EGO 24/2017 to modify Law 220/2008 on the support scheme for electricity from renewable sources /Energy

It is undebatable that Law 220/2008, as it was before the enactment of EGO 24/2017, needed changes because its provisions were distorting the RES-E market.

Consumers, large or small, producers and electricity suppliers were all dissatisfied with the situation they were facing. I believe that Law 220/2008 was part of an exclusive group of enactments in Romania, capable to discourage all its participants. This is even more peculiar when considering that Law 220/2008 aims to provide a support scheme to encourage clean electricity and the environment.

Although the anticipation was great for these amendments to Law 220/2008 and that the general feeling is that the amendments were better thought through this time, it might be that they will not be able to bring order to a sector which already faced great difficulties.

Firstly, note should be made that the RES-E support scheme is at its end. No further accreditations to adhere to the scheme can be obtained after 31 December 2016. Consequently, at this moment in time, we should have already been in front of a mature sector, where both RES-E electricity and related green certificates should have been traded per Article 23 (1) of Law 123/2012 – electricity transactions must be carried on the competitive market, transparently, publicly, centralised and non-discriminatory.

So why the need for further amendments? The previous eight (8) amendments, all implemented by Emergency Government Ordinances, were not enough to set the RES-E sector on the right course whereby the underlying principles be observed?    

It would appear that the Government – at this stage, thinks those amendments were not enough and a further fine tuning was necessary, to protect consumers, producers and suppliers alike.

Thus, EGO 24/2017 was implemented. But the Government did not choose to clarify the previous discrepancies. It went boldly to introduce new mechanisms, definitions, trading markets and, of course, new interdictions. All of these, again, at the end of a support scheme presented to the RES-E sector back in 2008. It was therefore not enough to change the rules during the game, now the rules are changed even after the game ended.

Although we do not advocate that changes were not needed, after all the discrepancies induced with the previous amendments to Law 220/2008, we do not however understand how the new static yearly quantity of green certificates, the anonymous centralized market for green certificates, the centralized market for RES-E electricity and the average impact of green certificates to end consumer will put Law 220/2008 on the course whereby the competitive market, transparency, publicity, centralised and non-discriminatory principles are preserved.

For example, how can we speak of competitive market when the green certificates should be traded between a minimum and maximum values but, at the same time, such green certificates may not impact the invoice of the end consumer by more than 11.1 euro/MWh. The two limitations are redundant if the RES-E sector would have been matured and the mechanisms already provided in the early versions of Law 220/2008 – overcompensation, RES-E quota, green certificates quota were applied.

Furthermore, although sounds nice - the anonymous centralized market for green certificates, it may be that this market will have a residual added value to the RES-E sector. Being at the end of the scheme, whereby most of the RES-E facilities were developed with different credit facilities from banks, most of the RES-E producers have in place long-term GCPAs which should not be affected.

Hence, the anonymous centralized market for green certificates might present interest only for the RES-E producers which need to supplement their green certificates should they not be able to cover the number of green certificates they need to sell to their suppliers during a certain month. Another possible utility of this anonymous market may be for those RES-E producers which concluded GCPAs with traders, which further to EGO 24/2017 might have great difficulties in participating to green certificates markets.

Another measure, which appears to be beneficial, is the extended validity period of the green certificates and the relief offered to the producers, that the green certificates will achieve value once they are traded.

Nevertheless, these will be ineffective if the producers will not be able to sell them. It is expected that the static yearly quantity of green certificates will not cover the entire issued green certificates. We need also to consider that many green certificates have already piled up in the suspension period. It almost makes no sense how many green certificates the different technologies receive, as long as the respective RES-E producers – for example, will be able to sell only one (1) out of the six (6) green certificates received, and at a value which is not certain.

The Law 220/2008, in its initial concept, was having the appropriate tools to correct the market and offer protection to the consumers. Indeed, the RES-E market registered an accelerated growth after year 2011, but this was expected because the market was in its incipient phases. Unfortunately, before the correction tools were supposed to kick in, the Government intervened and disrupted a support scheme of which balance was never recovered again.

The RES-E sector is far from that envisaged balance whereby consumers, producers and suppliers participate in a fair, transparent and competitive manner. If the authorities have this constant desire to implement innovative tools and mechanisms, maybe they should have considered, at this stage, the replacement of the green certificates scheme with a feed-in tariff.

In this way, we should have had an enactment – not longer than 3 pages, with clear provisions, easy to understand by all interested parties. Instead, we have a support scheme so complicated than nobody can say for sure how it will work.

This insecurity has led to uncertainty which made consumers reject the support scheme, the producers to play catch up trying to maintain their businesses and suppliers which cannot make a business plan in relation to the purchase of green certificates (translated in months with high demand in green certificates and other months with almost insignificant trading).

Publishing date: 09.05.2017

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