The two Romanian associations- RWEA – Romanian Wind Energy Association and RPIA – Romanian Photovoltaic Industry Association, representing producers, developers and providers of services and equipment in the renewable energy sector, make a force majeure appeal to the President of Romania, the Parliament and the Government to ensure a legislative framework that supports investments in energy from renewable sources.
We note with great concern that, in the meeting of the Chamber of Deputies on June 28, 2023, a modified form of the Law approving the Emergency Ordinance 153/2022 was adopted, an act which was previously the subject of a request for reconsideration by the President, being implemented in this final version of the legislative act a series of amendments that contradict the fundamentals of the energy market and the recommendations of the recently adopted European regulations.
RWEA and RPIA draw attention to the extremely serious consequences that the decision to abandon a series of amendments that were included in the original form of the Law will bring, as well as to 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.
In the case of producers of energy from renewable sources, if the application of the Contribution to the Energy Transition Fund will be maintained in its current form, respectively with the consideration in the calculation formula of all revenues, without taking into account in a fair way also the expenses, the producers they 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 energy transition goals. We have previously pointed out that 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 are talking about overtaxing the loss.
For a correct and complete understanding of the entire context, we presented to the authorities the particularities of the renewable energy industry that have an impact on the Contributions to the Energy Transition Fund owed by the electricity producers that generate additional income, as well as due for the income obtained from financial insurance contracts of risks (hedging).
The negative impact on companies in our industry is caused by the formula for calculating the Manufacturer’s 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 recognized only in proportion to 5% of the value of electricity sold, while the industry standard shows imbalances recorded by wind power plants of approx. 40%, respectively 25% in the case of solar 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 producers from renewable sources, according to industry standards.
Regarding the mechanism for calculating and paying the Contribution for the revenues from the Hedging Contracts, we consider that it is still 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 mechanism of withholding tax, 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 regarding the application of the calculation formula, to a new surcharge on them.
If the renewable energy producer sells the estimated production in advance, thus not knowing with reasonable precision the actual production it will achieve, it will be forced to purchase part of the contracted energy quantity for sale from the market, in order to cover the obligations firm delivery contracts. 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 expenses with the purchase of energy necessary for honoring the 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.
Certainly, the future of the European Union will be a green one. Renewable energy is a priority for European countries, and Romania must keep up, urgently assume commitments and act to stimulate the production of energy from renewable sources, as the European Commission does and recommends to EU member countries.