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Romania to offer $3.3 billion in aid for solar and wind power projects

The European Commission has granted clearance for a EUR 3 billion ($3.3 billion) package offered by the Romanian government for onshore wind and solar photovoltaic farms.

The aid, in the form of a two-way contract for difference, is specified to be for new projects. It will be granted by competitive bidding, the European Union’s executive arm said in a news release.

Under a two-way contract for difference, an electricity operator sells generation to the market and either pays or is paid for the difference between the market price and the strike price agreed in advance with a public entity. The company is entitled to receive payments when the market price is below the strike price. Under European Union rules, excess revenues should be distributed to consumers, with some flexibility for the government.

A contract for difference “stabilizes the prices by setting, in addition to a revenue guarantee, an upward limitation of the market revenues of the generation asset”, the Commission says on its website. “This is to ensure that producers do not gain windfall profits from excessively high market prices, while at the same time always having revenue certainty guaranteed by the government”.

Under the Romanian scheme, the strike price will be determined through the pay-as-bid mechanism, under which the generator is paid according to its bidding price, while the reference price will be set as a monthly output-weighted average of the market price of power in the day ahead markets.

“When the reference price is below the strike price, the beneficiary will be entitled to receive payments equal to the difference between the two prices”, the Commission said in the press release announcing the greenlight for the Romanian scheme. “However, when the reference price is above the strike price, the beneficiary will have to pay the difference to the Romanian authorities”.

Margrethe Vestage, executive vice president for competition policy at the Commission, said in a statement, “This scheme will also contribute to reduce Romania’s dependence on imported fossil fuels, without unduly distorting competition in the Single Market”.

The scheme has been approved under fair competition rules for state support packages. “The Commission found that the Romanian scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework”, the Commission said.

The framework, adopted March 9, 2023, supports measures accelerating the transition to net-zero greenhouse gas emissions and curbing reliance on Russian fossil fuels.

Amending and extending the earlier Temporary Crisis Framework adopted 2022, the new one allows the 27 EU countries to use the flexibility allowed under the bloc's state aid rules to cushion the economic impacts of the Russia-Ukraine war, including by providing assistance in the energy sector, as well as the sectors of agriculture, aquaculture and fisheries.

The new one was amended November 20, 2023, to prolong for six months provisions related to the Russia-Ukraine war.

Under the active framework, energy-related support, which could be granted till June 2024, EU states may partially compensate companies, "in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases", the Commission noted in the announcement of the Romanian scheme.

For renewable energy state aid, the framework allows “schemes for investments in all renewable energy sources, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field”, the Commission added.


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