Trade Mission to Romania

Business Collaborations In the Solar, Decarbonization, & Renewable Energy Sector

 

The Long-Term Outlook on Solar (PV) by the Romanian Government

 

Topics:

1. Which legislative steps are being taken to ensure the successful development of PV projects in Romania;

2. Opportunities for international stakeholders entering the Romanian market;

3. How can the public & private sectors work together to promote PV in Romania;

4. Understanding the new auction model in Romania.

5. Romania benefits from a few legislative actions which create the appropriate framework for successful PV project developments. In this regard I will mention the following:

 

General Message

 

The Integrated National Energy and Climate Plan (NECP) aims to increase the share of energy from renewable sources in total energy consumption by 2030 by increasing the installed capacity of wind and photovoltaic plants and increasing the number of consumers. The global share of energy from renewable sources in the final gross energy consumption is 30.7%, although the recommendation of the European Commission (EC) for Romania is to increase the level of ambition for 2030, to a share of energy from renewable sources to at least 34%.

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As you may know, Romania has planned through NECP to have a net installed capacity of 5.1 GWh of solar and 5.3 GWh of wind by 2030. In total, Romania intends to install in the period 2021-2030 additional capacities of 6.9 GW from renewable sources. This plan is due to Romania's commitment to phasing out coal-fired power by 2032 from the energy mix, which will require in conjunction to develop a stimulating regulatory and investment framework to encourage the introduction of renewable technologies, the development of the transport network, and the digitization of the sector.

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The main driver for the growth of installed capacity in renewable energy is the ambitious climate targets that have forced the European Union to develop sophisticated new sets of legislation to achieve carbon neutrality by 2050.

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On the other hand, the geopolitical context in the proximity of the Black Sea will play an important role in increasing the installed renewable capacity since there is a high need to reduce the dependence on natural gas imported from Russia.

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As part of the National Recovery and Resilience Plan (RRP) Romania is considering:

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• Investment 1 (I1). New capacities for electricity generation from renewable sources

 

The investment consists of grants for the construction of new installations, with the objective of installing 950MW of renewables power production capacity, or the maximum volume compatible with the tender being held in competitive conditions. 

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In this regard, the guidelines for applicants and the state aid scheme have already been launched for public consultations since February and last week the call for projects was launched as well.

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• Investment 2 (I2). Renewable gas distribution infrastructure (using natural gas in combination with green hydrogen as a transitional measure), as well as green hydrogen production capacity and/or its use for electricity storage.

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The objective of this investment involves the installation of green hydrogen production capacities of at least 100 MW in electrolyzers, which will encourage investments in renewable energy.

 

• Investment 3 (I3). Industrial chain for the production and/or assembly and/or recycling of batteries, cells, and photovoltaic panels (including ancillary equipment), as well as new electricity storage capacity.

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The second sub-measure of I3, which aims to develop production units in the value chain of photovoltaic cells and panels (production, assembly, and recycling) will reach a total annual capacity of at least 200 MW, until Q4 2025

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Storage facilities, batteries, and hydrogen can also play an important role in both decarbonizations of several economic sectors and the development of intermittent renewable energy production capacities.

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1. Which legislative steps are being taken to ensure the successful development of PV projects in Romania;

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In RRP Romania has proposed to introduce a Contract for Difference (CfD) scheme inspired by the UK model to encourage investments in renewable energy sources. In this regard, the Ministry of Energy is working through the European Bank for Reconstruction and Development (EBRD) with a consultant on the adoption of the CfD mechanism, the development of primary and secondary legislation and the rules and requirements for the tendering, monitoring and technical assistance needed to notify the mechanism CfD to the European Commission the scheme. The Ministry of Energy aims to launch the first tenders for renewable energy, both solar and onshore wind, in 2023. 

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On the other hand, if we consider small installed capacities in renewable energy dedicated to prosumers, new perspectives are opening up, according to the Law on Electricity and Natural Gas no. 123/2012, which gives the right to individuals and legal entities to use solutions for the production of electricity from renewable sources to ensure their own consumption and at the same time benefit from quantitative compensation between the electricity consumed in the network and the electricity produced and delivered in the network by prosumers who have power plants from renewable sources with an installed power of up to 200 kW per place of consumption, with the possibility of carrying over the surplus electricity for use in a subsequent billing period(s), but not more than 24 months from the delivery of the electricity in the electricity grid. Prosumers with installed capacities between 200 - 400 kW will benefit from the financial compensation.

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Quantitative compensation of prosumers with installations with a power of up to 200 kW will be granted until December 31, 2030, in the context of measures and actions related to achieving commitments on the share of renewable energy in 2030 according to NEPC, based on an established methodology by the National Energy Regulatory Authority.

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2. Opportunities for international stakeholders entering the Romanian market;

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As I mentioned before, Romania has undertaken to achieve a quota of 30.7% for renewable energy within the total energy mix by 2030, according to the NECP, an amount which will be significantly increased in the revision version of the plan in 2023 in line with the new targets set by the EC in the new climate package “Fit for 55”. 

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Overall, the Romanian energy production system needs massive investments in the coming years. In order to address the issues with regards to meeting Romania’s energy consumption needs, to help in the transition to clean energy and the new mix with an increased share of renewable energy sources, the Ministry of Energy has considered the introduction of a support scheme for CfD, to support through investment aid a series of investments in generation electricity capacities with low carbon emissions funded from the National Recovery and Resilience Plan (NRRP) and Modernization Fund (MF) too.

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Given the sources of funding, I mention the MF as the main funding mechanism established by the EU-ETS Directive, which will support low carbon investments in energy systems. At least 70% of MF resources can be used to support investments in priority areas, called "priority investments", such as the production and use of electricity from renewable sources; improving energy efficiency; energy storage; modernization of energy networks; electricity transmission networks and increasing interconnections between Member States; support for a fair transition in the carbon-dependent regions of the beneficiary Member States; investments in energy efficiency in transport, construction, agriculture, and waste. The selection of projects for financing from the MF will be made following selection processes that will take place between 2022 and 2030.

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Considering the information presented above regarding the support scheme and the potential for renewable energy sources in Romania, international stakeholders would benefit from considerable opportunities when entering the Romanian market.

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3. How can the public & private sectors work together to promote PV in Romania;

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Working together, governments, businesses, and entrepreneurs can contribute to the achievement of the agreed targets in terms of decarbonization, NetZero economy. In order to reach NetZero involves a huge transition. Complex changes that involve switching from coal to renewable energy sources are complicated and this is difficult to achieve without all parties involved. Both government and business can innovate, grow markets, create value, develop and deliver goods and services, and shape consumer behavior. If we are looking for a change in speed, both government and business need to work together with their efforts building on and amplifying each other. 

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Over the years, there have been numerous initiatives at the public administration level to encourage the installation of photovoltaics where household consumers and then small and medium enterprises were able to apply for funding to install photovoltaic capacity. Additionally, in terms of collaboration between the public and private sectors, the Ministry of Energy submitted to public consultation the guidelines and guides for the call for projects for the State Aid Scheme which aimed at supporting investments from RRP, respecting the decisional transparency framework.

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The public sector is aware that it must take the lead in explaining the need for change and building support scheme, on the other hand aligning business strategy with policy signals and evolving regulatory environment remains the responsibility of the business makers, and only a strong coordinating between two sectors can help achieve the targets set, and therefore in promoting photovoltaics installation in Romania.

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4. Understanding the new auction model in Romania

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As previously mentioned, the CfD scheme is designed to offer long-term price stabilization to new low-carbon generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers. The competition will keep up with cost reduction and help deliver maximum deployment.

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The draft CfD Law, CfD Contract, and accompanying Auction Framework are currently in the final stages and are expected to be notified to the EC by the end of this year. This scheme will see support contracts awarded in a competitive auction process. The RRP states that the first round of competitive procedures within the CfD will be finalized by Q4 2023, with contracts signed for a total capacity of at least 1,500 MW. This round will most likely be technologically neutral and allow bids from solar PV and onshore wind production facilities. The second round, covering at least 2,000 MW, should be finalized by Q2 2025.

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In terms of the auction procedure itself, bidders will be invited to submit applications after fulfilling a number of eligibility criteria. It’s worth highlighting that a technical grid connection permit (ATR) will be one of the main requirements. Developers’ bids should include information about the technology type, their price, capacity, and the delivery year of the project. Those bids will be ranked according to their strike price and contracts will be awarded to the successful on a pay-as-bid basis.

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This represents just a broad overview of the auction process, while the complete procedure will be detailed in the Auction Framework due to be released by the end of this year.

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Our intention is that CfDs are a modern policy instrument for a modern renewables sector and will play a significant role in addressing the electricity market price risk, the regulatory risk, and the inflation risk.

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The Ministry of Energy believes the current policy approach will support an increase in the pace of deployment of new renewable electricity generation needed to achieve Romania’s 2030 renewable energy sources targets.

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