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Contracts for Difference: The European Commission Has Approved a EUR 3 Billion State Aid Scheme for Romania to Support Onshore Wind and Solar Photovoltaic Installations.

Contracts for Difference: The European Commission Has Approved a EUR 3 Billion State Aid Scheme for Romania to Support Onshore Wind and Solar Photovoltaic Installations.

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On 6 March 2024, the Ministry of Energy received approval from the European Commission (the “Decision“) for the contract-for-difference financing scheme in support of onshore wind and solar PV installations to promote the transition to a zero net-zero economy. On 27 March 2024, a non-confidential version of the Decision was published in the State Aid Register on the Commission’s competition website.

Pursuant to the Decision:

  • The estimated budget of the scheme is RON 15.222 billion, corresponding to around EUR 3 billion, and the volume is 5000 MW of new #renewable #electricity capacity. The measure will be financed through a CfD Liquidity Fund. This fund will be primarily financed through the Modernisation
  • The beneficiaries of the measure are companies of all sizes active in the production of electricity located in the territory of Romania.
  • The technologies eligible under the measure are #onshore #wind and solar #photovoltaic.
  • In order to be eligible under the measure, projects must: (i) be implemented on the territory of Romania; (ii) have a minimum installed capacity of 5 MW; (iii) be commissioned such that they can lawfully generate and inject electricity to the national energy system pursuant to a commercial operation license granted by ANRE within 36 months from the date of granting of the aid, and (iv) the projects participating in the first round of auctions will be required to obtain a technical grid connection permit (#ATR) within six months from the signature of the CfD.
  • The aid allocation process involves a competitive bidding overseen by Transelectrica, scheduled for two rounds – one in 2024 (for 2 GW – consisting of 1 GW solar and 1 GW onshore wind) and one in 2025 (the remaining 3 GW – consisting of 1.5 GW onshore wind and 1.5 GW solar).
  • Applicants are required to provide a bid bond issued for an amount of EUR 20,000/MW of the capacity with which the applicant intends to participate in the scheme.
  • Aid applications will be ranked solely based on the strike price bid. Applications will be selected starting from the lowest strike price bid until the volume of the auctions is reached. In case of tied bids, the following criteria will be used to break the tie: (i) projects with ATR, (ii) higher capacity, (iii) COD closed to the auction date, earlier application date.
  • The maximum strike price for the first round is set at EUR 93 /MW for onshore wind and EUR 91 /MW for solar.
  • The auctions will result in the determination of the number of generators that will benefit from the CfD scheme, as well as in the determination of the strike price for each beneficiary (i.e. pay-as-bid).
  • Aid under the measure will be granted in the form of two-way contracts for difference, in relation to the energy output of the installation and with a contract duration of 15 years from the start of operations of the aided installation.
  • Successful applicants must provide performance bonds (EUR 75,000/MW of the project capacity) and comply with commissioning deadlines. Penalties apply for delays and underperformance, except in cases of force majeure. The “do no significant harm” principle is adhered to, with no expected adverse environmental impacts.
  • The beneficiaries will be required to sell the electricity subject to the CfD on organized marketplaces and will receive from the CfD counterparty (which is OPCOM) or pay back to the CfD counterparty the difference between the strike price set in the competitive bidding procedure and a reference price calculated by ANRE as a monthly output-weighted average of prices achieved in the day-ahead markets.

By Monica Iancu, Partner, and Alina Zaharia, Junior Associate, Bondoc si Asociatii

Romanian Knowledge Partner

Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

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