Renewable Energy Regulation in Moldova CONTENT This article is purported to provide a “flash” on the regulation of renewable energy (“RE”) in Moldova, NATURE AND IMPORTANCE OF RENEWABLE ENERGY including an overview of available incentives and IN MOLDOVA guarantees to the parties interested in investing in this area. REGULATION AND INSTITUTIONAL FRAMEWORK Please note, that the information contained herein is provided for general information purposes only and MANUFACTURING AND TRADING REQUIREMENTS does not constitute legal advice. For a more detailed expertise, please address your questions or concerns INCENTIVES AVAILABLE TO RENEWABLE ENERGY to us or any other local renewable energy expert. COMPANIES We hope you will find this article informative and helpful for your business activity in the Republic of Moldova. With kind regards, ACI Partners Team Chisinau, May 2013 © ACI Partners 2013 Nature and Importance of Renewable Energy in Moldova During the last couple of years, Moldova has begun to promote and expand its RE industry. The absence of energy resources and increasing dependence on imports of energy propelled RE into a strategic priority, which became a hot spot for both local and foreign investments. With only 5% of local conventional energy resources, Moldova depends heavily upon imported energy resources, mostly from Russia or Ukraine. This situation fostered the necessity to identify and promote alternative energy resources and further unlock the Moldova’s authorities propensity toward RE. In line with the objectives of the European Union, Moldova has set a national target to reach 20% of renewable energy in the total energy consumption by 2020. According to the data provided for by the Moldovan Energy Strategy the renewable energy resources (“RES”) available in Moldova (biomass, hydro-electric, solar and wind energy) have the potential to cover the whole country current consumption needs. The UNDP Energy and Biomass Project with a budget of EUR 14.56 million and the European Union budget support program of EUR 42.4 million to help energy sector reform aim to contribute to a more secure, competitive and sustainable energy production in the Republic of Moldova through targeted support to RE. However, greater investment, especially foreign investment, will be needed in order to make Moldova achieve its long desired energy security. Thus, Moldova has recently designed a legal framework which provides the ways of organizing production and marketing of renewable energy and fuels, including support for RE projects and directions for achieving energy efficiency. Regulation and Institutional Framework The Law no 160-XVI on Renewable Energy was Moldovan legislation defines RES and RE by itemizing approved by the Parliament on 12 July 2007 and is what is included. According to the Statute of the the main legal act regulating the Renewable Energy International Renewable Energy Agency (“IRENA”) in Moldova. renewable energy means all forms of energy produced from renewable sources in a sustainable Other important policy documents are National manner. In its various forms, it derives directly or Energy Regulation Agency (“ANRE”) Resolution No indirectly from the sun, or from heat generated 321 of 22.01.2009 on Methodology for the deep within the earth. Included in the definition Determination, Approval and Application of Tariffs is energy generated from solar, wind, for the Electricity Generated from Renewable Electric biomass, geothermal, hydro power and ocean Energy and Bio fuel, and ANRE Resolution No 330 of resources, and bio fuels and hydrogen derived from 03.04.2009 on approving the Regulation on the renewable resources.” Guarantees for Origin of Electricity Generated from Renewable Electric Energy and Bio fuel. Thus, Moldova’s approach aligns to the latter definition, in particular due to its ratification of Subsequently, the Parliament approved the Law No IRENA Statute on 24 February 2011. 142 dated 2 July 2010 on Energy Efficiency which is intended to reduce the negative impact of the It is noteworthy that the law allows production of energy sector on the environment. renewable energy and fuel either exclusively from renewable energy sources, or as a mix of renewables and other traditional sources. Manufacturing and Trading Requirements Renewable energy manufacturers may produce and trade with energy if the following requirements are met: Manufacturing requirements Trading requirements If the energy is intended for public use, a license shall In order to trade with RE, the RE generator is be obtained by power plants reaching a capacity of 5 required to obtain a certificate confirming that the MW. In case of internal consumption, the license is electricity was generated by RES. Biogas falls under only required if it reaches 20 MW. the requirements of conformity certificates which certify that the fuel conforms to a particular standard The price for a license is MDL 3200 (approx EUR 200) or normative document. and is issued for 25 years. Suppliers are required to deliver energy resources of the quality parameters set forth in the mandatory normative acts. Furthermore, the supply of renewable energy shall be done under a contractual basis at tariffs established by ANRE. Incentives Available to Renewable Energy Companies Tax and Customs Exemptions: The Moldovan Parliament has recently approved exemptions from custom fees and VAT on imports for power projects for manufacturing wind energy. These exemptions shall be valid up until 31 December 2015. Purchase Guaranty: Energy suppliers are bound to purchase energy produced from RES. The energy suppliers may not refuse to purchase such energy if the relevant conditions have been met by the RE generator. Payback Tariffs: The energy distributors shall purchase energy from RE generators at tariffs approved by ANRE according to a certain methodology based on a payback period of up to 15 years provided the rate of cost- efficiency would not exceed more than two-fold the respective cost-efficiency rate in the traditional energy sector. Tariffs for electric RE are determined for each particular generator for 1 kWh of delivered electric energy. State Loan Guarantees: An energy efficiency fund was recently created specifically for financing energy efficiency and RE projects in Moldova. Thus, companies implementing projects aimed at improving energy efficiency are eligible for loans and investment guarantees on preferential terms. Priority Policy: Under the energy efficiency policy, priority shall be given to generating installations using RES. Priority for connection to the transmission and/or distribution system is provided for RE companies. Currently, there are the following energy suppliers in Moldova: "RED Nord" S.A., "RED Nord-Vest" S.A., Î.C.S. ”RED Union Fenosa” S.A. Investing Guarantees: Foreign and local investors are treated equally under the Moldovan legislation, whereas the legal framework is designed to encourage foreign investments. As a general rule, investments in energy sector cannot be expropriated, except if it is required by the national legislation and international treaties that Moldova is a party to. However, in the event of expropriation of investment the state guarantees equivalent compensation for its market value. Moldovan public authorities provide full protection and security to all investments and shall be liable according to the law for infringement of investors’ rights and for damages incurred. ABOUT US ACI Partners is a dynamically growing Moldovan law firm with an expanding network of partners throughout Europe. Our business strategy is to deliver a solid and reliable service, which the clients may turn to whenever they need. In reaching this goal, we employ a personalized approach to each client, showing a genuine respect for their values and unqualified commitment to their interests and needs, steadily investing in knowledge and data management and ensuring a working environment consistent with our clients’ quality demands and high expectations. We are proud of the company we have built and of the services we have delivered so far and look forward to future accomplishments. Contact Information: Igor Odobescu ACI PARTNERS Managing Partner Ștefan cel Mare 65 [email protected] Chisinau, Moldova Ludmila Ciubaciuc Tel: +373 22 27 93 23 Junior Lawyer Fax: +373 22 27 93 37 [email protected] http://www.aci.md.