Against the background of energy transition and of the states’ need to ensure their energy security in the current geopolitical context, offshore renewable energy technologies have gained increased attention. Today, they have been included in renewable energy policies both in the European Union ("EU") and in the EU Member States, whether we are talking about wave energy, tidal energy, energy produced by floating photovoltaic panels, floating wind turbines and wind turbines attached to the seabed.
Insofar as offshore wind energy is concerned, while some states have made significant progress in this area, other states have not even adopted a specific regulatory framework, and some sea basins have still remained untapped. This is also the case of the Black Sea, which is known to have a good natural potential for the harnessing of offshore wind energy (both turbines attached to the seabed and floating turbines).
In Romania, which is bordered by the Black Sea, the authorities have not yet adopted the maritime spatial planning ("MSP") despite the deadlines established at European and national level, although a first draft in this respect has been relatively recently published for public consultation. As to the regulatory framework governing offshore wind energy, the first legislative initiative was launched in 2019, but it seems that it will be replaced by a new legislative initiative recently registered in the Senate for debate.
Even in the absence of a regulatory framework in this field and, implicitly, in the absence of a real possibility to invest in this field today, some renewable energy investors, foreign and local, have already announced their intention to develop offshore wind projects in the Black Sea.
Against the backdrop of recent developments in the offshore wind energy policy of the European Union and Romania, this article is aimed at briefly looking at the current situation and the prospects of the industry in terms of regulatory framework and strategies.
The European Context
On 19 November 2020, the European Commission („Commission” „EC”)) adopted the EU Strategy to harness the potential of offshore renewable energy for a climate neutral future (the „European Commission Offshore Strategy”), while on 16 February 2022, the European Parliament adopted the Resolution on a European strategy for offshore renewable energy („European Parliament Offshore Resolution”).
The objective of the European Commission Offshore Strategy is to have an installed capacity of at least 60 GW of offshore wind energy by 2030 and 300 GW by 2050. At the time when the strategy was published, there was, according to this document, an installed offshore wind capacity of about 12 GW.
On the other hand, according to the impact assessment made by the European Commission, which accompanies the Commission Communication on Stepping up Europe’s 2030 climate ambition - Investing in a climate-neutral future for the benefit of our people, the installed offshore wind capacity should be around 70-79 GW (depending on the chosen scenario) to ensure a cost-competitive trajectory to guarantee a 55% reduction in greenhouse gas emissions by 2030.
The European Parliament Offshore Resolution calls on Member States and the public and private sectors to exceed the 55% reduction target by 2030 and also urges the Commission to revise public procurement and State aid rules to secure a cost-competitive transition supported by a well-functioning market pushing the uptake of offshore wind projects.
Achieving an installed capacity of 300 GW of offshore wind energy by 2050 means multiplying capacity by around 30 times by that time. According to the European Commission Offshore Strategy, the investment needs for the large-scale deployment of offshore renewable energy technologies (not only wind energy) by 2050 are estimated to be almost EUR 800 billion, around two thirds to fund the associated grid infrastructure and a third for offshore energy generation. The European Parliament Offshore Resolution mentions a considerable drop in offshore renewable energy prices, with the global equalised weighted average cost of offshore wind energy falling by 48% between 2010 and 2020, from EUR 0.14 to EUR 0.071 per kWh.
Although the North Sea is currently the most important region in terms of installed capacity and expertise in offshore wind energy, the European Commission Offshore Strategy and the European Parliament Offshore Resolution do not ignore the potential of other sea basins. For example, it is mentioned that the Black Sea offers good natural potential for offshore wind energy, with bottom-fixed and floating turbines. Moreover, regional cooperation is already materializing in the context of the Common Maritime Agenda for the Black Sea, one of the priorities being to boost the emerging sectors of the blue economy, such as offshore wind energy technology.
To achieve the objectives set out in the European Commission Offshore Strategy, a cross-border collaboration at sea basin level will be required between the member states. In this respect, among the amendments envisaged in the Proposal amending Directive (EU) 2018/2001 of the European Parliament and of the Council of December 11, 2018 as regards the promotion of energy from renewable sources ("REDII Amendment Proposal"), are those regarding the cooperation of Member States bordering a sea basin to jointly define the amount of offshore renewable energy they plan to produce in that sea basin by 2050, with intermediate steps in 2030 and 2040.
Furthermore, the accompanying documents of the European Commission Offshore Strategy recognize that the electricity market rules were not designed with the specific needs of offshore projects in mind. For this reason, an analysis is made of the current regulatory framework and the possible adaptations required to ensure that they suit the purpose of the large-scale expansion of offshore renewable energy projects (for example, in terms of grid connection rules, dispatching, unbundling, cross-border trading of energy, etc.).
The European Commission and the European Investment Bank (EIB) financially contribute to the development of offshore wind farms. EIB has recently announced the conclusion of three financing agreements, with the support of the European Commission, for installing and commissioning three floating offshore wind farms off the French Mediterranean coast. The EIB investments are supported by the European Commission with one of the projects backed by the InnovFin EDP (energy demonstration projects) facility, and the other two guaranteed by the European Fund for Strategic Investments (EFSI), the central pillar of the Investment Plan for Europe.
Furthermore, the European Commission has recently selected Technip Energies, X1 Wind and a consortium of ten international entities to deliver the NextFloat project, a program under which the partners will test a 6 MW floating wind platform in France. The grant agreement is currently under negotiations with the European Commission and the project is expected to start in the fourth quarter of 2022. The integrated solution relies on X1 Wind’s floating offshore wind technology, which is said to be a lighter floater design with a reduced steel requirement, as well as a more efficient and compact mooring system that can minimize the impact on seabed.
Therefore, at European level, the strategy for offshore wind energy is well defined and specific projects are already advanced and effective enough to support the strategic objectives. But what is going on in Romania?
Offshore Wind Energy in Romania
Regulatory Framework
Draft Regulatory Acts
At legislative level, currently there are two draft regulatory acts on offshore wind energy: (i) Draft Law on the necessary measures to carry out operations for the exploitation of offshore wind energy (PL-x no. 648/2020) adopted by the Senate on 14 October 2020 and which is now at the level of the Chamber of Deputies ("Draft Offshore Law 1”) and (ii) Legislative proposal on the measures necessary to carry out offshore wind energy operations (B450/2022) registered with the Senate on 29 June 2022 and submitted for approvals on 18 July 2022 ("Draft Offshore Law 2”). From the time of registration until now, there has been no legislative development on this draft law.
Despite statements announcing the adoption of Draft Offshore Law 1 by the end of 2021, this has not happened and the draft law in question will apparently be abandoned. It received a negative opinion from the Government on 4 May 2022 and from the Commission for Culture, Arts, Mass Media on 8 May 2022. According to recent statements made by officials from the Ministry of Energy, Draft Offshore Law 1 is no longer feasible, and work is now underway together with the World Bank, in a consultative capacity, to develop the offshore wind legislation. Also, according to other statements, a regulatory act in this area will be adopted by the end of 2022, and there is also talk about a pilot project of at least 300 MW. It is not clear whether the officials' statements refer to Draft Offshore Law 2 which has recently entered the legislative process, but given the topic covered, it will likely replace Draft Offshore Law 1. For this reason, further consideration will be given only to Draft Offshore Law 2.
Draft Offshore Law 2 is structured in 10 chapters, as follows:
Chapter I (general provisions), which is intended to define the subject matter of the draft law and the terminology used.
Chapter II (authorization procedure), which aims to regulate (i) the award of the concession for the construction and operation of the offshore wind farm (e.g., the competitive dialogue procedure, the qualification, selection and award criteria, the royalty of at least 1.5% annually of the gross revenues generated from the sale of electricity produced by the wind farm), (ii) licenses for exploration, construction of the offshore wind farm, production of electricity (e.g., subject matter, duration and procedure of obtaining each type of license, the rights and obligations arising from each type of license, the regime of offshore and onshore works, the commissioning of the offshore wind farm within no more than 10 years from the award of the license for the construction of the farm) and (iii) general provisions regarding licenses (e.g., assignment of rights and obligations deriving from licenses, challenging the award of licenses).
Chapter III (rights of access), which aims to regulate (i) access to state-owned land (e.g. nature and content of the right of way, duration, notification regarding the exercise of the right of way, compensations and indemnities), (ii) access to the land owned by individuals or private legal entities (e.g. methods to obtain the right of use, the establishment and content of the right of use and easement, payment of indemnities and compensations, notification regarding the commencement of works, improvements made to lands, settlement of disputes), (iii) environment related provisions (e.g. ensuring free access to the beach, safety, protection of tourists and the use of beaches for tourism purposes, interdiction on placing the equipment necessary to carry out the works on the beach, observance of protected natural areas, conservation of natural habitats, flora and wild fauna).
Chapter IV (certification), which aims to regulate the requirements to be met for the certification of wind turbines by specialized companies.
Chapter V (spatial planning), which aims to regulate the requirement pursuant to which maritime spatial planning must be taken into account upon the issuance of licenses for offshore activities.
Chapter VI (grid connection and cost allocation), which aims to regulate the requirements to be met for offshore wind farms connection to the grid (e.g. the preparation of the verification report by the wind farm developer, demonstrating that the technical, functional and documentary requirements have been met, the connection to the grid by the developer or Transelectrica, the regime of the farm's internal network up to the grid connection point, the regime of the grid connection point, the regime of installations located after the grid connection point up to the shore).
Chapter VII (liability of wind farm developers and of the transport and system operator), which is intended to regulate e.g. (i) the developer’s liability if it fails to build and connect the farm to the grid according to the licenses granted, (ii) Transelectrica’s liability for the losses incurred by the developer if it does not meet the deadline for grid connection, (iii) Transelectrica’s right to order electricity producers to reduce or shut down their production if necessary.
Chapter VIII (decommissioning of farms), which aims to regulate e.g. the decommissioning obligations and conditions, the right of the Ministry of Energy to request full or partial decommissioning according to a calendar established by the ministry.
Chapter IX (misdemeanors and sanctions), which is intended to regulate misdemeanors applicable to farm holders, the authorities involved, establishment of misdemeanors and application of sanctions.
Chapter X (final transitory provisions), which aims to regulate e.g. the correlation with other regulatory acts in the field of electricity, labor, constructions, private international law rules.
Also, Draft Offshore Law 2 stipulates that (i) within 90 days from the enactment of the law adopted on the basis of Draft Offshore Law 2, ANRE will develop the secondary legislation, and the Government will adopt a procedure for the acceptance of works, including the onshore ones, (ii) within 30 days, the Government will adopt the procedure for the identification of lands subject to use and easement rights, the procedure for the payment or recording of indemnities and/or compensations and the template agreement regarding the amount of indemnities and/or compensations owed to individuals or private legal entities, (iii) within 60 days ANAF or the Ministry of Regional Development and Public Administration will develop the method for declaring and paying compensations and indemnities due to the state or local budget.
According to the National Recovery and Resilience Plan ("NRRP"), Reform 1 of Component 6 ("Electricity market reform, replacement of coal in the energy mix and support for a legislative and regulatory framework for private investment in renewable electricity production”) includes, among other things, the adoption of a new specific framework for offshore renewable energy production plants. Also, according to NRRP, the new energy law, which should enter into force by 30 June 2023, will regulate, among other things, a new specific framework to support investments in offshore renewable sources.
Other Regulatory Acts
The production of offshore wind energy is addressed under certain sectoral regulatory acts. For example, from an ecological perspective, relevant are (i) the guidelines for environmental impact assessment adopted under Order of the Ministry of Environment, Water and Forests no. 269/2020., which make reference to the OSPAR Convention – „Assessment of the environmental impact of offshore wind-farms”, as well as (ii) the program of measures to achieve good ecological status of the Black Sea marine region adopted under Government Decision no. 432/2020.
Insofar as the connection to public power grids is concerned, of relevance is the Norm regarding the technical connection requirements for power plants consisting of offshore generator modules (located offshore), adopted under ANRE Order no. 208/2018. The technical connection requirements set forth under this technical norm apply, among other things, to power plants consisting of offshore generator modules (located offshore) and which have one or more offshore connection points, in alternating current (AC).
Even if the acts mentioned above contain a number of relevant provisions, a unitary and comprehensive legislative framework will need to be adopted to cover all relevant aspects for the development of offshore wind farms, as actually envisaged in Draft Offshore Law 2.
Strategies, Programs, National Plans and Announced Projects
Mention should be made that the production of offshore wind energy is also provided for in the energy policy documents developed by the Romanian authorities, as well as in the investment strategies of some companies acting in this sector.
According to Romania’s draft Energy Strategy 2020-2030 with an outlook to 2050 ("SER"), investments for increasing the production potential of renewable energy are considered to be a priority in light of Romania's potential for energy produced in offshore wind farms. SER also predicts that offshore wind technology will have at least 20-35% lower capital costs by 2040.
The strategic objectives announced in the Government Program 2021—2024 - Coalition for resilience, development and prosperity include the creation of a framework to foster the absorption of European funds for making investments in offshore wind energy production. Also mentioned is Hidroelectrica's objective to install capacities for offshore wind energy production with a total installed power ranging between 300 MW and 500 MW, depending on the feasibility studies.
Offshore wind energy is also addressed in the 2021-2030 Integrated National Energy and Climate Plan („PNIESC”) in the sense that although the costs of this technology are still quite high, in the long term (around 2030) a reduction in costs is expected.
The energy measures (Component 6) of the National Recovery and Resilience Plan aim, among other things, to increase the share of energy from renewable sources in the total energy mix by investing in offshore renewable energy production capacities. Also, as shown above, according to the NRRP, the new energy law will introduce a specific support framework for investments in offshore renewable energy. More generally, the implementation of renewable energy reforms is expected to allow for an additional capacity of at least 3,000 MW of renewable energy (wind and solar) to be installed and connected to the grid by 30 June 2026.
Hidroelectrica’s Investment Strategy („HIS”), the largest state-owned energy producer in Romania, provides, among other things, for the development of a portfolio of offshore wind power plants, with a total installed power ranging between 300 MW and 500 MW, depending on the feasibility studies. The estimated term for the plants commissioning is 2026, and the project value, for an installed power of 300 MW, is approximately RON 2,880,000 thousand.
HIS also provides that the offshore wind project will start based on the results of a study on the potential for wind energy production through the development of wind farms installed in the Romanian sector of the Black Sea. The feasibility studies will envisage a non-reimbursable European financing of approximately 50% or alternatively, various support schemes specific to green energy investments will be used.
Maritime Spatial Planning
The development of offshore wind farms depends on maritime spatial planning. According to Draft Offshore Law 2, the spatial planning of offshore installations, including wind farms, is subject to Ordinance no. 18/2016 on maritime spatial planning ("GO 18/2016"), and public authorities will have to give consideration to the maritime spatial planning when issuing licenses for offshore activities. Also, the offshore perimeter will need to be developed in line with the maritime spatial planning. According to the Draft Offshore Law 2, this represents the area corresponding to the surface projection of the contour of the part of the earth's crust within which exploration, development, construction, operation and commercial exploitation, including storage, as well as the areas necessary for the transmission of electricity, are carried out offshore within a given depth range.
According to the European Commission Offshore Strategy, achieving an installed capacity of 300 GW of offshore renewable wind power by 2050 will require identifying and using a much larger number of sites for offshore renewable energy production and connection to the power transmission grid. Thus, public authorities should therefore plan these long-term developments early on, assessing their environmental, social and economic sustainability, ensuring coexistence with other activities, such as fisheries and aquaculture, shipping, tourism, defense or infrastructure deployment, and making sure the public accept planned deployments. Maritime spatial planning is an essential and well-established tool to anticipate change, prevent and mitigate conflicts between policy priorities while also creating synergies between economic sectors.
According to the European Commission Offshore Strategy, the offshore wind industry is estimated to require less than 3% of the European maritime space to achieve the 55% reduction target in greenhouse gas emissions by 2030, and therefore may be compatible with the objectives of the EU Biodiversity Strategy. At the same time, the European Parliament Offshore Resolution refers to a 2.8% necessary space to ensure a wind capacity in the northern seas that meets the objectives for 2050.
At the EU level, Directive 2014/89/EU of the European Parliament and of the Council of 23 July 2014 establishing a framework for maritime spatial planning was adopted ("Directive 2014/89"). Directive 2014/89 was transposed into the national law under (i) GO 18/2016, (ii) Law no. 88/2017 approving Government Ordinance no. 18/2016 on maritime spatial planning ("Law 88/2017") and (iii) Government Decision no. 436/2018 approving the Methodology for the development of the maritime spatial planning ("GD 436/2018").
GO 18/2016 stipulates that the MSP has a guiding and regulatory character and includes the installations and infrastructures for renewable energy production among the activities, uses and fields that fall under the MSP scope. Similar provisions on MSP framework content can also be found in GD 436/2018.
According to Directive 2014/89, maritime spatial plans should have been developed at national level no later than 31 March 2021. Along the same line, GO 18/2016 sets forth that the maritime spatial planning is approved under organic law, enters into force on 31 March 2021 at the latest and is revised at least once every 10 years. However, up to the present, the Romanian authorities have not adopted such a law, which is why, on 2 December 2021, the European Commission sent a letter of formal notice to Romania (INFR (2021)2224), granting, at the same time, a two-month term to respond and remedy the deficiencies identified, under penalty of issuing a reasoned opinion. The procedure initiated by the European Commission is still in the formal notice stage.
The Ministry of Development, Public Works and Administration has recently published for public consultation the first version of the draft maritime spatial planning. The maritime spatial planning aims to establish the principles and long-term objectives for the use of the maritime space, in order to minimize the negative impact on the marine environment and to support the sustainable development of the blue economy.
The draft MSP provides the exploitation of renewable energy resources as one of the categories of uses of maritime space. Regarding offshore wind energy, the draft MSP reiterates certain aspects laid down in the European Commission Offshore Strategy and the World Bank's estimates regarding Romania's offshore wind potential. It mentions that, in terms of cost-benefit ratio, the first turbines to be installed are those fixed on the seabed, making an analysis of the advantages and challenges of this technology.
In conclusion, although there have been some developments at national level in laying down the legislative framework necessary to launch offshore wind energy projects, it appears that investors will have to bide their time, given the history and status of the legislative initiatives, as well as the political statements that have not yet materialized into concrete results. At the same time, the current context as well as the experience gained in setting in motion the first gas offshore project recently put into operation (experience that can be partially replicated for offshore energy) should contribute to boosting a faster-moving agenda.
By Monica Iancu, Partner, and Vasile Soltan, Associate, Bondoc si Asociatii