On 13 July 2011 the European Commission approved a new support mechanism for renewable energy in Romania. The approval was granted in light of certain amendments to Law no. 220/2008, regarding the support mechanism currently in place for the generation of energy from renewable sources (“Law 220”), which are pending the approval of the Romanian Government. Law 220 was published in the Official Gazette in 2008 and was amended twice, but has not been implemented given the absence of the European Commission’s approval.
The proposed amendments that, according to the Romanian authorities, have been discussed and agreed with the European Commission mainly refer to:
- the reduction of the number of green certificates (“GCs”) for certain technologies where there was a risk of over compensation (e.g. biogas, biomass);
- establishing a validity period for the GCs;
- GCs granted during the testing period;
- the extension of the obligation to acquire GCs to energy generators;
- the mechanism to address over compensation in cases where the generators benefit from the support mechanism and other types of state aid;
- introduction of guaranteed access instead of priority dispatch for the majority of the energy capacities;
- individual notifications to the European Commission for generators owning energy capacities over 125MW; and
- National Energy Regulatory Authority (“ANRE”) monitoring and other attributions.
In light of the recent sanctioning by the European Commission and the proposed amendments to Law 220, pending approval by the Romanian Government, the support mechanism for energy from renewable sources (combined compulsory quotas with the trading of green certificates) shall be applicable as follows:
Term for application of the support mechanism
a) 15 years for generation capacities using new equipment;
b) 10 years for refurbished hydropower plants and three years for non- refurbished power plants having an installed capacity of maximum 10 MW; and
c) seven years for generation capacities using second hand equipment if installed in isolated areas or, if commissioned before the entering into force of the new support mechanism.
The support mechanism applies to generators that have been qualified by ANRE and have commissioned their generation capacities by the end of 2016.
If the generation capacity benefited from the GC support mechanism currently in force before the entering into force of the new support mechanism, the term of the support mechanism for each such generator shall be reduced accordingly.
The generators of electricity using renewable sources will receive:
a) For the electricity produced by hydropower plants with an installed capacity of up to 10 MW: three GCs for each MWh produced by new hydropower plants, two GCs for each MWh produced by refurbished hydropower plants and one GC for each 2 MWh produced by hydropower plants that are neither new nor refurbished;
b) two GCs until 2017 and one GC starting in 2018 for each MWh produced by wind farms; and
c) two GCs for each MWh produced from geothermal sources, biomass (however three GCs for each MWh produced from biomass resulted from crops that are especially cultivated for biofuels and biomass), biogas and bio-liquids and one GC for each MWh produced from waste fermentation and mud fermentation gas.
Generators using biomass, bio-liquids and biogas will be granted GCs only on the basis of a valid certificate of origin assessing the origin of the renewable sources. Such certificates of origin shall be issued by certified entities in accordance with a methodology that is to be approved by a Government Decision.
For the energy produced by high-efficiency co-generation systems using renewable sources mentioned in this paragraph, one additional GC shall be granted. We would note, however, that the generator has the option to choose between the high efficiency co-generation bonus and the support mechanism for energy from renewable sources;
d) six GCs for each MW produced by solar power plants. Also, the share of energy produced from renewable sources by generation methods using both conventional and renewable sources qualifies for the support mechanism if the percentage of the conventional source used is less than or equal to 10%.
During the tests for commissioning, all energy capacities, regardless the of the energy source used, shall be granted one GC per each MWh.
The GCs are valid for three years, which means that they can be reported if they have not been sold in the year in which they were granted. However, there are discussions currently taking place to reduce this term to 16 months.
Obligation to acquire GCs
The new support mechanism extends the obligation to acquire GCs to:
a) energy acquired by the suppliers for their own consumption and for re-sale to end consumers;
b) energy used by the generators for their own consumption, other than the technological consumption; and
c) energy delivered by the generators to end-consumers connected to their generation capacities by direct line.
ANRE established that in 2011 the minimum price per GC shall be EUR 27.567/GC (RON 118.33/GC) and the maximum price shall be EUR 56.155/GC (RON 241.04/GC). Furthermore, in 2011, the penalty that a supplier* has to pay to Transelectrica for each non-acquired GC is of EUR 112.3 (RON 482.09). Starting with 2011, the GCs prices shall be indexed annually by ANRE in accordance with the annual average inflation index calculated for the EU Euro area for the preceding year, as officially stated by Eurostat. ANRE shall annually publish on its website the minimum and maximum GC prices calculated according to the method described above. The penalty for each non-acquired GC shall also be indexed by ANRE according to the same indexation formula.
* This obligation will also apply to producers after the entering into force of the new support mechanism.
Support mechanism and state aid
If the generator of renewable energy benefits of non-refundable grants for the project, then ANRE will reduce the number of GCs granted to the respective generator so as to keep the internal rate of return (“IRR”) to what was agreed and approved by the European Commission.
The current wording of Law 220 published in the Official Gazette (but not implemented) provides that, if the project benefits from state aid, then the generator will only be granted one GC per MWh.
Guaranteed access v. Priority dispatch
The proposed amendments to Law 220 make a distinction between guaranteed access to the grid and priority dispatch. According to Transelectrica, guaranteed access means that the generator that entered into a grid connection contract with the transmission or distribution grid operator will be able to deliver the electricity to the grid (except in cases of technical restrictions imposed by the national dispatcher) but will not be responsible for the balancing. Priority dispatch is only available to generators, owners of energy capacities of up to 1MW that do not require balancing which, in either case, will be treated as maximum priority dispatch. These generators sell their electricity at regulated tariffs depending on the type of technology and do not benefit of the GCs support mechanism.
Individual notification to the European Commission by owners of capacities over 125MW
In order to benefit from the new support mechanism, generators developing power plants with installed capacities of over 125 MW, have the obligation to send individual notifications to the European Commission. This is a condition for being qualified by ANRE to be granted GCs.
ANRE will monitor the implementation of the support mechanism and may propose a reduction of the number of GCs for certain types of technology if, in practice, the IRR for that technology is higher than the IRR contemplated when the new support mechanism was approved. The measures proposed by ANRE will have to be approved by a Government Decision and will be applicable only to new generation capacities that are commissioned after the entering into force of such a Government Decision.
ANRE shall draft and enact the regulations that will allow the transmission and system operator to limit or interrupt the generation of electricity from renewable sources. Such limitation or interruption will also be allowed in exceptional circumstances when such measures are absolutely necessary for the safety and security of the national transmission system.
We would note that the above support mechanism is still under discussion and certain amendments may occur in the final version of the Government Emergency Ordinance for the amendment of Law 220. In addition, a number of regulations have to be enacted in order to allow the implementation of the new support mechanism.