Russian invasion of Ukraine weighs on Moldova’s PV sector – pv magazine International

The Russian invasion of Ukraine has already had a significant impact on the region’s PV sector, including in Moldova. The ongoing military clash has had a negative impact as it has created uncertainty for potential investors both internationally and locally. The first months of this year indicated a boom in Moldova’s PV sector, but the first consequences of Russian aggression are already visible.

“We are already seeing the decline. Some potential investors are taking their time, while at the same time cooperation with some suppliers, partners and industries in Ukraine has completely stopped,” said Vitali Zveaghintev, the founder of Zaw Energy Srl PV Magazine.

Ukraine, a regional powerhouse in industries such as steel production, has played a key role in the regional PV sector.

“We in the photovoltaic industry mainly import the metal structures for ground-mounted systems,” he said.

Zveaghintev returned to Moldova in 2018 to contribute to the development of his country. His company – a distributor and a contractor – has worked with companies like Enel Green Power on projects in Chile. It has reportedly accounted for around 50% of all new PV installations in Moldova in the last three years.

Moldova’s current law for PV development provides for three funding programs. A net metering program has been in place since the law came into force in March 2018. The country also has the feed-in tariff for plants up to 1MW and then power purchase agreements (PPAs) for plants larger than 1MW.

“In terms of feed-in tariffs, an attempt has been made to split the quotas that the government has allocated in 2020. It was 15MW for solar, a ridiculous share. In two years, only 30% to 40% of these projects were implemented. Political instability and lack of interest in allocating new quotas for the renewable energy sector slowed everything down,” Zveaghintev explained.

PAS, a pro-EU political party, won an outright majority in the 2021 elections on a platform promoting change. His rise has sparked new, unprecedented interest.

“In the autumn, the new pro-European government began implementing the strategies that Moldova had already defined when it made commitments to the European Union and the European Energy Community. In December, the government allocated many more renewable energy certificates – hundreds of megawatts for PV, wind and biomass,” Zveaghintev said.

The feed-in tariff procedure is scheduled to begin at the beginning of April. Auctions for PPAs are expected to start at the end of the year.

“The ministry is working on secondary legislation to create the commissions and rules to organize the procedures. The year has started very well, especially with the increase in gas prices,” he said. “This has increased the interest of the private sector, private individuals, but also small and medium-sized industry. Many planned investments in renewable energy. Everything was going well until two weeks ago. Now everything is on stand-by because priorities have changed.”

Despite other priorities, government sources have said PV Magazine that they remain determined on renewables, despite the current difficulties.

“We are planning to revise the Renewable Energy Sources Act with this law. So far, we have already allocated 200 MW of capacity for renewable energy. At the moment only 3% of the electricity consumed comes from renewable sources,” they said, adding that Parliament had launched a campaign for prosumers.

logistical problems

The war in Ukraine has hurt prospects for a third reason.

“Our suppliers not only want to move the place of delivery to Constanta or Varna, but also not to the Black Sea,” Zveaghintev said, noting that suppliers leave deliveries in Greece or Holland, so transport costs will increase dramatically. “Now we are trying to increase cooperation with Turkey.”

This development comes on top of the pandemic-related cost increases in logistics and raw materials. Companies in the region have been reporting problems with shipments from China since the pandemic began.

“Transportation costs have skyrocketed. We have minimized our cooperation with China and established partnerships in Turkey, Romania and Ukraine – countries that can be reached by truck and not by ship,” Zveaghintev said. “We have partially solved the problem.”

However, Ukraine is now out of the equation.

In the last 30 years since independence, Moldova has done little to modernize its energy infrastructure. Government sources have confirmed that they are aware of this.

“Intermittent problems are there. Despite the political and financial interest, we cannot allocate more because we have neither storage capacity nor transmission capacity,” government sources said PV Magazine. “We now need interconnectors to Romania and storage to avoid disruption issues as we invest in renewable energy as a country. By 2025, we aim to allocate 235 MW of renewable quotas, of which 70 MW will be renewable.”

Accordingly official documents, the PV tariff is now 1.88 MDL ($0.10)/kWh.

Zveaghintev said old infrastructure is hampering solar development.

“The transmission grids and substations are old. There have been many requests for connections over the years. So many that they have exceeded the theoretical capacity of all networks. Now the theoretical capacity of the networks is exhausted,” he said.

In this context, synchronization with the European network would play an important role. The Ukrainian and Moldovan systems operate in isolation from the Russian network. Since February 24, the day before the Russian invasion began, a test exercise has been conducted that showed Moldova’s readiness to connect to the European Network of Transmission System Operators for Electricity (ENTSO-E).

“One of the most important projects is the construction of the 400 kW high-voltage grid between Chisinau and Vulcanesti in the south of the country, where a substation and transmission line are already connected to Romania – the Vulcanesti-Isaccea power line. By building this 400kW line to the capital and connecting it to Romania, we will partially solve the problem of energy independence,” Zveaghintev said.

The time frame is three years, feasibility studies have been completed. A procurement agreement was signed years ago, but the project was reportedly frozen due to political disputes. Development was halted until the new government came in, when the project was immediately released. It is currently in the design phase, with work scheduled to begin next year.

Concerns about corruption

“I know of two PV companies in Moldova – one owned by former Prime Minister Chiril Gaburici, the second owned by former Economy Minister Christophe Bridé, a dual Moldovan-French citizen. The second was embroiled in a huge corruption scandal…big bank fraud,” said Valeriu Pasa, president of think tank WatchDog.MD PV Magazine.

Zveaghintev said he disagreed, at least to some extent.

“I’m not really aware of what happened in the energy sector in Moldova before 2018 because I was part of the diaspora. What I do know is that Mr. Gaburici was Prime Minister and then Ministry of Economy and Infrastructure. He knows the situation in the energy sector very well and, to my knowledge, is really interested in the development of renewable energy in Moldova,” he said. “Why we have not seen progress in this direction during his tenure as prime minister or minister remains an open question for me. He contributes to the construction of the first almost 1 MW photovoltaic park, which has been in operation since 2018. He is currently involved in developing and advising on the systems; he is not in construction.”

security considerations

At around 4%, Moldova is the country with the highest proportion of refugees in the native population. For Poland, Hungary and Romania the percentage is below 2%. This puts a strain on public finances.

Pasa claims that the local banking system has significant funds and he doesn’t know how to mobilize them. This makes private funds a faster way to invest.

“The European Bank for Reconstruction and Development (EBRD) and the European Investment Bank have some influence, but not much. Any process to get European funds would take at least three years,” he said.

Pasa argues that European funds have overly complicated procedures.

“There are as many costs as advice that are completely exaggerated. You can use these programs in Romania, where the funds are huge, but less here.” he said.

He added that many EBRD-funded projects are lagging behind; sometimes they don’t even start.

“We found cases of energy efficiency investments in newly built houses or not built at all. Of the 10 million euros they invested just half a million. We need something replicable instead,” said Pasa.

Zveaghintev said governments introduced subsidies from European funds through government agency AIPA.

“This helps to partially offset investments farmers are making in their sector, for example in a grain store or cold store. This fund will compensate farmers up to 50% from 2019,” said Zveaghintev PV Magazine.

However, some local industry observers said renewable energy quotas are relatively limited.

“We will not have any dramatic changes in the renewable energy space. The government isn’t investing much, but private investment is increasing,” Pasa said, adding that the best results come from investing in energy efficiency.

Everyone PV Magazine spoke to themselves about the need to diversify power sources and reduce dependence on Transnistria’s Kuchurgan station, which is owned by MGRES, a unit of Moscow-based Inter RAO. The Kuchurgan gas power plant supplies around 75% of electricity consumption in Moldova.

At this point, however, war and security concerns need to be factored into investment decisions. External support must also be considered, and any decision must be made on the basis of the war in Ukraine, Moldova’s fourth largest trading partner.

“Our country is small. The difference in irradiation between north and south is small; we’re talking about a few percentage points…almost irrelevant,” Zveaghintev said. “The southern region is a bit more interesting, especially for PPAs, which don’t currently exist. It would make sense for large plants over 5 MW to 10 MW. There are already feasibility studies in the south of the country for systems larger than 10 MW.”

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