Legal & Tax Alerts

The European Commission approves the Romanian two-way contract for difference aid scheme

Commission announced that it had approved a EUR 3 billion (RON 15.22 billion) Romanian aid scheme (“CfD scheme”) to support onshore wind and solar photovoltaic power generation capacities (“PGC”) in the form of a two-way contract for difference (“CfD”), a contract that will be granted through a tender process.

This approval represents a key milestone in the process of implementing the CfD scheme in Romania, and will unlock the process of approving the legal framework, considering that the required legislation is either under public consultation or has yet to be drafted/published. Up to this moment, the draft Order regarding the CfD scheme has not yet been published by the Ministry of Energy, although the CfD scheme received approval from the European Commission.

The main points of interest regarding the CfD scheme:

The CfD scheme aims to provide a baseline return for the participants while simultaneously preventing them from being overcompensated for periods when the reference price is higher than the strike price;

The term of the CfD scheme will be for a maximum of 15 years from payment start date;

The CfD scheme will involve two rounds of auctions, each with separate tenders for onshore wind and solar photovoltaic eligible PGC, and with a total capacity of 5,000 megawatts.

The strike price is to be established during the auction (“pay as bid”), but it will be capped (i.e., the authorities will set an upper limit that cannot be exceeded for each tender). Strike prices will be indexed on an annual basis in line with the Eurozone Consumer Price Index;

The reference price will be the monthly output-weighted average of the market price of electricity in the day ahead markets;

When the reference price of electricity is below the strike price, the beneficiaries will receive a top-up payment (in RON) for the difference from the CfD Counterparty (i.e. OPCOM);

When the reference price is greater than the strike price, the beneficiaries will pay the difference to the CfD Counterparty;

Funding for the CfD scheme will be ensured from the European Union Modernisation Fund and transferred to the CfD Liquidity Fund. OPCOM, as the CfD counterparty, will be responsible for managing CfD payments to and from the Liquidity Fund;

The Liquidity Fund can be supplemented with amounts received through a specific CfD levy to be imposed on retail customers (details of the levy not being yet public).

Eligibility requirements

Below are some key bidder and project requirements based on the information published so far by the Ministry of Energy:

For the bidder:

The bidder must be a legally constituted entity in accordance with the legislation of Romania, and it must have the production of energy as the primary or secondary scope of activity registered in the company’s articles of incorporation;

For participation in the tender, a bid bond/guarantee must be provided. Also, for the CfD execution, a performance bond/guarantee must be constituted in favour of OPCOM, the latter having the right to enforce this bond/guarantee if the beneficiary breaches its obligations, as provided in the CfD. The values of these bonds/guarantees have not yet been published.

For the projects (i.e. the PGCs):

Must consist of new electricity generation capacity and utilise only onshore wind or solar photovoltaic-eligible generation technologies;

The proposed installed capacity must be equal to or greater than 5MW;

Projects are required to have at least a grid connection permit (“ATR”) and target commissioning date must not exceed 36 months from the anticipated date of signing of the CfD contract.

In addition to the above, the bidder and the project must meet other legal, financial and technical requirements to ensure eligibility.

We will provide additional information on this topic as soon as the legal framework is published and approved by the competent authorities (i.e., the Romanian Government, Ministry of Energy, ANRE etc.).

 

Cookie Settings