Romanian government incentives for new power production capacities

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The recently adopted Government Emergency Ordinance no. 74/2020 (“GEO 74/2020”) was published in the Official Gazette and entered into force on May 19, 2020. This allows over-the-counter transactions for the power produced by new power production capacities as follows:

  • power producers are allowed to conclude bilateral power purchase agreements (PPAs) outside OPCOM’s centralized markets, at negotiated prices, in order to sell the electricity produced by capacities commissioned after June 1, 2020;
  • producers are also exempted from the obligation to publicly and non-discriminatorily offer the electricity produced by the above-mentioned new capacities.

In this respect, GEO 74/2020 fills a gap in Romanian primary legislation and moves closer to the provisions of EU Regulation 2019/943 on the internal market for electricity as implemented by ANRE’s Order 236/2019 entered into force as of January 1, 2020. These enactments aim to be in line with the EU RED II Directive that requires EU member states to remove unjustified barriers to long-term PPAs and facilitate their uptake in order to stimulate the market.

GEO 74/2020 maintains the ban on over-the-counter PPAs in the case of electricity produced by power capacities commissioned before June 1, 2020, but it is nevertheless a major step forward, which should make greenfield projects bankable again.

At the same time, the end of the green certificates support scheme for RES projects commissioned after 2017 obliges the Romanian authorities to prepare a new support scheme in order to help achieve the country’s RES target for 2030. One such support mechanism could be based on contracts for difference (CfDs), which would use an agreed strike price as benchmark against the fluctuations of the competitive market price.

We note also that between July 1, 2020, and December 31, 2020, the legal obligation to provide to the last resort suppliers the electricity necessary to cover household demand for which regulated tariffs are applied is applicable only to producers that operate dispatchable production facilities and only in case of production units that don’t benefit from support schemes. At the same time this obligation applies in the ascending order of the prices established by the relevant authority, for the entire quantity of electricity necessary to cover such household demand, so that tariffs will not exceed the level recorded on May 19, 2020.

More elaborated provisions implementing GEO 74/2020 should be enacted by the Romanian National Regulatory Authority (ANRE) within the next 30 days and hopefully clarify some of the aspects regulated by GEO 74/2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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