Russian invasion of Ukraine weighing 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 negative repercussions because it has driven uncertainties for potential investors, both internationally and at the local level. The first months of this year pointed at a boom in the Moldovan PV sector, but the initial consequences of Russian aggression are already visible.

“We are already seeing the decline. Some potential investors are taking time, while at the same time cooperation with some suppliers, stopped partners and industries in Ukraine has completely,” Vitali Zveaghintev, the founder of Zaw Energy Srl, told 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 sector, mostly import the metal support structures for ground mounting systems,” he said.

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

Moldova’s current law for PV development features three support schemes. A net-metering program has been in place since the law went into force in March 2018. The nation also has the feed-in-tariff for installations up to 1MW, and then power purchase agreements (PPAs) for installations above 1MW in size.

“With regard to the feed-in-tariff, there has been an attempt to divide up the quotas that the government assigned in 2020. It was 15MW for solar, a derisory share. In two years, only 30% to 40% of those projects were implemented. Political instability and a lack of interest in allocating new quotas for the renewables sector slowed everything down,” explained Zveaghintev.

PAS, a pro-EU political party, won an absolute majority in the 2021 elections on a platform promoting change. Its rise has triggered new, remarkable interest.

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

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

“The ministry is working on secondary legislation to create the commissions and rules to organize the procedures. The year was off to a very good start, especially with the rise in gas prices,” he said. “This increased the interest of the private sector, individuals but also small and medium-sized industries. Many planned investments in renewables. Everything was going well until a fortnight ago. Now everything is on stand-by because priorities have changed.”

Despite other priorities, government sources have told pv magazine that they remain firmly committed to renewables, despite the current difficulties.

“We are planning to review the renewables law this law. So far, we have already assigned 200MW capacity for renewables. For now, we have just 3% of the consumed electricity coming from renewables,” they said, adding that the parliament has started a campaign for prosumers.

Logistical issues

The war in Ukraine has damaged the prospects for a third reason.

“Our suppliers not only want to change the delivery point to Constanta or Varna, but they also don’t even want to enter the Black Sea,” said Zveaghintev, noting that suppliers leave deliveries in Greece or Holland, so transport costs will increase . “Now we are trying to increase cooperation with Turkey.”

This development adds to the pandemic-related rise in costs of logistics and raw materials. Since the start of the pandemic, companies in the region have reported problems with supplies from China.

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

However, Ukraine is now out of the equation.

Over the past 30 years, since its independence, Moldova has done little to update its energy infrastructure. Government sources have confirmed that they are aware of that.

“Intermittency issues are there”. We cannot allocate more, despite the political and financial interest, because we don’t have storage capacity nor transmission capacity,” government sources told pv magazine. “We need interconnections to Romania and storage now to avoid intermittency issues to invest in renewables as a country. We want to allocate 235MW quotas for renewables by 2025, of which 70MW for renewables.”

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

Zveaghintev said old infrastructure affects solar development.

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

In this context, synchronization with the European network would play a significant role. The Ukrainian and Moldovan systems work in isolation from the Russian grid. Since Feb. 24, the day before the start of the Russian invasion, a test exercise was conducted, indicating that Moldova was ready 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 400kW high-voltage network between Chisinau and Vulcanesti in the south of the country, where there is already an existing substation and transmission line connected to Romania – the Vulcanesti–Isaccia power line. By building this 400kW line to the capital and connecting to Romania, we will partially solve the problem of energy independence,” said Zveaghintev.

The timeframe is three years and feasibility studies have been completed. An award agreement was signed years ago, but the project was reportedly frozen due to political disputes. Development stopped until the new government came in, when the project was immediately unblocked. It is now in the design phase, with work set to start next year.

Corruption concerns

“I know about two PV companies in Moldova – one owned by former Prime Minister Chiril Gaburici, the second by former Economy Minister Christophe Bridé, a dual Moldovan-French citizen. The second has been involved in a huge corruption scandal … big banking fraud,” Valeriu Pasa, president of think tank WatchDog.MD, told pv magazine.

Zveaghintev said he disagrees, at least to a certain degree.

“I am not really aware of what happened before 2018 in energy sector in Moldova because I was part of diaspora. What I know is that Mr. Gaburici was prime minister and after that Ministry of Economy and Infrastructure. He knows very well the situation in the energy sector and as per my understanding he is really interested in development of renewables in Moldova,” he said. “Why we didn’t see progress in this direction during his mandate as PM or minister remains an open question for me. He contribute to the construction of the first nearly 1MW photovoltaic park in operation since 2018. Right now he is busy with development and consulting on the plants; he is not active in construction.”

Security considerations

Moldova is the country with the highest number of refugees as a proportion of the local population, at around 4%. The percentage is below 2% for Poland, Hungary and Romania. This is putting a strain on public finances.

Pasa claims that the local banking system has significant funds, and he does not know how to mobilize them. That makes private funds a faster way to invest.

“The European Bank for Reconstruction and Development (EBRD) and the European Investment Bank have some impact, 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 so many costs like consultancy which are completely exaggerated. You can use these programs in Romania, where the funds are huge, but less so here,” he said.

He added that many EBRD-funded projects lag; Sometimes, they do not even start.

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

Zveaghintev said governments have implemented subsidies through European funds, via the AIPA government agency.

“This is helping to partially compensate for investments that farmers make in their sector, for example, a grain store or a cold store. This fund compensates farmers up to 50% from 2019,” Zveaghintev told pv magazine.

However, some local industry observers said the quotas for renewables are relatively limited.

“We will not have dramatic changes in the renewable energy sector. The government is not investing a lot, but private investment is growing,” said Pasa, adding that the best results would be achieved via investments in energy efficiency.

Everyone pv magazine Spoke to agreed on the need to diversify electricity 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 station provides around 75% of the electricity consumed in Moldova.

However, at this point the war and security concerns will have to be factored into investment decisions. External support will also have to be considered, and every decision will need to be made on the basis of the war in Ukraine, which is Moldova’s fourth-biggest trading partner.

“Our country is small. The difference in irradiation between north and south is small; we are talking about few percentage points … almost irrelevant,” said Zveaghintev. “The southern region is slightly more interesting, especially for PPAs, which do not exist at the moment. For large plants over 5MW to 10MW, it would make sense. There are already feasibility studies for plants bigger than 10MW in the southern part of the country.”

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.

Leave a Comment