The target for renewable energy consumption in Europe is to reach at least 42.5 percent by 2030 for all sectors, under Directive (EU) 2023/2413 of the European Parliament and of the Council. Known as RED III, it encourages the conclusion of power purchase agreements (PPAs) by requiring member states to adopt various measures.
They include, for example:
- The removal of administrative, technical and financial obstacles to the conclusion of PPAs, so that these may be entered into much more easily
- Strengthening the system for Guarantees of Origin (GoOs) so that the issuing, transfer and use of GoOs are done in a standard manner across the EU, with a view to transfer them directly to the buyer of electricity
- The implementation of policies that encourage the development of renewable energy projects and indirectly enhance the conclusion of PPAs, such as support schemes and various other incentives
What is the current status in Romania?
After the ban on power purchase agreements was lifted in 2022, Romania was set to boost the number of PPAs concluded, due to the advantages for both the renewable energy generator and the corporate offtaker. Most important among these was price stability for the duration of the PPA, as well as the offtaker obtaining GoOs, which is a means to prove, including from an ESG perspective, that the offtaker’s green energy quota is being met.
As the number of renewable projects continues to grow, alongside a rise in the price of energy—not to mention the fact that Council Regulation 2022/1854 of 6 October 2022 is a temporary measure capping the electricity system as part of an emergency intervention to address high energy prices in Europe—the need to conclude PPAs for an extensive duration is as essential as ever.
Various market challenges still affect the development of this sector, namely:
- The lengthy permitting process with implications on project timelines
- An insufficient grid capacity in various areas where renewable energy projects are developed
- The limited number of creditworthy offtakers
- The impossibility to transfer GoOs directly from the renewable energy generator to the offtaker
Despite the above, Romania witnessed the conclusion of various PPAs in 2023 and 2024. Most of these were characterized by a shorter duration than in other EU countries, with the most active offtakers being manufacturers and communication services providers. Such PPAs included various contractual mechanisms to mitigate the above risks.
Furthermore, Romania is currently in the process of transposing RED III and is set to become a member of the Association of Issuing Bodies (AIB) in order for the GoOs to be traded.
At the same time legislative amendments to the existing legislation (e.g. GEO 163/2022 regarding the amendment to the use of renewable energy as well as for the amendment to other legal enactments) expressly provide that GoOs transferred based on the PPAs concluded after 1 April 2022 only in relation to generation facilities which do not benefit from a support scheme, may be transferred directly from the generator to the offtaker, upon the request of the latter. As an alternative, it is expected that secondary legislation is enacted to allow the trading of GoOs on the dedicated markets.
The final form of the RED III transposition remains to be seen. Nevertheless, it is expected to expand the renewables sector and to whet appetites for concluding more PPAs.
By Elena Vlasceanu, Counsel, Dentons
