The Romanian Association for Wind Energy (RWEA), the Employers’ Organization of Renewable Energy Producers in Romania (PATRES) and the Association of the Romanian Photovoltaic Industry (RPIA) urge the authorities to give up both the 80% over-taxation measure of the revenue generated by to the producers of electricity, as well as to the measure of suspension for one year of the green certificates, in order not to endanger the production of green energy.
In a joint press release, the associations ask the Romanian Government to elaborate and approve, as a matter of urgency, the formula for calculating the 80% tax to be applied to the income resulting from the deduction of energy purchase expenses by regularizing the entire period (November 2021 – March 2022), taking into account the real costs of the energy market.
The representatives of RWEA, PATRES, RPIA, together with WindEurope and SolarPower Europe, state that they notified the authorities in Bucharest and Brussels about the impact that the two measures have on Romania’s energy security and electricity price, in the context in which the cost of energy from renewable sources is the lowest compared to other energy sources.
“Given the current situation on Romania’s border, we believe that such measures will seriously affect Romania’s energy security, undermining investments in non-fossil fuel-based production sources that are urgently needed,” said Adrian Borotea, RWEA Vice President. “It is unacceptable that producers in the renewables sector, who have invested more than 10 billion euros in the Romanian economy, through an unstable and unpredictable legislative framework, should be constantly sanctioned for the explosion of electricity prices. Increasing the production of renewable energy in the energy mix leads to lower bills to the final consumer. The losses accumulated between November 2021 and March 2022 as a result of the application of Law 259/2021, GEO 3/2022 on the over-taxation of producers, in conjunction with the lack of calculation formula for it, are not corrected in the proposal presented by the authorities, on the contrary, these losses will increase significantly, both by cancelling the support scheme with green certificates and by increasing the impact of over-taxation due to the decrease of the threshold to 300 lei”, explained Adrian Borotea.
At the moment, no official document on these measures is yet available for public debate.
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As a result of the frequent legislative changes regarding the reduction of the support scheme through green certificates, the producers in the renewable industry registered significant financial losses in the period 2014-2018, losses between 1.2-2 billion euros per year, according to the website www.mfinanțe.ro for CAEN code 3511 – Electricity production, underline the signatories of the common message. According to a study conducted by an international financial audit company, the losses recorded by producers in the wind industry are over 5.58 billion lei, in the same period 2014-2018.
The new proposal considered by the Romanian authorities will increase the negative financial impact, by reducing the reference price on the wholesale market from 450 lei/MWh to 300 lei/MWh and applying the same percentage of 80% on those revenues, which impact it is already extremely high for these producers.
In addition to the two measures, the associations also point out the lack of a formula for calculating the additional tax, from the beginning of its application, namely November 2021. Thus, the volatile nature of renewable energy production is not taken into account in conjunction with energy market rules, which require constant deliveries of energy and real costs, of over 1,000 lei/MWh for the purchase of energy when the wind does not blow or the sun does not radiate according to the forecast – for the realization of the contracts imposed by the respective regulations.
The renewable energy industry points out that this tax, applied for at least a year and a half, contradicts the objectives of combating climate change of the European Union and Romania. Exceptional taxation, in addition to being discriminatory, will also have the effect of discouraging new investments in new production capacity, at a time when Romania has an acute need for these investments in electricity production. Moreover, we are witnessing the absurd situation in which an industry benefiting from state aid approved by the European Commission, precisely to compensate for the difference between the cost of investment and the income from the electricity market, is arbitrarily taxed,
“In this context, by implementing the two measures, virtually all renewable energy producers will have much higher operating costs than revenues that are drastically reduced. Thus, the state leads the producers of renewables in the de facto situation of insolvency/bankruptcy, which forces the withdrawal of these production capacities, with a negative impact both on the price to the final consumer (in the absence of renewable energy production, energy price on the markets will increase by at least 20-30%), as well as on the energy balance. It should also be noted that a large part of the production units has been financed by banks, and by reducing revenues, producers will be unable to pay their financial obligations to them, and the impact on the banking system will be substantial”, says Viorel Lefter, President of PATRES.
Renewable energy producers have provided almost 30% of final electricity consumption in Romania in recent months and have made a major contribution to lowering the price of energy in these markets in recent months. This is in the context in which from 2016 until now, the national energy system has benefited from ZERO investments in electricity generation units also due to similar measures adopted by the Romanian state institutions.
In addition, the associations point out that “current government policies will lead to a permanent loss of investor confidence with consequences for investments in new renewable energy production capacity, which Romania needs very much, which will worsen the current state of the energy system. with immeasurable consequences in the medium and long term”.
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If the above-mentioned measures are approved by the Executive, investors will be forced to challenge in court the changes introduced, which could lead to an increase in the number of arbitration actions against the Romanian state in international tribunals, currently the Romanian state is already acting in four files at ICSID.
“Romania has committed, through the NECP approved in October 2021, to produce 30.7% of the country’s energy for final consumption from renewable sources, by 2030, a target to which it must already contribute with new production capacity in renewable sources, and which will be overhauled to comply with the European Commission’s recommendation for a renewable energy target of at least 38% nationally. Also, as the European Commission points out, every wind turbine and every photovoltaic panel has the immediate role of reducing dependence on fossil fuel imports and producing clean energy at low cost “, says Mihai Bălan, RPIA Executive Director.
In conclusion, the adoption of such measures by the Romanian Government will produce extremely negative effects on all levels, not only for the renewables sector, especially in the turbulent conditions of today’s international business environment, where the credibility of a state is essential in attracting investments.
RWEA, PATRES and RPIA urge the Government to re-examine the proposals presented at the meeting on 24 February this year and to identify alternative measures that would have a positive effect on both the final consumer and the producers of energy from renewable sources.