​The Romanian Government has brought significant changes to the green certificates support scheme (the “GC Scheme”) in an effort to balance the interests of electricity producers from renewable sources (“E-RES Producers”) and the financial impact of the support scheme on electricity consumers. These changes include:

• the introduction of the static annual quantity of green certificates (“GCs”) used to calculate the annual GC acquisition quota and a cap of EUR 11.1/MWh for the impact of the GC Scheme on electricity consumers;

• the estimated GC acquisition quota for the period April 2017 – December 2017 is 0.358 GC/MWh;

• 2 GCs issued for each MWh produced by solar electricity producers accredited before 31 December 2013 are postponed from trading between 1 April 2017 and 31 December 2024;

• GCs postponed from trading will be recovered in equal monthly tranches between 1 January 2018 and 31 December 2025 for micro-hydro and wind electricity producers, and between 1 January 2025 and 31 December 2030 for solar electricity producers;

• GCs are valid until the end of 2031 and can be traded until 31 March 2032;

• new GCs markets and new trading rules.

Entering into force

The Romanian Government has adopted Government Emergency Ordinance No. 24 of 30 March 2017 for the amendment of Law No. 220/2008 on renewables and of other pieces of legislation (the “Ordinance”). The Ordinance was published in the Official Gazette on Friday, 31 March 2017, and entered into force on the same date.

The Ordinance is subject to the review of the Parliament which must issue a law to confirm, amend or reject the Ordinance.

By 31 September 2017, the National Energy Regulatory Authority (“ANRE”) must prepare new secondary legislation or amend the existing rules of the GC Scheme.

The GC Static Quantity and the GC Acquisition Quota

The static annual quantity of GCs (the “GC Static Quantity”) is defined by the Ordinance as the total quantity of GCs estimated to be issued to renewable energy producers until the end of 2031 plus all GCs postponed from trading between 2013 and 2024, divided by the number of years left until the expiry of the GC Scheme. The purpose of the GC Static Quantity, according to the explanatory note of the Ordinance, is to linearize the impact of the GC Scheme on electricity consumers.

The GC Static Quantity is used by ANRE to calculate the quota of GCs which must be purchased by electricity suppliers, and in some cases by electricity producers, for every MWh of consumed electricity (the “GC Acquisition Quota”). The number of GCs issued to E-RES producers is no longer relevant for calculating the GC Acquisition Quota.

Starting from 2018, ANRE must calculate the GC Static Quantity every 2 years and inform the Government by 30 June in this respect. Within 60 days, the Government must approve through Government Decision the GC Static Quantity.

When calculating the GC Acquisition Quota, ANRE must ensure that the financial impact of the GC Scheme on electricity consumers does not exceed EUR 11.1/MWh. Therefore, the maximum impact of the GC Scheme on electricity consumers is no longer decided by the Government, at the recommendation of ANRE, but it is provided by law at a fixed level (ie. EUR 11.1/MWh).

According to the Ordinance, the GC Static Quantity for 2017-2018 is 14,910,140 GCs. ANRE has set through Order No. 27 of 31 March 2017 the estimated GC Acquisition Quota for the period April 2017 – December 2017 at 0.358 GC/MWh.

GCs issued to solar electricity producers are postponed from trading

The Ordinance provides that 2 GCs issued for each MWh produced by solar electricity producers accredited before 31 December 2013 will be postponed from trading between 1 April 2017 and 31 December 2024. Solar electricity producers accredited before 31 December 2013 receive 6 GCs for every MWh of electricity produced and delivered to the grid. Therefore, these producers will be able to immediately trade only 4 GCs for every MWh of electricity produced, while 2 GCs/MWh are postponed from trading.

According to the explanatory note of the Ordinance, this additional postponement of GCs¹ is required in order to create better market conditions for selling GCs. The GCs market is currently affected by a significant oversupply of GCs and following the release into the market of GCs postponed from trading between 1 July 2013 and 31 March 2017, the oversupply of GCs is expected to increase. The postponement measure appears to be aimed at reducing the oversupply of GCs on the market.

The postponement measure applies only to solar electricity producers accredited before 31 December 2013 because there is a major discrepancy between the Internal Rate of Return (”IRR”) of these solar electricity producers² and the IRR of other electricity producers from renewable sources.

Release of GCs postponed from trading

The GCs postponed from trading will be released into the market as follows:

a) for electricity producers operating micro-hydro power plants and wind power plants, all GCs postponed from trading will be released in equal monthly tranches between 1 January 2018 and 31 December 2025; and

b) for electricity producers operating solar power plants, all GCs postponed from trading, both those postponed between 1 July 2013 and 31 March 2017 and the GCs postponed from trading between 1 April 2017 and 31 December 2024, will be released in equal monthly tranches between 1 January 2025 and 31 December 2030.

GCs – validity term and accounting value

The Ordinance provides that GCs issued after 31 March 2017 and all GCs postponed from trading (from 1 July 2013 onwards) are valid until the end of 2031 and can be traded until 31 March 2032 (even if the accreditation decision of the E-RES Producer has expired).

In addition, the Ordinance provides that GCs issued after 1 April 2017 are not financial instruments and acquire value only when actually traded (and not when the GCs are issued to the E-RES Producers). This clarification of the law is important from an accounting perspective and helps E-RES Producers to manage their cash flow and taxable profits.

New GCs markets and new trading rules

The Ordinance introduces the following new rules and markets for trading GCs:

a) Centralised anonymous GCs market – the GCs market is redefined as the organised GC trading structure, managed by OPCOM, where market participants place firm orders, in relation to the price and quantity of GCs, without having access to information regarding the identity of other market participants or the offered quantities and prices.

GCs will be traded, as in the past, both through spot transactions and forward transactions (using standard contracts for forward transactions).

b) Centralised market for electricity produced from renewable sources and supported by the GC Scheme – this is a new centralised and anonymous market where electricity is traded in a competitive, transparent, public, centralised and non-discriminatory manner together with the GCs associated with the traded quantity of electricity; the price for the traded electricity is set through a competitive process while the GCs are sold at the latest available market closing price for spot transactions performed on the centralised anonymous GCs market.

c) GCs can be traded only on the above two markets starting from 1 September 2017.

d) Market participants - only E-RES Producers and electricity suppliers which are subject to the GC Acquisition Quota can trade GCs; by way of exception, GCs can be purchased by all electricity suppliers. A GC can be traded only once between an E-RES Producer, as seller, and an electricity supplier, as purchaser³.

e) GC trading values – starting from 1 April 2017, GCs can be traded between EUR 29.4/GC and EUR 35/GC. The minimum and maximum trading values for GCs will no longer be subject to annual indexation.

Electricity suppliers and producers which fail to comply with the GC Acquisition Quota will pay EUR 70 to the Environmental Fund Administration for each GC not purchased.

f) Existing GC sale-purchase agreements – the Ordinance provides that the existing bilateral sale-purchase agreements for GCs remain in force and are valid until their expiry date. However, the term of these agreements cannot be extended and the quantity of traded GCs cannot be increased (failure to comply with this provision is sanctioned with an administrative fine ranging from 1% to 5% of the annual turnover for the previous year.

The term of all GC sale-purchase agreements concluded on the existing GCs market after 1 April 2017 will not exceed 31 August 2017.

Other changes

• Electricity suppliers can invoice to the final consumers the cost for GCs only at the level of the weighted average price applicable in the past month/year to GCs traded through spot transactions on the centralised anonymous GCs market.

• The Ordinance provides new situations in which administrative fines can be applied by ANRE and the amounts payable for certain breaches of the rules governing the GC Scheme were significantly increased (in some cases by reference to the annual turnover of the entity in breach).

• Public authorities which operate renewable energy power plants can sell electricity to their electricity suppliers.

• The support scheme for renewable energy power plants with less than 500 kW installed capacity will not be implemented.

Footnotes

1 The first postponement of GCs from trading was enacted in June 2013 and applied between 1 July 2013 and 31 March 2017 to micro-hydro, wind and solar power plants.
2 In January 2014, the number of GCs issued to solar electricity producers accredited after 31 December 2013 was reduced from 6 GCs/MWh to 3 GCs/MWh, after ANRE determined that the IRR of solar electricity producers was higher than the limit agreed with the European Commission.2
3  E-RES Producers can purchase and resell GCs in order to cover the difference between the number of GCs received and the number of GCs through forward transactions with electricity suppliers.