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Hot summer for PV industry

This summer brought some long awaited clarifications about the timeframe of the first overcompensation analysis to be performed by the National Regulatory Authority in the Energy Field (ANRE). For the solar industry, this is expected to reduce the number of green certificates from 6 to 4 according to some authorities’ representatives, starting January 1, 2014. For power generated from other renewable energy sources the first overcompensation analysis will be applied one year later (January 1, 2015). These timeframes were set by the Law 134 as of July 18, 2012, which entered into force on July 26, 2012 and approved the Government Emergency Ordinance No. 88/2011 which, in turn, modified and supplemented the Law 220/2008 on the subsidy system for electricity produced from renewable energy sources (E-RES) and gave the investors (especially those in the photovoltaic industry) a breath of fresh air.

At the same time, the Law no. 123 as of July 10, 2012 for electric energy and natural gas (the New Energy Act), that came into force on July 19, 2012 and transposed in the nation-al legislation the relevant EU directives in this field, seems to have banned the conclusion of power purchase agreements (PPAs) as the E-RES industry has known them under the old regulation. ANRE has to approve the power supply regulation within 60 days as of the New Energy Act’s entry into force. Furthermore, within 6 months as of the entry into force of the New Energy Act, ANRE must adjust the entire regulatory framework in the electricity sector. For the natural gas sector the respective deadline is 9 months.

From now on, according to Art. 23 in connection with Art. 28 lett. c) and Art. 3 of Title I of the New Energy Act, all electricity transactions are to take place exclusively on the competitive market (Rom. piaţa concurenţială) managed by the Romanian Power Market Operator (OPCOM), in a transparent, public, centralized and non discriminating manner. The sale prices will be based on supply and demand, according to competitive market mechanisms and ANRE’s regulations. The reading of the New Energy Act implies that the generated electricity can still be traded based on bilateral agreements, yet only on the so-called centralized market of bilateral agreements, also transparently and auction-based. ANRE together with OPCOM must draft and approve the secondary legislation needed to this end within the aforementioned timeframe of 6 months as of the entry into force of the New Energy Act.

All power producers – including the producers of E-RES, as the New Energy Act does not differentiate – must offer the entire electricity available on the competitive market in a public and non-discriminating manner. It is thus clear that with the entering into force of the New Energy Act, PPAs can no longer be concluded outside the OPCOM-operated cen-tralized market. Even if the said obligation is incumbent upon all electricity producers as of July 19, 2012 (since the legal provisions of the New Energy Act are imperative and imme-diately enforceable), because there is no trading platform for such bilateral agreements (es-pecially for the electricity producers not yet holding an electricity production licence and thus unable to register on the OPCOM-operated centralized market), their implementation will have to await for the secondary legislation to come in place.

The New Energy Act does not take into consideration the impact of the new regulations upon the private sector and especially on the producers of E-RES, who are thus left without a crucial pillar for the bankability assessment of their projects: the PPAs. In order to compensate this, the competent authorities envisage the creation of a special trading platform on which even future producers – those not yet holding a production licence – might be able to conclude bilateral agreements with respect to the power to be generated in their E-RES facilities.

Thus on the one hand the Romanian legislator gave new hope to the investors in this field by encouraging them to invest in the photovoltaic sector – investments in solar parks that start injecting power into the grid until December 2013 will still benefit for the entire duration of the subsidy scheme (maximum 15 years) of 6 green certificates per each MWh of electricity produced. But on the other hand this made it difficult for the investors to get their projects financed, since PPAs can no longer be concluded in an early project stage – that is to say, prior to holding the electricity production license.