects are entitled to Hungarian Energy Office is authorized a temporary and gradually decreasing to distribute renewable Contract for compensation in order to mitigate Difference subsidies through auctions their significant financial burdens. up to a yearly cap of HUF 2.5 billion (€6.9 million) and the government Response to the plans to announce a new auction COVID-19 crisis every six months until August 2022. In response to the COVID-19 Hungary is working on its National crisis, the deadline for the start of Hydrogen Strategy, with the commercial operation of FIT projects establishment of the National and those METÁR projects that were Hydrogen Technology Platform. awarded CfDs without an auction Pilot projects to convert excess and which were or are due to start carbon-free power to gas (hydrogen, commercial operations between biomethane) with innovative March 11, 2020, and June 30, 2021, technology will be supported was extended until June 30, 2022, with a budget of HUF 8 billion and the deadline of those that are (€22.1 million). Additional calls due to start commercial operations for pilot projects are in place, between July 1, 2021, and December including projects focusing on the 30, 2021, was extended until establishment and operation of December 31, 2022. energy communities. These will

dentons.com • 35 Ireland

Dentons’ Dublin office opened in 2020, just as the Irish renewables sector embarked upon a period of accelerated, state-backed, infrastructure development. This transformation of the energy sector towards renewables is driven by the need to reduce carbon emissions while meeting Ireland’s growing demand for energy. A decade of steady growth, led by onshore wind, left Ireland generating over one third of its power from renewables in 2020 (with a higher proportion of wind power than any other European market), but falling short of the 2020 national target of 40 percent renewable electricity. The National Energy and Climate Plan aims to deliver at least 70 percent by 2030 and carbon neutrality by 2050.

Share of renewable energy in gross final energy consumption in 2019 – 12.0 percent Ireland national target by 2020 – 16 percent

Drivers on a Contract for Difference (CfD) model with two-way payments (and In September 2020, the results of no payments to generators when Ireland’s first green energy auction wholesale prices are negative), and to take place under the long-awaited replaces the previous, tariff-based Renewable Energy Support Scheme regime. A total of 82 new renewable (RESS) were released. RESS is based energy projects were declared

36 • dentons.com successful under RESS-1. Notably, in 2021, which is expected to be 77 percent of RESS winners were closely linked with Ireland’s offshore solar energy projects, which is in wind strategy. line with the government policy to diversify the mix of renewable Constraints and risk factors technologies connected to the A key consideration up for discussion national grid. These RESS auctions is cost. A recent Irish Wind Energy will be an annual feature for the next Association report noted that the cost decade as Ireland seeks to meet its of Irish renewables will be significantly green energy targets. affected by decisions taken on Perhaps the most exciting part of key policy points in relation to tax, the Irish renewables market is the grid charges, balancing costs, and offshore wind sector. Here, the planning and environmental controls. new government proposes to raise Collectively, these could make the target for 2030 from 3.5 GW Irish renewables either among the to 5 GW and has promised a RESS cheapest or most expensive in the auction dedicated to offshore EU. The government has indicated projects in 2021. A modernized that the political will required to make marine consenting regime is under renewable energy a success in Ireland development, and seven projects is present on all sides, but this will be that had already made significant an area to watch out for in 2021. progress under the existing regime will be “grandfathered” across into Response to the the new process. Ireland’s Atlantic COVID-19 crisis Coast could produce 30 GW or more As Ireland relies on European and of floating offshore wind, with the global supply chains for raw materials potential for significant exports of and components, project sponsors energy, either as electricity are factoring this into their planning via interconnectors or as to address any potential logistical green hydrogen. delays in their supply chains. Ireland has significant potential Moreover, while scaled government for hydrogen production and the restrictions introduced to combat coalition government appears COVID-19 cases limited activity in the keen to focus hydrogen use on construction sector over the course difficult to decarbonize sectors such of 2020, it did not directly affect RESS as transport and industry. A national projects as many are scheduled to hydrogen strategy is expected commence construction in 2021.

dentons.com • 37 Italy

The Integrated National Energy and Climate Plan describes Italy’s decarbonization and energy strategy from 2021 to 2030. It envisages adding approximately 40 GW of renewable energy generation capacity (principally wind and solar) by 2030, bringing the share of renewables in gross final energy consumption to 30 percent. In November 2020, the Italian government issued a first draft of the National Hydrogen Strategy, setting out ambitious targets for 2030 and 2050.

Share of renewable energy in gross final energy consumption in 2019 – 18.2 percent Italy national target by 2020 – 17 percent, with a long-term goal of 30 percent by 2030

Drivers uncertainties of income streams and prefer lending to projects with The development of utility-scale government support. The 2019 FER1 projects in Italy is booming again, Decree gives RES plants incentives especially in wind and solar PV, which of about €1 billion per year, and have reached market parity in Italy. aims to support the development of On the offtake side, there is a strong approximately 4.8 GW of generating appetite for physical and financial capacity until the end of 2021. PPAs from both utilities and traders, During the final three rounds in 2021, often from outside Italy. contracts for a further 2.3 GW of Italian banks are still wary about the capacity should be awarded. The

38 • dentons.com government is currently working on scheme were undersubscribed. a successor incentive scheme (FER2) Developers struggle to secure large to continue government support enough sites and some regions after 2021. hinder projects on agricultural land despite national law specifying In 2020, new legislation was that projects can be installed enacted to provide incentives to in such areas. New rules on renewable energy systems shared a single integrated procedure for by energy communities and self- Environmental Impact Assessments consumption collectives, thereby and permitting are not yet correctly partially anticipating the transposition applied in all regions. of the new EU Renewable Energy Directive. A pilot phase of the new In 2020, new rules were introduced rules, focusing on systems with to simplify administrative procedures a generation capacity of no more relating to renewables and EV than 200 kW, will run until June 2021. charging projects, amongst others, but their impact will be In late 2020, The Ministry of seen only in 2021. Economic Development of Italy published the draft Hydrogen Response to the Strategy. Current predictions are that COVID-19 crisis hydrogen may satisfy around 2 percent of national energy demand The pandemic has had little by 2030, and around 20 percent by impact on project development 2050, with 5 GW of green hydrogen activity in Italy, apart from slowing production capacity to be operational down permitting processes. The by 2030. The ministry is targeting government took emergency investments in the sector of around measures to extend permitting €10 billion, with half of the amount deadlines, and the energy service coming from European funds and management company (GSE) private investments. Support will be extended certain timelines under the given only to green, but not blue or new incentives regimes to protect gray hydrogen, which in turn investments. Prime Minister Giuseppe will require a further increase of Conte announced that a robust production capacity from renewable energy transition will be a pillar energy sources. of Italy’s post-COVID-19 future, and a number of Italian energy Constraints and risk factors majors accelerated their investments in renewables. Early rounds of the FER1 support

dentons.com • 39 Kazakhstan

Kazakhstan continues to support the RES sector with investment incentives, extending deadlines during the pandemic, and initiating legislative amendments to boost investment attractiveness.

Drivers tried to boost interest from RES project developers. There were The Law of Kazakhstan on Support for eight renewable auctions for a total the Use of Renewable Energy Sources capacity of 250 MW, of which only (RES Law) and related secondary two auctions were unsuccessful. legislation continue to evolve. In 2019 and 2020, in total 16 projects In 2019, in addition to regular were successfully auctioned for RES auctions, project auctions a total capacity of 147.95 MW. The were introduced, where projects Ministry of Energy of Kazakhstan has are auctioned with land plots, also announced plans to organize connection points and some project project auctions for wind in the very documentation already available. near future. Project auctions are designed Separately, in February 2020 to address investors’ concerns Kazakhstan included electricity regarding the costs of obtaining a site generation, transmission and and building a transmission line to the distribution as priority activities, connection point. eligible for investment preferences Kazakhstan held its first project such as customs and tax exemptions, auctions for solar power in 2019. In and state grants. 2020, auctions for new renewable Importantly, in December 2020 the capacity went ahead, as the regulator RES Law was amended to extend the

40 • dentons.com term of power purchase agreements Response to the (PPA) from 15 to 20 years. This will COVID-19 crisis apply to PPAs concluded further to On the positive side, in 2020 auctions held after January 1, 2021. the Minister of Energy of Kazakhstan International financial institutions amended the underlying regulations are increasing their support for RES concerning purchase of renewable projects in Kazakhstan. The Asian energy by the offtaker. The Infrastructure Investment Bank regulations set deadlines after financed its first such deal in Central which the offtaker could cash in Asia. The Asian Development Bank 30 then 70 percent of the developer’s (ADB) raised 14 billion tenge performance bond and even (US$32 million) in the first green terminate the PPA. The amendments bonds listed on the Kazakhstan Stock provided a one-time grace period Exchange. Commercial banks are also during which the notice period for becoming active on the RES market. the commissioning of facilities could be extended for one year in relation Constraints and risk factors to a feed-in PPA. With regard to an auction PPA, the notice periods for There are still a number of constraints the commencement of construction hindering RES development in and commissioning of facilities Kazakhstan, such as the offtaker could also be extended for one year, having limited assets, without any subject to provision of an extended guaranteed support from the system financial security. operator or the state, tariffs being fixed in tenge (with limited linking to hard currency) while most equipment is imported, tightening fiscal policy with respect to solar projects, etc.

dentons.com • 41 Luxembourg

Luxembourg has made the development of sustainable finance activities a top priority. It is a key destination for investments in RES projects, using its prominence as a financial center to play a significant and growing role in green finance.

Share of renewable energy in gross final energy consumption in 2019 – 7.0 percent Luxembourg national target by 2020 – 11 percent, with a long-term goal of 25 percent by 2030

Drivers production can now take advantage of the elimination of charges and In 2020, the Luxembourg Sustainable fees for self-consumed electricity. Finance Initiative was launched to This has made self-consumption coordinate the development of more attractive. a local sustainable finance ecosystem and agenda. The draft National Energy and Climate Plan (NECP) of Luxembourg In Luxembourg, the production of refers to hydrogen as part of the energy from RES is promoted through energy transition to a low-carbon subsidies and feed-in and premium economy, especially in mobility tariffs for electricity. and industry, and as an energy Grid access for RES electricity is storage vector. Luxembourg also subject to general law provisions sees hydrogen as an interesting applicable to electricity. As of opportunity for its industrial January 1, 2020, consumers who companies and research institutions. wish to use their own electricity

42 • dentons.com Two draft laws are currently under Response to the review in parliament in relation to COVID-19 crisis the implementation of the NECP A law was adopted on in order to increase the share of July 24, 2020, in order to stimulate renewable energy in gross final business investments during the energy consumption and to enhance COVID-19 crisis. The purpose of the energy efficiency. law is to encourage companies that find themselves in financial difficulty Constraints and risk factors following a significant drop in their The level of self-consumption remains turnover to make investments low in Luxembourg compared that would have been canceled or to other EU member states. postponed due to the COVID-19 Luxembourg’s energy system is crisis. One of the three types of characterized by its high dependence investment aid relates to energy on imports and reliance on fossil efficiency projects or projects that fuels. These, plus the challenges do not comply with standards. presented by rapid population growth and the expanding economy, may have a negative influence on meeting the government’s ambitious targets.

dentons.com • 43 The Netherlands

The Dutch Climate Agreement aims to reduce the emission of

CO2 and other greenhouse gases by at least 49 percent by 2030. Compared to 2018, the share of renewable energy in gross final energy consumption increased slightly in 2019. However, the Dutch target for 2020 is far from being achieved. To speed up the energy transition, the government is taking additional measures to stimulate the use of RES.

Share of renewable energy in gross final energy consumption in 2019 – 8.8 percent The Netherlands national target by 2020 – 14 percent, with a long-term goal of 27 percent by 2030

Over the past few years, the (2 percent) to a total installed Netherlands has seen significant capacity of 4,500 MW (960 MW growth in solar energy. In 2019, offshore and 3,540 MW onshore). 2,350 MW of new solar production Biomass is still by far the largest capacity was installed, which brought source of RES in the Netherlands the total capacity to 6,874 MW. (59 percent), but it is highly The contribution of solar energy to controversial. the final use of renewable energy is still growing and was close to Drivers 11 percent in 2019. Compared to In 2020, a new subsidy scheme 2018, the installed capacity of wind was introduced: the SDE++ subsidy. energy increased slightly in 2019

44 • dentons.com This scheme stimulates not only the also a frontrunner in developing generation of renewable energy, hydrogen as an energy carrier for but also other emission reduction the shipping industry. technologies, such as carbon capture and storage (CCS), to contribute to Constraints and risk factors the emission reduction goal of The Dutch RES market can be termed 49 percent by 2030. Under the new competitive. This is due to the subsidy scheme, projects compete limited availability of land and to the based on the criterion that they have fact that people living in the direct “avoided CO and other greenhouse 2 vicinity of a planned project often gases,” instead of “generated start proceedings against permits renewable energy,” as previously. for RES projects. In addition, there is The first round of the SDE++ subsidy insufficient grid capacity available in opened on November 24, 2020, with many parts of the country. a budget of €5 billion. The Netherlands is currently also Response to the seeing important developments in COVID-19 crisis the field of hydrogen. A number of Many RES projects have come to large-scale hydrogen production a standstill as a result of COVID-19. projects have been announced. This may have a significant impact In addition, the Ministry of Economic on the Dutch energy transition. Affairs and Climate, the national Nevertheless, CO emissions in 2020 electricity grid manager, TenneT, 2 are significantly lower than in 2019, and the operator of the gas transport because of the measures relating network, Gasunie, are investigating to the COVID-19 crisis and because the possibilities of developing of the high RES production level, national transport infrastructure amongst other factors. for hydrogen. The Netherlands is

dentons.com • 45 Poland

The Polish RES market continued to thrive in 2020, with resilience to the COVID-19 turmoil enhanced by quick regulatory action to aid projects under construction. Key regulatory and legislative developments materialized towards the year-end (offshore and balancing market design), with solar projects enjoying the fastest growth rates.

Share of renewable energy in gross final energy consumption in 2019 – 12.2 percent Poland national target by 2020 – 15 percent, with a long-term goal of 21-23 percent by 2030

Drivers By June 2021, the first group of most advanced projects may receive The Polish government began 2020 individual grants of sliding CfD with a robust plan to stimulate premiums, covering up to 5.9 GW growth in RES. With the current of capacity. Less developed projects auction schedule closing in 2021, the may look forward to the auctions government proposed extending the planned for 2025 and 2027, each for scheme to 2026, along with 2.5 GW. The scheme is marked by works on multi-year budgets, a generous 25-year term of support making the support framework (or 100,000 hours per MW of installed much more transparent. capacity). The scheme and individual In January 2021, parliament passed grants will need to be notified to the the Dedicated Offshore Wind Act. European Commission for state aid

46 • dentons.com clearance, with procedural provisions Constraints and risk factors already included in the law. With lessons learned from the The first onshore projects successful 2018 and 2019 auctions, investors in the 2018 auction neared prepared with more assurance for completion, with financings closing the next auction round. Financings and Poland turning into a major RES progressed, with major projects construction site. In 2020, the market closing in H1 2020. The key residual saw increased interest in long-term limitation remained the onshore offtake contracts supporting both wind distance law affecting the auction-based projects and merchant development of new locations. This development, with physical delivery, favors utility-scale PV projects, which as well as virtual PPAs. have a better chance of accessing the auction budget. The key challenge Commercial solar PV (in Poland, remains for the government to ensure constructed projects not exceeding good progress of notifications to the 1 MW) kept growing in 2020 and European Commission in order to utility-scale projects (over 1 MW) secure continuation of the scheme successfully competed in the 2020 towards 2026. auction. The rooftop installations sector continued its lightning pace Response to the of development, driven by the initial COVID-19 crisis success of the government support program in 2019. Overall, solar PV The Polish government reacted installations reached over 2.6 GW of swiftly to the pandemic, increasing installed capacity by October 2020, the permitted construction time delivering over 12.3 GWh of electricity of auction-based projects by up on the peak production day in to 12 months to mitigate delivery August 2020. and construction delays caused by the disruption of supply chains From January 1, 2021, new rules of the and additional safety requirements balancing market will apply, allowing affecting the workforce. RES to enter the balancing services The regulation was welcomed by market in line with the European market participants and proved easy network codes. The reform will be to apply in practice. gradually rolled out throughout 2021, with additional financial drivers planned for 2022.

dentons.com • 47 Romania

Romania has significant unexploited natural RES resources. Although the legislative agenda has moved forward, further measures need to be taken in order to meet investors’ expectations.

Share of renewable energy in gross final energy consumption in 2019 – 24.3 percent Romania national target by 2020 – 24 percent, with a long-term goal of 29.7 percent by 2030

Drivers CfDs, developed by the Ministry of Energy in accordance with Romania’s For RES capacity commissioned RES Strategy. before January 1, 2017, the support system is based on a mandatory Against the background of fluctuating quota of green certificates (whose wholesale power prices, CfD validity is extended to 2032) payments based on the difference corresponding to a mandatory between an indexed strike price—set quota of RES power to be sold by by a pay-as-bid auction process—and electricity suppliers. The government a wholesale market reference price, has announced that it is considering would provide certainty of revenues a new RES support mechanism based for projects, and certainty of scheme on auctions of two-sided Contracts costs imposed on consumers. The for Difference (CfDs). In June 2020, it CfD mechanism is also proposed for published a Memorandum regarding new nuclear and carbon capture, General Principles for Implementing usage and storage projects, but with

48 • dentons.com separate allocation processes. The In May 2020, the government finalized CfD proposals will need promulgated new legislation allowing to be approved by the European power producers to conclude Commission for state aid purposes. bilateral power purchase agreements (PPAs) outside of OPCOM’s More generally, the authorities centralized markets, at negotiated have been implementing a number prices, for electricity produced by of outstanding market structural facilities commissioned after requirements of the EU Clean Energy June 1, 2020. This is progress. Package, including the provision for Producers are also exempted from electricity storage and aggregators. the obligation to publicly and non- Looking further ahead, although discriminatorily offer the electricity much remains to be done before produced by the above-mentioned developers can exploit the tens of new capacities. This partial lifting GW of potential for wind generation of the ban on PPAs helped boost in the Romanian Black Sea (fixed investor confidence in the RES market and floating technologies), a law on in Romania in H2 2020. offshore wind is now progressing through parliament. Offshore wind is Market hopes are that the seen as potentially playing a big part aforementioned provisions will be in a future green hydrogen industry maintained by the newly elected in Romania. Pilot renewable hydrogen Romanian parliament that started projects are already taking shape work in late December 2020. Given and a preliminary regulatory step has that the EU RED II Directive requires been taken in relation to licensing EU member states to remove hydrogen producers. unjustified barriers to the making of long-term PPAs agreed directly with Constraints and risk factors generators (an obligation which must be implemented by June 30, 2021), RES producers are required to sell it is hoped that other measures to all their electricity production on the encourage PPA formation may follow. organized electricity market operated by Transelectrica’s subsidiary OPCOM (except for facilities under 3 MW). This has resulted in long-term PPAs being scarce and bank financing difficult to obtain.

dentons.com • 49 Russia

Geo-politics and COVID-19 have triggered a perfect storm in the Russian economy. Lockdowns and restrictions of economic activities have underlined the need for development and greater efficiency. In response, the state program on the development of renewables has been extended until 2035 and continues to be updated to address ongoing challenges. Meanwhile, the collapse of state income from the export of fossil fuels is forcing the Russian government to trim budgets, and the RES market is no exception.

Economic instability is slowing down the scheduled pace of the RES development in Russia. By 2024, RES generation (excluding hydro) is expected to be approximately 1 percent of total generation. That is less than one-third of the 4.5 percent target set by the government.

Drivers However, the latter target may be significantly reduced (down to 3 GW) The updated RES state program due to budget cuts. provides for RES power supply agreements (DPM VIE) to remain the The revised state program sets main tool for RES development in capacity targets, as well as local Russia. It is expected that up to 5 GW content requirements for equipment: of RES capacity will be commissioned Over the next 15 years, local content by 2024 under DPM VIE 1.0 and up should increase steadily to to 7 GW by 2035 under DPM VIE 2.0. 98-100 percent. In addition to local

50 • dentons.com content requirements, RES players Response to the have export targets as regards COVID-19 crisis local equipment. COVID-19 meant a large number In 2020, the national solar power of RES players faced delivery market welcomed a new champion: bottlenecks as regards hardware and The Staromarievskaya solar power spare parts, as well as commissioning plant reached its maximum power delays at both operating RES power capacity and officially became the plants and those under construction. most powerful solar PV station in At least 30 percent of the capacity Russia, with attested capacity of scheduled to be commissioned in 100 MW – almost 40 percent more 2020 is said to be subject to delay. than the capacity of the former At the same time, there are no state leader, the 60 MW Sorochinskaya anti-COVID-19 measures for the solar power plant. RES sector. Notably, the Russian As for microgeneration (private government is reluctant to extend generating facilities with up to commissioning deadlines for RES 15 kW capacity), despite a positive plants under construction. Individual start in 2019, there are still ambiguities discussions are ongoing between the and gaps in the applicable RES regulator (Association “NP Market legislation that hinder expansion. Council”) and market players on the The procedure for sale of surplus extension of deadlines and granting power from microgeneration also of grace periods. requires improvement.

Constraints and risk factors • Slowdown of RES development due to fossil fuels surplus. • Lack of financial incentives. • Increasing local content requirements for equipment. • Slow lawmaking in the sector, lack of regulation addressing current challenges.

dentons.com • 51 Slovak Republic

Slovakia has struggled to meet its EU targets for the share of RES in the energy mix for a number of years. It adopted some fundamental changes in RES legislation in 2019 as a first step and much is expected of the new government. New incentives, clear and coherent legislation and more optimistic expectations are required in order to meet the EU targets for 2030.

Share of renewable energy in gross final energy consumption in 2019 – 16.9 percent Slovak Republic national target by 2020 – 14 percent, with a long-term goal of 19.2 percent by 2030

EU authorities criticized the lack of are still seen as exceeding the ambition of the Integrated National economic benefits it brings, which is Energy and Climate Plan of Slovakia problematic, especially in light of the for 2021-2030, prepared by the national target for 2030. Ministry of Economy. Slovakia The most commonly used proposed to lower its contribution to renewables in Slovakia are biomass the European target by 2030, with and solar energy, although there only a 19.2 percent (from 20 percent) is also interest in heat pumps. share of RES, while the EU proposed Biomass is seen as one of the most to increase its national target to interesting renewables. 24 percent. The wind energy market, long Due to Slovakia’s historic energy underdeveloped due to the natural mix, the costs of RES support

52 • dentons.com conditions of the country, is slowly Constraints and risk factors recovering as new projects are • Inconsistent legislation and rules. introduced in western Slovakia. • Nuclear energy, with its current Drivers 54 percent share in electricity production (and one reactor in The Regulatory Office for Network construction), remains the most Industries, under new management important source of electricity following the elections, is also in Slovakia. focused on repositioning the existing system of RES support to prolong the • Most photovoltaic sources operation of existing projects beyond connected to the grid in the current 15 years of support 2010-2012 will lose financial and, at the same time, reduce the support in 2025-2027 and are total burden of support that falls on expected to be disconnected. consumer tariffs each year. • Regulatory requirements, such The recently introduced auction as building permits and natural system based on feed-in premiums habitat protection, are a typical applies for new electricity-generating barrier to solar and wind plants installations with installed capacity in Slovakia. exceeding 500 kW. Winners of auctions will be granted Response to the a supplementary sum (“green bonus”). COVID-19 crisis The new regime encourages the local All auctions were postponed consumption of electricity generated until after the COVID-19 crisis. by installations not exceeding 500 kW capacity and not connected to the grid. This targets businesses that want to produce electricity for their own needs. Such projects will not be entitled to a subsidy, but equally will not pay grid connection charges, elements of which are a concern for other RES producers, which view them as making their power more expensive than imports from other countries.

dentons.com • 53 Spain

The Spanish renewable energy market remains attractive for foreign investors, with large transactions in 2020 and new ones expected for 2021. New regulations affecting connection to electricity networks and a new system of auctions to support renewable generation projects are expected to further enhance investment appetite.

Share of renewable energy in gross final energy consumption in 2019 – 18.4 percent Spain national target by 2020 – 20 percent, with a long-term goal of 42 percent by 2030

Drivers must comply to keep their grid connection rights secure. Failure to Purchases of large portfolios of meet milestones, such as obtaining renewable assets continue to help environmental approvals and drive the Spanish renewables administrative authorizations by set market, often involving oil and gas deadlines, means the project loses companies, international investment secured connection points and funds and Chinese companies, the developer forfeits guarantees. which are increasingly showing their These measures have released about appetite for RES opportunities. 40 GW of connection capacity. New regulations passed in June 2020 New regulations to provide more have tightened the requirements transparency regarding the available with which projects developers capacity in the network and accuracy

54 • dentons.com in the management of connection Constraints and risk factors points by the grid operators were Despite the massive release of approved in late 2020. Transparency grid connection capacity, scarce platforms must be in place in the availability of connection points short term according to criteria to be remains an entry barrier for approved by the regulator (CNMC). developing renewable energy Until then, no new connection projects in Spain, and it will continue capacity can be allocated by the to be so until provision of access and network companies. connection permits is resumed. The government approved a new This is preventing a number of renewables support mechanism, projects from being developed, and which will provide successful bidders the price of connection permits is still with an element of price stability rather high. (price per MWh) for a specified In addition, government amount of their output during authorization is now needed for a 10 to 15-year term (projects with foreign investments under certain qualifying storage capacity are also requirements in the electricity sector incentivized). The first auction under (including RES), either from non-EU/ this new regime will be resolved by EFTA countries, but also (at least until Q1 2021 and will award at least 3,000 June 2021) for investments of over MW of renewable generation capacity €500 million coming from EU/EFTA (in particular, for solar PV and wind countries. This administrative hurdle facilities). Annual auctions are affects project timelines. expected to be held until 2025 (with the scheme expected to be extended Response to the until 2030). COVID-19 crisis A renewable hydrogen roadmap COVID-19 caused a big drop in was approved to achieve 4 GW electricity demand for most of of electrolysis capacity by 2030 2020, with electricity market prices (reaching 300 to 600 MW by falling from €30-50 per MWh to 2024), 25 percent of industrial €20-40 per MWh. However, the RES consumption of hydrogen from generation market is still buoyant, renewable sources, and a significant without any specific support measure increase of renewable hydrogen- being needed. powered transport.

dentons.com • 55 Turkey

Mostly due to the desire to reduce dependence on energy imports, Turkey remains committed to increasing the share of renewables in electricity generation. Although the RES sector has had its share of delays and challenges due to the COVID-19 crisis, the policy of supporting renewables and using locally manufactured equipment persists. The collection of bids for auctions relating to multiple solar projects (initially planned for Q1 2020) will now take place in March 2021.

Share of renewable energy in gross final energy consumption in 2018 – 13.7 percent Turkey national target by 2023 – 20.5 percent

Drivers June 30, 2021 (the previous commissioning deadline of For renewables, Turkey offers December 31, 2020, was extended a system which is partly feed-in tariff due to the COVID-19 crisis). and partly feed-in premium, whereby the guaranteed prices are applicable The Ministry of Energy and Natural for 10 years after commissioning. Resources of Turkey announced that The level of FIT varies depending the next round of YEKA applications on the source and the amount and (Turkish acronym for renewable type of local content. The US cent energy designated area) are to denominated FIT is applicable for be submitted between renewables commissioned by March 8 and 12, 2021, for 74 solar

56 • dentons.com mini-YEKA tenders (each with Constraints and risk factors a capacity of 10-20 MW). The projects • Grid capacity for connecting wind are spread across 36 provinces and and solar power plants is limited. have an aggregate installed capacity EMRA had announced that it of 1 GW. The tenders will be held by would accept preliminary license way of reverse auction, with a ceiling applications for wind projects with price of 35 kuruş/kWh. The offered an aggregate capacity of 2 GW in electricity purchase term is 15 years October 2022, but this has been from the execution of the agreement postponed until further notice. granting YEKA utilization rights. • For projects commissioned after A series of amendments to the June 30, 2021, the RES support relevant regulations has set the mechanism will continue to apply, regulatory framework for hybrid and but with Turkish lira prices which multi-source power projects, which are yet to be determined. The were previously restricted due to terms on which the local content a lack of regulation. incentive will apply to renewables In November 2020, the regulation on remain uncertain. renewable energy source guarantee • The storage market is constrained certificates was published, paving the due to uncertainties caused by the way for the issuance and trading of lack of regulation. renewable energy source guarantee certificates (similar to guarantee of Response to the origin certificates). The regulation COVID-19 crisis shall be effective from June 2021. EMRA has published several decisions In December 2020, amendments on measures against the impact of to two main laws concerning COVID-19. The most notable is that renewables have brought positive EMRA declared the pandemic a force changes, such as broadening the majeure event as defined under scope of licensing requirement relevant legislation. Accordingly, exemptions provided for renewables all statutory deadlines (regarding and abolishing the requirement for fulfillment of certain requirements permission from the Turkish Electricity to obtain generation licenses, Market Regulatory Authority (EMRA) completion of construction, etc.) have to transfer shares in generation been extended for three months. license holders.

dentons.com • 57 Ukraine

In the first 10 months of 2020, against a backdrop of uncertainty that is starting to come to an end, about 1.1 GW of RES power capacity was awarded feed-in tariffs. Total RES power capacity with established feed-in tariffs in Ukraine has now reached 7.5 GW.

As of the end of 2019, the shares of renewables in overall electricity production and heat production in Ukraine were approximately 10.9 percent and 9 percent respectively.

Drivers storage facilities in the power system has prompted the government to Feed-in tariffs (FITs) for wind, small run auctions for 2 GW of new highly solar, biogas and biomass projects flexible capacity in 2021. There make projects commissioned are plans to build energy storage in Ukraine in the next two years infrastructure to facilitate balancing profitable. These FITs are fixed of RES and enhance energy security, (EUR-linked), with a state guarantee reducing import dependence. to purchase power from the date of commissioning to the end of 2029. Gradual increases in electricity Support awarded by auction will prices and network tariffs are making be fixed in EUR and have a PPA for RES self-consumption attractive. 20 years after commissioning. Industrial players completed the first Auctions are expected in the summer solar projects for self-consumption and autumn of 2021. The need for without FITs in 2020. Other highly flexible generating and energy new subsidy-free projects were

58 • dentons.com announced, for both solar and wind. producers (without compensation) There is increased interest in physical to balance the system and the corporate PPAs for electricity first defaults on payment to RES from RES. producers occurred, as there were issues with the liquidity of the There is a stimulating tariff for heat guaranteed offtaker. Wind projects from renewables and huge potential were significantly delayed by the for renewable gases. Ukraine’s impacts of the pandemic on the potential for green hydrogen facilities supply chain. is up to 10 GW; realizing it will require up to €20 billion of investment. The general situation began to The European Commission considers improve as the new law cutting Ukraine as a priority partner for green FITs and reducing timelines for hydrogen production due to the completing new solar projects under availability of RES and developed gas such tariffs for solar was finally transportation and storage systems. adopted and took effect in August Ukraine’s biomethane potential 2020. Timelines for constructing is 25 percent of its total natural current wind projects under FITs are gas consumption. unchanged; most have until the end of 2022 to complete. Payments for Constraints and risk factors electricity to RES producers have improved and the methodology for Protracted debate over expected curtailment compensation has taken changes in the support scheme effect. The government is taking eventually resulted in retroactive steps to finance payment of what cuts of feed-in tariffs for is owed to RES producers. It has wind (7.5 percent) and solar announced quotas for auctions (mostly up to 15 percent) from in 2021 (365 MW) and indicative August 1, 2020, as well as reduced quota figures for auctions in periods for completion of new ​ 2022-2025, but so far these are large-scale solar FIT projects. at quite a low level and have not Anticipating this, most investors tried yet been officially adopted. There to complete their solar projects by is uncertainty over upgrading the end of 2019. Many then focused the grid system and timelines for more on smaller projects, and the synchronization with ENTSO-E. Lack pace of solar project construction of liquidity in the electricity market slowed further from March 2020 due and distortion due to price caps, to the COVID-19 crisis. Due in part subsidies for households and to a lack of balancing facilities, there cross-subsidies are also unhelpful. was frequent curtailment of RES

dentons.com • 59 United Kingdom

In the first half of 2020, renewables accounted for 46 percent of UK electricity generation. For the first time, offshore wind produced a higher share (14 percent) than any other renewable technology. There are signs that policy related to RES will develop quite significantly (and in broadly positive ways) over the next year or two.

Drivers for Difference (CfDs) for renewable generators has been doubled to The government sees the opportunity 12 GW, and there are proposals to for a green recovery from the tighten the rules on “supply chain COVID-19 crisis as playing well with plans” so as to maximize local its mission to “level up” economically content. The government has started disadvantaged areas. COP26 in consulting on the possibility of Glasgow (in 2021) gives the UK wide-ranging changes to the CfD a further reason to show leadership regime beyond AR4. Other areas on decarbonization. highlighted for (possibly radical) Renewable highlights of the UK’s reform in the December 2020 recently announced 10-point plan Energy White Paper include storage, for a “green industrial revolution” system standards and data. include quadrupling current offshore The 2021 auction will provide the wind capacity by 2030 (to 40 GW) first opportunity since 2015 for solar and targeting 5 GW of low-carbon projects and onshore wind farms hydrogen production by 2030. (other than those on Scottish islands) The target capacity for next year’s to compete for CfD support. It will allocation round (AR4) for Contracts also see the first allocation of CfD

60 • dentons.com support for floating offshore wind plan and strategies for industrial (sub-target for 2030: 1 GW). decarbonization, EV charging Floating projects will not be infrastructure and hydrogen. competing against fixed bottom Another area of policy scheduled for projects, but against other less development is the possible evolution mature technologies. of the current “point to point” offshore transmission arrangements into The scale of future offshore wind a fully-fledged grid. Although the end projects is exemplified by the 3.6 GW of the Brexit transition period means Dogger Bank development, for which that GB is excluded from the EU’s debt finance (€6 billion) and offtake internal energy market from arrangements have been agreed. January 1, 2021, the draft EU-UK Eni entered the UK offshore wind Trade and Cooperation Agreement market by taking a 20 percent equity published on December 26, 2020 stake in the project’s first two phases. provides what appears in principle The secondary market continues to to be a good framework for EU-UK be active for onshore technologies cooperation in respect of offshore as well, and another notable feature RES cooperation and other key areas of 2020 has been the continuing of energy policy. strength of the battery storage project pipeline. Response to the COVID-19 crisis Constraints and risk factors UK renewable support schemes The scale of the UK government’s are financed by levies on energy ambition for renewables, and for retailers – the part of the value other aspects of net zero policy that chain that has suffered most directly relate to them, such as EVs as a result of the COVID-19 crisis. (no new diesel or petrol cars are However, a combination of industry to be sold in the UK after 2030), is and regulatory initiatives has so extremely welcome. But it creates far enabled the sector to be fairly major implementation challenges, resilient, notwithstanding some and it is hard to judge whether the periods of significantly reduced program is deliverable until more demand, low wholesale market prices of the detail has been worked and high balancing costs. out. Items on the agenda for 2021 include a transport decarbonization

dentons.com • 61 Uzbekistan

Uzbekistan continues to develop a legislative framework that will facilitate development of the renewable energy sector. It aims to increase the share of renewable energy sources in total energy generation from 10 percent currently to at least 25 percent by 2030.

Drivers Energy of Uzbekistan approved new rules for awarding support for Legislation adopted in 2019 defined RES projects by means of competitive the main directions of current selection. These are to apply to all state policy in relation to RES and RES projects of industrial scale provides certain incentives based on with a capacity of 1 MW or more tax exemptions. (except for small hydro plants) from In 2020, the government of January 1, 2021. A plan has been Uzbekistan approved a policy announced to develop hydropower, that defined the medium-term including 35 new HPPs and the and long-term objectives for the modernization of 27 HPPs. period to 2030, to be adjusted The new Tax Code of Uzbekistan as circumstances arise. These include includes substantial tax reliefs for the diversification of fuel and energy legal entities created with direct resources through development of private foreign investment and RES. Electricity capacity is expected specializing in the construction of to increase from the current 12.9 GW alternative power plants. to 29.3 GW, and production from 63.6 billion kWh to 120.8 billion kWh. In December 2020, the Ministry of Energy published the list of In October 2020, the Ministry of prequalified bidders for the IFC

62 • dentons.com Scaling Solar 2 Project (in Jizzakh will be connected by 500 kV and Samarkand regions). power lines. Fifteen international companies • Development of the distribution proceeded to the RFP stage of the network: In the process of tender process. Two renewable transition to a wholesale energy projects, namely the competitive electricity market, utility-scale solar PV project in the functions of operating the Sherabad, Surkhandarya region distribution network and selling (under consultancy of the Asian electricity to consumers will be Development Bank), and a 100 MW unbundled, and the distribution wind power plant in Karakalpakstan network will become state (under consultancy of the European property. The function of selling Bank for Reconstruction and electricity will be gradually Development), are currently at the transferred to private company tender stage. retailers on the basis of transparent tenders for PPP projects. Constraints and risk factors • Transition to a wholesale market In November 2018, the government and improvement of tariff policies: addressed low consumer prices for This will take place in stages in fuel and energy resources, approving 2020-2023, with the transition to a gradual increase in tariffs. President each subsequent stage depending Shavkat Mirziyoyev stated that on whether the conditions are met. electricity price liberalization is the By 2023, a competitive wholesale only way to attract investment in market is expected to be formed the energy sector. The authorities and all participants should have believe that Uzbekistan should raise equal and unimpeded access to electricity prices to attract more the grid. investors. This is part of a general transition to a more liberalized and These are all positive developments, competitive electricity sector that but will inevitably generate some will include: uncertainty in the near term. • Development of the national power grid: To increase the reliability of the electricity supply by 2025 all nodes of the single power system

dentons.com • 63 Contacts

Arkadiusz Krasnodębski Yolande Meyvis Poland Managing Partner Partner, Brussels Head of Europe Energy group Dentons Dentons D: +32 2 552 29 31 D: +48 22 242 56 63 [email protected] [email protected]

Dario Traum Petr Zákoucký Head of Energy Transitions Partner, Prague BloombergNEF Dentons T: +44 20 32 16 47 04 D: +420 236 082 280 [email protected] [email protected]

Giles Dickson Marc Fornacciari CEO Partner, Paris WindEurope Dentons T: +32 2 213 18 11 D: +33 1 42 68 45 44 [email protected] [email protected]

Walburga Hemetsberger Otar Kipshidze CEO Georgia Managing Partner SolarPower Europe Dentons T: +32 27 09 55 20 D: +995 32 250 93 00 [email protected] [email protected]

Denis Thomas Thomas Schubert Global Business Development Partner, Berlin Leader – Electrolyzers Co-head of Europe Energy Cummins Inc. Regulatory practice, Dentons T: +32 14 462 110 D: +49 30 26473 430 [email protected] [email protected]

James Hogan Dr. Gabriele Haas Azerbaijan Managing Partner Partner, Frankfurt Dentons Dentons D: +994 12 490 75 65 D: +49 69 45 00 12 393 [email protected] [email protected]

64 • dentons.com Anita Horváth Christel Dumont Partner, Budapest Senior Counsel, Luxembourg Co-head of Europe Energy Dentons Sector group, Dentons D: +352 46 83 83 211 D: +36 1 488 5200 [email protected] [email protected]

Eszter Zádori Jan Jakob Peelen Partner, Budapest Partner, Amsterdam Dentons Dentons D: +36 1 488 5200 D: +31 20 795 38 00 [email protected] [email protected]

Eavan Saunders Marcel Janssen Office Managing Partner, Dublin Partner, Amsterdam Dentons Dentons D: +353 1 5828102 D: +31 20 795 34 23 [email protected] [email protected]

Peter O’Brien Agnieszka Kulińska Partner, Dublin Partner, Warsaw Dentons Dentons D: +353 1 5828103 D: +48 22 242 57 40 [email protected] [email protected]

Dr. Carsten Steinhauer Michał Motylewski Partner, Rome Managing Counsel, Warsaw Dentons Dentons D: +39 06 809 120 19 D: +48 22 24 25 666 [email protected] [email protected]

Birzhan Zharasbayev Claudiu Munteanu-Jipescu Office Managing Partner, Nur-Sultan Partner, Bucharest Dentons Dentons D: +7 7172 55 2151 D: +40 21 312 4950 [email protected] [email protected]

dentons.com • 65 Alexei Zakharko David Cruickshank Russia Managing Partner Partner, Edinburgh Dentons Dentons D: +7 495 644 0500 D: +44 33 0222 1704 [email protected] [email protected]

Evgenia Teterevkova Charles July Partner, St. Petersburg Partner, London Dentons Dentons D: +7 812 325 84 44 D: +44 207 246 7654 [email protected] [email protected]

Katarína Pecnová Lucille De Silva Counsel, Bratislava Partner, London Dentons Dentons D: +421 220 660 220 D: +44 20 7320 3795 [email protected] [email protected]

Javier Lasa Louis Skyner Partner, Madrid Partner, London Dentons Dentons D: +34 91 43 63 325 D: +44 20 3530 3723 [email protected] [email protected]

Barlas Balcıoğlu Adam Brown Partner, Istanbul Managing Practice Development Balcıoğlu Selçuk Ardıyok Keki Lawyer, London Attorney Partnership Dentons D: +90 212 329 30 00 D: +44 20 7246 7014 [email protected] [email protected]

Maksym Sysoiev Eldor Mannopov Partner, Kyiv Uzbekistan Managing Partner Dentons Dentons D: +380 44 494 4774 D: +99 878 150 31 05 [email protected] [email protected]

66 • dentons.com Sources of official data used in this publication

• BloombergNEF

• Directive 2009/28/EC of the European Parliament and of the Council of April 23, 2009 on the promotion of the use of energy from renewable sources

• Directive (EU) 2018/2001 of the European Parliament and of the Council of December 11, 2018 on the promotion of the use of energy from renewable sources

• Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, on an EU Strategy to harness the potential of offshore renewable energy for a climate-neutral future, November 19, 2020

• Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, on a hydrogen strategy for a climate-neutral Europe, July 8, 2020

• Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, on powering a climate-neutral economy: An EU Strategy for Energy System Integration, July 8, 2020

• Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, on the European Green Deal, December 11, 2019

• European Commission Renewable Energy Progress Report, October 2020

• Eurostat data on the share of renewable energy in gross final energy consumption as of January 2021

• National Energy and Climate Plans

• SolarPower Europe

• WindEurope

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CSBRAND-47090-European-Renewables-2021-Brochure-A5-12-Digital — 04/03/2021