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Warning: The changes to GEO 153/2022 go against the fundamentals of the energy market and European recommendations

7 July 2023

The Romanian Wind Energy Association – RWEA and the Romanian Photovoltaic Industry Association – RPIA launched a new force majeure appeal to the Romanian President, Parliament and Government to ensure a legislative framework to support investments in energy from renewable sources. The two associations represent producers, developers and providers of services and equipment in the renewable energy sector.

The form adopted in the meeting of the Chamber of Deputies on June 28, 2023, includes a series of amendments that “are contrary to the foundations of the energy market and the recommendations of the recently adopted European regulations”, the representatives of the renewable sector underline.

RWEA and RPIA emphasize the extremely serious consequences of abandoning a series of amendments included in the original form of the Law, as well as the fact that it was still omitted to address some fundamental issues of the existing legislative framework. As a result of these decisions, existing and future investments in renewable energy are at major risk. In 2022, the two associations signaled that there is a risk of reaching an unprecedented situation in Romania in which the energy production capacities from renewable sources in operation will be irreparably affected.

The problem raised by RWEA and RPIA is related to how the Contribution to the Energy Transition Fund is calculated. Specifically, it has to do with the fact that all income is included in the formula without taking costs into account in a fair way. “Producers will continue to accumulate losses, jeopardizing the stability of the entire national energy system and the sustained efforts, over more than a decade, to meet the goals of the energy transition,” claim the officials of the two associations. “Any surtax formula must take into account the volatility of renewable generation, which by definition cannot produce the same amount consistently. The surtax formulas must be applied to the net income achieved after deducting the expenses necessary for the purchase of energy for profiling and the expenses for the registered imbalances, expenses which, in the case of producers from renewable sources, represent a substantial and indispensable component of the current operating costs. Otherwise, we’re talking about overtaxing the loss.”

“The negative impact on companies in our industry is caused by the formula for calculating the Producer Contribution. In accordance with the provisions of the expense chapter, the costs of the purchase of energy required to honor sales-purchase contracts with physical delivery when the energy source is not available (when there is no wind / when the degree of sunshine is reduced) are not recognized. The negative impact is also caused by imbalance expenses, which are only recognized in proportion to 5% of the value of the electricity sold, while the industry standard shows imbalances recorded by wind power plants of around 40%, respectively 25% in the case of solar power plants.

That is why it is imperative to take into account when calculating the Contribution owed by electricity producers, the expenses for the purchase of electricity to ensure deliveries according to contractual obligations, as well as the expenses for imbalances, in a higher differentiated percentage, for renewable producers, according to industry standards.”

At the same time, regarding the mechanism for calculating and paying the Contribution for the revenues from the Hedging Contracts, REWA and RPIA claim that “it remains necessary to change the withholding mechanism by introducing the obligation of self-declaration/self-imposition by the operators that offer hedging services, considering that the withholding mechanism, applicable at the moment and maintained further and following the amendments brought by the Law, creates a major impact for producers of energy from renewable sources, reaching in fact, due to the lack of clarity about to the application of the calculation formula, to a new overcharging of them”.

“If the renewable energy producer sells the estimated production in advance, thus not knowing with reasonable precision the actual production that it will achieve, it will be forced to purchase part of the contracted energy quantity for sale from the market, in order to cover firm contractual delivery obligations. If he does not purchase the difference between the contracted energy and the energy actually produced in the market, he will remain with volumes in the balancing market, an extremely penalizing market that also generates pressure on the system as a whole. For this reason, the recognition in the calculation formula of the Contribution, of the expenditure on the purchase of energy required to honor sales-purchase contracts with physical delivery is absolutely vital for the operation of producers from renewable sources. We are talking about such indispensable measures, not to ensure higher profits for producers from renewable sources, but for their survival in conditions of minimal economic profitability.”

RWEA and RPIA draw attention to the fact that the amendments included in the final form of the Law are against the national energy interest and the assumed objectives regarding the transition to renewable energy sources, the result being that Romania will be bypassed by investors, at a time when the need for new production capacity is greater than ever.

In order to avoid all these unwanted consequences and to protect long-term national interests in the energy sector, a substantial review and amendment of the Government Emergency Ordinance no. 27/2022 is still necessary, in order to create a fair framework that takes into account the particularities and the unique challenges that operating renewable generation capacity entails.


Photo by Casey Horner on Unsplash


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