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How is Romania Preparing for a New Wave of Investment in the Renewables Sector?

How is Romania Preparing for a New Wave of Investment in the Renewables Sector?

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Economic, policy, and legislative factors have revived investors’ interest in Romania’s renewables sector over the last year. As the second-largest market in Central and Eastern Europe, Romania managed to attract about EUR 8 billion in renewables investments in the first wave from 2008-2016 – mainly in solar (over 1.5 GW) and wind (over 3 GW) – benefitting from the green certificate support scheme, although Romania reached its 2020 target for green energy and investments slowed down significantly over the last five years.

As a result of the Green Deal, the Fourth Energy Package – especially EU Directive 2019/944 and EU Regulation 2019/943 – and the setting by the National Integrated Plan for Energy and Climate Change of a new target, of a 30.7% overall share of green energy in total consumption by 2030, the country made some steps in adopting a legal framework to attract the necessary investments to reach its decarbonization goals.

Still, although Romania proposed one of the largest green targets in the region, the European Commission recommended a target for the country of at least 34% to meet the accelerated post-pandemic EU transition goals for 2050. Under Romania’s current target, it is estimated that 6.9 GW in wind and solar are needed by 2030 to meet this goal, requiring about EUR 22 billion in overall investments, including some dedicated to grid development and conventional capacities, especially for gas-fired power plants.

Romania took several important steps in this past year towards preparing for this “new wave” of investments. As legislative predictability and clarity is paramount for investor confidence, Romania has recently published the draft of a revised Energy Law, aiming to fully transpose EU Directive 2019/944 and bring important changes to all segments of the electricity chain, most notably by allowing all generators to conclude freely-negotiated bilateral power-purchase agreements, both physical and virtual, so that new investments can be backed up by legal instruments to facilitate financing solutions under merchant-market conditions. This is also important in the context of the announcement last year that Romania intended to implement a new support scheme based on the Contracts for Difference mechanism (CfD) for low carbon technologies (including renewables, nuclear, CCS, and potentially others). This scheme is currently under development by the Ministry of Energy with the support of EBRD, and should be in place starting 2023.

Also, last autumn a draft bill was initiated in the Parliament dedicated to offshore wind power generation, marking the intention of the authorities to open new opportunities for offshore wind development in the Black Sea. The draft law allows generators to obtain concession rights via a support scheme based on the Contract for Difference mechanism, or, more directly, via competitive auctions with a premium allocated for the power price and the balancing cost.

The balancing market has undergone important changes in both primary and secondary legislation as well, as the Romanian Energy Regulator, ANRE, has adjusted the balancing methodology to allow for a single settlement price with an application date correlated with the implementation date of the 15-minute settlement interval. This new method, which came into force in February 2021, is expected to reduce the balancing costs for intermittent generation capacities.

The Ministry of Energy has also announced that it is revising the Renewables Law and is planning a new support scheme for energy efficiency and energy storage facilities. Under the National Recovery and Resilience Plan, green energy and energy efficiency, together, became a pillar for economic rebound, contributing an initial budget of EUR 1.3 billion. A number of other EU funds are available and dedicated to the energy sector as well, such as the Just Transition Fund.

As Romania is phasing out coal and part of the country’s nuclear capacity is unavailable while being refurbished, the country needs more generating capacities very soon, as it is now a net importer. The underlying market data seems to demonstrate positive conditions for such new investments. As we are at the forefront of these legislative changes due to our active involvement in the Energy Law transposition and the implementation of the new CfD support scheme, and as we see the effervescence of the M&A market for both operational and ready-to-build projects, we note the signs of a bold investment cycle to come. 

By Varinia Radu, Partner, CMS Romania

This Article was originally published in Issue 8.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

Țuca Zbârcea & Asociaţii is providing legal services in every aspect of business, covering all major areas of practice: corporate and M&A; litigation and international arbitration; corporate tax; public procurement; TMT; employment; insurance; banking and finance; capital markets; competition; healthcare and pharmaceutical; energy and natural resources; environmental; intellectual property; real estate; regulatory legal services.

Țuca Zbârcea & Asociaţii is a First-Tier law firm in all international legal directories and a multiple award-winning law firm both locally and internationally. It received the CEE Deal of the Year Award (DOTY Awards 2021) and the Law Firm of the Year Award: Romania (IFLR Europe Awards 2021). 

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