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New Developments on the CfD Mechanism in Romania

New Developments on the CfD Mechanism in Romania

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On 7 August 2023, the Ministry of Energy published for public consultation the draft Government decision on the approval of the general legal framework for the implementation and functioning of the Contracts for Difference (CfD) support mechanism for low carbon technologies (the “Draft Government Decision”), together with an information note for potential bidders in relation to the implementation of a first CfD scheme, the related auctions rounds being envisaged for Q4 2023 and Q1 2025 (the “Information Note”).

According to the Draft Government Decision, the Ministry of Energy will draw up CfD or ad-hoc CfD state aid schemes for the eligible generation technologies (i.e., onshore wind, offshore wind, solar, hydro, nuclear, hydrogen, storage) which shall be subject to authorization by the European Commission from a state aid perspective.

The funds for the CfD support mechanism will be ensured through the CfD levy collection mechanism applied to all final consumers starting with January 2024 and/or through non-reimbursable EU funds (e.g. the Modernisation Fund).

For the first CfD scheme (intended to be available only for onshore wind and solar photovoltaic technologies), it is envisaged that CfD auctions will take place in 2023 and 2025. As per the Information Note, the first CfD scheme (i) aims at helping Romania to achieve its decarbonisation targets whilst maintaining security of its electricity supply and (ii) is in line with Romania’s milestones identified in its National Recovery and Resilience Plan (NRRP), i.e. to execute contracts as early as Q4 2023 following the first round of tender procedure for the allocation of CfD in order to promote the production of electricity from renewable sources.

As for the roles/ responsibilities of the stakeholders involved in the CfD scheme, the contracts for difference will be offered to eligible producers through a competitive auction process run by Transelectrica (as CfD administrator), while OPCOM will act as CfD counterparty. In addition, ANRE will be responsible for issuing the relevant secondary legislation, the Ministry of Energy will have overall responsibility over the legal framework as well as the duty to ensure sufficient funds to finance the CfD scheme, while the Romanian Competition Council will be responsible for approving the national state aid scheme(s).

The first CfD scheme will involve two rounds of auctions, each with separate tenders for the eligible generation technologies (i.e. onshore wind and solar photovoltaic sources) for a total capacity of 5,000 MW, as follows:

  • 1,000 MW installed capacity for the production of electricity from onshore wind and 1,000 MW installed capacity for the production of electricity from solar photovoltaic sources, both as a result of a first round of auctions to be held by the end of 2023.
  • 1,500 MW installed capacity for the production of electricity from onshore wind and 1,500 MW installed capacity for the production of electricity from solar photovoltaic sources, both as a result of a second round of auctions to be held in the first half of 2025.

Other aspects relating to the eligibility for the first CfD scheme that should be considered by project developers:

  • the project must be implemented in Romania;
  • the project’s proposed installed capacity must consist of new electricity generation units; the projects aimed at replacing, expanding or upgrading existing capacities are therefore excluded from the scope of this CfD scheme.
  • for the first auction, the target commissioning date cannot be later than 36 months from the CfD signing date;
  • the project will be supported through the CfD scheme for a 15-year duration.

Further on, it seems that the Ministry of Energy will release in the coming weeks the Auction Initiation Order, including the detailed tender rules, as well as the draft Ministry Order and the draft CfD template relating to this scheme.

By Monica Iancu, Partner, Ionel Macovei, Associate, Bondoc si Asociatii

Romanian Knowledge Partner

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.

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