The Contracts for Difference scheme adopted by the authorities in Bucharest (in RO) provides for the development of 1,000 MW of onshore wind capacity and 500 MW in the photovoltaic segment. The mechanism is financed by Romania through the Modernization Fund, a first at European level, and an “essential tool for Romania’s green transition and the modernization of the national energy system”, underlines Energy Minister Sebastian Burduja.
The next step is to issue the order approving the tender rules, which will include both the conditions for participation and the maximum exercise prices.
The state aid scheme aims to conclude CfD contracts until December 31, 2025 for projects with a total capacity of 5,000 MW, using eligible onshore wind and solar photovoltaic technologies.
In the final form of the scheme, the capacity put out in the first auction for solar PV power generation has been reduced from 1,000 MW to 500 MW, with 500 MW to be reported in the second auction. Projects where work has commenced on or before March 9, 2023 on or before July 20, 2022 are eligible under this CfD scheme, subject to certain conditions.
The operating aid granted through CfD contracts awarded under this CfD scheme shall be granted on the basis of a tender for investments in projects using eligible onshore solar photovoltaic and wind onshore technologies and having an installed capacity of 5 MW or more.
The first auction is scheduled to take place by the end of 2024, and the second, for 3,500 MW of installed capacity, of which 1,500 MW of installed capacity for onshore wind power generation and 2,000 MW of installed capacity for solar photovoltaic power generation, will take place by the end of the third quarter of 2025.
Conditions for participation
The CfD scheme does not extend to projects replacing, expanding or retrofitting existing generation capacity and for the first CfD tender the project must obtain a valid technical connection permit for the CfD generation capacity within six months of signing the CfD contract. For the second tender, the technical connection permit will be applied for in accordance with the provisions of the order opening the tender.
Interested investors will pay a bid security “issued in accordance with the applicable provisions of the CfD Auction Initiation Order and the Rules for the relevant CfD Auction bidding procedure”. An applicant may apply for all or part of the installed capacity proposed to be used to carry out a project, provided that such capacity is and remains, for the duration of the CfD contract, measured separately from any other installed capacity that will not be the subject of the CfD contract, if awarded. The maximum capacity that may be offered and secured by an applicant in each bidding procedure in a CfD auction conducted under this CfD Scheme shall be 25% of the total capacity auctioned for that bidding procedure.
3 billion euro budget
According to the CfD contract, payments for the CfD difference are made over a maximum period of 15 years. The total estimated budget for this CfD scheme is the equivalent in RON of 3 billion euro, representing, as a priority, non-reimbursable EU funds provided by the relevant ministry from the Modernization Fund and transferred to the CfD liquidity fund, when necessary. In terms of the allocated budget, the estimated number of applicants who could benefit from support under this scheme is between 50 and 250 beneficiaries.
How the state aid is granted
A CfD beneficiary must deliver into the national electricity system and sell only on organized markets all quantities of electricity delivered by the electricity generation capacity covered by a CfD contract, with the exception of electricity used for its own technological consumption supplied from the CfD beneficiary’s own generator terminals.
CfD difference payments are calculated in euro and paid in lei. The strike price may be adjusted by indexation for inflation and as a result of provisions aimed at addressing any additional costs or additional savings for the CfD beneficiary or the CfD counterparty arising from changes in legislation. Indexation of the strike price is carried out under the conditions set out in the Authorization Decision and takes place once every 3 years, but only if the CPI index at that time is 10% or more above the CPI index applicable at the date of signature of the CfD contract or at the date of the last indexation applied.
CfD beneficiaries shall not receive CfD difference payments for any quantity of electricity delivered into the national power system in any period in which the weighted average of the prices obtained on the day-ahead markets administered by the designated Romanian electricity market operators, calculated in accordance with the CfD contract, used for the reference price, corresponding to that delivered quantity is negative. The mechanism for distributing the surplus profit obtained from bilateral contracts provided for in Article 12(2) and (3) of the CfD shall apply. (7) and (8) of Government Decision No 318/2024.
The new funding scheme is a milestone within the National Recovery and Resilience Plan – NRRP and a funding opportunity for investment projects that will ensure “the stability of the energy system and access to clean energy at a fair price”, according to Sebastian Burduja.