The Ministry of Energy of Romania approved the subsidy mechanism for contracts for difference (CfD) for wind and solar power projects that win support at upcoming tenders. Total quota for two rounds this year and next is 5 GW.

A contract for difference or CfD is a model of state aid ensuring the stability of income for investments in green energy production. Usually after a competitive procedure, project operators receive an agreed price per megawatt-hour.

The idea is to achieve very small profitability, but the renewable electricity plants can keep working after the determined period. One other option is to allow developers to compete with one part of the proposed project and sell the remaining output in the free market.

With a CfD, if the market price of the electricity that it sells is lower than the agreed price, the producer receives the difference. But if the market price is above the threshold, the company returns the surplus.

The Ministry of Energy of Romania approved the subsidy mechanism for contracts for difference for wind and solar power projects that win support at upcoming tenders. The government plans to enable CfDs for 5 GW in total. It set the target in the National Recovery and Resilience Plan (NRRP or, in Romanian, PNRR).

The contracts are for 15 years, for projects with at least 5 MW in planned capacity.

Romania to hold auctions this year for 1.5 GW

The plan is to hold the first round of tenders by the end of the year, for 1 GW of onshore wind power and 500 MW of photovoltaics. The call is late – it was supposed to be published months ago – and the ministry seemingly halved the solar power quota.

It envisages another auction by the end of the third quarter of next year, for 1.5 GW of onshore wind and 2 GW of PV capacity.

The Ministry of Energy previously determined the starting (maximum) prices at the first auction at EUR 91 per MWh for solar power and EUR 93 per MWh for wind. The developers with the lowest bids win CfDs within power purchase agreements or PPAs.

EU’s Modernisation Fund to cover CfD subsidies

The government approved the general framework for the state aid scheme in April. The subsidies are from a EUR 3 billion package from the European Union’s Modernisation Fund.

The European Commission gave the green light in March. Notably, it didn’t allow the support mechanism to cover regulatory and transmission expenses for electricity consumers. It means an additional item on power bills, but only four euro cents per MWh. It translates to 14 euro cents per year for households with a consumption of 300 kWh per month.

However, if the sum runs out, the costs could spill over to citizens, firms and institutions.

Romania is also preparing a massive subsidy mechanism for energy storage projects.