Alternative Energy & Power 2021

Last Updated July 20, 2021

Romania

Law and Practice

Authors



Bondoc si Asociatii SCA has an energy and natural resources practice with a very diverse range of clients, including financial institutions, private equity firms, integrated utilities, conventional and renewable power generators, project developers, contractors and service companies and large consumers of power. The firm has a 360-degree view regarding the legal issues in the energy field and thereby can deliver tailored advice to the particularities of each category of industry player. In the past year, its team has advised on a large amount of complex projects, being at the forefront of the Green Deal projects wave (including solar and wind, plus energy efficiency and energy digitalisation), and also regulatory changes impacting the business (massive amendment of the energy law as well as investigations by the regulatory authority). A significant number of energy transactions have been on its desk in the past 12 months, including assistance to STEAG GmbH in the sale of its participation in Romanian energy projects, a transaction ranked among the three largest transactions by value in Romania during 2020.

The Romanian electricity market is formed of the regulated market and the competitive market, each having a wholesale and a retail component, as follows:

  • the wholesale market – an organised framework attended by producers, suppliers, traders, the transmission and system operator (TSO), distribution operators (DSOs), the electricity market operator and wholesale customers; and
  • the retail market – an organised framework where final customers purchase electricity from suppliers or producers for their own consumption purposes.

The power industry in Romania is mainly governed by Law No 123/2012 on electricity and natural gas (“the Energy Law”). The Energy Law is complemented by numerous secondary acts (including acts issued by the Romanian Energy Regulatory Authority, ANRE) specific to each segment of the power industry, such as the Commercial Code of the electricity wholesale market (ANRE Order No 25/2004) or the Regulation on connecting users to the public grid (ANRE Order No 59/2013).

In regard to ownership rights over energy capacities, the specific legislation in the energy field is supplemented by the general legislation on public and private ownership, including the Romanian Constitution and the Civil Code. Prior to 1990, the Romanian power industry was operated through a state-owned or controlled monopoly under the supervision of the Industry Ministry, which in the following years gradually undertook a massive restructuring and was progressively unbundled. Nowadays, the players acting on the electricity market mirror a mix of state-owned and private investor-owned facilities.

The largest Romanian electricity generation facilities are owned through a majority shareholding by the Romanian state, such as Hidroelectrica SA (approximately 80% state-owned), the largest hydro energy producer and system services provider in Romania, and Nuclearelectrica SA (approximately 82% state-owned), the owner and operator of nuclear power reactors. The generation of electricity is also ensured by state-owned generators from so-called “classical sources” (ie, coal), such as CE Hunedoara and CE Oltenia and various other privately owned companies.

The electricity transmission services are exclusively provided by the National Energy Transport Company, Transelectrica, which is 59% owned by the Romanian state and is listed on the Bucharest Stock Exchange.

With respect to DSOs, currently there are eight regional electricity distribution companies operating in Romania, which have been granted distribution service concession agreements in this respect. Out of the eight DSOs, following privatisation procedures, only three currently have state-held shareholding.

One of the largest electricity suppliers in Romania is Electrica Furnizare SA, a partially state-owned company, listed on the Bucharest Stock Exchange. The supply side of the market is rather granular, with numerous suppliers active on the market. All of them are involved in the supply of electricity to final customers and competition is fierce, particularly after the full liberalisation of the market starting on 1 January 2021. 

In terms of restrictions/protections that apply to the Romanian power industry, pursuant to Competition Law No 21/1996 (“the Competition Law”), the operations of taking control over undertakings or assets, including through foreign investments which pose risks for the national security (operations in the field of energy security being expressly covered as per Decision No 73/2012 issued by the Supreme Council of National Defence, CSAT) are subject to assessment from a state defence perspective by CSAT, following the Competition Council’s notification. If a certain operation is considered a risk for the national security following such assessment, the Romanian government, at the proposal of CSAT, will issue a decision prohibiting it.

Other indirect restrictions on foreign investment that can also be relevant for the power industry can be found in the public procurement-related legal framework which establishes an equal treatment to that offered to economic operators in the European Union only for entities from the signatory countries to the WTO Agreement on Government Procurement or other international agreements which impose free access to the market in public procurement.

Furthermore, on 12 November 2020, a Draft Government Emergency Ordinance on Foreign Direct Investments for the implementation of Regulation (EU) 2019/452 for the screening of foreign direct investments into the Union (“the FDI Draft Ordinance”) was published for public consultation. The FDI Draft Ordinance changes the direct foreign investments (FDIs) approval regime in Romania and aims to regulate a new authority – ie, the Foreign Direct Investments Examination Committee – with prerogatives in this respect.

Falling under the scope of the envisaged screening procedure of FDIs are, among others, investments in the energy infrastructure, energy storage technologies or energy supply with a value higher than an EUR2 million threshold. FDIs that do not meet the above-mentioned threshold value may also be subject to the screening procedure if they would have a significant impact on or pose a significant risk to public security.

However, the FDI Draft Ordinance is still under the legislative process, despite Regulation (EU) 2019/452 having been applicable since 11 October 2020.

Generally, foreign investors benefit in Romania from the same incentives and protection measures as those offered to Romanian investors, as provided under the Energy Charter Treaty, as well as in other international treaties and instruments to which Romania is a party.

Except for some specific rules applicable to distribution assets or for the rules applicable to the sale of state-owned assets, there is no particular legislation in Romania with respect to the sale of energy assets or merger between energy operators. Consequently, the general legal framework applies – eg, the Civil Code, Competition Law, the Romanian Company Law No 31/1990, as well as the general national and EU competition rules.

Basically, with small exceptions, any entity conducting its business activity in the power sector must pass through a licensing procedure before ANRE which, depending on the market segment, includes consideration of certain financial and technical requirements. There are no specific prohibitions for licence transfer, except for rules concerning prior and/or post-transfer procedures, as the case may be, ANRE’s notification and the submission of the required documents in this respect. TSOs may not transfer the rights and obligations provided under the licence to third parties.

On a specific note, ANRE Order No 205/2020 for the approval of the methodology for the purchase of energy distribution capacities provides that concession holders are the only category of purchasers of such capacities: (i) if the connection of new users or the modification in the users’ initial characteristics resulted in the change of distribution facilities, with new expenses incumbent upon customers, or (ii) if the distribution network owner intends to sell the network or if it becomes unable to perform the distribution service or to provide the required power surplus; in this latter scenario, as a limitation to the freedom of supply, the sale value must be certified by an independent authorised expert and accepted by the purchaser within a maximum of 120 days from receiving the bid notice.

The energy sector in Romania is overseen by the Ministry of Energy, which is responsible for the implementation of the Government Programme with respect to energy-related objectives. The Ministry of Energy also represents Romania and the Romanian government in its relations with foreign authorities and with respect to strategic documents and initiates sector-specific legislative changes.

The electricity sector is regulated and supervised by ANRE, which was established as an autonomous administrative authority under Government Emergency Ordinance No 33/2007, and which has, among others, the following responsibilities:

  • to ensure the efficient, competitive and rational functioning of the electricity market through the development, adoption and application of specific regulatory acts;
  • to supervise the observance by all the participants to the electricity market of the regulations and obligations provided under the law and apply sanctions in case of non-compliance;
  • to grant specific authorisations and licences to companies operating in the energy sector and establish the corresponding conditions by which their holders must abide;
  • to develop and approve the methodologies for calculating the regulated tariffs and prices in the energy sector;
  • to establish, in accordance with the law, the framework contracts for the transmission and distribution of electricity.

Over the past years, significant amendments have been brought to the Romanian power industry legislation, including the following.

Electricity Market Liberalisation

In theory, the Romanian electricity market was fully liberalised at the end of December 2017. However, pursuant to amendments to the Energy Law enacted in the period 2018–20, until 31 December 2020 the supply of electricity to household customers was carried out in line with the regulated conditions approved by ANRE, which resulted in what has been generally seen as a setback in the liberalisation process.

This led to the Romanian electricity market being (again) fully liberalised starting from 1 January 2021; electricity is now supplied on a competitive basis, including to household customers. As a result of this change, each household customer may choose an electricity supplier depending on its specific needs and on the offers made on the market by electricity suppliers.

This change was aimed at implementing EU Regulation No 2019/943 and EU Directive No 2019/944. For the sake of clarifying the novelty brought by the liberalisation of the market, ANRE issued Order No 171/2020 on the approval of the conditions for the supply of electricity by the suppliers of last resort.

New Exemption from the Centralised Trading Obligation

Another recent significant development on the electricity market refers to power trading, enacted under Government Emergency Ordinance No 74/2020, which entered into force on 19 May 2020.

As a general rule, since its enactment to date, the Energy Law requires that all electricity transactions be carried out on the centralised markets operated by the Romanian electricity and natural gas market operator (OPCOM). This limitation kept being maintained in the law despite the EU Regulation No 2019/943 entering into force, which is generally interpreted in the sense that trading via power purchase agreements bilaterally concluded is allowed.

However, Government Emergency Ordinance No 74/2020 allowed producers to conclude bilateral agreements on the competitive market (wholesale or retail), subject to competition rules, at negotiated prices, outside the centralised market (the so-called PPAs), for the electricity produced by new power generation capacities which were commissioned after 1 June 2020.

Final clarifications of the legal regime applicable to such PPAs, in the sense of formally allowing the conclusion thereof and removing the discriminatory regime provided under GEO No 74/2020, is expected as part of the transposition into the national legislation of EU Directive 2019/944.

Amendments Brought to the Energy Law

Additionally, on 30 July 2020, Law No 155/2020 entered into force, amending the Energy Law and other regulatory acts. Law 155/2020 was partly aimed at implementing the regulatory framework necessary for the development of an integrated EU energy market through common energy market rules and a cross-border infrastructure, pursuant to the Clean Energy for all Europeans Package.

Specifically, the developments brought by Law 155/2020 refer to independent aggregators, energy storage, new trading products on the electricity wholesale market, closed distribution systems, additional provisions favouring prosumers, a partially amended sanctioning regime, etc.

In addition, on 29 April 2021, the Ministry of Energy published the draft law on the transposition into the national legislation of EU Directive 2019/944 on common rules for the internal market for electricity, amending Directive 2012/27/EU, which is intended to implement a massive legislative reshuffle by amending the Energy Law in line with the EU electricity market principles: competitiveness, customer-orientation, flexibility and non-discrimination.

The Romanian Energy Strategy

On 18 November 2020, the Ministry of Economy, Energy and Business Environment published the draft Government Ordinance for the approval of the Romanian Energy Strategy 2020–30, with an outlook to 2050.

The objectives of the Energy Strategy support the achievement of the national targets for 2030 assumed by the Romanian state, namely:

  • 30.7% share of renewable energy in the gross final energy consumption;
  • 43.9% reduction of emissions related to the ETS (emissions trading system) sectors compared with the level of 2005;
  • 2% reduction of emissions related to the non-ETS sectors compared with the level of 2005;
  • 40.4% reduction of the final energy consumption compared with the PRIMES 2007 reference scenario.

The Energy Strategy includes the key development directions, namely:

  • gradual transition from coal to gas;
  • investments in renewable energy (wind and solar in particular),
  • nuclear energy – development of Cernavoda Nuclear Power Plant (NPP) Units 3 and 4 and the refurbishment of Cernavoda NPP Unit 1.

The 2021–30 National Energy and Climate Plan

On 26 April 2021, the Ministry of Energy published the draft Government Decision for the Approval of the National Energy and Climate Plan for 2021–30, issued in line with the Energy Union Strategy (COM/2015/080), which aims to build an energy union that gives EU consumers secure, sustainable, competitive and affordable energy.

To date, the Energy Strategy and the National Energy and Climate Plan have not been finally approved.

National Recovery and Resilience Plan

Important changes for the Romanian power industry were also outlined by the Romanian government in the National Recovery and Resilience Plan recently sent for approval to the European Commission. The Plan sets out six main reforms planned for the energy sector, namely:

  • the reform of the power market by replacing coal in the energy mix and supporting a legal and regulatory framework stimulating private investments in renewable energy;
  • the development of a legal and regulatory framework favourable to technologies such as hydrogen and storage solutions;
  • the improvement of corporate governance of state-owned companies in the sector;
  • the development of a sustainable mechanism for stimulating energy efficiency in industry;
  • the increase of competitiveness and decarbonisation of the heating-cooling system;
  • the decarbonisation of the transport sector by means of investments in the electric transport infrastructure and creating stimulants for green transport.

Modernisation Fund

One other instrument for access to EU funding is the EU Modernisation Fund (estimated at approximately EUR6 billion). Implementation guidelines for the actual organisation of project calls that will be organised by the Romanian state in order to select the investment proposals which will ultimately benefit from this support are pending. 

Long-Term Renovation Strategy

Moreover, on 27 November 2020, the Romanian government approved Decision No 1034/2020 approving the Long-Term Renovation Strategy for supporting renovation of the national park of residential and non-residential buildings, both public and private, and for its gradual conversion into a high-energy efficiency and carbon-free park by 2050, involving the implementation of renewable energy sources technologies, such as installation of heat solar panels, photovoltaic panels and heat pumps.

Additional material changes for the power industry should come from the following.

  • A new support scheme based on the contracts for difference (CfD) mechanism. It was first announced at the beginning of spring 2019 and further formalised in mid-2020, being aimed at supporting new low-carbon electricity generation. The preparation of the legal framework around this mechanism will probably be finalised within the next 24 months, according to some public sources.
  • An offshore wind law should be enacted according to Romania's Energy Strategy – a draft law is currently under parliamentary procedure.
  • A law implementing the Renewable Energy Directive II, which is set to be transposed by the member states by 30 June 2021. The transposition process is in an early stage. 

Romania has a well-established power market structure and clear assignment of responsibilities between the regulatory authorities (eg, the Ministry of Energy, ANRE, Transelectrica), also benefiting from a balanced energy mix between conventional energy sources and renewable energy sources.

In order to observe the EU Third Energy Package 2012, Romania has unbundled the generation and distribution/sale operations from transmission operations for every company acting in the Romanian power market.

As a general rule, wholesale electricity transactions are performed on the Romanian power market in a centralised manner on the competitive centralised electricity markets operated by OPCOM.

The renewable energy sector is an important part of power generation in Romania. The Romanian state has encouraged renewable development in the context of the first renewable wave back in 2011, through a support scheme based on a green certificates trading mechanism, combined with a mandatory green certificates acquisition quota that is annually set by ANRE. The support scheme is still available for projects which became operational by the end of 2016, while for new renewable projects the Romanian state is currently assessing a new support mechanism based on contracts for difference.

The transactions on the wholesale electricity market are conducted on the competitive market (the regulated segment of the wholesale electricity market being gradually eliminated) and cover the sale/purchase of:

  • electricity;
  • principal ancillary services;
  • ancillary system services;
  • transmission services; and
  • distribution services.

The current form of the Energy Law sets forth that electricity transactions on the competitive market must be carried out, as a general rule, in a transparent, public, centralised and non-discriminatory manner. Thus, transactions on the wholesale electricity market can be conducted, among others, on the following electricity trading platforms organised and administrated by OPCOM:

  • day-ahead market;
  • intra-day market;
  • centralised market with double continuous negotiation for electricity bilateral contracts;
  • centralised market for electricity bilateral contracts with different trading arrangements;
  • centralised market for electricity from renewable energy sources supported by green certificates,
  • centralised market for universal service;
  • electricity market for large consumers; and
  • centralised market for awarding long-term electricity contracts.

Another notable platform is the balancing mandatory market, intended to balance deviations from the programmed values of electricity production and consumption, which is organised and administrated by the TSO.

In addition to the existing centralised trading platforms, subject to the clarifications set out under 1.6 Recent Material Changes in Law or Regulation, the wholesale electricity market also allows for transactions to be carried out under specific bilateral negotiated contracts expressly provided by law (eg, concluded between non-dispatchable producers of electricity from renewable energy sources or public authorities holding power plants producing energy from renewable energy sources with an installed capacity of no more than 3 MW per producer and the suppliers of final customers or covering the electricity produced by new generation capacities commissioned after 1 June 2020), and export and import transactions.

Prices on the Wholesale Electricity Market

Commercial transactions of wholesale electricity are conducted on the competitive market, as described above. As of 1 January 2021, the Romanian electricity market has been fully liberalised and the electricity prices deregulated, including for household customers.

Thus, prices of the wholesale electricity on the competitive centralised markets are set according to supply and demand, as a result of competitive mechanisms. Negotiated prices also apply where electricity transactions are conducted under permitted bilateral negotiated contracts.

Nonetheless, the electricity market segments related to electricity transmission and distribution services are currently regulated, representing a natural monopoly of the state under the Romanian law. Therefore, in this case, the tariffs charged by TSOs and DSOs are laid down or determined by orders of ANRE.

The allocation of cross-border capacity (auction-based) for transmission services is implemented by the TSO according to regulations enacted by ANRE and additional rules set by the TSO itself.

Both import and export transactions to and from other jurisdictions are permitted under the Romanian legislation. Aspects related to certain indirect restrictions imposed on electricity export transactions were subject to the CJUE Decision in case C-648/18 (related to a dispute between ANRE and the producer Hidroelectrica SA).

CJUE stated that a national legislative provision which requires national electricity producers to offer for sale all the electricity available to them on centralised markets (ie, the platforms managed by the only operator designated for national electricity market trading services) constitutes a measure having an equivalent effect of a quantitative restriction on exports that cannot be justified on grounds of public security connected to the security of energy supply, in so far as such legislation is not proportionate to the objective pursued.

The Romanian transmission interconnection system amounts to a total of 486.2 km in overhead power lines and is operated and administered by the TSO, which ensures the performance of import and export transactions with neighbouring power systems – Serbia, Hungary, Ukraine, Bulgaria and Moldova. The TSO is the entity responsible for the allocation of cross-border capacities and organises actions in this respect.

As a result of the coupling of electricity markets, the Romanian day-ahead market is functioning in conjunction with the spot markets in Slovakia, Hungary and the Czech Republic (the 4M Market Coupling) and the intra-day market with 20 other European countries (participants in the European Single Intra-Day Coupling). Furthermore, steps are currently being undertaken in order to connect the borders of 4M MC with the Multi-Regional Coupling and thus achieve one European Single Day-Ahead Coupling.

In 2020, compared to 2019, the TSO reported an increase by 23.1% in cross-border import flows. Circumstances that determine the need for import transactions usually imply various damages to the Romanian transmission network or an overall decrease in electricity production, as well as the competitive electricity prices existing in neighbouring countries, which have determined a constant increase in the import of electricity in Romania over the last years.

In terms of export transactions, 2020 also represented a year of growth for Romania, compared to 2019. Exports typically occur under conditions of higher electricity consumption in Europe, and a surplus electricity production by the Romanian capacities.

According to public information provided by ANRE, as of May 2021, Romania has had an installed capacity in electricity production facilities of 19,584.043 MW, which is distributed as follows:

  • hydro – 33.9%;
  • coal – 21.2%;
  • wind – 15.4%;
  • hydrocarbon – 14.5%;
  • nuclear – 7.2%;
  • solar – 7.1%;
  • biomass and others – <1%.

There are no specific laws stipulating a percentage limit for electricity supply that is controlled in the market. However, general laws regulating the protection of competition on the market are applicable and concentrations resulting from mergers, acquisitions and similar operations may be subject to merger control exercised by the Romanian Competition Council.

Generally, the obligation to notify the Romanian Competition Council is triggered by any economic concentration where the aggregate worldwide turnover of the undertakings concerned exceeds the equivalent in Romanian lei (RON) of EUR10 million, and there are at least two undertakings involved in the operation that each achieved on the Romanian territory a turnover exceeding the equivalent in RON of EUR4 million.

In regard to the dominance/market power, there is a relative presumption of dominance when one or more undertakings hold(s) a (cumulative) market share of 40% or above, which triggers the obligation not to abuse such a position.

In addition to the European Union legislation, the main pieces of law governing competition in Romania are the Competition Law, Unfair Competition Law No 11/1991 (Unfair Competition Law) and Order No 985/2019 on the implementation of the regulation for the organisation and functioning of the Romanian Competition Council.

The Romanian Competition Council, as an antitrust regulatory authority, is responsible for monitoring energy market participants’ compliance with the Competition Law and the Unfair Competition Law, as well as for ensuring an effective competition and for addressing distortions or restrictions of competition. The Romanian Competition Council may conduct investigations, request information, arrange interviews and may also adopt decisions imposing administrative fines of up to 10% of the company's turnover generated in its last fiscal year for wilful or negligent violations of certain prohibitions. However, fines may vary according to circumstances and depending on the particular violation.

In addition, Regulation (EU) No 1227/2011 on Energy Market Integrity and Transparency (REMIT) sets out the monitoring of wholesale energy trading in Europe and prohibits insider trading and market manipulation. ANRE is responsible for the national monitoring of compliance with REMIT, and it has authority with regard to specific anti-competitive behaviours. According to its oversight competences, ANRE co-operates with and informs the Romanian Competition Council when it has good reasons to suspect that certain acts that could constitute violations of competition laws are or have been committed on the wholesale energy market. 

Pursuant to the Energy Law, ANRE Order No 67/2018 on the methodology for monitoring the wholesale electricity market and ANRE Order 62/2013 regulating the investigation activity, ANRE has both investigative and enforcement powers. In other words, it may require disclosure of data, information, and documentation and may also adopt decisions imposing administrative fines for market manipulation and insider trading, ranging between 5% and 10% of the company's turnover generated in its last fiscal year preceding the application of the sanction.

While environmental protection legislation includes general references to climate change, Romania’s most recent National Strategy for Climate Change and Economic Growth based on low carbon emissions, dates from 2016 and covers the period 2016–20.

Emission levels allowed for a given installation are set in the (integrated) environmental permit issued by the relevant Environmental Protection Agency (EPA) in line with the relevant best available techniques (BAT) or with the environmental quality standard, if the latter provides for stricter conditions. Emission levels exceeding the above may be allowed only in specific cases where assessment provides that compliance with BAT values involves disproportionate high costs compared to the environmental benefit in the given situation. In any case, the maximum values set under the Romanian law implementing the Industrial Emissions Directive must be complied with. Specific provisions concern burning installations with a thermal capacity of 50 MW or more.

Failure to comply with emission levels provided in the permit represents a breach thereof, sanctioned by the imposition of fines and business suspension for up to six months, with withdrawal of the permit and interdiction to continue the activity, if not remedied within the suspension term. The sanctioning regime can be expected to change, in the context of the infringement procedure opened by the European Commission in February 2021 regarding the implementation by Romania of the Industrial Emissions Directive, in particular regarding low penalties and sanctions in case of installations functioning without the relevant permit.

The mechanism aimed at limiting emissions provided under the environmental legislation includes the following.

  • Implementation of the EU emission trading scheme, including as regard to CO₂ emissions from fuel burning in installations with an aggregate nominal thermal power exceeding 20 MW. Undertakings subject to the scheme that failed to return at the end of the year a number of certificates corresponding to the emissions issued must pay a penalty of EUR100 per CO₂ emission tonne.
  • An emission tax due by operators of stationary sources for emissions, in an amount provided by law.

Romania does not currently have a piece of legislation providing for a clear, mandatory calendar for coal facilities retirement.

Energy sector strategies and proposed reforms under the Recovery and Resilience Facility provide for:

  • replacement of coal with natural gas (as first step/intermediary fuel), with transition intended to start in 2024;
  • adoption of a law setting forth a mandatory calendar, including measures for closure/conservation of mines and just transition-related measures for professional reconversion and requalification, other measures with social and economic impact on affected communities.

The 2021–26 Decarbonation Plan for Oltenia Energy Company (CEO) provides for the gradual closing of coal production units and opening of solar and natural gas based capacities, and micro-hydropower plants, replacing (by 2030) 1,260 MW coal-based power capacities with 1,400 MW gas-based capacities and 300 MW solar energy capacities. Pending completion of this replacement, coal-based capacities that remain operational will be refurbished and their energy efficiency increased. This proposed Plan is currently pending, given the amendments to be made in the context of the European Commission’s state-aid investigation.

Romania promoted the development of renewable energy sources (wind, solar, hydro, biomass, biogas, geothermal) under a green certificates support scheme available for projects which became operational until the end of 2016, providing for:

  • the granting to producers of power from renewable energy sources a number of green certificates per MW produced and fed to the grid (different depending on the energy source);
  • the obligation of power suppliers and certain producers to purchase a certain number of green certificates.

The green certificates are traded on dedicated markets and failure of suppliers to comply with the purchasing obligation will result in the imposition of penalties for the number of certificates not purchased.

Romania promoted high-efficiency cogeneration capacities under a bonus-type support scheme covering the difference between generation costs and the price of energy supplied to the grid, the extension thereof until 2033 being currently under discussion with the European Commission. At the same time, the Romanian authorities intend to seek approval of a separate support scheme for developing new cogeneration capacities, whose applicability is to be assessed in the context of sustainability requirements under EU Taxonomy and the Green Deal.

Contributions for these support schemes are reflected in power invoices received by customers.

The development of alternative energy sources is an important part of Romania’s energy strategies, including the development of a legal and regulatory framework, as well as specific infrastructure investments for:

  • developing the introduction of alternative energy sources and fuels with a focus on hydrogen, but including LPG (liquefied petroleum gas), CNG (compressed natural gas) and LNG (liquefied natural gas);
  • developing sustainable alternative fuel networks, thus starting the implementation at national level of the alternative fuels network located in the main sections of the central TEN-T network (Trans-European Transport Network), with installation of infrastructure recharge.

The construction and operation of generation facilities in Romania are governed by a rather large number of regulatory acts considering the various steps and procedures that need to be followed, including the following.

The General Civil Construction-Related Framework

The general civil constructions-related framework is comprised of three main pieces of legislation, namely: Law No 50/1991 regarding the authorisation of construction works; Law No 350/2001 regarding land planning; and Law No 10/1995 regarding quality management in construction works. Various secondary pieces of legislation regulating specific situations (eg, the category of land on which the facility is to be built, which can determine legal and technical specificities) exist as well.

Environmental-Specific Aspects

In regard to the environmental-specific aspects, the construction and operation of generation facilities must in principle abide by the provisions of: Government Emergency Ordinance No 195/2005 on environmental protection; Law No 292/2018 regarding the environmental impact assessment of certain public and private projects (the EIA Procedure); and Order No 1798/2007 for the approval of the environmental permits issuance procedure.

Specific Energy Regulatory Framework

The specific energy regulatory framework, out of which the main relevant piece of legislation is the Energy Law, supplemented by various ANRE orders and regulations (ie, ANRE Order No 12/2015 approving the Regulation for the award of licences and authorisations in the electricity sector and ANRE Order No 80/2013 for the approval of the general conditions related to the setting-up authorisation and the general conditions related to the power production licence). The type of facility can also attract the application of specific pieces of legislation.

The Construction of Generation Facilities

For a proper understanding of the construction permitting phase of generation facilities, an analysis should be performed covering three distinct levels (which to some extent overlap).

Civil construction permitting

From a strict civil construction perspective, an envisaged generation facility must obtain the general approvals required under the Romanian law for the erection of any constructions.

This involves, as a first step, the procurement of an urban planning certificate, which will determine whether or not the construction of the envisaged facility is possible on a specific site (depending on the existing urban parameters), as well as which additional approvals and endorsements are required prior to obtaining a building permit (usually required from various authorities that may be interested in the construction as well as from the nearby utility providers and owners).

If all required prior approvals and endorsements have been obtained, the application for the building permit can be submitted. This permit allows for the commencement and development of the facility construction works, according to the conditions laid down therein.

The civil construction permitting phase also requires the information and consultation of the interested public, including through public hearings.

Environmental assessments

The construction phase of generation facilities is also, in principle, conditional upon an environmental impact assessment (EIA procedure), usually finalised with the issuance of an environmental approval. Except in certain cases, expressly provided for by law, which are automatically subject to this EIA procedure (ie, thermal power plants and other combustion plants with a thermal power of at least 300 MV), usually for other facilities in the energy industry, the need for an EIA procedure to be carried out must be established in advance by the competent authority, in an initial screening stage.

This environmental assessment will also determine the potential impact of the envisaged generation facility by reference to water bodies and protected natural areas, which may trigger the obligation to carry out other specific assessments and obtain relevant approvals for the generation facility’s construction.

The EIA procedure is usually conducted by the relevant local county environmental protection agency, with certain exceptions – for example, if the construction covers more than one county, has a cross-border impact or is developed within the perimeter of the Danube Delta Biosphere Reserve or at the limits of its perimeter, in which case other authorities have competence in the matter.

This represents a rather detailed procedure and involves the active participation of the public, to whom the applicable legislation offers the possibility to intervene at each stage of the procedure, including through public hearings.

Energy-specific permitting

In addition to the above, several energy specific approvals must also be obtained in the construction phase of a generation facility, namely:

  • an emplacement approval, which, when necessary (usually the urban planning certificate provides for the need to obtain it) is issued by operators of electricity networks located in the vicinity of the construction site;
  • a grid connection permit, issued by the relevant TSO or DSO, necessary to connect the facility to the power grid; and
  • a setting-up authorisation, issued by ANRE which can be viewed as an “electricity-specific” building permit.

The setting-up authorisation must be obtained before any commencement of the construction works and is required for the establishment of new electricity generating facilities of over 1 MW power. In those cases where the setting-up authorisation is not mandatory, the applicable legislation still requires the notification of ANRE about the conducted construction works, which shall also be kept informed about the status thereof through regular reports.

The Operation of Generation Facilities

Following the construction of a generation facility, several approvals are also necessary for its operation, mainly governed by the relevant environmental and energy specific regulations.

From an environmental standpoint

Under Romanian law, energy generation is qualified as an activity with a significant environmental impact, regardless of the source used for electricity production or the capacity of the plant. Thus, a generation facility shall require the issuance of an environmental permit, which shall be maintained for the entire operation period of the facility.

Depending on the generation facility’s potential impact on water bodies and protected natural areas, specific endorsements and authorisations shall be subsequently required.

The environmental permits’ issuance procedure also involves the participation of the public, including through public hearings.

Regarding energy-specific necessary approvals

Generation facilities can be operated only after obtaining the required power production licence, with some exceptions expressly provided for by law, for the commercial exploitation of the generation facility, (ie, strictly for performing the electricity generation activity).

The power production licence is issued by ANRE, after a specific procedure is conducted before the regulatory authority.

The commercial exploitation of generation facilities may be carried out without holding a power production licence in the case of: (i) power generation facilities that can be started without voltage from the national power grid, self-starting groups, used for internal purposes; and (ii) generation facilities with a total electricity power of less than 1 MW.

In connection with all of the approvals presented under 4.2Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities, the relevant authorities impose on their holders various specific terms and obligations determined on a case-by-case basis, depending on the nature of the generation facility and the conditions under which it has been built and operates.

Typical Terms Imposed in Relation to the Construction of Generation Facilities

The building permit imposes on its holder all relevant obligations and terms that must be met in connection with the construction works, including:

  • the commencement of the works during the building permit’s validity period (usually no more than 24 months from the date of issuance);
  • the timeline of the construction works;
  • various obligations in connection with the construction and site organisation (eg, the appropriate signalling of the site and the decommissioning of the temporary site constructions at the end of the works).

At the same time, the environmental approval contains all technical and legal conditions relevant from an environmental standpoint that must be observed during the construction phase of a generation facility, including references to the type of environmental parameters that need to be monitored and their duration, as well as the measures imposed in order to avoid, prevent or reduce and compensate for significant adverse effects on the environment generated during the construction works.

Through the setting-up authorisation, ANRE imposes, among others, a time limit for the completion of the construction (corresponding to the duration of the setting-up authorisation), which is decided by ANRE, on a case-by-case basis, depending on the particularities of the construction. This authorisation also imposes on its holder the obligation to establish and apply, throughout the works execution, measures for the protection of persons, property and the environment and to obtain all the approvals provided by law for the completion of the authorised facility.

Typical Terms Imposed in Relation to the Operation of Generation Facilities

Once the environmental permit has been issued, it will be valid only for the period for which the annual visa is granted, which imposes on its holder the obligation to annually conduct a specific procedure in order to obtain such visa. Other than aspects related to its validity, the environmental permit also imposes certain obligations on its holder – often technical in nature – which ensure the compliant operation of the generation facility from an environmental perspective, usually in the form of a compliance programme.

The power production licence is valid for a maximum of 25 years and lays down the holder’s rights and obligations, the conditions for its transfer, modification, suspension, withdrawal, the conditions under which ANRE is entitled to apply sanctions to the holder, etc.

Amendments Regarding Terms Imposed in Relation to Construction and Operation of Generation Facilities

As a general principle, once the above-mentioned approvals have been granted, their terms and conditions must be complied with accordingly.

They are usually amended if subsequent changes affect the holder’s statute or structure, if new elements become relevant or the conditions or circumstances underlying their issuance have changed (ie, any updates of the specific conditions associated therewith, such as amendments to the technical characteristics that lead to the modification of a facility’s installed power).

The modification of the approvals issued by ANRE can also be initiated by the authority itself as a result of the change in the conditions existing at the date of their award (including in the case of amendments to the applicable regulatory and legislative framework and/or legal decisions) or as a result of events substantially affecting the market.

Expropriation Rights

According to the Energy Law, if the land necessary for the construction and operation of the facility is the private property of a third party, the applicant for a setting-up authorisation must, as a first option, seek to purchase the land from the owner; alternatively, the law offers applicants the possibility to initiate the legal procedure of land expropriation for public utility causes. Following the expropriation procedure, the applicant must also obtain the concession of the land in question during the facility's existence.

The general expropriation procedure involves the completion of specific procedural steps, both administrative and judicial. The procedure is finalised with a decision of the Romanian courts which, if the expropriation has been ascertained, shall also establish the amount of the required compensations. The compensation must be fair and prior to the actual expropriation and, in principle, amounts to the circulation (“real”) value of the land, as established under an expert report and the value of damages caused to the owner. The amount of compensation can also be established by mutual agreement with the expropriated person(s).

Romanian law also regulates a more streamlined expropriation procedure in the case of works for the construction, development of production, transmission and distribution of electricity which are considered to be of national interest.

Limitation Rights

In addition, given that the works for the construction of generation facilities for which the setting-up authorisation is granted, and that the activities and services for which licences are granted by ANRE (including the power production licence) are considered, with small exceptions, as being of public interest. Certain limitation rights arise as a consequence of these approvals, for example:

  • right of use to carry out the works for the facility’s construction and to ensure its proper operation;
  • right of way to install/dismantle electrical networks or other equipment related to the facility;
  • right of access to public utilities;
  • right to obtain the restriction/cessation of certain activities that endanger the power capacity.

Pursuant to the applicable regulations, except for the nuclear power plants, there are no energy-specific requirements regarding decommissioning of generation facilities.

Generation facilities are however deemed to be “constructions” in the meaning of the applicable related legislation and, therefore, decommissioning of a generation facility is subject to the general civil constructions-related framework.

In addition, the general conditions attached to the licence for the commercial exploitation of power generating facilities approved under ANRE Order No 80/2013 provide a general obligation incumbent on such licence holders to gradually perform, based on economic grounds, the generation facilities’ modernisation and refurbishment or their conservation or decommissioning, as the case may be.

Concerning nuclear facilities, specific requirements for their decommissioning are stated mainly in Law No 111/1996 on the safe deployment, regulation, authorisation and control of nuclear activities.

The construction and operation of transmission lines and associated facilities are mainly regulated by the same pieces of legislation mentioned under 4.1Principal Laws Governing the Construction and Operation of Generation Facilities, supplemented by various secondary regulatory acts adopted by ANRE, such as the Technical Code of the Electric Transmission Network approved under ANRE Order No 20/2004.

The construction of transmission facilities is subject to the same general approvals and procedures that govern generation facilities, with certain particularities.

The Construction of Transmission Facilities

The construction of transmission facilities will require the fulfilment of the general civil permitting procedures for the authorisation of construction works – ie, the urban planning certificate and building permit – and shall be realised in accordance with the specific technical and security norms set forth in the applicable regulatory acts issued by ANRE.

From an environmental perspective, the Romanian law requires the performance of an EIA procedure for the construction of overhead power lines with a voltage of at least 220 kV and a length of at least 15 km; in other cases, the need to complete the procedure will be analysed on a case-by-case basis.

The Operation of Transmission Facilities

Obtaining an environmental permit for the operation of transmission facilities is mandatory under the applicable environmental legislation, but only with regard to high and medium voltage power lines.

In regard to the energy sector specific approvals, the operation of transmission services requires the issuance by ANRE of an electricity transmission licence. Given the express qualification of transmission networks as public property of the state and of the electricity transmission activity as a public service of national interest, in Romania transmission services are also provided under a concession agreement.

In Romania, the only TSO authorised by ANRE to provide transmission and system-related services is Transelectrica, which operates under Electricity Transmission Licence No 161/2000, as amended.

Please refer to 4.3Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities for details related to the types of terms and conditions usually imposed in the approvals necessary for the construction and operation of transmission facilities (those typically included in the necessary approvals for generation facilities being applicable accordingly).

As it is deemed to be in the interest of public utility, where the development of the electricity transmission network is sought, the aspects regarding the possibility to resort to the expropriation procedure become applicable accordingly, as detailed under 4.4Proponent's Eminent Domain, Condemnation or Expropriation Rights.

In Romania, currently the transmission service is ensured on the entire national territory exclusively by a single TSO, which is Transelectrica (licensed in this respect and certified in accordance with the ownership unbundling model by ANRE). 

From an ownership perspective, the existing transmission grid on the Romanian territory, together with the sites on which it is located represents the public property of the Romanian state (the “old network”). Transelectrica has been granted the rights to use these assets via a concession agreement, while the rest of the assets composing the electricity transmission system are privately owned by Transelectrica.

Although the Energy Law does not currently exclude the possibility for other entities to construct and operate transmission facilities and certify themselves accordingly, the present situation of the Romanian transmission network and service amounts to a natural monopoly situation as defined by the Energy Law.

The main laws governing the provision of transmission service in Romania include the Energy Law; ANRE Order No 72/2017 on Technical Norms regarding technical requirements for connection to public interest grids, and ANRE Order No 171/2019 approving the methodology establishing tariffs for electricity transmission services. To benefit from transmission services, a framework agreement in the form approved by ANRE must also be concluded in this respect.

Transmission charges are established by ANRE according to the methodology approved in this respect, by also considering the TSO proposals, taking into account the following main aspects.

The main rules for establishing the service system tariff are the following:

  • a non-discriminatory treatment for all service customers;
  • a limited coverage of the justified expenses for the system service, together with a reasonable profit percentage;
  • a calculation method providing incentive elements for the service efficiency growth.

Accordingly, as of 1 January 2021, ANRE approved the following relevant tariffs under Order No 214/2020:

  • 20.55 RON/MWh for the transmission service;
  • 1.30 RON/MWh for injecting electricity into the grid;
  • 19.22 RON/MWh for taking out electricity from the grid;
  • 10.82 RON/MWh for system services (as of 1 March 2021).

As mentioned, transmission terms of service are provided under the frame agreement to be concluded between Transelectrica and the energy transport service beneficiary, approved under ANRE Order No 89/2013 approving the frame system service and electricity transport service agreement between Transelectrica and the beneficiary (“Services Agreement Order”).

Transelectrica must provide network access for the benefit of all electricity transport network users in a non-discriminatory manner, providing the same tariff for any applicant.

Third parties may access the transmission grid on regulated terms provided that the connection is technically and economically feasible and the security of the national energy system is not endangered.

Thus, the public energy network users must pursue the stages listed under ANRE Order No 59/2013 for the connection to the public interest energy network:

  • a preliminary stage of documentation and information;
  • submission of connection application and the relevant documentation to the TSO, for obtaining the connection technical endorsement;
  • establishment of the connection technical solution and issuance of connection technical endorsement by the TSO; 
  • conclusion of connection agreement between the TSO and the user;
  • connection workings and commissioning of the connection installation;
  • if the case, setting the installation under voltage for trial;
  • issuance of the connection certificate by the TSO, for the place of energy consumption and/or production;
  • final setting of the installation under voltage.

The construction and operation of electricity distribution facilities are mainly regulated by the same pieces of legislation mentioned under 4.1Principal Laws Governing the Construction and Operation of Generation Facilities, which are subsequently supplemented with specific secondary ANRE legislation for the distribution sector.

Please refer to 4.2Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities, which applies to general civil construction permitting requirements for distribution facilities.

Similar to electricity transmission facilities, the EIA procedure must also be conducted as mentioned above under 5.1.2Regulatory Process for Obtaining Approvals to Construct and Operate Transmission Facilities, with the difference that Romanian law does not provide for the need to also obtain, in case of distribution facilities, an environmental permit for their operation.

Energy-Specific Approvals

Distribution facilities are operated based on and according to an electricity distribution licence issued by ANRE in line with specific procedures established in this respect.

Electricity distribution in Romania is a public service of general interest and therefore, as a rule, the electricity distribution licence is granted to economic operators who have concluded a concession agreement in this respect,  (ie, concessionary DSOs). Nonetheless, ANRE also grants electricity distribution licences to economic operators that own distribution networks in an area already subject to concession, provided that the written consent of the concessionary DSOs has been obtained. Such a consent can only be withheld for well-grounded and objective reasons, from a technical and/or economic point of view.

The law also provides for certain exceptions in which case the provision of distribution services is allowed without a licence, based on a decision issued by ANRE confirming the existence of a closed distribution system – eg, DSOs or managers of industrial parks within the respective industrial parks.

Please refer to 4.3Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities for details on the types of terms and conditions usually imposed in the approvals necessary for the construction and operation of distribution facilities. 

The electricity distribution licence shall also expressly stipulate the territory in which the performance of the electricity distribution service is acknowledged for each DSO (as opposed to the electricity transmission licence which is exclusively granted to Transelectrica for the entire national territory).

Other conditions provided in the electricity distribution licence set out the content of the electricity distribution public service of general interest, as well as the performance standards and conforming procedures that the facility must comply with. If the case, all the terms and conditions contained in the electricity distribution licence are subsequently supplemented, if not overlapping, by the obligations set out in the relevant concession agreements.

The aspects related to the possibility of resorting to the expropriation procedure detailed under 4.4 Proponent's Eminent Domain, Condemnation or Expropriation Rights will apply accordingly.

The national territory is divided among the eight DSOs that currently benefit from a concession granted in this respect by the Ministry of Energy and from an electricity distribution licence issued by ANRE, regulatory documents which appropriately circumscribe the geographical territory in which each DSO performs its services. Nonetheless, distribution services can be provided by more than one operator in the same geographical territory, based on the concessionary DSO's acceptance.

As a matter of principle, DSOs must ensure the access to their respective electricity distribution networks in a non-discriminatory manner to the benefit of all network users.

The Energy Law is the main regulatory act that regulates the provision of distribution services, with the main obligations incumbent on a DSO being listed thereunder. Further, the terms of the distribution service are also set forth under the Distribution Grid Technical Code, and the General Licence Conditions for Distribution Service Performance approved by ANRE and also under the agreements concluded with the energy suppliers and the users, whose mandatory framework is established under ANRE Order No 90/2015. The tariffs applied for the electricity distribution service are established according to methodologies approved by ANRE.

The electricity distribution charges are established using methodologies approved by the energy regulator. In this respect, ANRE has approved two distinct calculation methodologies, depending on whether the DSO has or has not concluded a concession agreement with the Ministry of Energy.

In regard to non-concessionary DSOs, tariffs are, in principle, established by DSOs themselves and approved by their executive boards. Further, following the users’ notification on the tariffs' levels, in respect to which they might submit objections to the DSO, the DSO would apply the tariffs regulated by ANRE if the users’ objections remained unresolved.

In setting its tariffs, DSOs must consider only justified expenses which shall cover the following:

  • operation and maintenance costs;
  • amortisation costs for capital assets used in performing the distribution service;
  • coverage of own technological use within the distribution network;
  • financial costs.

For concessionary DSOs, ANRE regulated a basket methodology for establishing the tariffs for the distribution service. Distribution tariffs are applicable on a contractual basis to all users connected to the energy network, according to the voltage level of electricity introduction/extraction.

The methodology covers the operating and maintenance costs (controllable and non-controllable) of regulated activities (such as permits, connection fees) and non-regulated activities (such as rentals, waste management, other services performed by the distributor). According to the ANRE's methodology, DSOs must prepare proposals on distribution services prices and tariffs, which should be then verified and approved for each one by ANRE Order, subsequently published in the Official Gazette.

In its review process, ANRE considers, in principle:

  • justified energy quantity according to the national economic growth indicator;
  • DSO performance standards;
  • tariff setting;
  • regulated technological own consumption;
  • optimal network development;
  • cost-efficiency applicable rate for the distribution network assets;
  • fees related to the distribution services, established by central or local authorities;
  • DSO financial viability.

Although not expressly provided under the Romanian energy-related legislation, ANRE's tariff decision might be challenged under the wider framework of administrative legislation.

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Law and Practice

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Bondoc si Asociatii SCA has an energy and natural resources practice with a very diverse range of clients, including financial institutions, private equity firms, integrated utilities, conventional and renewable power generators, project developers, contractors and service companies and large consumers of power. The firm has a 360-degree view regarding the legal issues in the energy field and thereby can deliver tailored advice to the particularities of each category of industry player. In the past year, its team has advised on a large amount of complex projects, being at the forefront of the Green Deal projects wave (including solar and wind, plus energy efficiency and energy digitalisation), and also regulatory changes impacting the business (massive amendment of the energy law as well as investigations by the regulatory authority). A significant number of energy transactions have been on its desk in the past 12 months, including assistance to STEAG GmbH in the sale of its participation in Romanian energy projects, a transaction ranked among the three largest transactions by value in Romania during 2020.

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