The policy and regulatory frameworki The policy background
In June 2020, the Senate proposed to debate a draft law regarding the necessary measures for performing operations for offshore wind exploitation (Offshore Wind Draft Bill 2020). Currently, this draft law is still awaiting endorsements from various parliamentary committees. The bill proposes that the rights to initiate and carry out offshore projects must be obtained from the Romanian state through the Ministry of Economy, Energy and the Business Environment, either through concessions or tender procedures, or by direct licensing (granted to interested parties showing relevant technical and financial capabilities). Offshore wind farms established in accordance with competitive tendering procedures are entitled to subsidies in certain circumstances. In October 2022, the Chamber of Deputies proposed debating another draft law regarding the necessary measures for performing operations for offshore wind exploitation which is also awaiting approvals from various parliamentary committees (Offshore Wind Draft Bill 2022).20 Currently, there are no recent developments on these two drafts.
However, the completion of the draft of the offshore law by the second quarter of 2023 is crucial for the government to establish the necessary legislative framework for the installation of sea-based turbines. This deadline is an important milestone within the NRRP, and the World Bank is advising Romania to meet it. The World Bank has put forth two scenarios, one of which is a hybrid option. The energy minister has recently expressed his optimism that the first tenders for offshore wind turbines will commence by the end of 2023.21
Also in 2020, the Romanian government approved a memorandum presenting the plan for a support mechanism in the form of a scheme based on paid-capacity tenders through CfDs and provisional annual budgets for the auctions, which are technology specific. Currently, the Ministry of Energy with the support of EBRD is working on the implementation scheme for CfDs, for which a market sounding event was carried out at the end of 2022.The technologies considered as potential beneficiaries of a CfD scheme are:
- nuclear technology, for the construction of new units;
- technology for the use of renewable resources; and
- carbon capture and storage (CCS) and carbon capture and utilisation (CCU) technology for fossil fuel-based electricity generation facilities when they become commercially viable.
The CfD scheme is estimated to be enacted mid 2023 with the first auctions for onshore wind and solar capacities to be launched towards the end of 2023. CfDs will be granted in line with European state aid guidelines.
Since the promotion of the Energy and Gas Law in 2012, the law has suffered subsequent amendments while, notably, recent years have brought changes aiming to align the framework with the EU acquis. The Ministry of Energy initiated, in 2020, the process of amending the Energy and Gas Law to transpose Directive 2019/944/EU. This was finalised by the enactment of GEO 143 which was further approved in 20 July 2022 by the Law 248. GEO 143 includes relevant provisions related to EU environmental legislation, system flexibility, increased interconnection and market liberalisation, which facilitate the transition to a low-carbon economy, new concepts of active consumers, citizen energy communities and aggregators, and more facilities to prosumers, among other things.
Romania is also putting in place a hydrogen strategy that will be part of the NRRP, focusing on new distribution networks capable of hosting a mixture of 10 per cent gas and hydrogen.
On the other hand, the Renewables Law was most significantly amended in 2017, bringing changes to the green certificates' subsidies regime with the goal of final consumer protection. As a result of these changes,22 ANRE elaborated on (and subsequently amended and supplemented) the regulatory framework specific to this field whenever necessary.
To conclude, the legislative evolution has been marked by interventions on the support scheme related to renewable energy sources investments, leading to a sentiment of instability with a negative market impact. As the green certificates scheme ended in 2016, the market went through a steep decline in investments. However, since the Fourth Energy Package was promoted and the European Green Deal and subsequently Repower EU plan emerged, a series of legislative and policy measures have put Romania back on the renewables investment map.Green certificate support scheme
For the renewable energy sources projects commissioned until December 2016, in addition to the revenues obtained from selling the electricity output of a renewable energy project, a green certificates scheme is in place under the promotion mechanism for renewable energy in Romania set out by the Renewable Law. The transmission and system operator, Transelectrica, issues green certificates to producers on a monthly basis for the green electricity produced and delivered to suppliers or final consumers.
The number of green certificates issued depends on the technology type used for renewable generation. The trading issuance of a share of the initial number of green certificates was suspended for some technologies between 1 July 2013 and 31 March 2017, and further to 31 December 2020 for solar generation specifically. Thus, the number of green certificates issued during this time was reduced by one green certificate for hydropower and wind energy, and by two green certificates for solar power plants. The suspended green certificates resumed trading as of 1 January 2021. This deferral of a certain quota of green certificates applies only to renewable power plants that received approval for production from ANRE until 31 December 2013.
Under the Renewable Law, as amended, renewable electricity generators receive a number of green certificates for each megawatt hour delivered to the grid, depending on the technology. Electricity suppliers (and generators in certain circumstances) have the obligation to acquire green certificates according to an annual mandatory quota established by ANRE.Setting the mandatory quota
The estimated yearly mandatory quota for the green certificates' acquisition is established by ANRE in December for the following year. The quota is calculated taking into consideration the estimated final energy consumption for the upcoming year and the median impact on consumers, which should not exceed €12.50 perMWh in 2019, €13 perMWh in 2020 and 2021, and €14.50 perMWh in 2022.
Additionally (as of 2018), ANRE will calculate by 1 March of each year the mandatory acquisition quota for the previous year, the amount of electricity produced from renewable sources and the average impact on consumers, which should not exceed €11.70 perMWh in 2018, €12.50 perMWh in 2019, €13 perMWh in 2020 and 2021, and €14.50 perMWh from 2022.Obligation to acquire green certificates
Energy suppliers and generators (if applicable) are under an obligation to acquire a number of green certificates annually equal to the value of the mandatory quota for the acquisition of green certificates established by ANRE for the applicable year, multiplied by the total number of megawatt hours.
The mandatory quota for the green certificates acquisition for 2022, it was established at the value of 0.5014313 green certificates perMWh and for 2023 it was established at the value of 0.4943963 green certificates perMWh.Term of the support mechanism
The support mechanism applies to the renewable power plants accredited by ANRE to have commissioned their generation capacities by the end of 2016. The term for application of the support mechanism is:
- 15 years for power plants using new equipment;
- 10 years for the refurbished hydropower plants with installed power up to 10MW;
- seven years for wind farms using second-hand equipment if installed in isolated areas or if commissioned before the Renewable Law entered into force; and
- three years for the hydropower plants that have not been refurbished, with installed power up to 10MW.
Green certificates can be traded only on the centralised markets operated by OPCOM in a transparent and non-discriminatory manner between the operators that have, by law, an obligation to buy green certificates and renewable energy producers. The centralised markets operated by OPCOM are:
- the centralised anonymous spot market of green certificates;
- the green certificates anonymous centralised term market; and
- the centralised market for electricity from renewable energy sources supported by green certificates where electricity produced from renewable sources and the corresponding green certificates are traded together, as a package, in a competitive, transparent, public, centralised and non-discriminatory manner.
The selling of the green certificates is only allowed to producers of renewable energy. A green certificate may be the subject of a single transaction between the producer as seller and the supplier as buyer. As per a recent amendment from January 2023, the green certificates held in an account, along with the green certificates deferred from the trading activities of a renewable electricity producer which is transferring an accredited power plant, can be transferred to the buyer without being treated as a commercial transaction. This transfer is allowed on the condition that the green certificates are issued for the electricity generated and supplied from the power plant being transferred. Once transferred, these green certificates can be traded and will gain value when traded by the new generator who has taken over the power plant as part of the transfer process.
According to the Renewable Law, until 2032, the minimum price per green certificates is €29.40 and the maximum price is €35, calculated in lei, at the average exchange rate established by the National Bank of Romania for the last month of the previous year.Co-generation bonus
In accordance with the provisions of the Government Decision (GD) No. 1215/2009 regarding the establishment of the legal framework necessary for the implementation of the support scheme for the promotion of high-efficiency co-generation based on the demand for useful thermal energy, Romania has promoted high-efficiency co-generation systems of thermal energy and electricity (CHP) for the greening of electricity production. The scheme aims to support electricity and heat producers as well as owners of high-efficiency CHP units or those who operate them to encourage new investments in co-generation technology. The scheme also aims to encourage the replacement or refurbishment of existing installations.
The contribution for high-efficiency co-generation is a tax collected from all electricity consumers in Romania to support district heating power plants and was increased after a period in which it had decreased. In 2022, this tax's rate was 0.02044 lei per kWh, without value added tax, and starting from 1 January 2023 is 0 lei per kWh. The scheme will be in force until 2033 and Transelectrica has the responsibility of administering the support scheme, which includes collecting contributions and payments made to eligible generators.Subsidies under the Offshore Wind Draft Bill 2020
The Offshore Wind Draft Bill 202023 is currently undergoing the legislative process within the Chamber of Deputies, following its adoption by the Senate in October 2020. As part of the process within the Chamber of Deputies, the Offshore Wind Draft Bill 2020 is now subject to reviews by various parliamentary commissions that are entitled to propose amendments to the form adopted by the Senate.
The Offshore Wind Draft Bill 2020 proposes that the rights for initiating and carrying out offshore wind projects are granted by the Romanian state through the relevant ministry, either through competitive tender procedures (concessions) or by direct licensing (granted to interested parties showing relevant technical and financial capabilities).
Offshore wind projects established in accordance with direct licensing procedures will – following their grid connection – be entitled to a premium of a maximum of €0.025 per kWh on top of the electricity market price (limited to €0.06 per kWh). The premium must be proportionally reduced should the electricity market price exceed €0.035 per kWh. The premium shall be granted individually for each offshore wind project and shall consider a certain amount of electricity produced per project, based on a 30 per cent relevance or benefit of the wind element and 70 per cent surface.
In addition to the premium, compensation will be granted for the balancing of costs amounting to €0.02 per kWh for 20 years from the time the network is connected.Other developments
According to the National Integrated Plan for Energy and Climate Change 2021–2030 (PNIESC), approved by GD No. 1076 on 4 October 2021, the authorities are considering the implementation of pilot projects to promote the use of hydrogen in electricity production and in the industrial sector. Currently, there is no comprehensive regulatory framework or coordinated action plan in place for green hydrogen. However, in October 2022, the Ministry of Energy announced the initiation of the National Hydrogen Strategy and Action Plan development process as part of the NRRP. Furthermore, a legislative proposal concerning the integration of hydrogen from renewable and low-carbon sources in the industry and transportation sectors has been registered at the Senate for debate.24
Under the NRRP, a support scheme called 'Supporting investments in the construction of green hydrogen production capacity in electrolysis plants' was launched in 2022 with an estimated budget of €148,752,500. By the end of 2022, 32 projects had applied for the scheme.25
Romania's long-term potential for green hydrogen is significant, particularly in conjunction with established local industrial sectors, such as petrochemistry or steel manufacturing, which could use it as an energy source during their manufacturing processes. Additionally, green hydrogen's complementarity with renewable capacities that require a storage solution further emphasises its importance within the NRRP.
Also, as part of the transition efforts, the Ministry of Energy announced upcoming legislation to promote investments in storage capacities linked to hydro, solar, wind and hydrogen production plants to ensure continuity of supply and to facilitate the balancing of the national electricity system. Under NRRP, a support scheme 'Supporting investment in the development of electricity storage capacities (batteries)' was launched in 2022 with a total estimated budget of €103.480.000.26
On 18 July 2022, Romania enacted Governmental Emergency Ordinance No. 112/2022 (GEO 112), which establishes, among others things, a financial support scheme for small, medium and large companies aimed at stimulating investments in energy efficiency in Romania.
GEO 112 is designed to provide financial support for businesses in Romania to achieve energy efficiency (EE) by giving grants to companies for implementing energy-saving measures at their industrial and auxiliary buildings or through technological processes, and producing green energy for their own consumption (EE Financial Scheme). As part of this EE Financial Scheme, grants will have a minimum value of €50,000 and a maximum value of €500,000 with the exception of those awarded under the de minimis scheme where the maximum value will be €200,000.
Societatea Națională de Gaze Naturale Romgaz SA Mediaș (Romgaz) plans to build an electricity plant by integrating electricity from renewable sources with hydrogen production through a 200MW power plant using natural gas located in Turnu Severin, Halânga. According to the Ministry of Energy, this pilot project has been accepted by the European Commission from a conceptual point of view. The land on which the plant will be built has been purchased and the feasibility study is being worked on.27
In June 2020, Romgaz and Liberty Galați signed a memorandum for the construction of a gas plant that also has wind and photovoltaic capacities, setting up a joint venture with a view to developing greenfield investment projects, including the development of a natural gas-fired electricity generation unit and renewable energy production units, using both wind and photovoltaic technologies. The project is potentially one of the largest investments in Europe, as it will be worth €1.2 billion over the next five years. It is a large investment that should make the Galați steel plant carbon neutral by 2030. The project involves the use of gas and then gas replacement with hydrogen. No recent developments were reported on this project.ii The regulatory and consenting frameworkLegislation
Primary legislation includes:
- the Energy and Gas Law.
- the Renewable Law.
- Law 121/2014 on energy efficiency.
- GD No. 780 dated 14 June 2006 establishing a system for greenhouse gas emission allowance trading, published in Official Gazette No. 554 dated 27 June 2006.
- Offshore Wind Legislation: since 2020 there have been two bills in the Parliament for promoting the legal framework for offshore wind developments in the Black Sea. Currently, the Ministry of Energy has commissioned a Roadmap for Offshore Wind, with the support of World Bank, which is expected to be launched mid-2023. Subsequently, it is expected that Romania will promote the legal framework for offshore wind by the end of 2023.
Secondary legislation includes:
- the Technical Code of the Energy Transmission Network;
- the Technical Code of the Energy Distribution Networks;
- the Code for Electricity Metering;
- Order No. 12/2015 on the approval of the regulation for granting licences and authorisations in the electricity sector;
- Order No. 77/2017 for the approval of the regulation on the organisation and functioning of the green certificates market;
- Order No. 80/2013 for the approval of the general conditions associated with the establishment authorisation and the general conditions associated with the licence for the commercial exploitation of electricity production capacities and, as the case may be, of the thermal energy produced in co-generation;
- Order No. 78/2014 on the approval of the regulation on modalities for the conclusion of electricity bilateral contracts through extended auction and continuous negotiation and by processing contracts;
- Order No. 64/2020 for the approval of the regulation on the manner of concluding bilateral electricity contracts by extended auction and the use of products to ensure trading flexibility; and
- ANRE Order No. 160 of 10 July 2019 for the approval of the regulation regarding the functioning of the centralised market for electricity from renewable energy sources supported by green certificates.
The electricity generation sector is mainly state owned.28 In addition to the state-owned generators, OMV PETROM, a former state-owned company currently controlled by the OMV Group, has commissioned an 860MW combined cycle gas turbine generating station (the Brazi Gas Turbine Generating Station), which is expected to provide up to 9 per cent of Romania's electricity demand.
The TSO is the sole operator of the electricity transmission grid. It is a joint stock company with a majority stake (approximately 59 per cent) owned by the Romanian state through the General Secretariat of Government. The other stakeholders are Fondul de Pensii Administrat Privat NN/NN Pensii S.A.F.P.A.P SA (5.46 per cent), Paval Holding (6.48 per cent), and private entities (approximately 22 per cent).
OPCOM is a joint stock company owned by the TSO (97.84 per cent) and Romanian State (2.16 per cent). It is responsible for providing an organised, viable and efficient framework for trading on the wholesale electricity market and green certificates market in a transparent and non-discriminatory manner.
Five out of the six distribution operators are privatised and, since its liberalisation in 2007, the supply market currently has 70 licensed suppliers registered with ANRE, from which 21 are activated on the wholesale electricity market and 49 are active in the retail electricity market.
The Environmental Protection Agency implements environmental rules and policies and is the main regulatory body with permitting attributions.
The connection to the grid enabled by the grid connection permit (ATR) of the generation facilities is regulated by ANRE Order No. 59/2013 for the approval of the regulation for the connection of users to the public grid.
The ATR is the offer of the grid operator to request connection submitted by the applicant. The grid operator issues the ATR in accordance with the approved solution study, and it contains all the technical and economic conditions for the connection to the grid. The grid operator also issues the technical conformity certificate, a prerequisite for the generation licence. The generation licence must be obtained from ANRE after the plant has been commissioned and before the commencement of commercial operations.
ANRE issues the setting-up authorisation, which is independent from the building permit and is required for the construction of energy plants with an installed power capacity above 1MW.
The Environmental Protection Agency issues the environmental authorisation, and establishes the conditions and parameters of operation of an existing activity or a new activity with a possible significant impact on the environment.
The balancing market, dedicated to offsetting deviations from the programmed values of the production and consumption of electricity, is organised and operated by Transelectrica, which trades electricity with electricity producers who operate dispatchable production facilities and with end customers to provide real-time balance between production and consumption.
To develop a renewable project, the following permits, approval, certificates and authorisations are customarily required; however, the list is not exhaustive and may vary or may be extended on a case-by-case basis:
- the building permit is issued by the relevant competent local administrative bodies and, on average, requires approximately six months to be obtained;
- the grid connection permit applies for connection to the power network, transportation or distribution lines, as the case may be, and is issued by the applicable TSO or distribution system operator under certain conditions;
- the setting-up authorisation is issued by ANRE within 30 days of the submission of all the required documents and payment of the corresponding fee;
- the licence for commercial operation of electricity generation and energy storage facilities related to the form of generation is issued by ANRE after the submission of the complete documentation and payment of the corresponding fee; and
- the environmental authorisation is issued by the competent environmental agency, which is dependent on the project location, and is issued within a maximum of 90 days.
Renewable energy sources projects are subject to a project environmental screening by the competent environmental protection agencies (e.g., local agencies in charge of the applicable administrative region) to determine the requirement for an impact assessment or adequate assessment. Following the screening, the environmental authority may decide to issue the environmental agreement, which would govern the project throughout the development stage. Many of the projects undergo multiple changes prior to the building phase, determined by changes of technology and locations, and improvements of equipment, among other factors. Any such changes are subject to notification and assessment by the environmental authority. The first environmental permitting requirement is typically listed within the preliminary documentation for the building permit. Accordingly, the urbanism certificate – a mandatory permit for securing the building permit – lists the required environmental approvals alongside various other permits secured from aviation and archaeological authorities (among others), as well as public roads waivers and other such permits.
The environmental agreement allows a window of opportunity of five years to start the development stage, which then implies an environmental permit. Various project locations contain certain protected areas of national and community interest. In case of an activity that can significantly affect protected natural areas, the competent environmental authorities are required to consult the representatives of the National Agency for Protected Natural Areas or the administrators of the protected areas of national and community interest.