Is the reduction of the RES-E quota a retroactive measure? /Energy

Law 220/2008 regarding the green certificates support scheme has been one of the most amended legal norms applicable in Romania.

This is rather peculiar as one may reasonably expect that a legal norm regulating a support scheme should, above all, enjoy long term predictability and transparency. Otherwise, the market participants would lose trust and, ultimately, withdraw their investments. The direct outcome is that future investors will be cautious, to say the least, when analysing business opportunities in Romania.

Lately, we have seen the first effects whereby one of the most important investors in RES-E market in Romania decided to dismantle its wind park, as its operation would have been cumbersome under the current and expected developments in the RES-E market.

But how did the RES-E market come to this and why are existent operators in the RES-E market confronted with such difficulties?

The main factor which triggered the shrinking of the RES-E market for all the participants came with the amendment of Law 220/2008 whereby the RES-E quota benefiting from support under the green certificates support scheme would be determined yearly by ANRE.

In the initial form of Law 220/2008, before its amendment in 2014, the RES-E quota was already established for each year until 2020 and provided progressive quotas starting from year 2008 [i.e. 2008 – 8.3%, (...), 2015 – 16%, 2020 – 20%].

The support scheme itself comprises the allocation of a certain number of green certificates, depending on the renewable source falling under the ambit of the support scheme, coupled with a mandatory quota of RES-E electricity which is benefiting from support. Thus, the support scheme granted the title – the green certificate with a minimum and a maximum trading value but also the certainty that such green certificates would be purchased by the electricity suppliers up to certain, predetermined thresholds.

The sole allocation of green certificates without a correspondent mandatory purchase quota would have triggered the impossibility of trading the green certificates, as no buyers would have purchased them without an obligation of doing so.

Hence, it is clear that the support scheme should be viewed through its two interdependent elements – the allocation of green certificates and the possibility of their trading. Conversely, the support scheme would be ineffective.

In light of the foregoing, the manner in which the amendment of Law 220/2008 has been done with respect to 1) the allocation of green certificates and 2) the reduction of the RES-E quota appears to be inconsistent.

Mainly, the inconsistency regards the manner in which the amendment of the two elements affected the market participants. As opposed to the reduction of the green certificates, which would apply only to those RES-E producers that obtained the accreditation after the reduction of the number of green certificates, the reduction of the RES-E quota would apply to all.

Therefore, the support scheme was affected to the core. Currently, it does not even matter anymore whether a producer was accredited on the initial or on the further reduced number of green certificates, since the difficulty of not being able to sell the green certificates applies to everyone. This is why the current market participants face difficulties, irrespective of their entitlement to a reduced number or not of green certificates.

Consequently, since the support scheme may not be divided in its two basic interdependent elements, their effects further to any amendment should not apply differently either.

Thus, a RES-E producer that obtained accreditation on a support scheme which granted a certain number of green certificates coupled with a predetermined RES-E quota (i.e. progressive until year 2020) should neither be affected by the subsequent reduction of the green certificates nor by the reduction of the RES-E quota.

The latter situation should only apply to those RES-E producers which joined the support scheme after its amendment (i.e. reduction of the number of green certificate and/or reduction of the RES-E quota after the amendment of 2014).

In this context, the effects of RES-E quota reduction in a way that is different from the reduction of the green certificates number appears to be retroactive, as it affects market participants which joined the support scheme before the amendments too.

Publishing date: 23.08.2015

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