1. Background

The reduction of the current support scheme for renewables in Romania was intensely discussed by various Romanian officials over the past few months. Some of the main drives for such reduction include the constant increase1 in the electricity prices paid by end-consumers, the “battle” with the conventional producers forced to stop their capacities in order to allow the renewable output to be integrated in the system, technical limitations of the national electricity grid, etc. In addition, the ANRE overcompensation analysis recently published for the first year of application of the current support scheme concluded that there is overcompensation for the following technologies: solar, wind and new hydro power plants. Consequently, ANRE proposed the reduction of the number of green certificates granted for such technologies as follows: 3 green certificates instead of 6 for solar, 1.5 green certificates instead of 2 for new wind farms, 1.3 green certificates instead of 2 for wind farms using second hand equipment and 2.3 green certificates instead of 3 for new hydro power plants under 10 MW.

2. Proposed changes

Given the above considerations, on 2 April 2013, a draft government emergency ordinance (the “Draft”) aiming to amend the current legislation on renewables (i.e. Law 220/2008) and to reduce the current support mechanism was published on the website of the Romanian Ministry of Industry for public debate.

The main changes of the Draft are the following:

2.1 Postponement of the green certificates

Between 1 July 2013 and 31 December 2016 a number of green certificates (that should have been granted to renewable producers for each MWh produced and delivered to the grid) shall be postponed 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;
  3. 2 green certificates (out of 6) for solar power plants.

Renewable producers at (a) and (c) above shall be able to recover the postponed green certificates starting on 1 January 2017 and the renewable producers at (b) above starting on 1 January 2018. The scheduled recovery of the green certificates shall be established by secondary legislation issued by ANRE.

2.2 Exemption to acquire green certificates

50% of the electricity supplied to large industrial consumers with annual consumption that exceeds 150,000 MWh shall be exempted from bearing the costs of green certificates. The threshold of the annual consumption entitling large consumers to the exemption can be amended by Government Decision.

2.3 Grid access limitation

ANRE is entitled to refuse the accreditation (temporarily suspend the accreditation) of new renewable plants if the annual thresholds of installed renewable capacities as provided by the National Action Plan in the Renewable Energy Sector is reached. The annual total installed capacities from renewable sources as per the National Action Plan in the Renewable Energy Sector are the following:

  • 9,635 MW in 2013;
  • 10,420 MW in 2014;
  • 11,060 MW in 2015;
  • 11,480 MW in 2016;
  • 11,792 MW in 2017;
  • 12,048 MW in 2018;
  • 12,351 MW in 2019;
  • 12,589 MW in 2020.

In addition, the grid operators are entitled to require financial guarantees in order to issue grid connection permits for new capacities. We note that such financial guarantees are required under applicable legislation only at the moment of signature of the grid connection agreement if the payment of the grid connection tariff is to be made in installments.

2.4 Negotiated PPAs d for small renewable producers

The Draft allows renewable producers with capacities under 5MW to negotiate power purchase agreements outside the centralized markets operated by OPCOM (the operator of the electricity and green certificates markets). This is an exemption from the general restriction in the Energy and Gas Law, which provides that all electricity produced in Romania must be traded on the centralized market operated by OPCOM.

2.5 Adjustments in case of overcompensation

At the end of March 2013 ANRE published the monitoring report for 2012, which concludes that there is overcompensation for wind, solar and new hydro power plants (see section 1 above). According to the Draft, the first reduction of the number of green certificates can be done according to this monitoring report. The estimated timeframe for such reduction as stated in the Draft’s accompanying notes (Ro: Nota de Fundamentare) is 1October 2013 (i.e. within 30 days from the entering into force of the Draft, ANRE may propose the reduction to the Government, and the Government has 60 days to approve such reduction. This timeframe seems realistic if the Draft enters into force by 1July 2013 as expected (see section 3 below).

Therefore, time limitations provided in the current legislation for enactment of reductions (i.e. 1 January 2014 for solar and 1 January 2015 for other technologies) are abrogated.

Moreover, the Draft provides that ANRE shall draft a monitoring report each semester and propose the reduction of the number of green certificates in case it finds that there is overcompensation for a certain technology. ANRE must first publish the monitoring report within 90 days as of the end of the semester. Within 30 days of its publication, ANRE must propose to the Government measures for the reduction of the number of green certificates. Finally, the reduction measures must be approved by Government decision within 60 days as 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 entering into force of the Government Decision approving such reduction.

2.6 Prices of the green certificates

The Draft does not bring any amendments with respect to the minimum and maximum prices of the green certificates provided under current legislation which shall remain unchanged, i.e. of EUR 27 and EUR 55 per green certificate as annually indexed by ANRE 2.

3. Time frame for enactment

The Draft was made available for public debate on 2 April 2013. The legal procedure for enactment of new legislation provides for a 30 day mandatory public debate. A government emergency ordinance (such as the Draft) can come into effect as early as 2 months following the opening of the public debate procedure, respectively, 30 days of public debate plus another 30 days for various inter-ministerial approvals. However, the Draft shall be enacted only with the European Commission’s approval. The period recommended for the European Commission to give an answer with respect to the Draft is 1 month. However, in this case, given that the Draft would not supplement (i.e. increase) the support scheme, the European Commission may reply earlier that the usual 1 month deadline.

We also note that the Draft might be amended during the public debate as it is very likely that the investors and other market participants will strongly oppose the current wording of the Draft in order to protect the renewable energy sector and to allow project financing for renewable energy projects.

The Government intends to implement the Draft by 1 July 2013.