Ahead of the first auctions in Romania, representatives of renewable energy companies proposed changes in the draft contracts-for-difference mechanism to the Ministry of Energy to reduce project development risks.
The Romanian Government is preparing the first call to renewable electricity auctions within a contracts-for-difference (CfD) support scheme. According to the draft, competitive bidding will be held before the end of the year for solar and wind power capacities of 1 GW each, followed by another 3 GW in 2025.
By 2030, the authorities plan to award agreements for 10 GW in total for the two technologies. The renewables industry has proposed changes, aimed at lowering project development risks, to the Ministry of Energy and called for discussions, e-nergia.ro reported.
CfDs can also be awarded without auctions
Under CfDs, the government will pay the difference to the selected companies between their winning bids from the auctions and the market price for each megawatt-hour that they sell. Conversely, when market prices are bigger than the producer’s price accepted in an auction, the producer pays the spread amount to the government.
The group of companies said the impact of interruptions, limitations and balancing costs need to be taken into account in determining the ceiling prices for the upcoming auctions
The framework also allows direct negotiations on contracts for difference, without auctions, like in the case of the two more reactors that are planned to be built in the Cernavodă nuclear power plant.
Investors want protection from negative prices
Among other demands, the industry wants CfD holders to have priority access to the network and no production limits, the article adds. Its representatives argued that new legislation no longer gives priority to purchases of renewable energy.
The Romanian electricity market experienced its first negative prices this year
Furthermore, companies in the sector warned that the CfD model doesn’t stipulate any payments when market prices are negative. It means the producer would either have to pay for its electricity to be offtaken or halt the operations of the facility. The Romanian market experienced its first negative prices this year, attributed mostly to the rapid rise in solar power capacity on the grid and the lack of energy storage systems.
The group suggested to resolve the issue by determining a minimal price that CfD beneficiaries would be entitled to in case of prolonged periods of prices holding below zero. Such risks should also be taken into account when setting the ceiling price for the auction, the companies stressed.
Starting auction price shouldn’t be lower than EUR 120 per MWh
Renewables developers asked for the starting price to be at least EUR 120 per MWh, citing balancing costs and the possibility of outages and limitations. They added that energy storage should be included in the mechanism alongside production facilities. They also asked for the minimum capacity per contract to be above 20 MW.
Highlighting the conclusions from the public discussion process, investors said the guarantees that auction participants must submit should be in the range of EUR 10,000 per MW to EUR 20,000 per MW and that the sum for timely EUR 50,000 per MW to EUR 100,000 per MW for a timely completion and functionality.