1. Background

Following the example of other EU member states that implemented various measures to reduce the support mechanism for renewable energy, Romania decided to amend Law 220/2008 on renewable energy by Government Emergency Ordinance no. 57/2013 published in the Romanian Official Gazette no. 335 dated 7 June 2013 which will enter into force on 1 July 2013 (“GEO 57”).

This initiative follows a constant increase1 in electricity prices for end consumers, the “battle” between the renewable electricity generators and conventional producers forced to stop their capacities to allow the renewable output to be injected into the grid, technical limitations of the national electricity grid, etc.

2. Main Changes

2.1 Green Certificates Deferral

Between 1 July 2013 and 31 March 2017 a number of green certificates (that should have been granted to renewable producers for each MWh produced and delivered to the grid) shall be deferred as follows:

  1. 1 green certificate (out of 3) for new hydro power plants under 10 MW;
  2. 1 green certificate (out of 2) for wind power plants; and
  3. 2 green certificates (out of 6) for solar power plants.

Renewable producers at (a) and (c) above shall be able to recover the deferred green certificates from 1 April 2017 and the renewable producers at (b) above from 1 January 2018. The recovery of the green certificates shall be made by 31 December 2020 at the latest in accordance with a schedule to be established by order of ANRE president. It is unclear what will happen with green certificates for wind power plants between 1 April 2017 and 1 January 2018. We would assume that the green certificates will be issued to wind farms between 1 April 2017 and 31 December 2017, but the generators will not have the right to trade them. We expect that the order of ANRE president will clarify this aspect.

2.2 Green Certificates Adjustments

At the end Q1 of 2013, ANRE published the overcompensation monitoring report for 2012, which concludes that there is overcompensation for wind, solar and new hydro power plants. ANRE therefore suggested that the following numbers shall bring the IRR for each of the above technologies down to the values reported to the European Commission when the support mechanism was notified and approved:

  1. 3 green certificates instead of 6 for solar;
  2. 1.5 green certificates instead of 2 for new wind farms,
  3. 1.3 green certificates instead of 2 for wind farms using second hand equipment; and
  4. 2.3 green certificates instead of 3 for new hydro power plants under 10MW.

However, under current legislation (i.e. Law 220/2008) ANRE does not have the right to propose adjustments to the number of green certificates for new power plants to avoid overcompensation until 1 January 2014 for solar and 1 January 2015 for other technologies.

GEO 57 abrogates the above mentioned deadlines and gives ANRE the right to propose the reduction in the number of green certificates for new power plants within 30 days of the GEO coming into force and on the basis of ANRE’s monitoring report for 2012 published at the end of Q1. The proposed reduction has to be approved by Government Decision within 60 days of the ANRE proposal in order to become effective. The reduction approved by Government Decision shall be applicable to new power plants only, i.e. power plants that will be accredited after the entering into force of GEO 57. In light of the above, the first reduction in the number of green certificates is expected to be applicable from 1 October 2013 at the latest (although it can be earlier) to power plants that will receive final accreditation after aforementioned date.

In addition, according to GEO 57 ANRE shall draft a monitoring report each semester and propose a reduction in the number of green certificates should it discover overcompensation for a certain technology. ANRE must first publish the monitoring report within 90 days of the end of each semester. Within 30 days of its publication, ANRE must propose to the Government measures for the reduction of the number of green certificates for new renewable capacities. Finally, the reduction measures must be approved by Government Decision within 60 days of the date ANRE communicates the measures to the Government. The reduction measures shall be applicable to new renewable plants accredited by ANRE after the Government Decision approving such reduction has come into effect.

Although the deferral detailed in section 2.1 above seems to be applicable to existing power plants only, and the reduction to ‘new’ power plants only, the language of Law 220/2008 as amended by the GEO is ambiguous. As such, it may lead to the interpretation that ‘new’ power plants may be affected by both the deferral and the adjustments. We expect that ANRE will clarify this point at the time of the proposal to adjust the number of green certificates for ‘new’ power plants. The proposal is expected within 30 days as of 1 June 2013.

2.3 Exclusion from the Application of the Support Mechanism

From 1 July 2013, the green certificates support mechanism shall not be applicable to:

  1. the electricity produced by solar power plants located on plots of land in agricultural use (in Romanian: “circuitul agricol”); and
  2. the electricity delivered by dispatchable units2 that generate positive imbalances in the system (i.e. the electricity in excess of the quantities notified to the transmission system operator under the hourly physical notifications).

2.4 Exemption to Acquire Green Certificates

A certain percentage of the electricity supplied to end consumers shall be exempted from bearing the costs of green certificates. The exemption mechanism as well as the exempted quantity of electricity shall be approved by Government Decision after notification and EC approval. The exemption is conditioned on the implementation of energy efficiency programmes.

2.5 Green Certificates Trading Restrictions

GEO 57 provides certain restrictions on the trading of green certificates:

  1. traders of electricity (i.e. companies that only trade on the wholesale market but do not supply electricity to end consumers) and other intermediaries will not be allowed to trade green certificates; and
  2. green certificates can be traded only on the centralized markets operated by OPCOM in a transparent and non-discriminatory manner between the operators that have by law the obligation to buy green certificates3 and the renewable energy generators4.

2.6 Limitation of Accreditation

ANRE is entitled to limit the accreditation of new renewable plants benefitting from green certificates up to the revised annual total thresholds of installed renewable capacities in the National Action Plan in the Renewable Sector (“PNAER”). The revision of the current thresholds in the PNAER will be made by Government Decision. This means that ANRE can hold the accreditation of a power plant if the threshold approved by the Government for the respective year has been already met.

The Government is expected to update and approve the total annual values of installed renewable capacities as the current numbers provided under the PNAER for 2013 are outdated and for certain technologies (such as solar) appear to have been already exceeded.

2.7 Financial Guarantees for Grid Connection

Grid operators are entitled to require financial guarantees in order to issue grid connection permits for new renewable capacities. The amount of such guarantees and the modality of using them shall be subsequently regulated by ANRE. Before the enactment of GEO 57 such guarantees were required only upon execution of the grid connection agreements in order to secure full payment of the entire price of the grid connection tariff (if the tariff was to be paid in instalments).

2.8 ANRE’s Obligation to Establish Annual Quotas of Renewable Electricity

Under GEO 57, ANRE is required to determine the annual quotas of renewable electricity that will be injected into the grid and can benefit from the green certificates pursuant to contracts entered into by ANRE and the generators of renewable energy. This new provision seems to give ANRE the right to enforce limitations on the quantity of renewable electricity that can benefit from green certificates.

It is expected that secondary legislation, to be issued by ANRE, will shed more light on the effect of this obligation.

2.9 Regulated Contracts

GEO 57 also provides that the renewable electricity can also be sold under regulated contracts, i.e. contracts with captive consumers at regulated tariffs.