On 31 March 2017 the Romanian Government adopted its Emergency Ordinance No. 24 (the “Ordinance”) which has brought in significant changes to Romania’s incentive scheme for electricity from renewable energy sources (“E-RES”). The Ordinance is aimed at restoring the viability of the E-RES incentive scheme following drastic cuts in 2013 and 2014, which resulted in claims being filed against Romania and risked sending renewable energy production in Romania into reverse.

Many other EU Member States are currently in similar predicaments.  Spain, the Czech Republic, Bulgaria and Italy have all been forced to defend claims domestically and in investor–state arbitrations as a result of reducing their renewable energy support schemes in the past few years.

"The stated aim of the Ordinance is to balance the need to incentivise E-RES production, including protecting existing investments in E-RES, with the need (and primary consideration) for end-consumers to have affordable electricity."

The starting point for the current situation is the 2009 Renewable Energy Directive, under which EU Member States are required to reach mandatory E-RES targets by 2020. In response many Member States implemented E-RES incentive schemes. The Romanian incentive scheme was implemented in October 2011.  It resulted in billions of euros being invested in E-RES in the years immediately following, to such an extent that by the end of 2013 Romania had exceeded its 2020 target. However, this jump in E-RES production also caused electricity prices for consumers to rise well beyond the permitted threshold.

The Romanian Government responded by implementing a series of changes during 2013 and 2014, which effectively gutted the incentive scheme and stalled any further E-RES investment in Romania. After fervent lobbying, complaints to the European Commission (which were rejected), and claims against the Romanian Government, the newly adopted Ordinance was tabled by the Ministry of Energy in October 2016, approved by the European Commission in December 2016, and adopted into law by the Romanian Government on 31 March 2017.

The stated aim of the Ordinance is to balance the need to incentivise E-RES production, including protecting existing investments in E-RES, with the need (and primary consideration) for end-consumers to have affordable electricity. Key changes include that:

• the number of green certificates issued each year will be set by a fixed calculation up to 2031;
• the price band that green certificates may be traded for has been narrowed;
• the lifespan of green certificates has been increased until the end of 2031; and
• the cost to consumers must not exceed an average impact of €11.1 per MW.

Overall, E-RES producers have been positive about the changes, although some associations such as the Renewable Energy Producers Organisation in Romania state that the changes do not go far enough to protect in particular smaller E-RES producers. On the other side, large energy consumers have stated that the amendments go too far towards promoting E-RES.

The Ordinance is still a long way short of the incentives originally promised in October 2011. However, it goes some way towards striking a sustainable balance between the promotion of E-RES and the interests of consumers, and it is a significant step towards providing once again a positive investment environment for E-RES producers in Romania. 

By Robbie McCrea