Market and Policy Outlook for Renewable Energy in Europe and the CIS

Investment_UNDP_COVER 05/05/14 10:44 Page 1

Empowered lives. Resilient nations. Market and Policy Outlook for Renewable Energy in Europe and the CIS

Empowered lives. Resilient nations.

UNDP Europe and the CIS Bratislava Regional Centre Grosslingova 35 811 09 Bratislava Slovak Republic Tel.: +421 2 5933 7111 Fax: +421 2 5933 7450 http://europeandcis.undp.org UNITED NATIONS DEVELOPMENT PROGRAMME DEVELOPMENT NATIONS UNITED Market and Policy Outlook for Renewable Energy in Europe and the CIS UNDP partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain the kind of growth that improves the quality of life for everyone. On the ground in more than 170 countries and territories, we offer global perspective and local insight to help empower lives and build resilient nations.

May 014

Empowered lives. Resilient nations.

this publication does not necessarily reflect the official views or policies of the united nations, including undP, or un Member States, nor do the boundaries and names shown on maps imply official endorsement by the united nations.

Author: christoph S. Henrich

UNDP reviewers and contributors: Martin krause, John o’brien, daniela carrington, Marina olshanskaya and oliver waissbein.

Citation: united nations development Programme (undP), 014: Market and Policy outlook for renewable energy in europe and the ciS

ISBN: 978-9-9509-87-7

Editor: tom woodhatch

Cover Page Photo Credits: undP europe and the ciS flickr Photo gallery (Montenegro, croatia, albania, kazakhstan, bosnia and Herzegovina, uzbekistan)

Design: Valeur s.r.o.

Acknowledgments: the author would like to thank John o’brien for his valued technical guidance and continual support. this report and associated research benefited from additional input from a wide range of experts and country-level colleagues who helped to improve the quality and accuracy of the collected information. thanks go to: Mirela kamberi, aram ter-Zakaryan, georgi arzumanyan, diana Harutyunyan, chingiz Mammadov, alexandre J. grebenkov, igar tchoulba, Sanjin avdic, Sandra Vlasic, Zoran kordic, nino antadze, Vakhtang berishvili, Stanislav kim, rassul rakhimov, daniar ibragimov, anita kodzoman, nicolae Zaharia, nadja Vetters, Jelena Janjusevic, nargizakhon usmanova, katalin Zaim, rovshen nurmuhamedov, olena ovchynnikova, Sergei Volkov and rano baykhanova.

Market and Policy outlook for renewable energy in euroPe and tHe ciS Table of Contents

Foreword ...... 4

List of Figures and Tables ...... 5

Acronyms ...... 7

Executive Summary ...... 8

1. Current Situation and Potential of Renewable Energy in the Region ...... 15

1.1 deployed renewable energy capacity ...... 15

1. renewable energy Potential ...... 18

1. renewable energy legislation and Policies ...... 0

1..1 decreasing technology costs ......

1.. Public de-risking instruments ......

1.. direct financial incentives ...... 4

1.4 renewable energy deployment and growth ...... 8

2. Barriers to Renewable Energy Investment in the Region ...... 33

.1 Market Prospects and government Policies to Stimulate investment ......

. Market distortions and access to the energy Market ...... 5

. concessions, Permits and licences ...... 7

.4 access to the electricity grid ...... 9

.5 technology and Supply chain ...... 9

.6 cost of information and limited experience with renewable energy ...... 40

.7 capital Scarcity ...... 41

.8 inadequate transmission infrastructure ...... 4

.9 Political instability and country risk ...... 4

3. Best Countries for Renewable Energy Investment ...... 45

4. De-risking Renewable Energy Investment ...... 49

Conclusion ...... 55

References ...... 56

Annex ...... 64

Market and Policy outlook for renewable energy in euroPe and tHe ciS Foreword

renewable energy holds tremendous potential for increased deploy - ment in the europe & ciS region despite the fact that currently only a small percentage of energy is supplied by renewable sources of energy. in recent years numerous new laws, regulations, policies and incentives have been put in place to encourage increased investment in renewable energy. key drivers behind the push for increased renewable energy in the europe & ciS region include concerns about energy security and cli - mate change and realization of commercial opportunities. the costs of renewable energy technologies have substantially decreased over the past few years opening up commercial opportunities for private enter - prises and investors. Many countries in the region want to reduce their dependency on domestic and imported fossil fuels such as coal, gas, and oil. renewable energy offers excellent opportunities towards supply diversification and energy in - dependence. in addition, increased investments in renewable energy offer substantial opportunities for reducing greenhouse gas emissions.

investments in renewable energy in the europe & ciS region can be facilitated by de-risking the pol - icy and regulatory environment and removing institutional, financing and informational barriers . Suc - cessful de-risking leads to increased confidence and higher internal rates of return for investors. chal - lenges related to scarcity of capital and the inability of project developers to obtain financing are significantly reduced once de-risking has taken place. well designed renewable energy incentive schemes, policies and measures increase the uptake of renewable energy. a level playing field for re - newable energy and increased investment in renewable energy technologies also requires reduction of subsidies on fossil fuels which have been an enormous barrier, not just in this region but globally.

this report provides a market and policy analysis and outlook for renewable energy for the europe & ciS region. it describes and explains the linkages between policy development and renewable en - ergy deployment and examines the barriers to and opportunities for increased investments in re - newable energy. we hope that this report will contribute to a better understanding of the renewable energy market in the europe & ciS region; ultimately leading to increased investments in the sector.

Martin Krause undP, Senior global energy Policy advisor & energy and environment Practice leader for europe and ciS

4 Market and Policy outlook for renewable energy in euroPe and tHe ciS List of Figures andTables

Figures figure 1: cornerstone instruments and the risk and reward Structure of a renewable energy Project figure : lower and upper bound lcoe and feed-in tariffs for reS in Slovenia, ukraine and turkey figure : europe and the commonwealth of independent States region figure 4: absolute installed renewable energy capacity in Mw per country figure 5: Share of renewable energy to total installed electricity capacity (%) figure 6: total installed renewable electricity capacity in Mw in the region (green) and the rest of the world (blue) figure 7: technical renewable energy Potential in gw installed Power capacity by technology and country figure 8: yearly average Horizontal Surface radiation by country in kw-h/m² figure 9: the impact of financing costs on wind and gas Power generation costs in devel - oped and developing countries figure 10: technology Specific feed-in tariffs for renewable energy technologies by country in €/Mw-h figure 11: cornerstone instruments and the risk and reward Structure of a renewable energy Project figure 1: deployed biomass, Solar PV and wind Power capacity in Mw, 005 and 01 figure 1: legally binding Share of renewable energy Sources in gross final energy consumption by 00 figure 14: lower and upper bound lcoe and feed-in tariffs for reS in Slovenia, ukraine and turkey figure 15: lcoe for a wind Power Project before and after de-risking

Market and Policy outlook for renewable energy in euroPe and tHe ciS 5 Tables

table 1: capital cost and o&M cost estimates by technology in the u.S.a., 01

table : Some countries with the Most favourable renewable energy Promotion Policies

table : country risk indicator by country

table 4: feed-in tariff and feed-in Premium for renewable energy technologies in Slovenia

table 5: feed-in tariff for renewable energy technologies in ukraine

table 6: feed-in tariffs for renewable energy technologies in turkey

table 7: risk categories and their tailored Public de-risking instruments

Annex

table 8: implemented renewable energy related Policies

table 9: world bank indicators

table 10: opportunities to finance renewable energy Projects in the region

table 11: renewable energy investment opportunities in the region

table 1: assumptions for lcoe calculations

6 Market and Policy outlook for renewable energy in euroPe and tHe ciS Acronyms

adb asian development bank acn anti-corruption network for eastern europe and central asia ccgt combined cycle gas turbine ebrd european bank for reconstruction and development ec energy community eciS europe and commonwealth of independent States ecS energy charter Secretariat edb eurasian development bank eMra turkish energy Market regulatory authority eu european union fbiH federation of bosnia and Herzegovina fit feed-in tariff fyroM former yugoslav republic of Macedonia gef global environment facility gw gigawatt iea international energy agency iPcc intergovernmental Panel on climate change kw kilowatt kw-h kilowatt Hour lcoe levelized cost of electricity lcr local content requirement Mw Megawatt Mw-h Megawatt Hour nPV net Present Value oecd organisation for economic co-operation and development o&M operation and Maintenance PV Photovoltaic re renewable energy reS renewable energy Source roi return on investment rS republic Srpska SHPP Small Hydropower Plants SMe Small and Medium-sized enterprise trcc tradable renewable enery credits wacc weighted average cost of capital

Market and Policy outlook for renewable energy in euroPe and tHe ciS 7 Executive Summary

in the coming years, the worldwide deployment region. High dependency on imported tradi - of renewable energy technologies will increase. tional fossil fuels such as oil, coal and gas, and the international energy agency (iea) estimates concerns over energy security, focuses atten - that, by 05, power from renewable energy tion on further expansion of renewable energy (re) 1 will account for almost half of the increase sources (reS) in the region. removal of fossil in the global power generation, of which almost fuel subsidies will help to reduce the depend - half will be from wind and solar photovoltaic ency on fossil fuels. additionally, there is tremen - (PV) sources (ieab, 01). the share of re in the dous potential to exploit renewable resources, global power generation reached 480 gw in 01 and annual re investment In 2013, global investment in renewable amounted to $14 billion in 01 (ren energy was more than seven times higher 1, 01 and fS & uneP, 014). this is over seven times more than in 004, than in 2004. when investment amounted to $0 bil - lion (ren 1, 005). in 01, renewable energy such as wind, solar PV, biomass and small hy - technologies represented 4.6 percent of the dropower for electricity generation. for exam - new installed electricity power capacity (fS & ple, with almost 000 kw-h/m , turkmenistan, uneP, 014). a combination of recently imple - kyrgyzstan, tajikistan and uzbekistan have the mented re promotion schemes with increased highest annual average horizontal solar surface concerns over energy security, energy demand radiation in the region. despite that potential, and climate change, as well as a sharp fall in re the region’s share of renewable electricity power technology costs, has driven this development. capacity in 01, excluding large hydro power, unique geopolitical features give countries in was only .7 percent. excluding all hydro power europe and the commonwealth of independent capacity as a reS, in 01 the region only con - tributed around 16 gw to the world - In 2012, renewable energy made up wide non-hydro renewable electricity 3.7 percent of the region’s power capacity. power capacity. this represents a global share of . percent. the deployment of re capacity over the last decade, partic - States (eciS) specific incentives to further de - ularly solar PV and wind, is unequally distrib - velop diversified energy mixes including re - uted among the countries of the region. in con - newable technologies. the combination of very trast to existing re promotion schemes in many cold winters, inadequate and outdated trans - of the region’s countries, only some countries in - mission infrastructure and numerous energy creased their re power capacities. this report supply shortages makes energy a key determi - seeks to analyse the major barriers and related nant of socioeconomic development across the risks that inhibit re investment and deployment

1 Please note that this includes large hydropower and nuclear power. In this report, both forms of energy production are not deﬁned as renewable energy sources and are therefore excluded. 2 For the purpose of this report, the ECIS region consists of: Russian Federation, Ukraine, Moldova, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Armenia, Georgia, Azerbaijan, Turkey, Albania, Serbia, Former Yu - goslav Republic of Macedonia, Montenegro, Bosnia and Herzegovina, Croatia, Slovenia, Slovakia, Czech Republic, Poland, Hungary, Latvia, Lithuania, Estonia, Romania and Bulgaria.

8 Market and Policy outlook for renewable energy in euroPe and tHe ciS in the region. it also highlights which countries ing economies of scales due to expansion of have had most success with different types of re - technology deployment and increased compe - newable energy, highlighting their policies and tition. considering that expanding uncompeti - institutional set up as a means of creating links tive technologies requires expensive incentives between policies, financing and overall renew - for market players in the first place, a decrease in able energy deployment. technology costs is not a realistic alternative for countries with scarce public means. likewise, technology advances in some developed coun - Coherence between tries have already been reducing technology Renewable Energy Legislation costs substantially. and Deployment an alternative to reducing technology costs are compared to traditional energy sources, re policy de-risking instruments. these act to ad - power plants usually require a relatively high up - dress the underlying risks, which are the root front investment while having significant lower cause of the high cost of financing. Policy de- operation costs during their lifetime. the lev - risking instruments lower risks directly and con - elized cost of electricity (lcoe) is a concept to tribute to a reduction of required capital costs. compare all costs of a power plant during its renewable energy targets and prioritized ac - economic life by including instalment, mainte - cess of re to the electricity grid are the most nance and financing costs and normalizing them common policy de-risking instrument imple - over the total net electricity generated (Schwabe mented in the region. et al., 011). in some countries, the lcoe for specific renewable technolo - Compared to traditional energy sources, gies is already cost competitive com - RE power plants usually require a relatively pared to fossil fuel technologies (waiss - high upfront investment while having bein et al., 01). However, since re power plants are exposed to high up - signiﬁcant lower operation costs during front investment the high cost of eq - their lifetime. uity and debt for re projects in general, and in developing countries in particular, im - unlike policy de-risking, financial de-risking does pacts project profitability negatively and has a not tackle the risk itself, but rather transfers it to a significant bearing on the competiveness of re third party, for example development banks. low projects compared to fossil fuel alternatives. interest loans and loan guarantees are the region’s most common financial de-risking instrument. to increase the competitiveness of re, some governments have implemented or are imple - finally, policymakers have implemented vari - menting various re promotion schemes, essen - ous financial invective schemes to increase the tially through three different mechanisms: reward of produced renewable electricity in or - der to compensate for remaining incremental decreasing re technology costs to lower in - costs. tax rebates, equity grants, quota systems, stalment costs; feed-in tariffs, feed-in premiums and tender and decreasing financing costs of re power auction systems represent the most frequently plants; and adopted re incentive schemes in the region. increasing the reward for re generation to compensate for higher costs. Policy instruments may be combined to address various risks and barriers at the same time (fig - decreasing technology costs can be achieved by ure 1), which is referred to as cornerstone in - investing in technological progress and releas - strument (waissbein et al., 01).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 9 Figure 1: cornerstone instruments and the risk and reward Structure of a renewable energy Project t n

e feasible m

t renewable s e

v energy project n i n o n r u t e r unfeasible renewable energy project

risk of investment

financial incentive: Policy de-risking: feed-in tariﬀ, Prioritized acces to the electricity grid decreases risk related to planning insecurities if higher than the electricity price, financial de-risking: increases reward Power purchase obligations ensure risk transfer from project developer to utility

Source: Adapted from Glemarec (2011) and Waissbein et al. (2013)

analysing re deployment rates in the region However, they do not automatically explain over the last decade reveals that countries that differences in reS utilization. have recently adopted or do not have re pro - motion schemes have not recorded substantial growth in reS in the last few years. with the ex - Renewable Energy Related ception of ukraine and turkey, only european and Region-Speciﬁc union member states have increased their re Investment Barriers capacity considerably. whereas eu member states, turkey and ukraine showed an impres - instead of attributing the cause to a lack, or in - sive growth of non-hydro reS between 005 sufficient design, of re incentive schemes, the and 01, amounting to almost 15 gw, less analysis shows that the problem is embedded in than 0 Mw was deployed over the same pe - country-specific risks and barriers, which are re - riod in the rest of the region. this implies that sponsible for increasing technology and financ - aggressive re incentive schemes may have ing costs impeding private sector engagement been a necessary condition for re deployment. in re investment.

Aggressive RE incentive schemes may Market prospect and have been a necessary condition for RE governments policies to simulate investment deployment, but they do not automatically a lack of re targets in some central explain diﬀerences in RES utilization. asian countries is a signal to potential

10 Market and Policy outlook for renewable energy in euroPe and tHe ciS investors of relatively low commitment to re de - Cost of information and limited ployment. Some governments in central europe experience with RE have imposed retroactive changes to existing financial advisors’ lack of access to quality in - promotion schemes. according to iea, retroac - formation increases transaction costs, and fea - tive policy changes are considered a major bar - sibility studies of wind speed or water flow are rier to re investment, because they increase in - cost and time intensive. security, reduce predictability for the investor and therefore damage the investment climate Capital scarcity (ieaa, 01). a lack of equity and debt hampers investment and entrepreneurial activities. this problem in - Market distortions creases a project’s risk. increased risk means that Some countries in central asia possess large debt holders usually require higher shares of non-renewable energy resources, for example equity. oil and gas. cheap access to fossil fuels provides a disincentive to investing in renewable energy. Inadequate and outdated transmission Subsidized retail electricity prices are often too infrastructure low to make re competitive. Many countries in the region suffer from old and outdated electricity transmission infrastructure.this Access to the electricity market causes energy shortages, electricity cut-offs and in markets where state sector monopolies act as high distribution losses.the vulnerability of trans - a single vertically integrated energy company mission grids forces policymakers to cap additional responsible for generation, transmission and electricity capacity, which is often required for ad - energy supply difficulties in accessing the mar - ditional re installations. ket is impeding private sector participation. Political instability and country risk Concessions, permits and licences risk related to political insecurities is priced in by complicated, bureaucratic and oblique licence equity and debt holders. all countries covered in and permit processes increase transaction costs, the report are exposed to high political risks, delay returns and discourage investment. trans - according to oecd’s country risk indicator. parency in granting licences is essential in at - tracting private investors. if government deci - sions are unpredictable, investors face a higher De-Risking Renewable exposure to additional risks related to planning Energy Investment insecurities. typically, all of the risks and barriers mentioned Access to the electricity grid above can be addressed by public and financial as with licence granting, uncertainties and bu - de-risking instruments. for example, effective reaucratic red tape relating to grid connection public de-risking instruments are reliable re de - negatively influences re financing and installa - ployment strategies and targets, giving investors tions costs in some countries. planning security. effective policy not public de- risking measures function alongside financial de- Technology and supply chain risking instruments as loan guarantees or soft incomplete or poorly developed re supply (zero-interest) loans transferring remaining risks to chains and local infrastructure may prevent development banks and providing developers re deployment, particularly when re incen - with easier access to finance. correspondingly, tives are combined with the requirement to this can lower the lcoe significantly and either use locally-produced equipment in re instal - provides opportunities to lower existing incen - lations. tive promotion or helps to produce satisfactory re -

Market and Policy outlook for renewable energy in euroPe and tHe ciS 11 turns for investors.this has important im - Under certain conditions RE power plants plications for re deployment in the re - can already generate electricity at lower gion. due to increased energy prices and significant policy reforms, energy afford - costs compared to fossil fuel alternatives ability is already a major constraint in the even without promotion subsidies. region. during the last decade, the region has experienced a trend of raised house - not sustainable and threaten government budg - hold electricity tariffs that threatens its socioeco - ets significantly if international energy prices rise. nomic development (world bank, 01). given fossil fuel subsidies also prevent re from becom - that re incentive schemes either burden scarce ing a competitive and, if well-designed, a more af - public means or are correlated with increased fordable alternative. globally, several re projects household electricity prices, reward schemes com - have started in the recent past, demonstrating pensating investors for their higher risks should be that under certain conditions re power plants introduced only after the de-risking measures. in can already generate electricity at a lower cost addition, fossil fuel subsidies, which are intended than fossil fuel alternatives even without promo - to protect customers from rising energy prices, are tion subsidies (fS & uneP, 014).

Figure 2: lower and upper bound lcoe and feed-in tariﬀs for reS in Slovenia, ukraine and turkey

technology biomass Solar PV wind Small Hydro

Country Slovenia Ukraine Turkey Ukraine

lower bound lcoe .5 90.09 51.77 1.58

upper bound lcoe 18.8 51.01 176.9 66.81

feed-in tariﬀ 4.5 48.9 79.5 116.1

500 ) h

- 400 w M / r

u 00 e ( e o c

l 00 x a t - r e t f 100 a

0 biomass Solar PV wind Small Hydro

Source: Own calculations

3 Please refer to Annex Table 12 showing the underlying assumptions of the conservative and optimistic LCOE scenario.

1 Market and Policy outlook for renewable energy in euroPe and tHe ciS considering these risks and investment barri - and rural populations are particularly susceptible ers, the most favourable countries for re invest - to energy poverty, a major impediment to sus - ment in the region are currently Slovenia, turkey tainable and human development. increased en - and ukraine. Slovenia’s and ukraine’s feed-in tar - ergy prices are, therefore, of concern to poor and iffs outperform the upper bound lcoe for bio - vulnerable households and businesses. reward mass and small hydropower respectively, even schemes compensating investors for their higher when high financing and installations costs are risks are consequently a secondary alternative taken into account. the upper bound lcoe for for the region. solar PV in ukraine assumes a low capacity fac - tor of just 10 percent. yet plant sites located in ar - alternatively, electricity generation costs can be eas yielding more than 1,00 load hours would addressed using public de-risking instruments create enough return to decrease the lcoe for by either lowering policy risks or transferring fi - solar power under the current fit in ukraine, nancial investment risks. rather than increas - even when financing and instalment costs are ing the financial reward, those instruments can high. finally, turkey has proven in recent years help to reduce the substantial financing costs. that the current tariff is enough to satisfy in - this may also offer a potentially attractive alter - vestor requirements. in combination with a gov - native to fossil fuel subsidies, which are not sus - ernment target of deploying 0 gw wind ca - tainable and burden government budgets sig - pacity by 0, this produces to a relatively nificantly if international energy prices rise. stable and favourable investment climate. improved efficiency and lower technology costs mean that increasing numbers of onshore wind and solar PV power plants can now financially Conclusion out-compete fossil fuel alternatives even with - out subsidies; this is in cases where plants can be despite tremendous re potential, increasing en - built in favourable geographical conditions for ergy security concerns, and frequently adopted wind and sunshine load factors, as well as favourable re promotion schemes, only a few favourable financial conditions and low costs of countries in the eciS region showed consider - capital (fS & uneP, 014). However depending able deployment of renewable technologies in on individual countries’ energy markets, even recent years. rather than attributing this to inef - after effective de-risking direct financial incen - fectiveness or an absence of re incentive tives to make re investment competitive com - schemes, the analysis shows that the reasons for pared to other forms of energy generation may low re deployment are related to multiple in - still be required. financial instruments should di - vestment barriers and country-specific risks. the rectly address country-specific needs and im - resulting high costs to finance re projects (as pediments. the analysis shows that many coun - bank interest rates are much higher in this region than, for example, in Rather than increasing the financial reward, europe or the united States of amer - public de-risking instruments can help ica) is one reason for low re deploy - to reduce the substantial financing costs ment rates in the region. govern - ments have historically focused on of RE projects. reward-based incentive schemes to increase the profitability of re investment. How - tries experience difficulty in obtaining capital ever, re incentive schemes either burden scarce particularly equity. Hence, after effectively ad - public budgets or increase household electricity dressing risks and barriers, equity grant mecha - prices. in the eciS region, affordable energy is a nisms can help to close the equity gap, establish key determinant of socioeconomic development. entrepreneurial activity and rewards for poten - due to its location and climatic conditions, poor tially remaining incremental costs.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 1 Financial instruments should directly address anticipate increased re investment country-specific needs and impediments. in the coming years. other coun - tries show low deployment rates, despite the existing investment barriers, there is but some large projects are under development a rather positive trend for improved re invest - and specific investment barriers are starting to ment conditions in the region. the technical re be addressed.the combination of favourable ge - potential is substantial and the geopolitical situa - ographical conditions, constantly decreasing re tion in terms of energy security provides incen - technology costs and increased awareness makes tives for many countries to increase their own en - re technologies ever more attractive over tradi - ergy supply in the midterm. Some countries have tional ways of energy generation. this is likely to adopted or revised their re schemes and experts lead to more re deployment in the region.

14 Market and Policy outlook for renewable energy in euroPe and tHe ciS 1. Current Situation and Potential of Renewable Energy in the Region

1.1 Deployed Renewable region’s largest re capacity, sources its re power Energy Capacity almost solely from wind and small hydropower plants (SHPP). after turkey, six european union there is currently around 0,00 Mw installed re (eu) member states have the highest absolute power generation capacity in europe and the re deployment. in Poland, romania and Hun - commonwealth of independent States (eciS) gary, this is mostly from large wind and biomass which is the region analyzed in this report. 4 fig - installations. in the czech republic and bulgaria, ure 4 shows the absolute installed re power ca - solar PV capacity represents the largest renew - pacity in Megawatt (Mw). turkey, which has the able energy source.

Figure 3: europe and the commonwealth of independent States region 5

eStonia

ruSSian federation latVia

ruSSian fed. litHuania

belaruS Poland

cZecH reP. ukraine SloVakia kaZakHStan

SloVenia Hungary roMania

Serbia MoldoVa croatia bulgaria uZbekiStan georgia kyrgyZStan

boSnia turkey turkMeniStan & HerZ. albania taJikiStan Montenegro fyr of Macedonia arMenia aZerbaiJan Source: Own creation

4 This report defines RE as “electricity generation from biomass, solar PV, wind and small hydropower installations”. There is no internationally agreed definition of small hydropower (IEAa, 2012). This report defines SHPPs as “power plants not exceeding an installed capacity of 10 MW”. Large hydropower plants, if not particularly mentioned, were excluded as a renewable energy source due to its doubtful impact on sustainability and biodiversity. Geothermal power, commonly included as a RES, was also excluded, because of its current relatively low deployment rate in the region, the limited availability of resource assessments and relatively high installments costs. Only five countries (Russia, Estonia, Turkey, Hungary and Croatia) currently use geothermal sources for power production and installation costs amount up to $5,500 per 1 kW power capacity (Renewable Facts, 2013 and IRENA, 2013). In addition, it is environmentally critical that geothermal exploitation by drilling boreholes may release radioactive waste, primarily radium-226 and radium-228 (EPA, 2012). 5 The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 15 Figure 4: absolute installed renewable energy capacity in Mw per country n o i g e

r 4000 e H t n i 000 y g r e n

e 000 e l b a

w 1000 e n e r

f 0 o l s c y y a a a a a a a a a a a a a a a a e o n n n n n n d i i i i i i i i i i i i i i i r r l u v e a a a a a a n a t r n s n v k g n n n i n n n n r j b i a i t t t t t g k b o s i a a t r a r a v a a a a s s s s e r a e z o o l g e l a i i i t a u u d o g r e o t v v y o l u h l b u d r o n n k k l e s n l b k m r p m S e o i t o k g n o g h u e r P l r j c u e e l e b e e o r a t u a g t c e e b i S a e S a b y H r M r z z a z n t m l z r t k a k o h a e M u r k c o M u H e P t z & c d a i n n s a o b n o i t a

u Sources: Own creation t i S t n

e ukraine is the only country outside r Turkey has the region’s largest RE capacity r the eu apart from turkey with a ca - u

c and sources most of its RE power from wind pacity of above 500 Mw in re in - stallations, mainly due to significant and small hydropower plants. investment in wind energy and solar power. in 01, Montenegro, turkmenistan, with the highest relative share of re capacity azerbaijan and Moldova had less than 10 Mw are eu member states. turkey, with a share of installed re capacity. to increase comparability around 7 percent in renewable capacity, de - of re instalments between countries, the rela - creased from the first rank in terms of absolute tive re share of the total installed electricity ca - re capacity to the 10 th rank when considering pacity should be used. figure 5 shows that relative installed capacity. azerbaijan and russia have the lowest share of re deployment compared to total installed ca - on average, .7 percent of the installed elec - pacity. russia’s ranking fell from a middle posi - tricity capacity in the region originates from tion in absolute re installation to the second reS. figure 6 compares the region to the rest of last rank with just 0.1 percent re in total elec - the world. worldwide, only 15.6 gigawatts (gw) tricity generation capacity. changes in rank - (. percent) of the non-hydro re capacity is in - ing occur also among the top performers in stalled in the eciS region. including large hydro re power deployment. bulgaria and czech re - as a reS, the region’s share increases to 8.5 per - public show the highest relative re share with cent of the world’s total installed re capacity. both over 15 percent. all of the nine countries this is due to the significant installations of large hydropower plants in the region. for example, albania’s and tajikistan’s In the region some 3.7 percent, or around share of installed re capacity increases 20 GW installed capacity, to over 90 percent when taking large comes from renewable energy sources. hydropower into account. and the re -

16 Market and Policy outlook for renewable energy in euroPe and tHe ciS Figure 5: Share of renewable energy to total installed electricity capacity (%) n o i g e 0 r e H t n i

15 y g r e n

10 e e l b a w

5 e n e r f

0 o l s c y y a a a a a a a a a a a a a a a a e o n n n n n n d a i i i i i i i i i i i i i i i r r l u v e i a n a a a a a t r n s n v k g n i n n n n n n r j b i a t t t t t g k b o s i a a t r a r t a v a a a a s s s s a e r e z o o l g e l a i i i a u u d o g r e o t v v y o l u h l b u d r o n n k k l n e s n l b k m r p m S e o i t o k g o g h u e r P l r j c u e e l e b e e e o r a t u a g t c e e b i S a S a b y H r M r z z t a z n t m l z r k a k o h a e o M u r k c M u H P e t z & c d a i n n s a o b n o i t a

Sources: Own creation u t i S t n e

gion’s overall re share increases from .7 per - shown a trend of energy diversification away r r cent to 0.7 percent if large hydropower is taken from large hydropower. the combination of u c into account. nevertheless, due to a unique very cold winters, inadequate and outdated geopolitical context, recent decades have transmission infrastructure and numerous en -

Figure 6: total installed renewable electricity capacity in Mw in the region (green) and the rest of the world (blue)

15,000 15,600

including excluding Small and large Small and large Hydropower Hydropower

1,44,600 464,400

Sources: Ren21 (2013) and own creation

Market and Policy outlook for renewable energy in euroPe and tHe ciS 17 ergy supply shortages, makes

n Climate, geography, outdated infrastructure and

o the provision of reliable energy i

g dependency on fossil fuels make a compelling

e a key determinant of socioeco - r

e nomic development across the case for renewable energy in the ECIS region. H t region. High dependency on n i ergy potential. when measuring the technical y often imported traditional fossil fuels as oil, coal g

r and gas, and increased concerns over energy potential of wind energy, long-term average e

n security, make a compelling case for expansion wind speed is the crucial factor influencing the e e

l of reS. in 1980, total re capacity amounted to performance of a wind power plant’s electricity b

a over 70 gw stemming solely from large hy - output. for example, the wind atlas of kaza - w

e dropower (eiab, 01). by 01, the total bio - khstan, which was developed with support from n e

r mass, wind and solar PV electricity capacity in undP-gef, defines a value of long-term wind f

o the region was over 15 gw. speed less than 6 metres/second as poor, and l

a higher than 9 metres/second as exceptional i t

n (kea, 011). e t 1.2 Renewable Energy Potential o P russia and tajikistan have the greatest potential d

n figure 7 demonstrates the re potential, in gw, of for small hydropower exploitation. all countries a

n technical deployable re power capacity. 6 tech - with large SHPP potential already exploit this o i

t nical Potential is defined by the iPcc (007) as reS. except for turkey, however, none of the a u

t the amount of re that is potentially obtainable high potential is exploited in capacities ex - i S when already demonstrated technologies or ceeding 1 gw. russia also exceeds other coun - t

n 7

e practices are fully implemented. because of its tries in technical solar PV potential. turkey and r

r size, russia has over 50 gw possible exploitable kazakh stan follow with over ,500 gw potential u c biomass potential. Poland and ukraine are next, solar installations. again, the three most prom - both with over 0 gw. However, except for ising countries for solar applications have very Poland, the countries with the highest potential little or no solar technologies installed. using do not have any or very little biomass capacity in - power capacity as an indicator of technical so - stalled. Poland and kazakhstan have by far the lar potential might be misleading, though. the power capacity of a plant assumes per - fect conditions in terms of sunshine Poland, Turkey and Ukraine, three hours, the‘fuel’ of solar PV installations. countries with high wind power potential, therefore, the numbers in figure 7 dif - ferentiate only in the landmass that is have started exploiting that potential technically suitable for solar power in recent years. plants and do not indicate how much electricity can be produced, because greatest potential for wind energy. Poland, solar radiation is exposed to large region spe - turkey and ukraine, three countries with high cific variations. this, in turn, affects the electric - potential, have started exploiting that potential ity output and the return of the solar power in recent years. However, kazakhstan, belarus plant. in other words, a 1 Mw solar power plant and russia have not yet unlocked their wind en - will produce more electricity in turkey than in

6 Please note that Figure 7 includes only countries with a technical potential larger than 1 GW (for biomass and SHPP), larger than 10 GW (for wind), and the 15 countries with the highest technical potential (for solar PV). 7 Note due to illustrative reasons the technical solar PV potential for the Russian Federation is cut at 5,000 GW. However it is ca. 22,000 GW.

18 Market and Policy outlook for renewable energy in euroPe and tHe ciS Figure 7: technical renewable energy Potential in gw installed Power capacity per technology n and country o i g e r e H

biomass wind t n 60.00 800.00 i y g r 600.00 e n e e l

40.00 400.00 b a w e n

00.00 e r f o

0.00 – l a i s s c c y y y a a a a a a a a a a a e e n n n d d i i i i i i i i i i i i i r l l u u e e t a a a r t n n s s n n k g n n n n r r j b i i a t t k k b b s s i a a r a a r a a a a a a s s a r r a o l l g n l l a i u u u u o g r r e o t v u l h u u o r o n e e s n b k k m m r r p p S e e o t t k h u r P P l c u e b b e e e o o t u u a g t e b i S H r r r r z z m l a o k h h a r k c c P u e e t z z c c d n a n o i

Solar Small Hydro Power t 5,000.00 40.00 a u t i S

4,000.00 t 0.00 n e r

,000.00 r

0.00 u c ,000.00

10.00 1,000.00

– – s y y y a a a a a a a a a e e n n n n n n n n n n n d d i i i i i i i i i r u e e a a a a a a a a a a a r n n s s n n g g n n n r j b i i a t t t t t t t t t t k k s s i a r r a a r a a a a s s s s s s s s s s a r a r l l g l a i i i i i i u u g r r e o o z z l h h b u u o o n k k k k e n n l b k k m m r r S e e y y i i t t k k u r P P j j u e e b e e o o a g g u u a a g g a b a a r r b b H r r z z z t t m m z z y y a a k k a k k u u r r k k u u t t

Sources: Own creation 8

Poland, where the average radiation is lower. potential. it should be noted, though, that av - figure 8 shows average yearly horizontal sur - erage values may be misleading in general, be - face radiation per country measured in kw- cause solar resources are exposed to site-spe - h/m². the figure demonstrates that solar potential is especially high in central asia, caucasus and southern europe, The three most promising countries for whereas northern europe, for example solar applications have little or no solar the baltic countries, appears to have less technologies installed.

8 The technical solar potential is estimated by using Hoogwijk & Graus (2008) and Hoogwijk (2004) average land use factors for centralized solar PV installations and JRC’s (2011) assumption that 1 KW installed capacity requires a surface of 6.6 m². This equalizes an average conversion eﬃciency factor of ca. 16 percent.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 19 Solar energy potential is particularly high amount up to $ per kw n

o and variable o&M costs up to i

g in Central Asia, Caucasus and southern Europe.

e $16 per kw-h (eia, 01b). r

e this is significantly higher H t cific factors, for example microclimates, which than for re power plants, which show only mar - n i

y show a wide discrepancy in the potential ca - ginal fixed and no variable o&M costs (eia, g

r pacity output (irena, 01). 01b). it is interesting that according to irena e

n (01), SHPPs in europe and central asia have e e

l significant lower instalment costs (ca. 500 – b

a 1.3 Renewable Energy Legislation ,00 $/kw) compared to other regions, for ex - w e and Policies ample in the european union (ca. 1,400 to n e

r 6,600 $/kw). to enable cost comparability be - f

o compared to traditional energy sources, re tween the different technologies, all costs of a l

a power plants usually require a relatively high power plant during its economic life, including i t

n upfront investment, but have significant lower instalment, maintenance and financing costs, e t operation costs during their lifetimes (waiss - are normalized over the total net electricity o P bein et al., 01). table 1 shows capital costs generated (Schwabe et al. 011, waissbein et d

n and operation and maintenance (o&M) costs al., 01). this concept is called the levelized a

n for different electricity generating tech - o i

t nologies in the united States of america. a The LCOE compares electricity u t i generating technologies by taking into S for example, gas power plants in the t

n account all costs of a power plant during

e united States of america can reach cap - r

r ital costs under $1,000 per kw installed its economic life and normalizing them u c capacity. but fixed o&M costs can over the total net electricity generated.

Figure 8: yearly average Horizontal Surface radiation per country in kw-h/m²

000

1500

1000

500

0 s c y y a a a a a a a a a a a a a a a e o n n n n n n n d i i i i i i i i i i i i i i r r l u v e a a a a n a a r t n o n v k g n n n i n n n n r j b i a i t t t t t g k b o i a a t r a r t a v a a a a s s s s s r a e e o o l g e l a i i i a u d o g r e o t a v z v o l u l h b u d o r n r n k k l e s n l b k m p m S e y o i t o k o g h u e r P l r j c e u e e l e b e e o a t g u a g t c e e b i S a S d r a b H r M r z z a z n t m l z y e r a k o h a f k e u M r k c f M n u H e o t a z i & s c r s a y i u f n r s o b

Sources: Own creation

0 Market and Policy outlook for renewable energy in euroPe and tHe ciS Table 1: capital cost and o&M cost estimates by technology in the u.S.a., 01 n o i

technology ca pital cost fixed o & M Variable o & M g e

$/kw 9 $/kw $/kw-h r e H coal ,94 - 6,599 1.18 - 80.5 4.47 - 9.51 t n i y

gas 917 - ,095 7.04 - 1.79 .7 - 15.45 g r e n

biomass 4,114 - 8,180 105.6 -56.07 5.6 -17.49 e e l

geothermal 4,6 - 6,4 100 -1 0 b a w

Hydro ,96 - 5,88 14,1 - 18.00 0 e n e onshore wind ,1 9.55 0 r f o l

oﬀshore wind 6,0 74 0 a i t n

Solar PV ,87 - 4,18 4.69 - 4.75 0 e t o

Source: Adapted from EIA (2013b) P d n a 10 cost of electricity (lcoe). figure 9 shows the in the case of default, the cost of equity is higher n o i

lcoe for a wind and gas power plant in the de - than the cost of debt, thus increasing financing t a veloped and developing world. considering the costs. the problem is exacerbated in low in - u t i entire life time of a plant, the figure shows that come countries, which often have higher costs S t in a developed country wind power plants are of equity and debt than developed countries. n e r almost cost competitive compared to gas irena (01) estimates the reasonable r 11 u power plants. However, in developing coun - weighted average cost of capital (wacc) for c tries the lcoe of a wind farm is significantly re projects in africa at between 15 percent and higher than for the gas power plant. this is due 0 percent. this is significantly higher than the to the impact of the high upfront investment on wacc for re projects in oecd countries, where the financing costs. in the developing country it typically ranges between 6 percent and 1 scenario, the relatively high in - stalment costs for re projects Developing countries usually have higher costs impact project profitability neg - of equity and debt than developed countries. atively due to a higher cost of equity and debt. generally, re projects often percent. consequently, capital-intense invest - have higher financing costs due to concerns ment in developing countries is relatively un - on how the grid will manage intermittent re attractive, which – because of the long term supply (waissbein et al., 01). debt holders character of re investments – may have a sig - usually require a higher share of equity the nificant impact on the competiveness of re higher they perceive the risk of the underlying projects compared to fossil fuel technologies investment. due to the seniority nature of debt (waissbein et al., 01).

9 Please note that financing cost, for example fees or interest during construction, are not included in the table. 10 There is no generally applicable definition for LCOE. In this paper the LCOE is calculated from the perspective of a private financial investor. Hence the LCOE is defined as “the production-dependent income required to achieve a zero net present value (NPV) of the equity share of the investment outlay, and the sum of all years’ discounted after-tax cash flows” by using the nominal after-tax return on equity as a discount rate (Schwabe et al., 2011). 11 The WACC is defined as the sum of cost of equity and debt, of which each is weighted by its particular share on total capital. It therefore reflects the opportunity cost of all capital, debt and equity, which is invested in a project or enterprise.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 1 Figure 9: the impact of financing costs on wind and gas Power generation costs in developed n

o and developing countries i g e r e H t n i

y . g ) r h - e w n 1 e M 1.8 0.6 / s e

t 0. 0.

l 0.9 n .4 e b 0.9 c a d w S 1.1 e u 0.8 (

n 4.5 e .9 e o r c l f

x .9 .9 a o t - l e r

a 0.7 0.7 P i t n

e wind gas wind gas t

o (onshore) (ccgt) (onshore) (ccgt) P

d developed country developed country n a cost of equity = 10% cost of equity = 18% n

o cost of debt = 5% cost of debt = 10% i t a u t i

S financing costs (equity) financing costs (debt)

t operating costs (including fuel costs) investment costs/depreclation n e r r u c Source: Adapted from Waissbein et al. (2013)

as shown in figure 9, the competitiveness of re expanding uncompetitive technologies requires technologies can be increased through three incentives for market players in the first place. mechanisms: Historically, some leading developed countries with sufficient means enforced widespread in - decreasing re technology costs to lower in - centive schemes to create a technology push, stalment costs; which led to a substantial fall in the technology decreasing financing costs of re power costs of some re technologies (lilliestam et al., plants; and 01). in germany, for instance, the financial in - increasing the reward for re generation to centives for solar PV electricity during the last compensate for higher costs. decade triggered massive solar PV expansion.the market for solar modules increased, which re - leased economies of scale and investment in tech - 1.3.1 DecreasingTechnology Costs nological advancement. as a result, the average retail price for solar modules in germany fell an - decreasing technology costs can be achieved by nually by 15 percent from almost €5/watt in 006 investing in technological progress and releas - to below €/watt in 01 (fraunhofer iSe, 014). ing economies of scale, cost decreases due to increased technology deploy - ment and market effects, for example In Germany, incentive-driven technology increased competition.yet this approach reduced prices of solar modules by over is rather cost intense considering that 60 percent between 2006 and 2013.

Market and Policy outlook for renewable energy in euroPe and tHe ciS but germany’s re promotion was financed by Policy De-risking Instruments serve as a tool n higher electricity bills for retail customers. in 01, to address the root of high financing costs, the o i g an average german household paid almost 0 underlying risks. Hence policy de-risking instru - e r percent or €0.05/kw-h of the retail electricity ments lower risks directly and contribute to a re - e H price (0.9 eur/kw-h) for re incentives (fraun - duction of required capital costs. indeed, policy t n 1 i

hofer iSe, 014). in the eciS region, affordable de-risking usually requires some time to reveal y g energy is a key determinant of so - r e cioeconomic development. due to its n e

Policy de-risking instruments serve as a tool e location and climatic conditions, poor l b and rural populations are particularly to address the underlying risks and causes a w susceptible to energy poverty, a major of high financing costs. e n e impediment to sustainable and hu - r f

man development. for this reason, a decrease in a positive effect. However, by directly addressing o l technology costs by widespread and cost-inten - the risk, it is considered to sustainably reduce a i t

sive incentive schemes is not a realistic alternative the lcoe. the two most commonly imple - n e for countries in the region. Similarly, technology mented policy de-risking instruments in the re - t o pushes by some developed countries decreased gion are: P d technology costs substantially. between 009 and n a

014, the lcoe of onshore wind worldwide fell by Renewable Energy Targets n o i some 15 percent, and by around 5 percent for t a u

crystalline silicon PV systems. Shrinking technol - with re policy targets, government commit to t i ogy costs brought a fall in the total investment in reaching a specific share of re during a deter - S t n solar PV worldwide in 01. from 01 to 01, mined time-frame. if a government commits to e r total investment in solar PV fell by per cent to a specific target of re utilization, investors may r u $104 billion, but more new solar PV capacity was interpret this as the ambition of the government c installed worldwide in 01 (9 gw) than in 01 to pursue an energy strategy that encourages (1 gw) (fS & uneP, 014). the use of reS. this increases planning security, which usually reduces the risk of an underlying investment. therefore, re targets may help to 1.3.2 Public De-risking Instruments reduce risks related to planning insecurity and the cost of capital. of 9 countries in the region, rather than decreasing technology costs, the have pledged specific re targets. 1 lcoe of re projects can also be addressed by re - ducing the financing costs. financing costs can Priority Access to the Grid be decreased by if investors perceive uncertainty regarding elec - reducing the risk category itself through pol - tricity grid connection, they have to price the icy de-risking; or probability of a failing grid connection in their transferring the risk from an investor to a cost of capital. therefore, policymakers may pri - third party, referred to as financial de-risking. oritize re installations in grid connection over

12 It should be noted that the main incentive instrument for RE in Germany, a feed-in tariﬀ, is often blamed for the increased retail electricity prices. But this is only partly correct. The RE reallocation charge for customers increased by €0.063/kW-h from 2000 until 2013, compared to the retail electricity price which increased by €0.14/kW-h in the same period. Moreover, the merit-order eﬀect of RE squeezed wholesale electricity price traded at the stock exchange. Yet utilities have not passed price decreases on the stock exchange, induced by increased renewable electricity generation, to the end customers (Fraunhofer ISE, 2014). 13 For a detailed overview of RE targets in the region, please refer to chapter 2.1.or to Annex, Table 8.

Market and Policy outlook for renewable energy in euroPe and tHe ciS other power plants. this increases the probabil - growth fund provides direct and indirect fi - n

o ity of receiving a connection to the electricity nancing through financial intermediaries for i g

e grid and lowers the cost of capital. 16 countries small scale re projects usually not larger than r 15 e in the region prioritize re in access to the elec - €50 million (ggf, 01). H t tricity grid. 14 n i

y Loan Guarantees g

r as opposed to policy de-risking, financial de- e

n risking does not imply tackling the risk itself, but with a loan guarantee, a third party assures a e e

l transfers it to a third party, for example to a de - lender that it will cover the credit taker’s debt in b

a velopment bank. financial de-risking instru - full, or partially in the case of default. this re - w

e duces the default risk of the credit n e

r taker and therefore the cost of

f Financial de-risking instruments do not tackle

o capital. the advantages of loan l

a the risk itself, but transfer it to a third party. guarantees are that they provide i t

n borrowers with easier access to e t ments are not considered sustainable, because finance. Similar to low interest loans, loan guar - o P the underlying risks are not actually eliminated. antees serve to increase investment attractive - d

n but they function relatively quickly and effec - ness. However, cash payments by the warrantor a

n tively. the following financial de-risking instru - only occur in the case of default. for example, o i

t ments are the most commonly available in the ebrd offers loan guarantees in almost every a u

t region. country of the region. i S t n

e Low Interest Loans 1.3.3 Direct Financial Incentives r r u c low interest loans are loans claiming an un - even in a low risk environment, the lcoe may commonly small amount of interest and are in - not be reduced sufficiently to make re invest - dicated to reduce a project’s cost of debt. they ment profitable. the lcoe reflects all costs over serve to increase the investment attractiveness the economic life of a power plant from the per - of projects or branches where investment, due spective of a private investor. Put differently, it to high interests, would not occur otherwise. reflects the minimum electricity price that is re - development banks, such as the eurasian de - quired to be obtained, assuming several vari - velopment bank (edb) or the croatian bank for reconstruction Direct financial incentives increase rewards to and development, offer low in - terest loans for re projects. a va - compensate for remaining incremental costs. riety of international financial in - stitutions offer loans to market conditions for re ables such as the cost of equity and debt or pro - investment. the european bank for reconstruc - duction estimates, to achieve a zero net Present tion and development’s (ebrd) Sustainable en - Value (nPV) investment. this means that, in an ergy facilities provide financing through local in - ideal world, with all estimated parameters being termediary banks to re developers in belarus, perfectly forecasted, a power plant that is eligi - bulgaria, armenia, kyrgyzstan, Moldova, Poland, ble to obtain the lcoe per produced electricity romania, russia, Slovakia, turkey, ukraine and unit over the predicted lifetime, would just cre - the western balkans (ebrd, 01). the green ate as much return on equity as required by the

14 For a detailed overview in grid access and country examples, please refer to chapter 2.4 and Annex, Table 8. 15 For a detailed overview of ﬁnancing opportunities, please refer to Annex, Table 10.

4 Market and Policy outlook for renewable energy in euroPe and tHe ciS equity holder to execute the investment. due to for example, ebrd’s kyrgyz Sustainable en - n the concept’s construction, cost of equity and ergy financing facility provides up to 15 per - o i g debt are positively related to the lcoe. a high cent of its loans for re projects as a grant e r 17 cost of capital increases the lcoe, and vice versa. (kyrSeff, 01). grants do not only serve as e H if debt and/or equity holders require very high a financial incentive, but also help to reduce fi - t n i

returns, due to high perceived risks for example, nancing costs. grants provide project devel - y g policymakers may increase the reward to com - opers with‘free’ equity. this lowers the cost of r e pensate for remaining incremental costs. the equity and, due to the cheap increase of the n e e

following direct financial incentives for re proj - equity share, the cost of debt. l b ects are the most common in eciS. a w

Quota Systems e n e

Tax Rebates r f

in quota regulations, an authoritative body o l tax rebates are direct financial incentives that obliges electricity generators to produce a a i t

reduce the tax liability that would otherwise fixed amount of renewable electricity annu - n e apply to project developers. generally, they can ally. in order to give electricity generators the t o be based on project costs or project outputs opportunity to ‘outsource’ their re obligation, P d

(uneP, 01). for example tajikistan’s custom quota obligations are often combined with n a and tax codex ensures exemption from cus - tradable renewable energy credits (trec), n o i toms’ duties and Vat for imported materials usually issued in trec/Mw-h (uneP, 01). con - t a u

and equipment as well as exemption from profit sequently, electricity generators can either pro - t i tax, land tax, capital facility tax and social tax for duce renewable electricity themselves, or buy S t n employees during the construction process. certificates from re power plants. one Mw-h of e r

Moreover, independent SHPPs are exempt from renewable electricity generates two cash in - r u the water royalty tax (republic of tajikistan). flows for re plant operators: the obtained price c Some countries in the region have generally on the produced electricity and, additionally, low tax regimes designed to incentivize invest - the price for one trec. Prices for trecs are usu - ment. for example, Moldova charges 1 per - ally determined on a market. However, state cent corporate income tax, while that figure is authorities often define minimum and maxi - 10 percent in former yugoslav republic of mum price boundaries to limit volatility. ro - Macedonia (fyroM). mania, Poland and albania are the only coun - tries in the region that have a quota system Grants implemented. in romania, the re quota in - grants are direct financial in - Grants not only serve as a direct financial centives usually in the form incentive, but lower the costs of equity and debt. of cash payments provided to the project developer at the beginning of the project. grants are gen - creases every year. it started at 14 percent in erally available in only nine countries in the re - 01 and will increase to 0 percent in 00 gion: kyrgyzstan, Moldova, estonia, romania, (republic of romania, 008). in Poland, the bulgaria, czech republic, Slovakia, Hungary quota amounted to 1 percent in 01 and and Slovenia. 16 Some are available for investors will increase to 0 percent by 01 (reslegal, in general, others are related to re investment. 01). in albania, the law on Power Sector re -

16 For a detailed overview of available grants please refer to chapter 2.7 and Annex, Tables 8 and 10. 17 Annex, Table 10, provides all ﬁnancing opportunities (including grants) in detail.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 5 Figure 10: technology Speciﬁc feed-in tariﬀs for renewable energy technology per country n 18 o in € / Mw-h i g e r e H

t biomass wind n

i 50 150 y g

r 00 e n

e 100

e 150 l b a

w 100

e 50 n e

r 50 f o

l 0 0 a i s s c c y y y y a a a a a a a a a a a a a a a a S S e e o o n H H i i i i i i i i i i i i i i i i i i r r r r i i l l u u e e r r a t t n n t v v k k n n n n n n n n r r j b b i i a a g g b b k k b b i a a t t r r a a a a a a r e a e a e e r o o g g f f e e l l a a a n u u o o r r e e v v v v u u u u d d r r n n n n l l e e b k k p p m m S S o o e t t o o h h e e r l l r r c c u u e e l l b b e e t t u u t t c c e i i S S t S S a a H H r r a a z n n l l o o h h o a M M c c f f P M M e e o o z z c c r r d y y n f f a n o i Solar Small Hydro Power t

a 400 00 u t i S

t 00 150 n e r r

u 00 100 c

100 50

0 0 s s c c y y y y a a a a a a a a a a a a a a a a S S e e o o n H H i i i i i i i i i i i i i i i i i i r r r r i i l l u u e e r r a t t n n v v k k n n n n n n n n r r j b b i i a a g g b b k k b b i a a t t r r a a a a a a a e r e a r e a o o g g f f e e l l a a a u u o o r r e e v v v v u u b u u d d r r n n n n l l e e l b k k p p m S S o o t t o o h h e e r l l r c c u u e e l l b b e e a t t u u t t c c e i i S S S S a H H r r a a z n n l l o o h h a M M c c f f M M e e o o z z c c r r y y f f

Sources: Own creation

quires energy producers with an installed ca - Feed-in Tariffs and Feed-in Premiums pacity higher than 50 Mw to produce a quota of at least percent of their annual electricity this report defines feed-in tariffs (fit) as fixed output from reS. However, since the adoption cash per kw-h payments determined by an of the law no new thermal power plant has administrative body and generally available been commissioned and therefore the law has for eligible energy producers. a feed-in pre - not yet been implemented in practice. mium (premium) is a cash payment per kw-h

18 Please note that this figure has only limited comparability. The levels of respective FiTs reflect the highest possible amount that can be received for the specific RE technology. Each country has various differences in the conceptual design of FiTs, for example different amounts for different plant sizes.

6 Market and Policy outlook for renewable energy in euroPe and tHe ciS Feed-in tariffs are fixed cash per kW-h payments, and represent a costly long- n

term state commitment. as o while a feed-in premium is a cash payment i g

a result, policymakers may e per kW-h based on an underlying value. r not have control over re de - e H ployment rates. in addition, t n i

based on an underlying value (usually the high deployment may need substantial in - y g electricity price) and is subject to variations. vestment in the electricity grid. r e

Premiums are also determined by an admin - n e e

istrative body and are generally available for Tender and Auction System l b eligible energy producers. fits only provide a w direct financial incentives if the determined in a tender or auction system, project devel - e n e electricity price exceeds the tariff for electric - opers bid for the right to sell electricity at a r f

ity obtained on the market or by the regulator. defined price over a determined period of o l

However, ignoring the tariff level, they offer a time (uneP, 01). in other words, tenders and a i t

stable return of cashflow. So a fit may also re - auctions differ from fits and premiums in the n e flect a hedge against the risk of price fluctua - determination of the electricity price. in a ten - t o tion, which usually has a positive effect on der process, the price is defined by the lowest P d the cost of capital. fits are the most com - bidder. instead of determining the price ad - n a monly adopted re policy instrument in the ministratively, lithuania requires wind, bio - n o i world, and are implemented by 99 countries mass, hydro and solar project developers to t a u

(ren1, 01). the picture in the region is sim - participate in a tender-based auction system t i ilar, since almost all countries in the region if the plant capacity exceeds 10 kw (reslegal, S t

19 n have adopted a fit legislation. a premium 01). auctions and tenders are often used e r scheme is implemented in estonia. Some to control the quantity of installed power ca - r u countries also offer eligible electricity pro - pacity and reduce policy costs by using mar - c ducers the choice between fits and premi - ket-integrated incentives (fS & uneP, 01). in ums, for example the Serbian entity in bosnia 01, russia approved a capacity-based ten - and Herzegovina, republic Srpska, or Slovenia der scheme. the first capacity tender took and the czech republic. place in September 01 and around 100 Mw of wind projects and 400 Mw of solar projects in addition to technology-specific fits, proj - were auctioned. in 015, Poland plans to re - ect-specific fits see the tariff separately ne - place its current quota system with a com - gotiated between the project developer and petitive auction system. the regulating authority for each project. kazakhstan, kyrgyzstan, tajikistan, uzbekistan, Cornerstone Instruments Moldova and georgia (only for SHP) have proj - ect-specific fit implemented. in georgia, the when various policy instruments are com - renewable energy State Program offers hy - bined to address underlying risks and barriers dropower plants of up to 100 Mw power pur - at the same time, they are referred to as a cor - chase obligations with the transmission op - nerstone instrument. for example, fits are fre - erator for 10 years with a tariff negotiated quently combined with priority access to the with the georgian national energy regula - electricity grid and power purchase agree - tory commission (ecS, 01). a drawback of ments. the latter are requirements of energy fits is that they require steady institutions utilities to purchase the produced electricity

19 Russian Federation, Turkmenistan, Estonia, Romania and Poland have not adopted a FiT legislation.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 7 by eligible power producers. in this case, the 1.4 Renewable Energy n

o risk of volatile electricity prices is transferred i Deployment and Growth g

e to the utilities, representing a financial de- r

e risking instrument. the fixed cash payments, to elaborate further on the coherence between H t if they exceed the market electricity price, re incentive schemes and re deployment rates, n i

y this chapter compares re deployment g

r When policy instruments are combined levels between 005 and 01, because e

n most re incentive schemes have been e to address underlying risks and barriers e

l adopted since 005. figure 1 shows

b at the same time, they are known a the levels of re deployment in 005 and w

e as a cornerstone instrument. 01. in addition, a black line represents n e

r the year in which a particular re incen - f

o provide developers with direct financial in - tive scheme was implemented. for example, be - l

a centives. Priority grid access reduces policy tween 005 and 008 Poland’s biomass capac - i t

n related risk (waissbein et al., 01). ity grew only by around 40 Mw. in 008, Poland e

t adopted a quota scheme promoting electricity o P table shows countries with favourable re pro - produced from biomass installations. as a re - d

n motion polices, including incentive schemes as sult, capacity grew in just four years to almost 1 a

n well as policy and financial de-risking instru - gw in 01. Similar trends can be seen in czech o i

t ments. chapter 1.4 considers whether the adop - republic, Hungary and Slovakia. all countries a u

t tion of re incentive schemes have led to re de - showing a significant biomass deployment be - i S ployment. tween 005 and 01 are eu member states. t n e r r u c Figure 11: cornerstone instruments and the risk and reward Structure of a renewable energy Project t n

e feasible m

t renewable s e

v energy project n i n o n r u t e r unfeasible renewable energy project

risk of investment

Source: Adapted from Glemarec (2011) and Waissbein et al. (2013)

8 Market and Policy outlook for renewable energy in euroPe and tHe ciS Table 2: Some countries with the Most favourable renewable energy Promotion Policies 0 n o i

country Policy de-risking instruments financial de-risking direct financial incentives g e

instruments r e H t

Belarus Prioritized access to the Public loans and loan the highest fit for wind and one n i

electricity grid guarantees available of the highest fit for solar PV y

and SHP power plants in the g r region; e n e

tax rebates on re investment e l

available; b a

complimentary access to the w e

electricity grid n e r f

Croatia committed to a binding re share Public loans, low one of the highest fit in the o l

via eu directive 009/8/ec interest loans and loan region for solar PV, SHP and a i

guarantees available biomass power plants t n e t o

Bosnia committed to a binding re share Public loans and loan fit legislation adopted in both P

and Herze - via eu directive 009/8/ec; guarantees available entities: d n

govina Priority grid access for re power in fbiH, the fit is the second a n

plants in republic Srpska (rS) highest for small scale solar PV o i

and the federation of bosnia and installations in the region; t a

Herzegovina (fbiH) u

feed-in premium in rS; t i S

tax rebates available t n e r

Ukraine committed to a binding re share Public loans and loan the highest fit for solar PV and r u

via eu directive 009/8/ec guarantees available SHPP; c tax rebates on re investment available

Turkey committed to a re target; Public loans and loan fit legislation adopted Priority grid access for re power guarantees available plants

Bulgaria committed to a binding re share Public loans fit adopted; via eu directive 009/8/ec and loan guarantees eu grants available available

Serbia committed to a binding re share Public loans and loan fit adopted; via eu directive 009/8/ec; guarantees available tax rebates available Priority grid access for re power plants

Romania committed to a binding re share Public loans, low Quota with tradable trec in via eu directive 009/8/ec; interest loans and loan place; Priority grid access for re power guarantees available eu grants available; plants tax rebates available

Source: Own creation

20 For a detailed overview of RE promotion schemes please refer to Annex, Table 8.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 9 Figure 12: deployed biomass, Solar PV and wind Power capacity in Mw 005 and 01 1 n o i g e

r 1000 500 e H t 800 000 n i y

g 600 1500 r e n

e 400 1000 e l b

a 00 500 w e

n 0 0 e r c c y a a a a a a e d i i i i i i i i r l l f r n n k k n n n i a b b a a a a a a a e l o g u u g r v v v u l o n k m p p o o l o h u P l l u l e e o t u b i S S S a H r r r l i h h t c c e e n z z e c c t o P

d biomass 005 biomass 01 Solar PV 005 Solar PV 01 n a n o

i 500 t a u

t 000 i S t

n 1500 e r r

u 1000 c

500

0 c y y a a a a a a e d i i i i i i i r l e t r n n v n n n i a k b a a t a a a r a o l g a u o g r t u l u r o n l s k m p t h u P c u e e o t u b i H r r l h c e z c

wind capacity 005 wind capacity 01

Sources: Own creation

in contrast, croatia’s biomass capacity grew by sioned in 006 in germany, an average lcoe of only 1.76 Mw since 007, despite favourable re slightly under €0.5/kw-h was estimated (bMub, incentive schemes. due to the relatively high 007). this was significantly higher than the re - instalment costs, the coherence between re in - tail electricity price of €0.18/kw-h for an average centive schemes and deployment is even german household (bdew, 01). investment in stronger for solar PV power plants. for example, solar PV was only profitable with a significant re for a 0 kw roof top solar power plant commis - incentive scheme, for example a fit with a re -

21 Only countries with installed biomass capacity exceeding 5 MW and with solar PV/wind capacity exceeding 200 MW respectively are presented in this ﬁgure.

0 Market and Policy outlook for renewable energy in euroPe and tHe ciS muneration equalizing the lcoe. the black line in 01. experts estimate that the adoption of n which represents the year in which the incentive fits will likely lead to an increase in investment in o i g scheme was implemented is not visible. that is re in the coming years (ewea, 01). Similarly, e r because czech republic, bulgaria, Slovakia and the government of kazakhstan adopted a new e H ukraine had no solar PV capacities in 005 or in re law in 01, replacing project-specific with t n i

the respective year, when the re incentive pol - technology-specific fits (republic of kazakhstan, y g icy was introduced. czech republic adopted a 01). the time-consuming characteristic of an r e fit in 006 resulting in over gw installed solar re project makes the comparison of re invest - n e e

capacity by 01. ukraine adopted a fit in 009. ment with power generation deployment diffi - l b almost 400 Mw installed solar PV capacity has cult. for example, ukraine showed $.8 billion re a w been deployed since then. in contrast, the fed - investment in 01, almost three times as much e n e eration of bosnia and Herzegovina (fbiH) has as in 011. this was largely due to the financing r f

one of the highest fit for small scale solar PV in - of ca. 1 gw of SHPPs and phase one of the $16 o l stallations and shows one of the highest solar ra - million botievo wind farm (fS & uneP, 01).this a i t

diation potentials (figure 8), but there has been will be reflected in deployed power capacity in n e no significant solar PV deployment t o to date. the findings are similar for P

All countries which experienced a significant d wind capacity development be - n increase in RE capacity did so having a tween 005 and 01. Poland, n o recently introduced incentive schemes. i turkey and romania implemented t a

u its re incentive schemes in 008 t i and deployed almost gw of wind capacity be - the coming years. Similarly, turkey showed $1. S t n tween 008 and 01. ukraine and croatia’s million investment in re, mostly in wind farms e r wind energy sectors grew by ca. 00 Mw since (fS & uneP, 01). in 01, uzbekistan ($00 mil - r u incentives were introduced in 009. between lion) made the fifth largest investment in re and c 011 and 01, ukraine’s private sector con - kazakhstan ($100) million the eighth largest in tributed 75 percent of the installed wind capac - non-oecd asia, excluding china and india (fS & ity delivered by the state in the previous decade uneP, 014). However, investment-construction (ecSd, 01). but belarus stagnated in terms of delays cannot be the only explanation for low re wind power plant deployment over the same utilization rates despite implemented re incen - time period despite offering the highest fits for tive schemes. this chapter examines several key wind energy in the region. findings. it should be noted that some countries have low re deployment does not inherently seem to be deployment rates to date, but some large proj - tied to the selection of a specific incentive ects are currently under development. examples scheme, and particularly not to fits. Poland, one include the development of the 110 Mw Pir - of the few countries in the region that has a shakul wind farm and 5 Mw absheron solar PV quota scheme implemented, showed by far the Park in albania, and a pilot 50 Mw wind power greatest absolute growth in wind and biomass plant in formeryugoslav republic of Macedonia capacity deployment. albania’s expiring sup - (ecSa, 01 & Seecn, 01). others have recently port scheme, which is only applicable for SHPPs adopted or revised their re incentive schemes. and has a concession-based competitive ten - for example Serbia adopted a new re promotion der process, led to commissioning of 90 Mw in -

22 Turkey adopted the ﬁrst version of the Law on Utilization of RES for the Purpose of Generating Electrical Energy in 2005. However, only in 2008 was the law was amended by the introduction of FiTs. In 2010, Turkey revised and increased its FiT promotion scheme, which remains applicable to the present (IEA & IRENA, 2014).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 1 stalled SHPP capacity between 010 and 011 wind power capacity increased by Mw during n

o (republic of albania et al., 01). it is estimated the same period. turkey’s fit for wind power in - i g

e that by the end of 01, $56 million has been stallations is $7/Mw-h, excluding potentially r

e invested into albanian SHPPs (ifc, 01). How - obtainable bonuses for local content inclusion. H t ever, and due largely to high technology costs, it is therefore higher than azerbaijan’s fit, which n i

y there is evidence that re incentive schemes is $57/Mw-h (ecSb, 01 & government of g

r have been necessary to compensate for rela - turkey, 011). at a first glance, it seems obvious e

n to argue that azerbaijan’s fit provides e e

l an inadequate reward for investing in

b Historically, evidence suggests that RE

a re. but in 01 the turkish average mar -

w incentive schemes have been necessary e ket electricity price ($77/ Mw-h) ex - n

e to compensate for relatively high LCOEs.

r ceeded the fit obtained for electricity f

o generated by a wind power plant (ort - l

a tively high lcoes. russia adopted its capacity ner, 014). this implies that in 01 the fit in i t

n scheme in June 01. the overall capital invest - turkey did not provide a direct financial incen - e t ment in clean energy between 000 and 011 tive compared to electricity sold through the o P amounted to (only) $895million. with this electricity market. taking into account turkey’s d

n amount, russia ranked second last of all significant deployment rate, it still seemed to be a

n clean energy Ministerial countries (deutsche at least as high as the lcoe for wind power in o i

t bank, 01). although incentives might have turkey and therefore enough to cover the re - a u

t been necessary to launch re deployment, they quired roi of investors in the turkish wind en - i S do not explain all differences in reS utilization. ergy market. azerbaijan’s fit for wind energy is t n

e in some countries, seemingly favourable legis - just too low to cover the lcoe for wind power r

r lation did not lead to enhanced re power ca - generation in azerbaijan. but that does not au - u c pacity. a good example to illustrate, that focus - tomatically imply that it is necessary to increase ing solely on incentive schemes might ignore azerbaijan’s tariff to the level of turkey’s. it rather the depth of the problem is found in a compar - suggests a focus on the cost drivers of the lcoe, ison of turkey and azerbaijan. turkey’s installed in particular financing costs from higher per - wind capacity grew by almost gw between ceived risks, to reduce azerbaijan’s lcoe towards 008 and 01 (wwea, 01). but azerbaijan’s the level of the current fit.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 2. Barriers to Renewable Energy Investment in the Region

2.1 Market Prospects ,000 Mw of solar PV capacity (Melikoglu, and Government Policies 01). russia aims that 4.5 percent of pro - to Stimulate Investment duced and consumed energy should be pro - duced by re power plants by 00 (Ministry of together with the eu member states covered energy of the russian federation, 009). the in this report, energy community (ec) mem - russian energy forecasting agency estimates ber countries albania, bosnia and Herzegov - that reaching this target would require 14.7 ina, croatia, former yugoslav republic of gw of total new installed re capacity (ifc, Macedonia, Moldova, Montenegro, Serbia and 011). belarus plans that local fuels and re ukraine agreed on the implementation of eu shall have a share of not less than percent directive 009/8/ec and committed to a in energy production by 00 (ecSc, 01). binding share of reS in gross energy con - However, those targets are often rather vague sumption by 00 (ec, 01). turkey commit - formulated. also, a renunciation of the target ted to a 0 percent reS in power generation may be easier than for countries that agreed by 0, 0,000 Mw of installed wind and to eu directive 009/8/ec.

Figure 13: legally binding Share of renewable energy Sources in gross final energy consumption by 00

50%

40% 40% 40% 8% % 0% 8% 7% 5% 5% 5% 4% 0% 0% 17% 16% 15% 15% 14% 14% 11% 10%

0 c y a a a a a a a a a a a a a e o d i i i i i i i i i i i i r r l v n t r n n v k i n n n n n n b i a g b o a a t a r a v a a a e a o o l g e a u d o g r e t v v o l u l b d r o n n l s l k m p S o o o g h u e P l c u e l e e o a t u t c e b i S S H r M r z a n l r o h e M c f M H e o z & c r a y i f n s o b

Sources: Adapted from EC (2012)

Market and Policy outlook for renewable energy in euroPe and tHe ciS countries with no re targets show the weakest public, 01). this so-called solar tax led to the n

o commitment to a reliable re development strat - collapse of the czech solar PV market and al - i g

e egy. kyrgyzstan’s national energy Programme, most no additional solar PV deployment took r

e for example, officially recognizes environmental place in 011. that compares with almost 1.5 H t protection in the energy sector and the promo - gw additional installed capacity in 010 (eu - n i

t robserv’er, 01). Similar to the n

e Countries with no RE targets show the weakest czech republic, its neighbour, M

t the unexpected boom of Slova - S commitment to a reliable RE strategy. e

V kia’s solar PV market led to an n i tion of a new tariff policy. However, no specific adaption of legislation by decreasing the tariff y g

r targets have been set by the government (kyr - eligibility of solar installations (dojčanová, 011). e

n gyz republic, 008). the government’s commit - Many re investors are taking legal action against e e

l ment to promoting reS therefore remains un - these retroactive changes. in bulgaria, the b

a clear for investors. commitments of Supreme administrative court overruled the w

e governments toward re deployment are not grid usage fee, which forced solar PV power n e

r only communicated through re targets. in gen - plants commissioned between 010 and 01 o

t eral, legislation security is crucial, since retroac - retroactively to pay back up to 9 percent of S

r tive legislation changes harm the government- the fit to the grid operator. around €76 million e i

r investor trust relationship substantially in the collected by the grid and distribution operators r

a long term. uzbekistan, for example, ensures leg - had to be paid back to the plant operators b islation security for foreign investors over 10 (reslegal, 01). 4 years (undP et al., 01). unfortunately, some countries have enforced retroactive changes in even if retroactive changes are overruled, the re legislation. due to re promotion cost con - emerging planning insecurity as a result of leg - cerns, romania’s energy regulator anre sus - islation changes is expected to damage the in - pended the issuance of two trecs for solar vestment climate in the long term. according to power plants (until March 017), one certificate for wind (until december Policy uncertainty is the main barrier 018) and one certificate for SHP to investment in RE and was a major reason plants (until March 017) for plants commissioned before 1 January 014 for the drop in worldwide investment in RE. (rwea, 01). the government of czech republic revised its re law in 01. the re - the iea, policy uncertainties are considered to be vised law no longer offered tax incentives, but a the main barrier to re investment (ieaa, 01). tax for solar installations commissioned be - together with reductions in technology costs, tween January 009 and december 010 on the policy support concerns represented the major revenues of fit (6 percent) and premium (8 reason for the 14 percent drop in 01 from percent) between 011 and 01, (czech re - 01 of worldwide investment in renewable

23 In 2013, the tax regime was extended with a lower tax rate, 10 percent on the FiT and 11 percent on the premium. According to the last amendment by the Czech Parliament to the RE law (Regulation No. 310/2013) only plants commissioned until 31 December 2013 (except SHP) can receive the FiT. Wind, geothermal or biomass power plants with a maximum capacity of 100 kW and that hold a building permit issued before the amendment entered into force (2 October 2013), are eligible for support, but only if the plants will be commissioned before 31 December 2015. 24 However, in late 2013 the Bulgarian parliament adopted 20 percent fee on the revenue of wind and solar installations in 2014 following a proposal by the Budget Commission (Reuters, 2013). Bulgaria’s State Energy and Water Regulatory Commission currently proves the introduction of a new fee on transmission grid access for wind and solar power plants that are eligible to receive the FiT.

4 Market and Policy outlook for renewable energy in euroPe and tHe ciS power (fS & uneP, 014). the long-term nature such as czech republic, bulgaria and romania, n of project realization and amortization dispro - changed their promotion schemes retroactively o i g portionally exposes re investors to risks related after massive growth in re generating capacity. e r to planning insecurities. despite a diminishing that has caused ongoing damage to their local e H effect on re capacity deployment rates, one ap - re markets. countries with previously lower de - t n i

proach to avoid retroactive changes is the im - ployment rates, due to inherently capped de - t n plementation of deployment caps. govern - ployment rates, may be able to avoid retroactive e M ments may have incentives to slow down or changes. this could imply that countries with t S e limit new re instalments due to cost concerns or historically high re deployment rates and V n grid capacities. for example, the government of retroactive legislation changes will stagnate in i y g

formeryugoslav republic of Macedonia capped terms of re deployment, whereas countries with r e the overall installed capacity of privileged pro - historically lower re installation growth rates – n e e

ducers that are eligible to receive a fit (govern - due to implemented caps and profound de - l b ment of Macedonia, 010). the croatian trans - ployment plans – may expand re capacities a w

more sustainable over the coming e n e Retroactive changes in legislation should years. to increase the planning security r o

of investors, retroactive legislation t be avoided if investors’ planning security S

changes should be avoided. re promo - r e i is to be assured. tion schemes can include detailed de - r r

ployment plans, caps or a determined a b mission System operator HeP-oPS limited the gradual decrease of promotion over a longer installed capacity of new wind power plants at period of time which takes grid capacities and 60 Mw (krajacic et al., 01). estonia discon - cost increases into account. tinued its premium for wind power plants when a total electricity production of 600 gw-h/ is reached. it is important to state that the exis - 2.2 Market Distortions and Access tence of caps do not necessarily hinder invest - to the Energy Market ment. in latvia, which also implemented output caps, the fit caused a massive growth in com - Market distortions and access to the electricity missioned wind power plants, which increased market remain challenges in some countries. by almost 11 percent in 01 (wwea, 01). 5 Market distortions, for example subsidies for on the other hand, caps tend to inhibit invest - produced electricity from technologies other ment and re deployment, particularly when the than reS, are a particular problem in countries investment environment is favourable. in turkey, with large non-renewable energy resources, for single solar installations are capped to a maxi - example oil, coal and gas, and where electricity mum of 50 Mw and the total installed solar ca - prices are traditionally cheap and not cost re - pacity in the country was limited to 600 Mw flective. if the costs are directly transferred to until the end of 01. according to turkish electricity consumers, re incentive schemes en - newspapers, in the first half of 01, 500 com - tail an unpopular increase of retail electricity panies had submitted proposals of 9,000 Mw so - prices. as a result, governments are often reluc - lar PV capacity to the energy Market regulatory tant to promote re. according to the iea, global authority (eMra). this is 15 times as much as the fossil fuel subsidies are five times larger than cap of 600 Mw set by eMra for 01. regional the level of worldwide re incentives (ieab, 01). top performers in terms of re deployment rates, in 010, turkmenistan had the fourth largest

25 Despite deployment caps, Latvia’s FiT is on hold until 1 January 2016 for new installations and no electricity licences are granted for new installations (ResLegal, 2013).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 5 proven gas reserves in the world (world bank, a reducing – and, therefore, beneficial – effect on n

o 014). natural gas is almost the only source for low income household’s energy bills (waissbein i g

e power generation. retail electricity tariffs are et al., 01). r

e very low, not cost reflective and subsidized. de - H t spite enormous potential in solar PV particu - investors may hesitate to invest in countries n i

t larly, low tariffs in combination with a missing re where access to the energy market is difficult. n

e strategy result in a low share of re in the coun - Some countries are still in the progress of liber - M

t try’s overall installed electricity capacity of 0.18 alizing their energy market. in former yugoslav S e

V percent. a undP study for kyrgyzstan (011) es - republic of Macedonia, the state-owned Joint n i timated the generation costs of renewable elec - Stock company elM is the country’s largest en - y g

r tricity per kw-h at $0.19 for SHHP, $0.0 for wind ergy electricity generator, operating a total ca - e

n and biomass, and $0. for solar power. but be - pacity of 800Mw in thermal and seven HPPs of e e

l cause of massive subsidization, the current elec - 50Mw. in kyrgyzstan, state-owned energy b

a tricity tariff of $0.1/kw-h is way below re gen - company oJSc elektricheskie Stantsii is still the w

e eration costs and not cost reflective (oJSc major electricity generator producing 98 per - n e

r elektricheskie Stantsii, 01). due to the abun - cent of kyrgyzstan’s electricity (oJSc elektrich - o

t dance of natural gas and oil resources, uzbek - eskie Stantsii, 01). in turkmenistan, the elec - S

r istan’s energy sector is heavily dependent on tricity market is managed by verticall y-integrated e i

r non-renewable resources. despite considerable and state-owned turkmenenergo, which owns r

a technical re potential, the dependence on non- and operates the grid. turkmenenergo also b reS in combination with very low energy tariffs generates the electricity and distributes the prevents energy diversification (eshchanov et electricity to the end customers. in azerbaijan, the vertically-integrated and state- Removal of fossil fuel subsidies and public owned azerenerji owns most of the de-risking measures can help to reduce power generation capacity. in uzbek - istan, the vertically-integrated state- consumers’ energy bills. owned electricity company uzbeken - ergo generates 97 percent of the al., 01). the high upfront capital investment country’s electricity. the remaining percent is required for re projects and the absence of a the entire installed small hydropower capacity, legislative support scheme make re in uzbek - which is operated by state-owned uzsuven - istan unfavourable compared to investments in ergo. in tajikistan, the state-owned electricity oil or gas (undP, 007). countries that subsidize company, bargi tajik, owns most of the elec - fossil fuels to protect consumers from rising en - tricity generation capacity. However, both ergy prices distort re competiveness and pre - uzbekistan and tajikistan are currently liberal - vent investment in re technologies, which could izing their energy markets. tajikistan adopted a be a far more affordable alternative (Schmidt et programme for the construction of SHHPs, and al., 01). waissbein et al. (01) showed that – several mini and small hydropower plants with contrary to the common view that re promotion a total capacity of 47 Mw were commissioned schemes increase energy bills – public de-risking in 010 and 011. Some are privately owned measures can actually contribute to reducing and operated (undPc, 01). to attract private energy bills. countries with high fossil fuel sub - investment, countries should continue liberal - sidies implicitly burden households through tax izing their energy markets and facilitate private budgets used on unnecessary high energy ex - access to historically state-owned energy mar - penses. removal of fossil fuel subsidies and a re - kets. if incremental costs of re production re - allocation of the originating savings in the tax main after the implementation of de-risking in - budget in combination with public de-risking struments, countries with monopolistic organized measures for re technologies can actually have energy sectors could consider implementing a

6 Market and Policy outlook for renewable energy in euroPe and tHe ciS quota regulation scheme, requiring the state mo - tion, land use and electricity generation per - n nopoly to produce a certain amount of reS. com - mits might be a reason for the country’s rela - o i g pared to a fit, which requires a liberalized market, tively weak performance in terms of re deploy - e r this could help to effectively deploy reS by en - ment in recent years (Mijakowski & Mijakowski, e H suring control over the deployment rate, costs 01). in romania, around 85 permits and li - t n i

and alignment with grid capacities. cences have to be obtained to construct a wind t n

power plant (ewea, 01). generally, the com - e M

mission of re power plants requires a number of t S e

2.3 Concessions, Permits licences and permits. in a first step, several li - V n cences related to the right to construct the i and Licences y g

power plant have to be obtained. these can in - r e in some countries, the licence and permit clude environmental and biodiversity impact n e e processes are complicated, bureaucratic and un - assignments, location and land usage permits, l b transparent and it can take up to several years to as well as construction permits. in a second step, a w obtain all licences and permits to construct and operational permits such as the right for elec - e n e

tricity generation or qualifications r o

connected to the promotion t

Complicated, bureaucratic and S

scheme (often referred as qualified r e i untransparent licence and permit processes producer certificates) have to be ob - r r

tained. 6 Supplementary low trans - a can increase transaction costs, delay returns b and discourage investment. parency in the licence granting process impedes re investment. en - ergy companies in the region have operate an re plant. in croatia, it takes three to for a long time enjoyed the advantages of state- four years to obtain all necessary licences and owned monopolies. the lack of competition and permits for the construction of a wind power the closeness to decision-makers in the state plant (ewea, 01). this is significant higher promoted a lack of transparency in energy pol - than in other eu countries, for example in aus - icymaking. However, transparency in licence tria or italy where 19 months of administrative granting is essential if private investors are to be procedures for a wind park is the average (ewea, attracted. if a government’s decisions are un - 010). bureaucratic permits and licensing pro - predictable, investors face greater exposure to cedures are not only time-consuming, but also additional risk related to planning insecurities. cost-intensive. for example the capital cost therefore, at the start of an re project, investors breakdown of amayo wind power plant shows face high uncertainty whether and under what that around percent of the total installed costs conditions licences and permits may be ob - or almost $ million are borne by licence and tained. the world bank’s dealing with con - permit related expenditures (irena, 01). this can increase Transparency in licence granting is essential if transaction costs, delay returns private investors are to be attracted. If a and discourage investment. in former yugoslav republic of government’s decisions are unpredictable, Macedonia, the bureaucratic and investors face greater exposure to additional complex obtaining of construc - risk related to planning insecurities.

26 This is just a short list of generally required licences. Countries in the region diﬀer in the amount and type of licences required. For example, Turkish SHPP developers also need the permission of the State Hydraulic Works for the construction of a SHPP (Government of Turkey, 2002).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 7 struction Permits indicator quantifies the num - eign investors grew by over 400 percent be - n

o ber of procedures required to build a fictive tween 004 and 010 (MeSd, 01). together i g

e warehouse, the time required to fulfil those pro - with armenia (6) and Macedonia (7), georgia (8) r

e cedures and the costs associated with the pro - is also highly placed in the world bank’s‘Starting H t a business’ indicator 9 , which meas - n i

t ures how long and how cost inten -

n Some countries have improved their permit e sive it is to get a local company es - M

t processing mechanisms. tablished. 0 a major improvement in S e

V georgia’s business reforms has been n i cedures (ifc & world bank, 014) 7 . countries in the streamlining of its permission and tendering y g

r central asia particularly (regional average rank processes, yielding to a clear set of procedures for e

n 18.5), in the western balkans (regional aver - potential SHP developers. the commission of a e e

l age rank 145), russia (rank 178) and azerbaijan SHPP requires only three licences: a land lease or b

a (rank 180) suffer from complex, time-consuming purchase licences obtained from local authori - w

e and cost-intensive construction permit ties, a water usage permit issued by the Ministry n e

r processes (ifc & world bank, 014). of environment Protection, and a construction o

t permit issued by the Ministry of economy and S

r other countries, meanwhile, have improved their Sustainable development. georgian SHPPs of e i

r indicator ranking significantly. So far and despite up to 1 Mw installed capacity are exempt from r

a favourable re legislation, investors in ukraine a licence for power generation. other countries b have experienced difficulties in obtaining the have also simplified re-related permission grant - necessary permits and licences to construct re - ing processes by exempting re developers from newable energy power plants, to produce elec - otherwise obligatory licences. Serbia exempts tricity and to receive the status of an eligible producer under the fit.to ob - Shorter – and therefore cheaper – tain the necessary permits, several permission processes and licence federal and regional authorities have to be involved. the jurisdiction of au - exemptions reduce not just financing costs, thorities often overlaps. ewea (01) but the costs of RE energy instalment too. states that after all necessary licences related to land use are obtained it takes another power plants of less than 1 Mw and bulgaria two years to obtain the remaining licences and those of less than 5 Mw from the obligation to permits before the construction of a wind power obtain an electricity generation licence. also plant can start. yet ukraine climbed an impres - some countries have improved their anti-cor - sive 145 places in 01 to 45 th position in 014 ruption legislation 1 in recent years. others have (ifc & world bank, 014). Montenegro also rose ongoing accession negotiations with the euro - by 69 places over the same period. georgia has pean union, which include membership re - improved its business climate significantly over quirements in governance and anti-corruption the last decade. in the world bank’s ease of do - (european commission, 01). the eu assimi - ing business index, the country is ranked in lation and accession process will likely increase eighth position worldwide. 8 the number of for - transparency and governance in the future. for

27 Annex, Table 9 shows the ‘Dealing with Construction Permits’ indicator for all countries in the region. The indicators might be good proxies to display cost intensity and time-intensity of the construction of a RE power plant. However, it should be noted that IFC and the World Bank assume the construction of a warehouse for this indicator. 28 Annex, Table 9 shows World Bank’s ‘Ease of Doing Business’ indicator for all countries in the region. 29 Annex, Table 9 shows World Bank’s ‘Starting a Business indicator for all countries in the region. 30 The ECIS regional average in the World Bank’s ‘Starting a Business’ is 66.36 (IFC & World Bank, 2014).

8 Market and Policy outlook for renewable energy in euroPe and tHe ciS example, in 01 croatia, the youngest eu mem - electricity generation when applying for grid n ber state, recorded the highest fdi inflow in the connection. 16 countries in the region, for ex - o i g western balkans and the business environment ample turkey, lithuania, Serbia and bosnia & e r is likely to further improve (unctad, 01). Herzegovina, prioritize re developers when ap - e H plying for access to the grid. in addition to pol - t n i

increased transparency in combination with icy de-risking measures, authorities can provide t n streamlined and simplified re permission re developers with direct incentives, for example e M processes are effective public de-risking meas - complimentary access to the grid. in nine coun - t S e ures that reduce risks related to permission V n granting processes. Shorter – and therefore i y

In nine countries, RE developers enjoy g

cheaper – permission processes and licence r complimentary grid access. e exemptions reduce not only financing but n e e

also re energy instalment costs. this partic - l b ularly benefits small re developers with low cap - tries, developers enjoy complimentary grid ac - a

4 w ital resources and relatively high information costs. cess. the combination of enhanced utilization e n e

of policy de-risking measures (prioritization in r o

grid access and improved transparency) with di - t S

2.4 Access to the Electricity Grid rect financial incentives (complementary grid r e i

access) is likely to improve the bankability of re r r as with licence granting, uncertainties and risks projects in developing countries significantly. a b regarding electricity grid access negatively in - fluence financing costs. with a lack of trans - parency in the grid access process, investors 2.5 Technology and Supply Chain face higher exposure to additional risk related to planning insecurities. for example, wind farm an incomplete or poorly developed supply developers in Poland and romania face high chain can increase financing and instalment uncertainties regarding grid connection. be - costs, which can lead to investment reluctance. tween 009 and 010, around 1,00 grid con - Poor local infrastructure – roads, for example – nection applications with a cumulative installed could hamper the transport of hardware to the capacity of almost 10 gw were refused by the project location. Some countries in the region authorities (ewea, 01). in turkey, local envi - require re developers to use a certain percent - ronmental regulations and the determination age of locally produced hardware in their re of transmission fees face challenges in terms of projects. in russia’s new capacity scheme, com - transparency (ewea, 01). missioned from 014 onwards, wind projects have to contain 5 percent (65 percent from increasing the likelihood of grid connection – 016), solar projects 50 percent (70 percent from and therefore reducing uncertainty – can be 016) and small hydropower projects 0 per - achieved by prioritizing re over other forms of cent (65 percent from 018) locally produced

31 An example is OECD’s Anti-Corruption Network for Eastern Europe and Central Asia (ACN) initiative, which supports its members in efforts to fight corruption via the implementation and enforcement of anti-corruption reforms and laws. Some member states made significant progress in implementing anti-corrupting polices, by criminalizing corruption. For example, Georgia has reduced its levels of corruption significantly in recent years (OECDb, 2013). Also, Kazakhstan adopted two important anti-corruption laws changing liability provisions for corruption offences as a result of the initiative (OECD, 2011). 32 Turkey and Montenegro currently have negotiations ongoing, Serbia and Former Yugoslav Republic of Macedonia are candidate countries with no current negotiations. 33 Annex, Table 8 lists all countries with RE prioritization in grid connection. 34 Annex, Table 8 lists all countries offering complementary grid access.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 9 equipment. after the first tender in September investment 6 is financial advisors’ lack of access n

o 01, some critics noted that the relatively small to quality information and research (gateways i g

e amount of auctioned wind capacities was trig - to impact, 01). Project developers also face r

e gered by local content requirements (lcrs). es - information barriers. Pre-feasibility and feasi - H t pecially when the local re industry is still under bility studies on wind speed or water flow are n i

t development and inexperienced or spare parts cost- and time-intensive. in Moldova, the ab - n

e are rare to get, investors may react reluctantly to sence of small and medium size private invest - M

t lcrs. However, lcrs may also create benefits. ment in renewable energies has been due S e

V turkey promotes the use of locally produced largely to local banks’ unfamiliarity with in - n i equipment via a higher tariff for five years, which vestment in re (ecS, 011). y g r e

n However, some countries e Smart construction of LCRs is crucial to prevent e

l started to tackle information-

b investment reluctance and to successfully foster 7 a related investment barriers.

w the participation of the local economy in the e to reduce information costs for n

e development of a RE market, so that it benefits

r potential investors, georgia’s o

t from more jobs, improved infrastructure and Ministry of energy published a S

r manual for SHP developers

e increased human development. i

r and a list of possible SHPP r

a can be received if producers install domestic grounds open for investment with detailed pre- b equipment in their reS facilities. this can be feasibility studies (norsk et al., 01). in a joint beneficial for foreign investors, because capital project, the Serbian Ministry of energy and investment in $/Mw installed capacity for SHPPs undP have published investor guides explain - in turkey is significant smaller than in the rest of ing the licences and permits required for the in - the world, which leads to a payback period of vestment process in small hydro, wind, solar, less than three years (kucukali & baris, 009). 5 geothermal, or biomass power plants (undPa, therefore, the smart construction of lcrs is cru - 01). in kazakhstan, a wind atlas is available cial to prevent investment reluctance and to and provides interested investors with detailed successfully foster the participation of the local data about wind resources in the country. in a economy in the development of a re market, joint project between undP and the kazakh thus benefiting from more jobs, improved in - electricity association, pre-feasibility studies are frastructure and increased human development. offered for potential wind farm investment proj - ects. in formeryugoslav republic of Macedonia, investors have access to detailed rulebooks de - 2.6 Cost of Information scribing what to consider when constructing a and Limited Experience re power plant and how to obtain the fit. in - with Renewable Energy struments addressing information barriers pro - vide several positive effects on re investment. High information costs are a major barrier to re on the one hand, existing pre-feasibility studies investment. a recent survey revealed that one save developers and investors time and money of the major investment barriers to sustainable in the project development phase which re -

35 By assuming a capacity factor of 0.4, a max. available tariff of $96/MW-h and investment costs of $8,454/kW. 36 This study defines sustainable investment as “investment strategy that seeks to fulfill a positive return on investment in combination with a positive environmental and social impact including investment in companies which work with renewable energy”. 37 Annex, Table 11 provides a list of countries that offer RE investment opportunities and other instruments aiming to lower information-related investment barriers.

40 Market and Policy outlook for renewable energy in euroPe and tHe ciS Some countries have started to address rate, is the average interest rate of the pri - n

vate sector, which is obtained for short- o information-related investment barriers i g

and medium-term financing from banks. e r duces instalment costs. but on the other hand, it is normally differentiated according to the ob - e H governments that tender specific re sites reduce jectives of financing and the solvency of bor - t n i

policy-related risk due to an enhanced credibility rowers (world bank, 014). a higher lending in - t n in commitment to re deployment. in combina - terest rate increases the cost of capital and, e M tion with industry–finance conferences or train - therefore, the financing costs. the average lend - t S e ing and workshops on project feasibility, this low - ing interest rate for the region is 7. percent, V n ers financing costs (waissbein et al., 01). which is higher than for example in the united i y g

States of america (. percent) or in the united r 9 e kingdom (0.5 percent) (world bank, 014) . in n e e

2.7 Capital Scarcity particular, ukraine (18.4 percent), tajikistan (5. l b

percent), georgia (.1 percent) and belarus a w

Many countries in the eciS region face a lack of (19.5 percent) have high lending interest rates. e n e

available equity in comparison to oecd coun - in the world bank risk Premium on lending in - r o

tries. this problem increases with the risk of a dicator, tajikistan (0. percent), azerbaijan (15.9 t S project, since debt holders usually require percent) and georgia (15. percent) have high- r e 40 i higher shares of equity with increased project risk premiums on lending (world bank, 014) . r r risk. the lack of equity hampers investment and in other words, companies operating in tajik - a b entrepreneurial activities in general. However istan or georgia that want to obtain debt fi - even if equity is available, it is likely that project nancing from local banks pay, on average, developers need a considerable amount of debt higher risk premiums and consequently interest to finance the project, due to the high up - front capital required for re power plant investments. as well as project- and com - High interest rates and financing costs pany-specific differences in obtaining negatively affect a project’s bankability. credit, there are differences in local com - panies’ ability to obtain credit in the eciS coun - rates than in lithuania (. percent) or Mon - tries. the ifc and world bank’s getting credit tenegro (4.8 percent) (world bank, 014). re in dicator is quantified by combining indi- project bankability therefore suffers as a result of cators measuring whether certain features of higher interest rates and financing costs. facilitating lending exist, and the coverage, scope and accessibility of credit information that to address debt scarcity, the most effective so - is available. 8 the region’s average ranking for lution in the short term is financial de-risking, in this indicator is 48.4. Some countries perform which development banks take over some of better, for example Poland, Montenegro and the additional risks. this encourages banks to Macedonia (all with a ranking of ), while others provide loans and reduces the cost of capital. are weaker, such as tajikistan (159) and uzbek - a number of development banks and interna - istan (10) (ifc & world bank, 014). another tional financial institutions in the region offer risk debt-related indicator, the lending interest decreasing instruments, such as soft loans or

38 Annex, Table 9 provides the ‘Getting Credit’ ranking for each country. 39 No data was available for Poland, Kazakhstan, Turkmenistan, Uzbekistan and Turkey; Also, according to the World Bank (2014), the calculation diﬀers by country which limits the comparability. 40 The World Bank deﬁned the risk premium on lending as “the interest rate charged by banks on loans to private sector customers minus the „risk free“ treasury bill interest rate at which short-term government securities are issued or traded in the market” (World Bank, 2014).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 41 loan guarantees. international development bates, ahead of the construction phase by of - n

o banks, for example the ebrd, ebrd’s Sustain - fering grants. in romania, where re developers i g

e able energy financing facilities, the eurasian are supported by a mix of a quota and trecs, the r

e development bank (edb), the asian develop - energy regulator anre evaluates the number of H t ment bank (adb) and the international finance certificates granted on a case-to case basis, in n i

t corporation offer public loans and loan guar - the event that grants or other subsidies were dis -

n 41 e antees. in some countries, national funds have tributed for the construction of the re power M

t been implemented to provide re developers plant. one other advantage of grants is that they S e

V with financing. examples include the german- not only serve as a financial incentive before n i armenian-fund in armenia and Moldova’s en - the start of the project, but also help to reduce y g

r financing costs. grants provide e

n Grants not only serve as a financial incentive, project developers with‘free’ (or, at e e

l but reduce financing costs. least, cheaper) equity. this lowers b

a the cost of equity. Moreover, an w

e ergy efficiency fund. but despite obviously ben - increase in the equity share usually lowers the n e

r eficial impacts on project economics, the loan cost of debt. even if not provided as a grant, de - o

t and guarantee programmes only address debt velopment agencies can reduce financing costs S

r scarcity. generally, debt holders require a spe - by providing equity stakes in the early project e i

r cific amount of equity financing to provide cred - development phase. an example is ifc’s in - r

a itors with a loan. for example, the western fraVentures programme, which equips private b balkan Sustainable energy direct financing fa - and bankable infrastructure projects with early cility requires a sufficient amount of equity to equity and assistance to close the equity gap provide re developers with loans (webSedff, (ifc, 014). both equity stakes and grants may 014). early equity grants in the project devel - also have a positive effect on the historically opment phase are an effective instrument to low small-scale re investment in the region. al - tackle equity scarcity. However, only in nine though in 01 ukraine had the 10 th highest as - countries of the region investment grants are set financing in re worldwide, no country in this available, of which seven are located in the eu. report is represented in the top 10 for invest - in kyrgyzstan and Moldova, the only non-eu ment in re capacity smaller than 1 Mw (fS & countries with re grants available, the local uneP, 01). ebrd Sustainable energy financing facilities, kyrSeff and MoSeff, offer grants to re investors. due to equity scarcity, the absence of grant 2.8 InadequateTransmission mechanisms in certain countries may have pre - Infrastructure vented investment in re energy. fits or tax re - bates start unfolding their beneficial effect in Many countries in the region suffer from old the ex-post construction phase. However, these and outdated electricity transmission infra - instruments are rather ineffective when there is structure, causing energy shortages, electricity inherently no equity available. yet closing the cut-offs and high distribution losses. the con - equity gap by providing grants does not auto - flict during the 1990s in the western balkans de - matically increase the amount of incentives that stroyed parts of the transmission infrastructure are already available. instead, it means shifting and cut off entire villages from the electricity some of the often available ex-post construction grid, a situation that continues to the present re incentive schemes, such as fits or tax re - day. in uzbekistan, 50 percent of the population

41 Annex, Table 10 provides an overview of national and international ﬁnancial institutions providing loans, loan guarantees and grants for RE.

4 Market and Policy outlook for renewable energy in euroPe and tHe ciS winter, the government of geor -

Old and outdated infrastructure is a problem n

gia offers a power purchase o i in the region causing energy shortages, g guarantee to ensure domestic e r electricity cut-offs and high distribution losses. energy supply (MeSd, 01). e H t n lives in rural areas and experience significant i t n problems with electricity shortages and cut- 2.9 Political Instability e M offs due to high distribution losses, illegal en - and Country Risk t S e

ergy tapping and the generally poor condition V n of infrastructure in remote areas. this may be an according to the oecd, country risk is the risk of i y opportunity for off-grid re solutions. accept - capital transfer and convertibility or the risk of g r e

ance and interest by the rural population in re a force majeure . transfer and convertibility risk n e is high, as a recent study by eshchanov et al. measures the likelihood of governments im - e l b

(01) demonstrates. Moreover, governments posing capital or currency exchange controls. a w could introduce a legal basis for electricity ex - Force majeure includes war, expropriations, rev - e n port. if prudently designed, electricity export olutions, natural disasters etc. (oecda, 01). in - e r can provide numerous benefits to countries vestors perceive these risks and price it in their o t S

with scarce capital. with help from the con - minimum roi. r e i

tracting party, exporting countries are able to r r secure capital to deploy re installations. coun - in countries with stable institutions, a posi - a b tries lacking an adequate transmission infra - tive track record as well as lower regulatory structure can use the income earned on ex - and currency devaluation risk makes for lower cost of capital, a lower If prudently designed, electricity export can provide roi and positive project numerous benefits to countries with scarce capital. economics. in countries where political uncer - ported electricity by reinvesting it in the local tainty is high, higher perceived risk will be infrastructure. and as soon as the export agree - priced in by equity and debt holders, thereby ment expires, the re plant produces electricity increasing financing costs (irena, 01). oecd at low cost. development and infrastructure quantifies country risk on an indicator from 0 banks can assist with financial de-risking and to 7 (table ). the region does not perform through the provision of public loans. for ex - well and has a regional average rating of ample, to provide greater flexibility and reduce around 5. belarus, ukraine and Moldova (all the costs of the 0 percent re target in the eu, with a ranking of 7), central asia (6.), western reS-directive 009/8/ec allows for electricity balkans (5.8) and caucasus (5.7) all have high generation cooperation mechanism between country risk rankings. risks related to political eu and neighbouring countries. the €100 mil - and country-specific circumstance can be ad - lion lastva-Pljevlja transmission line between dressed through financial de-risking by de - Montenegro and italy is currently under devel - velopment banks offering risk-sharing prod - opment. the transmission line aims to connect ucts. examples include a political risk several hydropower plants and a wind farm in insurance that covers expropriation, political Montenegro to the italian grid. ebrd assisted in violence and currency restrictions (waissbein this by financing of €65 million in april 01 et al., 01). (Seecn, 01). in georgia, ex - cept for the three winter Political risk insurances can transfer risks related months, SHPP developers are allowed to export electricity to political and country-specific circumstance without an export licence. in to development banks.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 4 Table 3: country risk indicator by country n o i

g country ranking country ranking e r e

H kazakhstan 5 albania 6 t n i kyrgyzstan 7 bosnia and Herzegovina 7 t n e tajikistan 7 croatia 5 M t S

e turkmenistan 6 Montenegro 6 V n i

y uzbekistan 6 Serbia 6 g r

e belarus 7 former yugoslav republic of Macedonia 5 n e e

l ukraine 7 turkey 4 b a

w Moldova 7 armenia 6 e n

e russian federation azerbaijan 5 r o t bulgaria 4 georgia 6 S r e i

r romania 4 latvia 4 r a

b lithuania

Source: OECDa (2013) 42

42 Please note, for Czech Republic, Estonia, Hungary, Poland, Slovakia and Slovenia, data were not available.

44 Market and Policy outlook for renewable energy in euroPe and tHe ciS 3. Best Countries for Renewable Energy Investment

considering and evaluating the barriers and this is a serious advantage for investors, be - risks, figure 14 offers an overview of the most cause the calculations of the lower and upper favourable countries in the region for re invest - bound lcoe assume different amounts of in - ment. when calculating the lcoe for biomass stallation costs, o&M costs, load hours and fi - and small hydropower, the fits of Slovenia and nancing costs. 4 So even when assuming a weak ukraine cover the generation costs in both the load factor, high installation and financing costs, optimistic and in the conservative scenarios. biomass and small hydro investments remain

Figure 14: lower and upper bound lcoe and feed-in tariﬀs for reS in Slovenia, ukraine and turkey

technology biomass Solar PV wind Small Hydro

Country Slovenia Ukraine Turkey Ukraine

lower bound lcoe .5 90.09 51.77 1.58

upper bound lcoe 18.8 51.01 176.9 66.81

feed-in tariﬀ 4.5 58.9 79.5 116.1

500 ) h

- 400 w M / r

u 00 e ( e o c

l 00 x a t - r e t f 100 a

0 biomass Solar PV wind Small Hydro

Source: Own calculations

43 Please refer to Annex, Table 12, which shows the underlying assumptions on the conservative and optimistic LCOE scenarios.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 45 Table 4: feed-in tariﬀ and feed-in Premium for renewable energy technologies in Slovenia t n e

M eligible additional constraint installed capacity tariﬀ granted t

S technologies in €/Mw-h e V n

i wind < 5 Mw 95.8 y

g 44 r Solar building integrated/other < 50 kw 1.57/115.16 e n

e building integrated/other < 1 Mw 11.10/106.1 e

l building integrated/other < 5 Mw 9.01/85.54 b a

w Hydro < 50 kw 105.47 e n

e < 1 Mw 9.61 r

r < 5 Mw 8.4 o f

S biomass at least 90 percent of the products < 50 kw case-by-case e i

r used must be from wood < 1 Mw 4.5 t n

u < 5 Mw 167.4 o c

t Source: Government of the Republic of Slovenia (2012) S e b profitable in both Slovenia and ukraine. for so - Biomass – Slovenia lar PV, the range between conservative and op - timistic lcoe is wider, largely because of huge Slovenia promotes renewable electricity with a discrepancies in the assumptions of the capac - combination of fit and premium. the tariff for ity factor. the upper bound lcoe assumes a ca - biomass installations smaller than 1 Mw in - pacity factor of 10 percent, resulting in 876 load stalled capacity is the highest in the region. the hours. figure 8 shows that the annual average maximum eligibility period for the fit is 15 years solar radiation in ukraine amounts to around and applies only to plants with an installed ca - 1,00 kw-h per square metre. yet solar PV sites pacity of less than 5 Mw. However, re power with a capacity factor of 15 percent reduces the plants up to 15 Mw may apply for a premium. lcoe in the conservative scenario, keeping all in addition to the re promotion policy, other fac - other variables constant, to €46 per Mw-h, tors can also benefit potential re investors. as a which is lower than the current fit in ukraine. eu member, Slovenia has a legally-binding tar - get of 5 percent share of reS in gross final en - despite not having the highest fit for wind in the ergy consumption by 00 (republic of Slove - region, turkey has in recent years demonstrated nia, 010). Since 1 July 007, its energy market that the deployment of wind power plants fulfils has been fully liberalized and re developers have prioritized access to Slovenia offers attractive RE incentives particularly the grid. Slovenia offers for investment in biomass power plants. possible tax exemption for foreign investment of up to 40 percent of the investor requirements. Since the turkish govern - amount invested. the corporate tax rate is rela - ment plans to massively expand its wind capaci - tively low at 17 percent, and this is expected to ty to 0 gw by 0, it is currently the region’s most be reduced further in 015 to 15 percent (invest attractive country for wind energy investment. Slovenia, 01). Several loans and grants for reS

44 The tariffs for solar PV reflect the October 2013 tariffs. Tariffs for solar power plants are subject to monthly recalcula - tion due to applied degression.

46 Market and Policy outlook for renewable energy in euroPe and tHe ciS investment are available, for example eko Sklad, scale of installations sizes.the tariff for SHPPs is also t the environmental fund of the republic of the largest in the region.the fit payments are de - n e M

Slovenia, which awards low-interest loans to re - fined in detail until 1 January 00, ensuring t S newable energy projects through tendering. planning security for long-term investments. al - e V n

though not a member of the euro zone and i y the lending interest rate in 011 was a moder - monthly fit revisions according the current ex - g r ate 5.5 percent and the country is a member of change rate (uaH/€), there is a guaranteed‘min - e n

rd e

the euro zone. in position, Slovenia ranks imum floor’, ensuring limited currency exchange e l twice as high as the regional average in the risk.with the decision of the ec Ministerial coun - b a world bank’s ease of doing business indicator cil to adopt directive 96/9/ec, ukraine agreed a w e n

(ifc & world bank, 014). legally binding re target of 11 percent share of reS e r

in gross final energy consumption by 00 (ec, r o

Solar PV and Small Hydropower – Ukraine 01). energy generation is fully liberalized. in ad - f S e dition to the fit, there are several tax incentives on i r t

the overall average solar radiation presented in fig - projects related to re. for instance, there is no Vat n u

ure 8 ranks ukraine in the bottom third of the re - on imported equipment and materials for con - o c

gion. However, some regions in ukraine show ex - struction of re plants.taxes for land with installed t S e

cellent potential for solar PV instalments. naS renewable energy production are lowered by 5 b (01) estimates that 8,600,000 Mw-h/yr electricity percent of the standard rate for land. could be produced (technical potential) by small hydropower installations. the government pro - in 01, lcrs for re power plants were imple - motes re with a fit. ukraine offers the region’s high - mented. although there are potential negative est fit for solar PV installations over a broad effects, these do have future potential benefits.

Table 5: feed-in tariﬀs for renewable energy technologies in ukraine

green tariﬀs in € / Mw-h

eligible until 1 april 01 01 Jan 015 01 Jan 00 01 Jan 05 technologies installed capacity 1 March to to to to 01 1 dec 014 1 dec 019 1 dec 04 1 dec 09 wind <600 kw 64.6 64.6 58. 51.7 45. >600 kw < Mw 75.4 75.4 67.9 60. 5.8 > Mw 11.1 113.1 101.8 90.5 79.

biomass 1.9 123.9 111.5 99.1 86.7

biogas - 123.9 111.5 99.1 86.7

Solar 465. 339.3 05. 71.4 7.5 (ground Mounted)

Solar <10 kw - 358.6 .8 86.9 51 (on roofs or <100 kw 46.5 358.6 .8 86.9 51 facades of buildings) >100 kw 445.9 348.9 14.1 79. 44.

Hydro Micro 116. 193.9 174.5 155.1 15.7 Mini 116. 155.1 19.6 14.1 108.6 Small 116. 116.1 104.7 9.1 81.4

Source: Imepower (2013)

Market and Policy outlook for renewable energy in euroPe and tHe ciS 47 lcrs are likely to develop ukraine’s re supply although not the region’s highest fit for wind t

n market and domestically produced equipment power, turkey’s re promotion scheme has e M

t may be produced cheaper, which lowers instal - been successful and satisfactory for investor S

e ment costs. in the world bank’s ease of doing requirements with more than 1 gw of de - V n

i business indicator, ukraine improved its rank by ployed wind capacity between 010 and

y th g 8 places to 11 position. in r e the sub-indicator, dealing n

e Turkey has successfully promoted RE to investors

e with construction Permits, it l

b improved its ranking from and has, in recent years, demonstrated that a

w 186 th position in 01 to 41st the deployment of wind power plants fulfils e n

e in 014, a very impressive in - investor requirements. r

r crease of 145 places (ifc & o

f world bank, 014). it is likely that the previous 01. in addition, voluntary lcrs benefit re S e i untransparent and complex permission granting developers in two ways. they increase the r t

n process for re power plants will be improved in maximum possible tariff and may decrease u

o the coming years. the country suffers from high the instalment costs due to lower capital in - c

t country risk (7), as shown in table , and cur - vestment in terms of $/Mw. the fit is deter - S e

b rently faces its most serious geopolitical chal - mined in $/Mw-h, which limits currency con - lenge in recent history. the exposure to force version exposure. turkey targets a share of 0 majeure is relatively high and investors are cur - percent of reS in power generation by 0. rently inclined to withhold investment. external in particular, the government aims to reach pressures aside, ukraine now stands at a cross - 0,000 Mw of installed wind and ,000 Mw of roads to fundamentally transform its political, installed solar PV capacity by 0 (Melikoglu, economic and societal interactions. ukraine’s ca - 01). energy generation is subject to licens - pacity to foster strong and responsive domestic ing and re power plants must obtain a reS institutions will define the country’s ability to certificate from the energy Market regulatory adjust to the changing environment and to rein - authority (eMra). re power plants with an in - venting its socioeconomic model. stalled capacity of less than 500 kw are ex - empt from obtaining a reS certificate (resle - Wind – Turkey gal, 01). the transmission company teiaS is obliged to prioritize access to the grid for re theturkish government adopted a fit available electricity generators (government of turkey, for 10 years from the commissioning of the plant. 00).

Table 6: feed-in tariﬀs for renewable energy technologies in turkey

eligible technologies tariﬀ applied $/Mw-h Max. tariﬀ possible if domestic equipment is included in $/ Mw-h

wind 7 110

Hydro 7 96

biomass 1 151

Solar PV 1 00

Source: Government of Turkey (2011)

48 Market and Policy outlook for renewable energy in euroPe and tHe ciS 4. De-risking Renewable Energy Investment

typically, all the above risks and barriers can be remain constant. armenia’s promotion scheme addressed by either policy or financial de-risking exemplifies the significance of de-risking. the fit instruments. figure 15 shows the theoretical for wind power plants in armenia amounts to potential to increase re competitiveness by €61.1/Mw-h (re, 014). 45 this is the third public de-risking instruments. if it is possible to lowest fit in the region for wind power genera - introduce measures that de-risk the cost of debt tion. Since only little wind capacity was de - to 6 percent and the cost of equity to 1 percent, ployed by 01, it could be argued that this tar - the lcoe falls by almost €10 per Mw-h to €65.9 iff is too low to incentivize investment in wind per Mw-h, assuming that all other input factors power plants.

Figure 15: lcoe for a wind Power Project before and after de-risking 46

) assumptions h - 76.77 w Plant Size: 1Mw M /

r debt / equity: 70% / 0%

u incremental e ( costs total investment: 1,980 uSd / kw e

o o&M expenses: 1.5 uS cents / kw-h c l 65.9 time Period: 15 years x a

t tax rate: 0% - r

e depreciation: 95% t f a cost of capital

before after de-risking de-risking debt: 8% debt: 6% equity: 18% equity: 1% lcoe before lcoe after de-risking de-risking

Source: Waissbein et al. (2013), IRENA (2013), PWC (2011) and own calculations

45 Based on the €/AMD exchange rate on 1 March 2014. 46 This graph is based on assumptions regarding electricity production and the cost of capital, which, if changed, do have a high impact on the outcome of the calculation. For the calculation of the pre and post de-risking LCOE, the ﬁnancial tool developed by Waissbein et al. (2013) has been used. Total investment costs as well as the O&M expenses are average values for Eastern and Central Europe derived from IRENA (2013). As a tax rate, the corporate income tax for Armenia has been used (PWC, 2011). A capacity factor of 0.34 – or 3,000 load hours – has been assumed. Although this graph is based on assumptions and serves to illustrate the de-risking potential, Waissbein et al. (2013) showed that eﬀective de-risking can actually have a positive impact on investor perception of risk leading to a fall in the cost of capital.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 49 assuming the costs of equity and debt for re in - gef project, removing barriers to wind Power t

n vestment in armenia are 18 percent and 8 per - development, supports institutional capacity e M

t cent respectively, wind electricity generation is building, technical wind resource assessments, S

e not economically viable. the lcoe of €76.77 per and training for local o&M responsibilities. in V n

i Mw-h is higher than the current fit. but with the combination with de-risking strategies, the proj - y

g implementation of de-risking measures, the tar - ect aims to negotiate fits for wind power de - r e iff would be almost sufficient for re investment velopers, which are lower than they would be n e

e with remaining incremental costs of around without the de-risking elements. in azerbaijan, l

b €4.60. without de-risking measures, the fit undP and a state company, area, launched the a

w Promoting the development of re - e n

e newable energy in azerbaijan project.

r Public de-risking reduces the LCOE

g this continued until the end of 01 n

i significantly, assuming that all other input

k and supported azerbaijan in the con - S i factors remain constant. r struction of a pilot SHPP, by identifying - e the most efficient types of reS and by d would need to be increased to around €77/Mw- drafting the law on renewable energy in azer - h to cover the incremental costs between lcoe baijan (undPb, 01). a undP project in croa - and fit. this example therefore shows that even tia illustrated that countries with inadequate if some incremental costs do remain between electricity infrastructure may want to focus on fit and lcoe, the required increase will be be - off-grid renewable energy solutions for remote low the otherwise necessary increase that would areas due to cost effectiveness over expensive to be required without de-risking. grid expansion or rehabilitation (undPb, 01). to address capital scarcity in georgia, undP and these findings have important implications for gef worked with german development bank the region’s human development. due to in - kfw to develop and launch a re revolving fund, creased energy prices and significant reforms, which was capitalized with €5 million. the fund energy affordability is already a major constraint. successfully invested in the first two privately during the last decade, the region has experi - owned small hydropower projects in georgia. enced a trend of rising household electricity tar - undP and gef are currently developing a bio - iffs threatening its socioeconomic development (world bank, 01). UNDP supports countries in the region in all given that re incentive schemes ei - three forms of public instruments, often with ther burden scarce public means or are correlated with an increased an integrated approach. household electricity price, govern - ments are reluctant to increase electricity prices mass financing mechanism together with in - induced by re reward schemes that compensate vestment grant mechanisms for pilot biomass investors for their higher risks. fossil fuel subsi - projects. in addition, the project envisages rais - dies, which are ultimately intended to protect ing public awareness on the production and end customers from rising energy prices, are use of biomass fuels (undPa, 01). in the re - not sustainable and significantly threaten gov - ducing barriers to accelerate the development ernment budgets if international energy prices of biomass Markets in Serbia project, undP Ser - rise. as a result, they prevent re from becoming bia and ebrd developed an equity grant mech - a competitive and, if well designed, even a po - anism that helps to fill the equity gap. undP tentially more affordable substitution for fossil and gef albania developed a draft albanian fuels. undP supports countries in the region in renewable energy Plan and supported the all three forms of public instruments, often with preparation and adoption of a new law on re - an integrated approach. in belarus, a undP and newable energy with the introduction of fits

50 Market and Policy outlook for renewable energy in euroPe and tHe ciS g s r y t a t n o n g i e f n r h o g p n g i t e e s i r t e n g p c s c i n a a r o t M n e e w a e e t i e e c / c p t n b e s d k r t m ’ e r 8 i n i e n o y a m v u s S e s o r i i i r n t r r l e f d a o e b t r t t r l e i r / s t l a i o p - h i s c c f a d p s 9 o y g c V t t b t e k e a i d i g m e o c i h e 0 g s s n j t e n - e o d i d n t o k i 0 r e i d e n z r i i d a p t i t n i e a t t c e e t i l g g r o e i l o l a z n y g i e l s n a n c r n e n r a h r d a a i d r a n i t a b t g m a v i s e t r a n k s e i b e l u m d a k w h r t r a p i a n g t s a b e P i e d a c i c c o m x e h t l r e n l n g f n n t i n e s l e a t o n e n m r r n t g a n o s a o o c i o d i t e i t e o t f e n e m l y s o i l s s m s s a a d n d l e t t v i l t e i i s b a s i e y i d m y e e i u s l n a a k e t a e g g a c i u l u e e o e m d l r r o P k e l l p u c a t s r a i a b e m d i i k r i c r u o o P r l b b r p p n t e r o p o r a a i m g a a e e k z r e o e r t v 8 H n i v u a a t a e m n s u o t d p l g a c a 1 v u g s p g i S p m i x n w e i e n e s r t n g e n i m u k r S t i s r n i - e g n d i k s i r - e d l a i c n a n i f l t s a , s n s n y e t s e e t t o c i l e i s l g l e m s t o e t i s t e r n y g u n b b e r a u t p d o i w e a n i l a d h o t e , t d l t e o l s p i c s i m n d e u d h s d s e e n u t e u m n i s h g o u b n r r d i z s t o t o i a i t n h g u u i n i c s r s n s t m n n f t n a m m b c m i r n l a r r a s e o i p f a l n c e r d o e e e h p s r o o r u t t u a i g m p n f u c a t r a t d f a d g p n e c d g g e e i a e l a d s n e e l i s t k n l k r n n r h e e m n s r c s n s t a n o o s i t m a e e a y a l l a e e n m r h s r o v d n n b i t t c i h f - e i h h h h m i e t t l m e n n s s s s s e t e i i i i c y r y s m w a a l l l l m c a m d a l e m e g r e r o s s h d b b b b y a l l r i o c u h y c o o n u p a a a a r e d p p e f f t o t t t t o r c e r g t a e i l o r e a e t n s s s n s t v l t e e m s r e i d r e r p r e e m a e b s e p S o n P i g r n s i o d o n t k e t e y o c s t t u i i e g y d e s a s n r r l d r r s s g n - e e e r n t u e a y e r y e n . e l a c y n t m p l . s g y e e n d d a e t n r g s n y a y g r t s r r e t v v l n e o d i i n c s e e e o e i a r c r b n e e e t o l r o v c n t i a z u e p v a y i c i d t i p l b e o a r l c i n t t t e e t n n i s g e i e u g d e t s o l t n r a a h s i e i a n a P t h t e g t e i g r c s t i d o g b r c t t i c n n p t a n c i r d i s i f a n o n e n i e s d i e d s m b ﬃ s a m t y c r r c n t n l m i r n o e u e n n a a t t i a n o y n c a e s n l t s ﬁ e x g r n o a i e i l o p o e l t a l t l e n i e e t e e i , a m r t r p o r m p s . e s y e t a u t u i a t t t p t s e t e p o f t e e i i i r f r e e e l p m a v l r c i o c d t i m i l e s k k k e c e s o n s r e n u r r r b o r e c s n c s m b e e a a o a d a c v h r e a n e c o o u r h e n i n n t m i m m s a c m b u f t l i t r i d d n a s t e n d i e d r n s s t n a y o m i e a t i g s g s r c m r s n e i r e t e l t e o i e c v i n o a r t e r p n e p c r i a , p t e o s s s b e k t n h e t n s t o s t i c e a r i o n l i r n d p o e m s u t : e t t t s n c m s 7 e e e m i r e t i l s k s k k c e t e e r r r e l s n v d c a a a v o o n c b o n C a m a M t g i M a T

Market and Policy outlook for renewable energy in euroPe and tHe ciS 51 d a t s n i h n e t o v n i n c i a i i n t t e d l s n l g t f e h a r n n r y u a o n n o M a t e t e e i s i w i m m t s c e l s t t k g p r e m s i s s n m s u e s s s y S r e o o e i h b m t l o c r p f e i t d a r u i e i i c i k p c l - s e v n i e o i s e g a fi u i V e a a v r e i n y u z b h i e s q h e e i c e p n t t d d a f q t r 5 e s i s i e d - o f s n e k r i c a r t s n a e i p r e i e d a , y l g i e e r e c l o s e d h n f e i a t f t s r b i i t - p t p g s e n c ff e l c e o i s r i u i b e ff r v r u s e o n p d i i r r r c e e P i t e e r m t e d d o e n e a p a s f ff s a r i f o n c m o w a S t t n o r e o o o r g n e , u o e r o S t s c r n e p r s l p n z a a o a o e d p e e i i s i i e a d y e t d l e y l c r e h d g g i l h l o u e i e m e l r r b r l r p r t c a g u e i k n c i d i l a u t o o o a b r d n n i e r a l a s c c m h u h i e e r t y u a t a h e a o n n s M m n t l g s r p a g c i h i t w x n w e i e n e s r t n g e n m i u k r t S i s n r i - e g n d i k s i r - e d l a i c n a n i f e r e r c e g r g fi o e i g l n t n s w z i n c i t d i a - i n t o s i t c e n n i e r n r n y y r p r n r p a e e g e u s b f s c i a o t p , m r s v i s g l n w , r o m s n s n r g h o o e s h f n o e g e u fi r s a e d i t p l n i g n e s r i i o c ff p e t n n r s u e o g e n m m i o d r n o s i w t a n l r c o t c o l d n y a i e o m i r n u s e r o o s e n f r n s i o r o e i u a f t t l l h e o a t e e c r r e d e l s r t t b i f i r g a p c c i h d g o a t r o d c s e t w n d u f n e y u u i s i n f i r o c n n t o r o r t o o u g s r d i f a l k l p n t o t e o w c l g n n c t t i s t p s s s s e o i , n e y t e s e a o n n l s i n m a t n s c y i r p l r y o e t h p e e t t e i - a o d e t o a m i o s y i v i p t e a i c a a c l e e p s l r u s n t e m m h i a i n c r o c r t r i t t t l r d s g b t d v n c m n l s a b i i e r s s i s l e i e r e k a o r n a e t t v u v y a l r d s e e i a v v t d i o n r e c s p i c o a f d c a v v e o e o i o a i e r n v e r x m o r o l e o n n n n w d i l c P r p e c i S p g g d u f o i i l g o P t n y n s l c e l i r e o d t i a e r . i e t m a l s p r c c a e t e a n d c r e o u i t c i l n h a m r u p i s d t e r e u c g e j a s g a n o r v o y q i o t n n e e r o l f n i i y t e o r r i r e r f t p n r d e n e i a d u i e p o d e c c n c y s n r h b r i o a l y d e n a l a e r c e t a f e l i p i t n r a d l a r l h g y o t p c r e a t c r l t n a y i c s n e o s o n a s . i d p l a u e l d u u r s e k c l t u e e p q f t h s n o t m e n n t o n o s r u f o a a r c t e a a c s e o l o h o e n e t r s f n e s n b i c r r c p n d r a e i n k , o g s c fi i i e e k e e s g c e p h t a e m t r n r i c e h s t i a p p n s . r a l o p i s w o m a s i n n o o s c t n w r t u c , a l l r a w e s a e t s s s c n o c n e e e r c t c n i i e d e e r e t e s a r v v d r s c o e g v s c v c e n n r e e e a n n c o h e a n n n n r a fi i p c a d i f u a i p d t i h d d h y y t t l n i i p a c i w p r n e t u y o r c c s i g e t e n i r d l a r e e e r i n r a m n a e r e b e y h o p t t e f g x l n n o o e e b i l t a f o d m s t o s e n w n s t t i e e h i e d s c a c i n v c r o m e h e i n g i A r T c C l

5 Market and Policy outlook for renewable energy in euroPe and tHe ciS l e a s t i c . n i i c s a l e l m n r l n b s a e e b n a r g u d p a l t o n g n l M i i p d e i i o n t fi s o l u t e k a r r e s g y l n n e c s i l b S v , i p a n a e o v a u s r a i m e i r r y t n t m - e l n d i d a p s g g s ; V t n i o e d t a e i e o y n s n v a o e r t l n n d t o r t r P r a i i e e l o a e a r r h e r g c c n r H r e n v t e i n r i t i y l i h p r r o S e g e n d h u t i e t i b o b e t g t l y ff s w d c n r y c t s h r u t o f o b r t a m s n e g i e n n o e P i l i i o t r r o e s e s u o r m f e ff m s s i c r t o g e n n i d t q s n o s o f t o i e s e n e r e o a n r s e n e i i t s s i t n a b g n u p a t o e i a e n n n d a e e n l o m u s p g a i m a a t e o h m t c r s t l p k r x d t i d u n c u t o n o a m e a n b r 9 M r n e n l o s m a e a u u t o b a r o e a u n n n s i g a b r t M r t m q i e g f i x n w e i e n e e n s s i k r t h r s s s a t t t i n e s s r g g g k k e - - - t p d l s s o o n i i n o o o n o o n i a c c t t m n r r i l r r r t i e c a c s s e u r r e e e i i i k g g s a e e l n r t z z z s s v e e m i t S e a n n ( ( ( g h h a l s s i i i e i t s h h t t p i t t t n a a o c c t t n o d f f f y y n r o p t d d fi i l n n o s o p s a - t o o o b b a n n e k k a a s s s s s p c e g d d d c r s s r v a a , , , n n n n e t t n e j n n n e s s s d l l m e i a a fi fi o c c a a a e e e a a o p t o k d w b b s s u u r t t s e e e c s s s i o i r r s i o t t l y t t t d d p l s n n n e e p p r n n n e n n n b o o t r e - a a a a a r r v e e s w w o a a a c s e i c c i e o o o r r r e f p p l l l o o c s s e l l m m a a a s l l d o o d s ) ) ) s a c i t t r r t t t p p u u u l a a n a t i i n s s s e e n a a o o s s g g g c i c c m f f i s a l l r e e e s s r s s s s e a t c r r r k n n e e n n n j t e e u n n n e e e g n a a v v n a a a s k c c o s t t t a a a a a r s e e n n c c o o o o r r r i o n n n n n l i d fi t l l i i d b a t fi i p a t t r c i f n s - y e o g s i e t s i t r n g a c m s c o e i o n r t e l i e r r h o n t t m t n d c f o c e r b t r e n u e a e l s r e e l e d o m s e c e i l p d e c y r u s w n e a b r i c r o d a c e n i o t f i , e a i l l r o e s l r r n f e a h s r o e s a i r n e t g u c t s c i r p h s i e u h b o y r n n u s a t r v i g t v w i o r s a e e i a c d , b o t t r a n c c t d i y f n l u b s o n d a i g t r c t n r k l n a a o i e o n t e t t i s e a l a r z c u g y s i u t s i c s n t n l e g p a e a r i q n l e l t g g e l r - a l fi e l c i f e a l o r m n n i e e i e t a fi i i t m b f n t i t a c i e c t c c i d r r d n a e y o t x i s n l t e n n d o e b j h a t t v e y e a c m t a a c n s s p e o o c o r r v e n i r r r e n n r l x i o o o l e o o n fi fi c p i c p t f f e c t c e d P o P e d e c n r h d t a o d y n f r r s s n d g n a e e a a r a ff e l o ff ff t f i e s t o a - u u d a k o g n c b t s s . s n d e e i e o k s u t r l a r n n n s d c e i g u f ( r e o o o c r s i i i n y o l o e s h i fi s t f e i g g a t i s s o k s d t c i l e e h c i u c i n r r n t n e i r a p a n m a a r l t p e e c a r s s o l c s o t i , c h h d e - n a t l i e l t t e l y l r y a r r u o a t a r r t e e i n n t t t u n i i l b i , n n i i n t n s m o r p y s s o u c i e b . t i t e u i o t a e e i t o . u e s g i i t r c i g ) o r r c p f r r c r a i i t t t c a f y a d u r r r e n s t t y t n n o i r c e v e r a h j n c s m m u u e r u n k o ff a a g f t e e o o o o s i l q o h u i r r n n s h m f r c i s M e c d e i f c n o d i s n s a i y m t r s i n l e i n i o y r i a t b r t i r e a a a t r c t e b r k u r s e t a t s c t n i c c n i a r n S e l u u y w r l a r t q m a c O t t s i e t : s i t n a e i d e r l p c u a f r v a o o u n n n i i C I c P o S

Market and Policy outlook for renewable energy in euroPe and tHe ciS 5 and power purchase obligations of up to 15 tenegro, 01). 47 to address barriers arising from t

n years. the undP and gef project, Promoting investor’s lack of information, the Serbian Min - e M

t reS, worked with the government of Montene - istry of energy, development and environment S

e gro to develop the energy law and other re - Protection, together with undP, published in - V n

i lated bylaws regulating the rights and obliga - vestor guides for re technologies. the guides ex - y

g plain in detail the steps in - r e Many countries in the region are now addressing volved in the construction n e

e barriers to RE investment. process for small hydro, wind, l

b solar, geothermal, or biomass a

w tions of entitled reS producers, including the power plants (undPa, 01). and undP and e n

e introduction of power purchase obligations gef’s kazakhstan – wind Power Market devel - r

g valid for 1 years in combination with fit (gov - opment initiative produced a wind atlas con - n i

k ernment of Montenegro, 011). Since 008, 1 taining detailed wind assessments. S i

r concessions with a total installed capacity of 97 - e Mw for SHPP, and two wind power concessions alongside undP efforts, many countries in the d with a total installed capacity of 96 Mw, have region have started tackling barriers to re en - been granted to investors (Vener, 01). as a ergy investment. table 7 summarizes the in - result of this project, in 01 the Ministry of vestment barriers, their public de-risking in - economy of Montenegro opened a call for ten - strument counterparts, plus examples from ders for seven concessions for the exploitation of countries in the region that have started to ad - water resources (Ministry of economy of Mon - dress their risk and investment barriers.

47 More information about current SHPP tenders is available at: www.mek.gov.me/en/library/tenderi

54 Market and Policy outlook for renewable energy in euroPe and tHe ciS Conclusion

despite the region’s tremendous re potential, mean that increasing numbers of onshore wind increasing energy security concerns and fre - and solar PV power plants can now financially quently adopted favourable re promotion out-compete fossil fuel alternatives even with - schemes, only a few eciS countries have de - out subsidies; this is in cases where plants can be ployed renewable technologies to a significant built in favourable geographical conditions for extent in recent years. rather than attributing wind and sunshine load factors, as well as this to ineffectiveness or an absence of re in - favourable financial conditions and low costs of centive schemes, the analyses demonstrates capital (fS & uneP, 014). However depending that the reasons for low re deployment are re - on the energy market in each country, even af - lated to multiple investment barriers that often ter effective de-risking, direct financial incen - correspond with country-specific risks. the re - tives to make re investment competitive com - sulting high costs for financing re projects pared to other forms of energy generation might be the reason for low re deployment might still be required. financial instruments rates in the region. Historically, governments should directly address country-specific needs have focused on reward-based incentive and obstacles. the analysis shows that in many schemes to increase the profitability of re in - countries there are difficulties in obtaining cap - vestment. but re incentive schemes either bur - ital particularly equity. Hence, after effectively den scarce public budgets or increase house - addressing risks and barriers, equity grant mech - hold electricity prices. in the eciS region, anisms can help to close the equity gap, to es - affordable energy is a key determinant of so - tablish entrepreneurial activity and reward for cioeconomic development. Poor and rural pop - potentially remaining incremental costs. ulations are particularly vulnerable to energy poverty, a major impediment to sustainable despite existing investment barriers, there is and human development. increased energy a positive trend for improved re investment prices are, therefore, of concern to poor and conditions in the region. the technical re po - vulnerable households and businesses. reward tential is huge and the geopolitical situation in schemes compensating investors for their terms of energy security concerns provides in - higher risks are consequently a secondary al - centives for many countries to increase their ternative for the region. own energy supply in the mid-term. Some countries have recently adopted or revised alternatively, electricity generation costs could their re schemes and experts anticipate an in - be lowered through public de-risking instru - crease in re investment in the coming years. ments, by either lowering policy risks or trans - other countries show lower deployment rates, ferring financial investment risks. rather than but a number of large projects are being de - increasing the financial reward, those instru - veloped and investment barriers are being ad - ments can help to reduce the financing costs re - dressed. the combination of favourable geo - lated to the substantial up-front investment. graphical conditions, continued reductions in this also may offer a potentially attractive alter - re technology costs and increased awareness native to fossil fuel subsidies, which are not sus - make re technologies ever more attractive in tainable and burden government budgets sig - comparison to traditional ways of energy gen - nificantly if international energy prices rise. eration. this is likely to lead to more re de - improved efficiency and lower technology costs ployment in the region.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 55 References

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Market and Policy outlook for renewable energy in euroPe and tHe ciS 6 Annex

Table 8: implemented renewable energy related Policies 48

Policy financial direct financial incentives de-risking de-risking instruments instruments y r s a t t e t n s d s s s g i d e e e r s e l r e t r n a e e b m g a a e t t c m a e t n b c r y l n y u s s n t o i e a w e s a t a s i p i i g t r r t e r r c n n e d n m o d a c m o e n c e a a w i a n x i e t u u r r c u o e r r r n i o o o a e r a e l g P l l t g t f t a Q P c country g kazakhstan X X X X X X X

kyrgyzstan X X X X X

tajikistan X X X X X

turkmenistan

uzbekistan X X X

albania X X X X X

Serbia X X X X X

croatia X X X X

bosnia & Herzegovina X X X X X

Montenegro X X X

fyr Macedonia X X X

turkey X X X X

belarus X X X X X

Moldova X X X X X X

russia X X X

ukraine X X X

armenia X X X

48 Please note: Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Georgia (only for SHP) and Moldova have project- specific FiT implemented. Azerbaijan offers FiT only for wind and SHP. The premium in Bosnia accounts only for installations in the Republic Srpska, Hungary offers the tender only for wind. In Georgia, complimentary grid access is only available for SHPPs. Lithuania offers complimentary grid access only for installations smaller than 30 KW. In Poland, Slovakia and Hungary grid access has to be paid partially by the plant operator. The FiT for Latvia is on hold until 2016 and no new electricity licenses are granted. In the Czech Republic, except for small hydropower, the FiT and the premium apply only for installations that do not exceed 100 KW and are put into operation before the end of 2015 and hold a building permit issued before 02 October 2013.

64 Market and Policy outlook for renewable energy in euroPe and tHe ciS Policy financial direct financial incentives de-risking de-risking instruments instruments y r s a t t e t n s d s s s g i d e e e r s e l r e t r n a e e b m g a a e t t c m a e t n b c r y l n y u s s n t o i e a w e s a t a s i p i i g t r r t e r r c n n e d n m o d a c m o e n c e a a w i a n x i e t u u r r c u o e r r r n i o o o a e r a e l l l g P t Q g f t c g country P t a azerbaijan X X X

georgia X X X

estonia X X X X

latvia X X X X X

lithuania X X X X X X X X

romania X X X X X X X X

bulgaria X X X X X

Poland X X X X X X

czech republic X X X X X X X

Slovakia X X X X X X X

Hungary X X X X X X X X

Slovenia X X X X X X X X

Sources: Own creation

Table 9: world bank indicators s t i s s m ) r e t % e s n ( i P e t i s 4 r g g n m 1 1 u d e h n n t t i i o 0 0 e u b i i i r n o o t i a w c c m s s ) d d g s s g u e g f f g r r % n e e n n o o i t ( n i i P i n n s t l d i i t e e e r k a t n s s t s s n a s e e o a i u u a a t e r r l g b e b e c country S d kazakhstan 50 5 0 145 68 - -

kyrgyzstan 68 70 1 66 1 1.8 6.6

tajikistan 14 141 87 184 159 5. 0.

turkmenistan ------

uzbekistan 146 156 1 159 10 - -

Market and Policy outlook for renewable energy in euroPe and tHe ciS 65 s t i s s m ) r e t % e s n ( i P e t i s 4 r g g n m 1 1 u d e h n n t t i i o 0 0 e u b i i i r n o o t i a w c c m s s ) d d g s s g u e g f f g r r % n e e n n o o i t ( n i i P i n n s t l d i i t e e e r k a t n s s t s s n a s e e o a i u u a a t e d c S e e b b l g r country r albania 90 8 76 189 1 10.9 5.7

Serbia 9 87 45 18 4 1. 5.1

croatia 89 88 80 15 4 9.5 -

bosnia & Herzegovina 11 10 174 175 7 6.9 -

Montenegro 44 50 69 106 9.6 4.8

fyr of Macedonia 5 6 7 6 8.5 -

turkey 69 7 9 148 86 - -

belarus 6 64 15 0 109 19.5 -

Moldova 78 86 81 174 1 1.4 -

russia 9 111 88 178 109 9.1 -

ukraine 11 140 47 41 1 18.4 -

armenia 7 40 6 79 4 17. 7.4

azerbaijan 70 71 10 180 55 18. 15.9

georgia 8 9 8 .1 15.

estonia 1 61 8 4 5.7 -

latvia 4 4 57 79 5.5 5

lithuania 17 5 11 9 8 6.6 .

romania 7 7 60 16 1 11. 5.1

bulgaria 58 57 65 118 8 9.7 9.4

Poland 45 48 116 88 - -

czech republic 75 68 146 86 55 5.4 4.8

Slovakia 49 4 108 5 4 5.8 -

Hungary 54 5 59 47 55 9 .1

Slovenia 1 8 59 109 5.9 -

Source: World Bank (2014)

66 Market and Policy outlook for renewable energy in euroPe and tHe ciS Table 10: opportunities to finance renewable energy Projects in the region

institution countries terms of financing website available

national financing institutions and funds (including erbd’s Sustainable energy financing facilities)

KazREFF kazakhstan ebrd prepares to launch kazreff, which should – provide development support and debt ﬁnance to renewable energy projects meeting the required commercial, technical and environmental standards.

KyrSEFF kyrgyzstan Has means of $0 million. it provides loans up to www.kyrseﬀ.kg/en/ $00,000 and grants of up to 0 percent of the loan for private companies in renewable energy.

WeBSEDFF albania, Serbia, locally SMes with a sound financial and www.websedff.com croatia, bosnia economic structure and sufficient means of and Herzegov - equity capital can apply to western balkan ina, Montene - Sustainable energy direct financing facility for gro, fyr of direct loans of between € million and €6 million. Macedonia

WEBSEFF Serbia, bosnia western balkans Sustainable energy financing www.webseﬀ.com/ and facility provides loans of between € million and Herzegovina, €5 million via local banks for private corporation’s fyr of investments in energy eﬃciency or renewable Macedonia energy projects. loans can cover 100 percent of the investment costs.

TurSEFF turkey credit lines are provided by ebrd over eligible www.turseﬀ.org/ commercial banks to ﬁnancially viable private turkish SMes. a maximum loan of €5 million for renewable energy projects including technical assistance can be obtained.

BelSEFF belarus a $50 million credit line is available for private as www.belseﬀ.by/en well as public belarusian companies investing in re projects which have a positive nPV over a 10- year period by using an 8 percent discount rate in hard currency cash ﬂows.

Energy Moldova the main objective of the fund is to attract and www.fee.md/ Efficiency manage financial resources for funding and Fund implementing projects in the field of energy efficiency and renewable energy by providing grants, loans and technical assistance for eligible renewable and energy efficiency projects.

MoSEFF Moldova Private Moldavian ﬁrms can receive €5,000 to www.moseﬀ.org/ €,000,000 in loans for reS projects. between 5 index.php?id=1&l=1 percent and 0 percent of the loan can be given as a grant.

HBOR croatia croatian development bank oﬀers loans for www.hbor.hr/ public and private entities investing in energy hrvatski eﬃciency and renewable energy projects. a minimum loan is €1,000 and loans can cover up to 75 percent of the estimated investment value without Vat.

Market and Policy outlook for renewable energy in euroPe and tHe ciS 67 institution countries terms of financing website available

Fund for croatia awards interest-free loans to all legal and natural www.fzoeu.hr/hrv/ Environment persons in croatia for renewable energy projects index.asp al Protection through tendering processes. the amount and and Energy speciﬁc conditions vary for each tender. Eﬃciency

RuSEFF russia finances up to rub 00 million (c.€7 million) from www.ruseﬀ.com/ funds of the ebrd is available for privately owned, russian companies targeting an irr of 10 percent.

USELF ukraine Provides loans up to $ million from ebrd and free www.ukeep.org/ technical advice for privately-owned companies seeking to invest in renewable energy projects.

UKEEP ukraine Provides loans starting from €1 million and free www.uself.com.ua/ technical advice for small and medium projects in renewable energy.

ArmSEFF armenia Private armenian companies investing in www.armseﬀ.org/ renewable energy projects which are ﬁnancial viable can apply for loans.

RoSEFF romania reS projects of SMes can receive loans of up to www.seﬀ.ro/ eur 1 million and grants of up to 15 percent (max. €150,000) of investment costs.

PolSEFF Poland eligible for a loan of up to 100 percent of the www.polseﬀ.org/ investment costs are private Polish SMes investing in re projects which generate a minimum of kw-h per €1 invested annually.

BEERECL bulgaria local enterprises can benefit from ebrd loans http://beerecl.com for small scale reS projects up to €.5 million and grants (excluding PV) up to 15 percent of the received loan. eligible are SHPPs up to 10 Mw, wind power plants up to 5 Mw, biomass power plants up to 10 Mw and solar PV power plants up to 1Mw.

SLOVSEFF Slovakia Projects in the renovation or construction of ww.slovseﬀ.eu/ SHPP (up to 10 Mw), wind, solar heat systems, biomass, biogas and geothermal power plant projects with a minimum irr of 10 percent may be eligible to receive technical advice, funds up to eur .5 million and a grant (up to 15 percent of the loan) through partner intermediaries, e.g. Slovenská sporiteľňa or tatra banka.

BEECIF bulgaria SMes can receive loans for re projects up to 0 www.beeciﬀ.org/ percent through partnerships intermediaries (e.g. allianz bank bularia, dSk bank) and grants up to 50 percent (max. million bgn) of total eligible costs.

EERSF bulgaria the energy eﬃciency and renewable Sources www.bgeef.com fund provides loans and guarantees for bulgarian municipalities, private persons and corporations investing in energy eﬃciency, but also projects utilizing reS.

68 Market and Policy outlook for renewable energy in euroPe and tHe ciS institution countries terms of financing website available

German- armenia a €40 million loan was concluded between kfw www.gaf.am Armenian bank and central bank of armenia to promote the Fund (GAF) utilization of renewable energies and in particular SHPPs, by enhancing the access to loans for private entrepreneurs and private enterprises.

Environmental estonia Supports investments in wind energy or cHP www.kik.ee/en Investment projects with capital from co quota sales. Centre

Rural estonia oﬀers loans and guarantees in projects investing www.mes.ee/en Development in the economic development in rural areas. Foundation

Latvian latvia gives loans if the project provides environmental www.lvif.gov.lv Environment improvement and is ﬁnancially sound. Investment Fund

European latvia gives loans to SMes via ciP and JereMie initiative www.eif.org/what_ Investment through intermediate banks. we_do/where/lv/ Fund

Environmental lithuania Supports re investment projects in the forms of www.laaif.lt/ Investment interest subsidies and soft loans. there are two Fund (LEIF) calls per year, which are published in the media and on the leif website.

Fund for the lithuania oﬀers loans for applicants not engaged in www.laaif.lt/ Special economic and commercial activities €1,447,70 Programme and for applicants engaged in economic and for Climate commercial activities €199,7. the Ministry of Change environment and the applicant have to sign a Mitigation ﬁnance agreement and applications have to be sent to leif.

ERDF Hungary Via the operational Programme environment and www.nfu.hu/ energy small re developers (geothermal, biogas, wind up to 50 kw, solar up to 500 kw, SHPP up to Mw and biomass up to 0 Mw) can apply to the national development agency to be selected for a subsidy of up to 70 percent of the total eligible costs or maximum Huf 1500 million (approximately €5.07 million) or a loan of maximum Huf 800 million (approximately €.6 million) at a reduced interest rate of 0.5 percent.

Eko sklad Slovenia the environmental fund of the republic of www.ekosklad.si/ Slovenia awards low-interest loans to renewable energy projects via tendering. currently the fund calls for applications to subsidize the reconstruction and renovation of renewable energy plants. eligible investors are private and public legal and natural persons in Slovenia with a maximum loan of €4 million for municipalities, enterprises and other legal entities (15 years credit period) and €5 million for residents (10 years’ credit period).

Market and Policy outlook for renewable energy in euroPe and tHe ciS 69 institution countries terms of financing website available

Subsidy Slovenia the Ministry for infrastructure and Spatial Planning www.mzip.gov.si/ Scheme of the of the republic of Slovenia awards subsidies via a Ministry for tendering process to companies that invest in Infrastructure energy eﬃciency, renewable energy and cHP projects covering a maximum of 50 percent of the eligible costs of an investment project.

regional operating financing institutions

Green Growth albania, Provides direct and indirect (through ﬁnancial www.ggf.lu/ Fund armenia, intermediaries) ﬁnancing for small scale renewable azerbaijan, energy projects usually not larger than €50 million. Serbia, croatia, bosnia and Herzegovina, Montenegro, fyr of Macedonia, turkey, Moldova, ukraine, georgia

NEFCO russia, ukraine complements ﬁnancing from other interested www.nefco.org/ parties and/or ﬁnancial institutions for eligible projects having a nordic company or institution as business partner.

Eurasian kazakhstan Prioritizes investment in power generating http://eabr.org/e/ Development kyrgyzstan, renewable energy projects by providing debt from Bank tajikistan, russia, $0 million to $100 million. belarus, armenia

Asian armenia, asian development bank ﬁnances private or public www.adb.org/ Development azerbaijan, organizations with clear development impacts Bank georgia, (covering, among others, climate change and kazakhstan environmental sustainability) as well as a sound kyrgyzstan, rate of return. tajikistan, turkmenistan, uzbekistan

International all Provides loans and equity to eligible private, www.ifc.org/ Finance technically sound and proﬁtable projects either via Corporation direct capital or ﬁnancial intermediaries.

EBRD all Provides equity, loans and guarantees in projects www.ebrd.com/pa from one to 15 years. ges/workingwithus /projects.shtml

EU Means Hungary, loans and guarantees via commercial banks as http://europa.eu/yo eif Slovenia, Serbia, intermediaries and private equity/venture capital is ureurope/business/ eib Montenegro, fyr available. ﬁnance- Structural funds of Macedonia, support/access-to- turkey, estonia, ﬁnance/ latvia, lithuania, romania, bulgaria, Poland, czech republic

Sources: Own Creation

70 Market and Policy outlook for renewable energy in euroPe and tHe ciS Table 11: renewable energy investment opportunities in the region

country activity website

Serbia the Ministry of energy, development and environment www.undp.org/content/serbi Protection together with undP published investor guides a/en/home/presscenter/articl for renewable energy technologies. the guides explain in es/01/0/7/guides-for- detail the construction process of small hydro, wind, solar, investors-in-renewable-energ geothermal, or biomass power plants as for example the y-in-serbia/ licences and permits required for plant commissioning or which authorities are involved.

georgia user manual for the commissioning of SHP power plants is http://smallhydrogeorgia.org available explaining potential developers ﬁnance, /en/ negotiation and permit processes.

georgia interactive map illustrating potentially exploitable SHP www.energy.gov.ge/en/4756 sites.

georgia list of available and potentially exploitable SHP sites www.energy.gov.ge/en/4756 including Pre-feasibility Studies.

kazakhstan wind atlas illustrating and measuring the wind potential of www.atlas.windenergy.kz the entire country.

kazakhstan Potentially available wind farm investment projects with www.windenergy.kz/eng/pag pre-feasibility studies. es/ereymentau_investment_ projects.html

fyr investors have resources to detailed rulebooks on reS, on www.mek.gov.me/en/library/ of Macedonia reS for electricity generation, and on the Method of pravilnici obtaining Status of Preferred generator of electricity, generated from reS.

azerbaijan azpromo, the state owned investment agency of www.azpromo.az/uploads/str azerbaijan, oﬀers a list of available re investment projects. ucture/ﬁles/renewable percent0energy_51f6f05d 4ce0.pdf

bulgaria invest in bulgaria, the state owned investment agency of www.investbg.government.b bulgaria, oﬀers a list of available re investment projects. g/en/projects/environment- and-res-56.html

Slovenia invest in Slovenia oﬀers a list of available re investment www.investslovenia.org/inve projects. stment-opportunities/ select_category/19/

Sources: Own creation

Market and Policy outlook for renewable energy in euroPe and tHe ciS 71 . A . S 0 0 5 5 5 5 5 5 . 1 1 1 1 1 1 1 1 U Y n e s & h o r i t E t a r a e o m r f y o u ) r f n 3 d i 1 d 0 e 2 v ( i r b e % % % % % % % % A d I 9 9 0 0 7 7 9 9 y E 1 1 1 1 1 1 e f k o r s u e T i x x d a o n r t a p e s e n i u l a 0 0 0 0 0 0 0 0 r a s 4 6 0 0 0 0 0 0 k ...... v t U r s 6 9 0 0 0 0 0 t g , a 9 4 6 9 0 0 5 o n n a i e c 6 8 5 6 0 0 0 7 i a , , , , , , , , s l y n s 8 4 5 0 8 4 / i p M e 7 6 5 8 $ v r & m 5 9 o o n r l f i o S o F n . i n . e t o € 0 0 0 0 0 0 0 0 i a t 5 0 0 0 0 0 0 0 g o r t n e 5 0 0 5 0 0 0 x , , , , , , , r e n i a 1 7 4 e t w m d h l e k s t e t a t / t r t r s a $ o r s e o f o v n n s i c i p n d r o n o c c u e t o e r e b b h % % % % % % % % t r e 8 8 6 6 6 6 8 8 w e g s d n w e f i s o u o l l u t a d s v d n e o $ t a c r a E e O m p i C t p L s u l e % % % % % % % % a g e 8 8 8 8 n r n i y 1 1 1 1 1 1 1 1 e ﬁ t t i e w n u h e s t s e q t , r e r s e r u e o f t p i p e o c d r a , n p ) e 3 e p 1 h x t 5 4 5 4 1 5 0 . . . . e f 9 5 2 0 . 0 . 0 0 . . ( x o 0 0 0 0 a y y A t T i d N . r c s o E o a n b R t I p o e c i a t a h m t p c f o r n m f i u y d s c e s 1 1 1 1 1 1 1 1 v n a i e r t n e s i y d w s t i o e n r c e o w t e a r c n a p w M a p a l s e e n r z i c P e s i o s k t n t c o o n a T i f a . t l 1 4 5 8 y d a t p 7 9 6 6 7 6 5 4 l i e ...... c d 4 1 9 1 8 4 u m a n h 4 0 0 7 1 9 c n u - p l a i s 7 1 a a s n e w c a c o i o d s M t / e c n a a l $ r a w o u s t 0 c d s 7 , l : t o e 0 r c c b i 3 c o e o i t f f M t e c s d i o s l & i s o d e c m O n r c n i i m , t l i t a a s o t s t i h p i y o o e s t p s t r r i v o o t i m p e e e d d o u i c t s s b t y y q o o o a s s e V V n m p e e v H H a a c c c d o P P f r u i - l l l l l o o l l t r r o y s e m m t a a a c a a e e e s t s d i l o o l l l l s i i v v v y n u n i i i a o o m m a i o b b t t t c g q o t S S S S : i : : C a a a s e t o : : : : c w . l a a 2 v v v s n : : i i e e e e n i I d r r r o 1 y y : n n e n n n n A e e e i i i i n s s m e e . e e e e s s s i e ) e a a a a h u k k v v t l r r r r n n n c 4 r r o o c r e o o p k k k k o o o 1 b l l r u u c c e u 0 e l u l c c t t S u u c t S o u a o 2 T w ( S

7 Market and Policy outlook for renewable energy in euroPe and tHe ciS Investment_UNDP_COVER 05/05/14 10:44 Page 1

Empowered lives. Resilient nations. Market and Policy Outlook for Renewable Energy in Europe and the CIS

Empowered lives. Resilient nations.