​In the midst of renewable energy projects supported by billions of euros coming through the PNRR and the Modernization Fund, the Ministry of Energy is proposing a new support scheme that provides guaranteed energy prices for 15 years for the lucky ones. beneficiaries This mechanism is a type of contract for difference that is distributed through tenders for solar and wind projects. According to HotNews.ro sources, at the level of the Ministry of Energy, the strategists behind the implementation of the mechanism are considering a maximum starting price of 88 EUR/MWh for photovoltaics and 92 EUR/MWh for wind turbines, which is much higher than in Great Britain, which has a similar scheme.

The UK has set much lower prices than what the Department of Energy is considering

The experience of other countries shows that the execution prices set after auctions are not much lower than the maximum. The mechanism that the Ministry of Energy wants to implement in Romania is inspired by the British model, but the execution prices set after the last round of auctions were much lower: the equivalent of 56 euros/MWh for PV and 60 euros/MWh for wind. turbines

It should be remembered that these will be the so-called guaranteed prices for 15 years, which will be annually indexed to the level of inflation in the Eurozone.

Representatives of the renewable energy industry are pressuring decision-makers in Romania for maximum execution prices to be even higher than the ones the Ministry of Energy wants to auction at: 120 EUR/MWh.

The Ministry of Energy wants to launch a support scheme before the adoption of a European regulation indicating the prevention of destructive effects

The Ministry of Energy is in a hurry with this scheme, despite the fact that a draft Regulation on the structure of the energy market is being discussed at the level of the European Parliament and the European Council, which also contains an important section dedicated to contracts for difference. It will be adopted next year.

In principle, the European regulation, which is being prepared, provides that the risk of imbalance must be prevented by implementing a support scheme on the energy market, behavior on energy exchanges, as well as production and supply. It is also necessary to ensure that the level of execution prices is aligned with the cost of new investments.

Support scheme for several dozen beneficiaries

According to HotNews.ro, several projects of influential people in the political sphere are on the list of future beneficiaries. The Ministry of Energy will provide support for capacities up to 100 MW for each project. Since we are talking about renewable energy projects, 100 MW of wind or solar power/project is a significant capacity.

But since there is a cap on the total capacity that can benefit from contracts for difference, the number of lucky winners will also be limited.

The Contracts for Difference (CfD) scheme will involve two rounds of tenders, the first at the end of the year, each with separate bids for the respective power generation technologies – onshore wind and solar PV – with a total capacity of 5,000MW.

Total target power:

• Installed capacity of 1,000 MW for electricity generation from onshore wind and 1,000 MW for electricity generation from solar photovoltaic sources, both as a result of the first round of auctions to be held by the end of 2023 (“CfD 2023” auction “);

• Installed capacity of 1,500 MW for electricity generation from onshore wind farms and 1,500 MW for electricity generation from solar photovoltaic sources, both as a result of the second round of tenders to be held in the first half of 2025.

Rezvan Nicolescu: Never, when you have a large number of projects under market conditions, you never disrupt them with support schemes

Over the last year and a half, the energy sector has started to be flooded with investments in renewable energy sources, especially in the field of photovoltaic energy, even through the installation of solar panels. In fact, energy distributors even complain that the avalanche of connections could create an imbalance in a power grid that is not developed enough to suddenly receive too much power.

Read on to learn more

• The phenomenon of photovoltaics in houses: Next year we can have an installed capacity of 2000 MW, almost as much as three nuclear reactors from Chernavode
• Businesses with multi-billion euro stakes are being prepared in the energy sector / How much money is available to Romania for the coming years

Rezvan Nicolescu, an energy expert and former president of the European Energy Regulatory Agency (ACER), recently said that the implementation of this support scheme “will be a mistake affecting the electricity sector, a bigger mistake than the nonsense of the compensation scheme, which has so unbalanced the public budget”.

According to Rezvan Nicolescu, “never, when you have a large number of projects under market conditions, do you start destroying them with support schemes. The role of support schemes is to stimulate projects, not to block or stop them.’

What else does Rezvan Nikolescu say:

• If the auction results in too low a price, a large part of the current projects that will not receive CfD will stop. If you get €30/MWh from CfD, who else can convince financiers of €80/MWh forecasts? Hardly anyone!
• Even posts about nuclear ambitions no longer make sense when you have a €30 CfD and a battery pack at your disposal.
• If the auction is set at a high target price (strike price) or the price is set by hand, consumers will be out of pocket for about 15-20 years. The CfD is a market intervention mechanism that will have a massive impact on the market throughout the application period.
• The very debate about CfD is delaying projects that were running at a time when Romania needs investment. Those who recently did them without CfD are the ones who cheat the most.
• CFDs can benefit from CfDs, with some investors equating investments to government securities, China’s best-in-class equipment suppliers and banks including the EBRD and EIB targeting risk-free loans.

“We were inspired by the British CfD and the Hungarian CfD”

The first calls for the contract-for-difference scheme will be made in October, Radu Mustace, Marsh’s sales director, told the Energy in the Plug conference organized by Bursa newspaper.

He says Romania was inspired by the British and Hungarian models, but with slight differences. “The form in which this mechanism has now reached the implementation phase was previously communicated to the European Commission through the Directorate-General for Energy and the Directorate-General for Climate, comments were received and a request for funding through the Modernization Fund for the Liquidity Fund was made on 12 September. .an inspiring movement, there is no such mechanism in all of Europe. We were inspired by the British CfD and the Hungarian CfD, with slight differences.”

“Previous support schemes created overcompensation and imbalances in the market. This scheme will be linear over the next 15 years. It is desirable that the price of the CfD contract is guaranteed for 15 years,” Radu Mustace also said.

The key conditions of the scheme are designed by the Ministry of Energy

• The duration of support through the CfD scheme will be a maximum of 15 years from the date of commencement of payment.

• Beneficiaries will be able to trade the generated energy according to their trading agreements. If the base price of electricity is lower than the sale price, the beneficiaries will receive an additional payment for the difference. If the underlying price is higher than the strike price, the beneficiary pays the difference to the CfD counterparty.

• Proposals must specify the realization price (euro/MWh), the generating capacity to be installed and the target commissioning date.

• CfD payments will be made for each MWh of electricity generated and delivered to the National Electricity System, calculated through a dedicated CfD capacity meter.

• Base prices will be the weighted average monthly day-ahead market price (DAM). The price will be weighted for the same production technology subject to CfD support.

• Payment differences will be calculated in euros and converted to lei before payment is made in lei using the monthly average daily lei/euro exchange rates published by the National Bank of Romania.

• The strike price will be indexed annually according to the consumer price index of the Eurozone.