International investors who have suffered losses in the renewable energy sectors in Greece, Romania and Bulgaria, among others, may be entitled to compensation for their losses under the Energy Charter Treaty (ECT) and relevant bilateral investment treaties (BITs), lawyers recommended. Headed by Baiju S. Vasani, the team from global law firm Jones Day published an analysis on RenewableEnergyWorld.com portal in which they claim companies now recognize investor–state arbitration as “simply another dispute resolution mechanism – albeit one with more teeth – which does not preclude a continuing relationship with the respondent state.”
As governments rolled back feed-in tariffs and failed to honour governmental guarantees, investors in the renewable energy sector have seen their investments decimated, or substantially reduced, the article said. Many have already turned to investor–state arbitration in an attempt to recoup their investments — 23% of known investor–state arbitrations in 2013 arose as a result of renewable energy measures adopted by Spain and the Czech Republic.
Greece also rushed to support renewable growth through generous and ultimately unsustainable feed-in tariffs programs, accumulating substantial deficits in the process. In 2013, a round of tariffs cuts, which saw a 25-30% retrospective tax on solar revenues, resulted in an immediate reduction in photovoltaic installations across the country.
The 2008 Renewable Energy Law provided renewable energy plants with green certificate subsidies and preferential buying terms. Romania’s government later judged that this was too generous, and delivered the first statutory hit to renewables in April 2013. The government halved the support awarded to existing hydro, wind and solar power generation under the country’s green certificate scheme, and postponed some green certificates that were due to be allocated to producers. It then cut the level of subsidies for all new projects coming online after January 1, 2014. In September of that year, a group of Czech solar investors filed a notice of dispute against Romania under the ECT. More are expected to follow, Jones Day’s lawyers claim.
Governments rolled back feed-in tariffs and failed to honour guarantees.
In Bulgaria, the incentives were generous power purchase agreements – 25 years for solar power and 12 years for wind and hydro power. Rapid growth in the sector put significant financial strain on the government, who passed the cost of the feed-in tariffs onto electricity providers. In 2012, the government reduced them by 50% for solar and by 22% for wind power producers. Some of the most radical changes have included a moratorium on grid interconnection for new plants, the introduction of fees to access the grid and the introduction of fees for the generation of renewable energy, the analysis said. Austrian energy group EVN filed a claim against Bulgaria at the International Centre for Settlement of Investment Disputes in July 2013, related to the country’s electricity pricing and renewable energy regimes while it continues to have local operations.