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Good news for renewable energy producers following amendments to the Romanian Energy Law

January 2022 – On 31 December 2021, Government Emergency Ordinance no. 143/2021 amending the Romanian Energy Law no. 123/2012 (the “Energy Law”) and other normative acts was published in the Official Gazette (“GEO no. 143/2021”) and entered into force. GEO no. 143/2021 represents a significant redrafting of some of the principles and provisions of the Energy Law and was mainly intended to transpose under local law Directive (EU) 2019/944 on common rules for the internal market for electricity and amending Directive 20212/27/EU (“Directive 2019/944”), which should have been transposed by 31 December 2020. Among the most anticipated changes to the Energy Law is the repeal of the restrictions for electricity producers to conclude bilateral power purchase agreements (“PPAs”).

Context of the amendments

In view of the EU’s Clean Energy for all Europeans Package, the rationale of GEO no. 143/2021, as presented by the government, is to introduce to the Energy Law new principles and concepts (e.g., on the functioning of the electricity market, undistorted price setting, active customers and citizen energy communities, access to electricity derivatives etc.), to harmonise national provisions in conflict with EU law, and to amend the rules promoting electricity generation from renewable energy sources to further support electricity production by households and small producers.

GEO no. 143/2021 was enacted following a cumbersome decisional process, with several draft iterations published for public consultation throughout 2021 and with Romania facing infringement proceedings from the European Commission for failing to transpose Directive 2019/944 within the applicable deadlines. Changes also address previously applicable Energy Law provisions that allowed electricity producers to trade exclusively on centralised markets in a transparent, public, centralised and non-discriminatory manner.

Romania’s National Energy Regulatory Authority (“ANRE”) interpreted such centralised trading obligations restrictively and as also prohibiting the export of electricity by producers on centralised markets in neighbouring countries. The matter was eventually settled by the Court of Justice of the European Union in September 2020[1], in the sense that a national regulation imposing the obligation to trade electricity on a single platform, and therefore restricting producers from exporting electricity directly to other Member States, was seen as a measure having equivalent effect to a quantitative restriction on exports that could not be justified on grounds of public security connected to the security of energy supply, insofar as such legislation was not proportionate to the objective pursued.[2]

A previous step taken by the Romanian government to limit electricity producers’ centralised trading obligations came with the adoption of Government Emergency Ordinance no. 74/2020, which allowed electricity producers to conclude bilateral PPAs outside the centralised market at negotiated prices and in compliance with competition rules for electricity produced by electricity production capacities commissioned after 1 June 2020. See our insights on the matter here.

No more restrictions for PPAs

With the enactment of GEO no. 143/2021, the conclusion of bilateral PPAs by electricity producers is no longer restricted, regardless of the commissioning date of the power generation capacities. This amendment is in line with both Regulation (EU) 2019/943 on the internal market for electricity, which allows for long-term electricity supply agreements negotiable over-the-counter, and Directive 2019/944, and also clarifies previous legislative uncertainties on the matter. This measure had been long requested by sector players, from 2012 when centralised trading obligations were introduced, as PPAs could be presented as guarantee instruments and help persuade banks to support investments in new local power-generation capacities.

Other significant amendments to the Energy Law

In addition to repealing electricity producers’ restrictions regarding the conclusion of PPAs, other significant changes introduced by GEO no. 143/2021 include:

  • as a market liquidity measure­—state-owned electricity producers will have to trade at least 40% of their annual electricity production on the forward centralised markets (with the exception of electricity produced by capacities commissioned after 1 June 2020);
  • the possibility of having multiple operators of centralised electricity markets—this role was previously granted on an exclusive basis to the Romanian Power Exchange (OPCOM);
  • the repeal of legislative provisions that deal with the regulated electricity market;
  • additional rules that deal generally with electricity suppliers’ obligations towards prosumers and how electricity fed back to the grid should be compensated;
  • further clarification that the electromobility business of charging point operators does not qualify as supply of electricity—this is a welcome clarification, considering the scarce regulation of the electromobility sector under Romanian law. This removes previous uncertainties on the matter, as Law no. 34/2017 on installing the infrastructure for alternative fuels and Government Decision no. 87/2018 approving the Alternative Fuels Strategy only hinted at such a conclusion;
  • changes to the rules on granting licenses and permits in the electricity sector, as well as conditions for carrying out certain activities without a license;
  • further clarifications as to how a legal person registered in another EU Member State can carry out energy-related activities in Romania;
  • amending the rules on extending both electricity and gas networks and connections, as well as their financing, as well as further providing for a customer option to support part of such costs;
  • amendments to certain definitions or further defining terms such as “active customer”, “citizen energy community”, “dynamic electricity price contract”, “priority dispatch”, “imbalance settlement period”, “electricity derivatives”, and “prosumer”;
  • redefining the concept and principles of designating suppliers of last resort;
  • further amendments to the rights and obligations of electricity customers and suppliers, including the right of customers to conclude dynamic electricity price contracts and the suppliers’ associated information/explanatory obligations towards customers; and
  • additional regulations for aggregation activities.

Moreover, ANRE is mandated to enact secondary legislation for the application of these amendments within six months from the entry into force of GEO no. 143/2021, which is expected to be a complex and extensive legislative process.

Final remarks

With the unprecedented spikes in power prices (and price caps recently introduced by the government), red-hot inflation, and the on-going Covid pandemic, we see a fully balanced and functional energy sector paramount to Romania’s economic growth in the medium to long term. In this regard, capital-intensive investments into new green power generation capacities will be further required to ensure that Romania’s 2030 energy and climate targets are met, as the country’s old coal-based plants are to be phased out.

Moreover, it will be further relevant to closely follow how the new rules and secondary legislation to be adopted by ANRE will be applied in practice in the near future and to what extent they address their underlying rationale.

For more information contact Iustinian Captariu, Partner, at

e-mail

, or Cătălin Graure, Managing Associate, at .

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[1] See Case C-648/18, ANRE vs. Hidroelectrica SA, Judgment dated 17 September 2020, available here.

[2] In breach of Articles 35 and 36 of the Treaty on the Functioning of the European Union, prohibiting quantitative restrictions on exports and all measures having equivalent effect.