Legislative proposal on Contracts for Difference support scheme

On August 7^th, 2023, the Ministry of Energy published for public consultation the long-awaited draft Government Decision approving the general legal framework for the implementation and functioning of the Contracts for Difference (“CfD”) support scheme for low carbon technologies (the “Draft G.D.”) together with an informative note summarizing the envisaged auction process for 2023 and 2025 (“Informative Note”).

As per the Draft G.D., the CfD support scheme will be granted either under the CfD auction schemes or as ad hoc CfD contracts (in case of the eligible technologies that cannot be subject to an auction in which case the contract will be negotiated directly by the Romanian State and the beneficiary). The aid will be implemented further to the orders to be issued by the Ministry of Energy.

The CfD scheme will be financed through (i) the contribution collected from the end users which will apply as of January 1^st, 2024 and (ii) non-reimbursable European Union funds. Furthermore, the auctions that will take place in 2023 and 2025 will be financed mainly from the Modernization Fund.

Below we have summarized the key regulations for the CfD support schemes, as contained in the Draft G.D. and the Informative Note.

1. Eligible technologies:
   • As per the Draft G.D., will be eligible for CfD state aid projects for the production of energy using technologies with low carbon emissions (onshore and offshore wind, solar, hydro, nuclear and hydrogen), as well as energy storage projects.
   • First two auction rounds: The first two auction rounds will be organized by the end of 2023 and in the first half of 2025 respectively for onshore wind and solar projects only.  The overall installed capacity supported by the first two CfD auction rounds will be equal to 5,000 MW and will be divided as follows:
     • the first round: 1,000 MW for onshore wind projects and 1,000 MW for solar projects;
     • the second round: 1,500 MW for onshore wind projects and 1,500 MW for solar projects.
2. Proposed calendar for the first auction
   • As per the Informative Note, the interested beneficiaries should submit their offers not later than November 17^th, 2023 and the CfD contracts are expected to be signed with the winners of the auction by December 29^th, 2023.
3. Eligible projects:
   • As per the Draft G.D., only new generation capacities (meaning capacities consisting of equipment that was not used before the date of the financing request) are eligible for aid.
   • Eligibility for the first auction, the target commissioning date of the project should not exceed 36 months as of the signing date of the CfD agreement (envisaged to take place in December 2023).
   • Eligibility for the first two auction rounds:
     • will be eligible for the first two auction rounds new projects with a minimum installed capacity of 5 MW which possess a valid grid connection permit;
     • the Informative Note seems to imply that projects under development are also eligible if “the EPC contract or any other binding supply contracts” have been signed after July 20^th, 2022. The CfD support mechanism shall not be applicable to technological upgrades or expansion of existing projects;
     • for the first auction, the target commissioning date of the project should not exceed 36 months as of the signing date of the CfD agreement (envisaged to take place in December 2023).
4. CfD difference payments and reference price:
   • Start of payment: the CfD difference payments will start subject to the satisfaction of the following conditions (which should occur no later than 24 months as of the target commissioning date mentioned in the CfD agreement):
     • the beneficiary has obtained the generation license from ANRE;
     • the beneficiary has obtained the written confirmation from the grid operator that the meters dedicated for the supported capacity have been installed;
     • the beneficiary has confirmed in writing that it has started exploitation of at least 80% of the capacity supported by the CfD scheme;
     • the beneficiary has concluded the convention for undertaking the balancing responsibility with Transelectrica;
     • the beneficiary has obtained the environmental authorization and endorsements;
     • the beneficiary has obtained the grid connection certificate.
   • The reference price for the first two auctions will be equal to the weighted monthly average price of the day ahead market.
   • No difference payment will be due for the quantities delivered to the national energy system in the settlement intervals in which the reference price of such production is negative.
   • Duration of the CfD support will not exceed 15 years as of the first difference payment.

The CfD support scheme will become effective after the entry into force of the Draft G.D., the adoption of the order of the Ministry of Energy approving the auctions for 2023 and 2025 and the authorisation decision issued by the European Commission.  For any further details regarding the above, please contact Raluca Gabor, Managing Associate in the Energy team at RGabor@saa.ro.