Romania is on the verge of introducing a much-awaited new support scheme for renewable energy. On 7 August 2023, the Romanian Ministry of Energy launched for public consultations a draft decision approving the legal framework for the implementation and functioning of the Contracts for Difference ("CfD") support scheme for low-carbon technologies ("CfD Scheme").
In line with the milestones provided in the country's Recovery and Resilience Plan, the first objective of the CfD Scheme is to sign contracts for the first round of tender proceedings for the allocation of CfDs to promote the production of electricity from renewable sources in Q4 2023.
CfDs will be offered to eligible generators through a competitive auction process managed by Transelectrica SA, the country's national power grid company. CfDs will be issued by the Romanian Electricity and Gas Market Operator "Operatorul Pietei de Energie Electrica SA" (OPCOM) as the counterparty to the contracts (CfD Counterparty). While the general legal framework for implementing the CfD Scheme has a broader scope, being aimed at supporting various low-carbon technologies, the first two rounds of auctions will be exclusively dedicated to eligible onshore wind and solar power generation technologies.
The first two rounds of auctions, each with separate tenders for eligible onshore wind and solar power generation technologies, refer to a total capacity of 5 GW of new renewables. The total indicative targeted capacities are:
- 1 GW installed capacity for onshore wind projects and 1 GW installed capacity for solar projects – a first round of auctions to be held by the end of 2023 ("2023 CfD Auction"); and
- 5 GW installed capacity for onshore wind projects and 1.5 GW installed capacity for solar projects – a second round of auctions to be held in the first half of 2025.
A table providing the key milestones and timeline for the 2023 CfD Auction, including the submission, evaluation and selection process, is available on the Ministry's website. The auction evaluation process will be carried out in two stages: (1) the first stage involves an evaluation of the Technical Offer (on a pass or fail basis) and (2) the second stage involves an evaluation of the Financial Offer (ascending order of the strike price for qualified bidders).
Who can apply?
The support scheme is open to all legal entities established in Romania and active in the field of electricity generation, subject to the fulfilment of conditions typical for accessing state aid schemes, i.e., good standing, absence of debts to the public budget, etc. as well as the technical and financial capacity to sustain the project development and implementation. Additional technical, financial, environmental and social eligibility criteria may be specified in the CfD Auction Initiation Order. The Auction Initiation Order, including the detailed tender rules, eligibility criteria, the draft Ministry Order and the draft CfD template, will be released in the coming weeks.
Which projects may be financed?
Proposed projects must also fulfil certain eligibility criteria for the first tender round, with the most important of these being:
- Only new onshore wind and solar photovoltaic generation technologies are eligible.
Hence, replacement and re-powering projects or extensions of existing wind or solar power plants are not eligible under the CfD Scheme. Nevertheless, bidders may sign EPC contracts or any other binding supply contracts, as long as such contracts have been signed after July 2022. The installed capacity of eligible projects must entirely comprise new electricity generation capacity and utilise only onshore wind or solar technology (i.e., no mixing or integrated storage capacities are allowed);
- Projects must be implemented in the territory of Romania, must have secured at least a grid connection permit and have a projected installed capacity of over 5 MW;
- The target commissioning date must not exceed 36 months from the anticipated date of the signing of the CfD (i.e., December 2023). If the project is not commissioned by the target commissioning date, the term of the CfD shall be reduced by the time elapsed until commissioning takes place;
- The longstop date is the latest date that the CfD beneficiary can become eligible for CfD difference payments (and is 24 months after the target commissioning date); if the project is not commissioned by the longstop date, the CfD Counterparty may execute the performance bond and terminate the contract.
The CfD payments shall commence when all the requirements have been satisfied, essentially meaning that:
- The applicant has obtained all necessary permits for operating the plant; and
- The commissioned capacity of the plant is at least 80 % of the capacity awarded.
Key terms of the CfD Scheme
The term of the CfD will be for a maximum of 15 years from the payment start date;
Generators will be able to market their output as per their commercial arrangements. When the reference price of electricity is below the strike price, generators will receive a top-up payment for the difference. Where the reference price is greater than the strike price, the generator will pay the difference to the CfD Counterparty;
Bids are required to indicate a strike price (EUR/MWh), generation capacity to be installed and a target commissioning date;
CfD payments will be made for every MWh of electricity generated and delivered to the grid;
Reference prices will be the monthly weighted average of the day-ahead market price. The price will be weighted by the same generation technology subject to CfD support;
Difference payments will be calculated in euros and converted to Romanian leu prior to the payment being made in Romanian leu, using the monthly average of all daily leu/euro exchange rates that have been published by the National Bank of Romania;
The strike price will be indexed on an annual basis in line with the Eurozone Consumer Price Index.
Funding for the CfD Scheme
The financing of the CfD Scheme is expected to be ensured by funds secured by the Ministry of Energy from the European Union Modernisation Fund and transferred to the CfD Liquidity Fund. OPCOM, as the CfD Counterparty, will be responsible for managing CfD payments to and from the Liquidity Fund. The Ministry of Energy, as per the Government Decision, has an obligation to ensure that the Liquidity Fund is properly resourced at all times. The Liquidity Fund can be further supplemented with amounts received through a specific CfD levy to be imposed on retail customers.
The CfD Scheme funds are awarded through competitive tender proceedings. Therefore, submitting an offer does not guarantee automatic selection for the CfD payments. Moreover, a maximum capacity limit per sponsor may be considered in the auction process. In the context of recent geopolitical evolutions and European Union's plans to fast forward the green transition, this new CfD Scheme (coming in the wake of the state aid measures awarded under the local Recovery and Resilience Plan and of the recent legislative proposal for a CfD scheme targeting 3 GW capacities of offshore wind), strengthens the country's commitment to achieving its ambitious decarbonisation targets for 2030.
By Monica Cojocaru, Local Partner, and Vlad Cordea, Senior Attorney at Law, Schoenherr