Energy LawLEGAL FRAMEWORK AND STATE SUBSIDIES FOR RENEWABLE ENERGY INVESTMENTS IN ROMANIA

The increase in CO2 emissions and the unsustainability of energy from fossil fuels have recently led to an increased interest and investment in green energy. Renewable energy investments in Romania are attracting the attention of investors with state subsidies and high green energy production targets.

Energy production in Romania: Last year, electricity generation from fossil fuels fell below 30% for the first time. This is mainly due to the increase in renewable energy capacity from 43.1% in 2022 to 50.4% in 2023. The solar PV market capacity in Romania is planned to increase from 1.79 GW in 2024 to 4.21 GW in 2029. The Romanian Government plans to add a total of 7GW of renewable energy capacity by 2030, of which 3.7 GW will be solar.

In the medium term, the government’s supportive policies and falling solar panel costs raise serious expectations that Romania will realize its targets in the solar market. Although the first PPA (Power Purchase Agreement) contract was signed in 2021, Romania is progressing rapidly and increasing its capacity year by year.

What is a PPA (Power Purchase Agreement)?

PPAs are long-term electricity contracts that enable consumers to purchase electricity from renewable energy producers. These contracts provide consumers with predictability in paying their bills and generators with predictability in financing their project investments, as they provide electricity at a fixed or benchmark price.

Romanian Energy Market

The electric energy market in Romania is liberalized. Various markets (day-ahead, intraday, etc.) are operated by OPCOM. Only the balancing market is directly operated by the TSO, Transatlantica.

Romania State Subsidies

In Romania, state subsidies are granted for CapEx for some power plant investments under certain conditions. CapEx are funds used by a company to acquire, develop and maintain physical assets such as facilities, buildings, technology. CapEx financing for wind and solar energy is provided by the Ministry of Energy, the Ministry of Agriculture through auctions for prosumers and the Ministry of Environment through auctions for the general public. In addition, most of the state aid supports the installation and development of green energy, and photovoltaic parks, which appear in the form of producer-consumer installations, are a major beneficiary.

The Romanian Government has launched a tender program to protect owners of generating plants from market risks due to electricity price volatility. In August 2023, the first auction was held and the program will tender 2,000 MW of solar PV and wind power capacity projects backed by 15-year power purchase agreements (PPAs).

The Romanian Ministry of Energy has announced that it will support electricity generation companies with up to EUR 15,000,000 per solar or wind power plant, with or without storage. The planned capacity must be higher than 0.2 MW. The total amount of support to be provided under this announcement will be EUR 457.7 million and the country’s renewable energy capacity is expected to increase by 950 MW.

Also in Romania, under the ‘Energy Efficient House’ program, the government announced that it will provide subsidies of up to USD 15,970.3 per dwelling for new energy efficient equipment. In 2021, the Romanian Ministry of Environment donated over USD 63.7 million to the Casa Verde Fotovoltaice (green PV house) scheme in 2021 to help support residential solar installations.

Licensed-Unlicensed Electricity Generation

As in our country, there is a distinction between licensed and unlicensed generation in Romania. Although there is no obligation to obtain a license for power plants up to 1MW, they are subject to the same rights and obligations as producers with a production license.

The difference between licensed and unlicensed is only for prosumers generating up to 400 kW. Prosumers generating up to 400 kW do not have to participate in the balancing market.

Prosumers generating over 1 MW are also required to obtain a producer license.

Sale of Surplus Electricity

All unlicensed prosumers can supply the extra energy to the grid in the following ways:

– Up to 200 kW: Purchased by the electricity supplier of the prosumer at the active energy price.

– 200-400 kW: Purchased by the electricity supplier of the prosumer at the monthly day-ahead weighted average price.

– Above 400 kW: The generating prosumer is treated as a “producer” in terms of surplus and is treated as such. It has to sell electricity in markets managed by OPCOM. This includes selling to its supplier, as in the other two options mentioned above.

According to the law passed in June 2024, those with residential solar generation between 10.8 kW and 400 kW are required to switch to a storage energy system. Likewise, current prosumers with generation between 3kW-400 kW are also required to switch to a storage energy system by the end of 2027, otherwise their electricity supply to the grid will be limited to 3kW.

The law stipulates that energy storage systems must match at least 30% of the capacity of PV arrays between 3kW-200 kW and at least 50% of the capacity of solar installations between 200kW-400kW. The same law stipulates that the energy that prosumers supply to the grid cannot exceed their storage capacity.

Due to the congestion and power outages in the grid as a result of the excess energy produced by prosumers, the transition to a storage system in residential solar energy systems is seen as a mandatory step.

In the light of the above, we can say that Romania is committed to the main climate targets of the European Union’s “55 Adaptation Plan”, which targets 55% emission reduction by 2030 compared to 1990 levels and net carbon neutrality by 2050. In this context, the fact that green energy is in cooperation with both direct state support and financing funds of the relevant ministries shows that Romania is taking decisive steps towards the goals mentioned in our article.

We see that energy investments from Turkey to Romania have increased in recent years. In this context, we recommend that investors meticulously follow Romania’s regulatory rules and proceed with expert lawyers in order not to be deceived. Our team members at CLA Partners in Romania will be able to assist you with such needs.