June 21, 2010

Decree on Incentive Measures for Electric Energy Production Using Renewable Energy Sources and Combined Electric and Heat Power Production

Decree on Incentive Measures for Electric Energy Production Using Renewable Energy Sources, published in Official Gazette no. 99/2009 of December 1, 2009, (hereinafter referred to as the “Decree”) is designed to help accelerate the move toward grid parity, where renewable electricity would be equal to or cheaper than fossil fuel electricity.

The main idea behind the move toward the renewable sources of energy is to provide energy independence by shifting toward the abundant sources of energy, as well as reducing greenhouse gasses emissions, ultimately enabling long-term benefits to the environment.

Decree introduces implementation of Feed-in Tariff, a worldwide-recognized policy mechanism that enables renewable electricity producers to compete effectively in the electric energy production market.  Key provisions of the Feed-in Tariff policy, as indicated in this Decree, are:

- Guaranteed grid access to the privileged producers. This is a prerequisite for these producers to acquire access to the market.

- Guaranteed long-term contracts. Providing all the conditions prescribed by this Decree are met, it is mandatory for the public electricity company ("Buyer") to enter into agreement with the privileged producer, if so requested by the privileged producer, and such contracts are guaranteed to have a binding effect on the Buyer for a 12-year term.

- Purchase prices are based on the cost of renewable energy generation. The Buyer must purchase renewable electricity at prices set forth in this Decree. However, there is a limit set forth in the Decree as to the quantity of electric energy guaranteed to be sold at these predetermined prices. The Buyer is allowed to pass on any increase in price of electricity purchased to the tariff users.

This Decree is applicable for the period from January 1, 2010, through December 31, 2012.