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Studies Prepared Under the Project “Promoting Green Economy in GUAM Countries: Promotion of Renewable Energy Sources”

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Studies Prepared Under the Project “Promoting Green Economy in GUAM Countries: Promotion of Renewable Energy Sources” Studies prepared under the project “Promoting Green Economy in GUAM Countries: Promotion of Renewable Energy Sources” Azerbaijan, Georgia, Moldova, Ukraine February 2014 The project was implemented with the support of the Government of Japan through the Japan Special Fund (JSF), managed by the Regional Environmental Center for Central and Eastern Europe. Introduction The project “Promoting Green Economy in GUAM Countries: Promotion of Renewable Energy Sources” is supported by the Government of Japan through the Japan Special Fund (JSF) managed by the Regional Environmental Center for Central and Eastern Europe (REC). The JSF programme focuses on building capacities in the countries of Central and Eastern Europe (CEE) and beyond to develop climate policy and to support the implementation of the United Nations Framework Convention on Climate Change (UNFCCC). The project targets Georgia, Ukraine, Azerbaijan and Moldova, focusing on how to increase the share of renewable energy sources (RES) at national level. Information for this analysis of the RES situation in the GUAM countries was gathered at a seminar held in cooperation with the GUAM Secretariat in Kiev on October 17–18, 2013, by representatives of the GUAM countries. Further information was subsequently obtained via desk research. The country studies describe the general situation and role of RES, including the institutional context; relevant national policies and legislation; the current share of RES in energy production; the technical possibilities for its enhancement; fiscal initiatives; RES potential in terms of biomass, solar, wind and hydro; and RES-related projections and targets. At the end of each study, gaps are identified and recommendations made for further action. 1 Summary Azerbaijan assumed the position of a major hydrocarbon exporter in the mid- 2000s, when the large Caspian oil and gas fields came online. Export revenues have driven significant economic growth, including in the non-hydrocarbon sectors of the economy. With its current hydrocarbon production levels and available reserves, the country does not have pressing energy security concerns. However, there are other good reasons for the development of renewable energy sources (RES): substituting natural gas, which would help to increase its exports; meeting the energy demand of Nakhchivan Autonomous Republic, a landlocked exclave, and remote areas; and reducing the country’s carbon footprint. Hydropower plants (HPPs) can play a role in flood control and as part of irrigation systems. In 2011, RES (mainly large hydro and biomass) accounted for 2.6 percent of the country’s total primary energy supply (TPES) and 12.8 percent of its power generation. Azerbaijan has a renewable energy agency (SAARES) and a state company tasked with the implementation of renewable energy projects. The country does not have a renewable energy law, but a renewable energy strategy was adopted in 2004 and a new strategy for the period up to 2020 is being developed. The country has renewable energy targets for the year 2020: • a 20 percent share of RES in power generation; • a 9.7 percent share of RES in total final energy consumption; and • installed capacity of renewable-based generation facilities of 2,500 MW. There is a feed-in tariff for wind-based electricity (some 10 percent higher than the regular tariff). Regular tariffs apply to all other RES-based plants (for private small HPPs the tariff is even lower). Imported wind energy equipment is exempt from customs duties. Azerbaijan is actively building medium-sized and small HPPs in Nakhchivan and other regions. Projects using other renewables are currently at the pilot level, with an installed capacity of several megawatts or less. The renewable energy agency SAARES has built a hybrid pilot site combining solar, wind and biogas installations at Gobustan and is currently considering the construction of other hybrid plants. The decentralised use of small-scale solar power systems to produce electricity and heat for public buildings is also promoted. At the same time, larger wind-based projects are under consideration; some of them may be implemented by the state and financed by loans from international financial institutions (such as the German development bank KfW, which recently approved such a loan). The country needs to finalise and adopt a new renewable energy strategy, as requested by the president of Azerbaijan, and the possibility of adopting a dedicated renewable energy law can also be considered. 2 Attracting significant private investment in the renewable energy sector would probably require additional measures, including larger feed-in tariffs and fiscal incentives, as well as streamlining and simplifying administrative procedures. Further detailed studies of the country’s renewable energy potential, as well as the creation of a dedicated information resource providing one-stop-shop access to information on renewable energy in Azerbaijan, would be helpful. Georgia’s energy sector, in its current form, has been largely shaped by a series of reforms undertaken in the aftermath of the Rose Revolution (2003). The reforms, which prioritised the enhancement of the legal and regulatory framework for doing business and deregulation, succeeded in ensuring strong economic growth and many problems that plagued the energy sector in the early 2000s have been addressed. Renewable energy sources (mainly hydropower and biomass, but also a smaller fraction of geothermal energy) provide 28 percent of the country’s TPES — the highest value among the GUAM countries. Almost all fossil fuel resources consumed by Georgia are imported, thus the development of RES is the key way to enhance the country’s energy security. A distinct feature of Georgia’s electricity sector, which is dominated by HPPs (80– 90 percent of the total power output), is the seasonal generation pattern. Due to a limited reservoir capacity, hydropower output declines in the winter months, when electricity demand peaks. Gas-fired thermal power plants (TPPs) help balance demand and supply, but some imports are still necessary, even though the country may be a net electricity exporter. Georgia does not have a dedicated renewable energy agency (there is a second-level division at the Ministry of Energy). There is no renewable energy law or a strategy that would cover the entire range of RES, and there are no renewable energy targets. The country has applied for full membership in the Energy Community and will have to adopt a mandatory renewable energy target and develop a renewable energy action plan when its application is granted. Georgia has implemented a programme for facilitating private investments in the construction of greenfield HPPs, which relies on the deregulation and simplification of procedures to attract investors. During the winter months, HPPs are required to sell their output within the country (optionally under a guaranteed power purchase agreement), but they are free to choose the market and the price during the rest of the year. They are offered access to a transmission line to Turkey, an attractive export market. Overall, the programme has been effective: there are 16 ongoing construction projects; and MoUs for over 60 plants with a total installed capacity of over 2,400 MW and an estimated cost of over USD 3 billion have been signed. In the coming years, Georgia plans to become a significant regional electricity exporter. There are no major national initiatives for the promotion of other RES, although the latter can play a role in meeting the country’s energy demand. In particular, wind farms can contribute to addressing the issue of the “winter generation gap”. Plans to build a 20 MW wind farm financed by a state-owned company have 3 recently been announced. Modern biomass and solar solutions are currently being used in pilot mode on a small scale. Among the country’s needs are the development of a consistent renewable energy strategy and/or action plan that would cover the entire range of RES. The adoption of a renewable energy law and the creation of a dedicated agency should also be considered. Existing electricity tariffs may be insufficient to attract significant private investment in renewable-based generation, thus some additional incentives (e.g. feed-in tariffs and/or fiscal incentives) may be needed. Detailed studies of the available renewable energy potential are necessary. The Republic of Moldova is a landlocked country located between Romania and Ukraine and European integration is high on the nation’s agenda. The country does not have its own fossil fuel resources. Over 80 percent of the installed power generation capacity available in Moldova is situated in the breakaway region of Transnistria, thus 76–79 percent of the electricity consumed in Moldova is either imported or sourced from areas outside the control of the central government. Energy security concerns make the development of RES an important national priority. In 2011, RES (biomass and hydropower) represented some 3.4 percent of the country’s TPES. In 2007, the country adopted a renewable energy law. National development strategies include provisions on promoting the use of RES. Moldova has a dedicated energy efficiency agency responsible for the promotion of energy efficiency and the use of RES. Its Energy Efficiency Fund was created to identify and support energy efficiency and renewable energy projects. The country has a system of feed-in tariffs for renewable-based electricity producers, which are calculated on an individual basis. The system has not so far been very effective in attracting private investment to the sector. Save for a medium-sized HPP, the country has only small-scale renewable-based installations. Given the country’s significant agricultural sector and predominantly rural population, the decentralised use of biomass for heating is an efficient approach, which is being promoted by several initiatives. Moldova is a contracting party to the Energy Community Treaty and in 2012 it adopted a mandatory target of 17 percent for the share of renewable-based energy in gross final energy supply by 2020.
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