THE ROMANIAN WIND ENERGY MARKET
A PROFITABLE BUSINESS IN TIMES OF CRISIS
The development of a green economy is the engine for future growth. Furthermore,
while international market players increasingly criticize government subsidies
granted to the coal, oil, gas, and nuclear energy sectors as overly opaque, the
green energy sector has largely escaped these criticisms. In fact, the green
energy sector has earned a top place in the market and is projected to be a
continuing force in the coming years.
Green energy is regulated at the EU level, thus EU energy policy, economic
policy, and climate change policy must all be analyzed together. Once the EU’s
current 2020 binding renewable targets run out, the 2030 policy should represent
a more clarified consensus at the EU level. Renewable energy, including wind
energy, is essential to ensuring energy security throughout the EU, especially
when considered in light of the volatility of imported fossil fuel prices.
Because most onshore wind renewable energy markets have already matured, market
attention is currently focused on onshore emerging markets and
offshore potential markets as sources for future electricity demands.
Started in 2010, Romania’s renewable wind energy sector has one of the fastest
growth rates in Europe. In 2012, investments in wind energy projects represented
one third of the direct foreign investments in Romania, a significant success
even in times of financial crisis. While confronted with certain practical
problems, the wind energy sector remains one of the most active and attractive
in Romania. Because of the growing importance of the green energy sector,
investors must be well informed on how to overcome prospective obstacles to
achieving a profitable investment.
Law no. 123/2012
Finalizing an integrated European electricity market is an EU target
which needs to be grounded on the liberalization of the electricity
market and the connection of transnational networks between EU member
states. For economic, social, and political reasons, achieving this
target requires a complex approach and a thorough implementation of the
applicable regulations in all EU member states. In 2009, a third
legislative package was adopted at the EU level regarding internal
electricity and gas markets; its implementation in EU member states was
set for March 2011.
In its attempt to implement the EU directive, the Romanian Parliament
adopted Law no. 123/2012 – i.e. the electricity and gas law (hereinafter
referred to as the “Electricity Law”), transposing the provisions of the
Directive 72/2009 directly into national legislation. According to the
Electricity Law, the liberalization of the Romanian electricity market
is set to occur in stages. For industrial consumers, the regulated
tariffs were to be eliminated by September 1st, 2012, with electricity
supplied under regulated conditions until December 31, 2013. For
domestic consumers, regulated tariffs will be eliminated starting on
July 1st, 2013, and full liberalization will start on December 31st,
The most contested provisions of the Electricity Law are Articles 23 ¶ 1
and 28 ¶ 1(c), which actually ban the use of power-purchase agreements
and bilaterally negotiated agreements (known as “PPAs”). The initial
interpretations of these provisions were divided between two schools of
thought: those who claimed that the provisions restricted electricity
trading on the wholesale market, and those who argued that this was not
the real intent of the legislature and that the respective confusion
triggered by the provisions would be fixed through proper secondary
legislation adopted by the National Regulatory Authority in the Energy
Field (“ANRE”). However, because the ANRE is not allowed to amend
legislation through secondary legislative provisions of the law, no
solution was found creating severe obstacles in the renewable energy
In order to comply with EU directives establishing targets for future
renewable energy production, the Romanian Parliament adopted Law no.
220/2008 (the “Renewable Energy Law”). Since investments for
renewable projects are much more costly than for conventional energy
projects, the Renewable Energy Law establishes a support scheme to
further incentivize investor interest in this sector. According to this
scheme, investors in renewable energy projects are entitled to receive,
besides the value of electricity sold on the Romanian electricity
market, a certain number of green certificates / MWh. A green
certificate is a document attesting that a certain quantity of
electricity is produced from renewable sources of energy. For renewable
wind energy projects, the support scheme provides for 2 green
certificates per investor through 2017, and one green certificate from
2018 and onwards.
The Renewable Energy Law also provides that the ANRE shall continuously
monitor the support scheme. Furthermore, if the ANRE ascertains that
investors have too high of a profitability rate on their investment,
then the number of green certificates granted through the support scheme
may be reduced. In 2009, one year after the adoption of the Renewable
Energy Law, the support scheme was pre-notified to the European
Commission, and in 2011, the EC decided that the law was EU-compliant.
Consequently, the Renewable Energy Law became effective in 2011 (3 years
after its adoption by the Parliament), and a number of investors became
qualified for the support scheme and began receiving green certificates.
Current Obstacles in Developing Renewable
Wind Projects in Romania
As noted above, one of the most striking problems in the general
Romanian renewable energy market is the ban on PPAs. According to the
problematic legal provisions of the Electricity Law, “the electricity
transactions will be carried on the competitive market transparently,
publicly, centralized and nondiscriminatory” (Article 23 ¶ 1), and “the
producers are obliged to publicly and nondiscriminatory offer on the
competitive market the entire electricity quantities” (Article 28 ¶
1(c)). As the business world could easily observe last year, these legal
provisions generated problems for electricity trading and blocked
investments in specific energy projects and in the entire Romanian
From an investors’ perspective, the ban of PPAs has made it impossible
to create accurate business plans that are able to predict future
revenue because financial institutions are more reluctant to provide the
required financing for the development of renewable projects.
Consequently, many investors have put their investments in Romania on
hold until a solution to the legislative uncertainty can be found.
severe consequence of the interdiction on PPAs is the blocking of
electricity imports and exports both on the Romanian market and abroad.
Foreign electricity producers and traders need to be registered on the
centralized market organized and managed by OPCOM, i.e. the electricity
market operator; however, because Romanian companies can no longer use
PPAs, they are effectively blocked from negotiating and working with
foreign producers and traders.
These two severe consequences deriving from the prohibition on PPAs were
perceived as a severe step back in the development of renewable projects
in Romania. However, these problematic issues should be resolved soon
and PPAs will once again be allowed under the law.
While the aforementioned obstacles affect developers of all types of
energy projects, another pressure put specifically on developers of
renewable wind projects comes from the grid infrastructure, especially
as the demand for connection permits continues to rise. In this context,
developers need to be properly informed and aware of the necessity to
invest in the grid and build the required substations and connections,
so that they can connect to the grid and deliver power into the system.
Last but not least, there is also pressure from the permit procedure
required for the development and operation of wind farm projects in
Romania. This burden, however, may be overcome by proper counseling and
assistance for producers on the procedural requirements of the permit
Main Advantages of the Romanian Wind
Renewable Energy Market
The fact that Romania currently has one of the fastest growth rates in
the wind energy sector is not random. In fact, there are very specific
reasons why investors were and will continue to be attracted by this
Perhaps the most obvious factor considered when deciding to invest in
renewable wind projects is the fact that Romania has very good winds
with average wind speeds of around 8m/s onshore and 10m/s offshore.
Furthermore, there are specific areas in the country which are ideally
situated to renewable wind energy projects. For example, because
villages are often located far away from one another, there is ample
space for the building of wind turbines.
Even more important than Romania’s geographic features, however, is the
fact that Romania has one of the most appealing support mechanisms for
wind power in Europe’s emerging markets. The green certificate support
scheme – detailed above – is an effective incentive to invest in the
Romanian market. Developers’ revenue comes from both the trading of
green certificates – at a minimum price of 27 euros and a maximum of 55
euros per certificate – and electricity. This dual method of revenue
generation is increasingly important since the ban on PPAs limits the
sale of electricity on the centralized market to OPCOM, thus depriving
investors from a significant part of their anticipated revenue. However,
impending amendments to the current legal provisions are expected to
re-allow the use of PPAs, thus unblocking the market and removing these
impediments to investor development of Romanian wind farms.
In fact, the imminent solution to the current PPA situation is proof
that Romanian authorities understand that PPAs are essential to unblock
the system for both investors and financing institutions.
In times of economic crises, when all countries face financial
shortages, financing institutions have found that the Romanian renewable
wind market is sufficiently stable to merit financing. This is a
significant step forward for the Romanian renewable market which should
grant confidence to those who are still undecided about investment in
Needless to say, the Romanian renewable energy market is not flawless,
but what market is? The fact that the Romanian authorities have listened
to criticism and found solutions to legislative problems related to PPAs
shows an understanding and commitment from these authorities to solve
existing problems and facilitate the construction of wind farms in
Romania. Compared to other systems of law – some based on feed-in
tariffs – where legislation was often changed overnight despite severe
negative consequences on the business environment, Romania’s market is
structured and well-functioning, and provides a forum for investors’
voices to be heard.
Furthermore, Romania is committed to complying with EU goals for
renewable energy. Right now, Romania is within reach of the 4,000 MW
objective set in the national renewable energy action plan. It is
extremely likely that Romania will meet and even exceed these targets;
all it needs to do is preserve the existing support scheme and invest in
further grid infrastructure development. With this in mind, it is highly
unlikely that Romania will adopt any new measures disrupting or
otherwise impeding the renewable energy sector.
the Romanian renewable energy sector has flaws. On the other hand, it is
equally obvious that the Romanian renewable energy sector has benefits
and that those investors who have undertaken the risks of investing in
this sector have remained active on the Romanian market. If properly
informed and aware of both the national system and local specificities,
those considering investment in Romanian wind farms may be able to
successfully invest in renewable wind energy projects.
Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
Copyright 2013 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
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