The Romanian Digest

Creating renewable energy in Romania

de Rubin Meyer Doru & Trandafir     The Romanian Digest
Luni, 17 noiembrie 2008, 13:42 English | Press Review

Renewable energy sources (E-RES) increase the diversity of energy supplies and will most likely replace the world’s diminishing supply of fossil fuels (coal, natural gas and petroleum). The use of E-RES resources instead of fossil fuels can substantially reduce greenhouse gases, mostly CO2 and other pollutants. The use of renewable energy also increases the economic independence of users that develop such energy sources. Energy dependence on politically unreliable sources can be vexing. For example, the EU is dependent upon Russian gas and Russia uses that dependence for political leverage to prevent the EU from taking stronger positions against Russian hegemonic activities in places such as Georgia and Moldova.

The EU’s first act to reduce greenhouse gas emissions was Directive 2001/77/EC of the European Parliament and Council on the promotion of electricity produced from renewable energy sources in the internal electricity market. Romania first implemented in its own legislation similar to Directive 2001/77/EC with GD no. 443/2003 with modification of GD no.958 / 2005. Romania’s goal is to produce by 2010 the equivalent of 33% of its gross national electricity consumption requirements soley by renewable energy sources.

Romania has been developing a number of E-RES projects based upon wind energy in particular. For example, Ramia Eol intends to create a windmill park in Marisel, Cluj district, while in Dobrogea, CEZ and Eolica Dobrogea intend to develop their own wind energy businesses. Investors targeting wind technology assert that the income from a windmill park is higher than that of a classic real estate investment as the operational costs are less.

The general legal framework for energy production in Romania is set forth in Law 13/2007 – the electricity law (the “Electricity Law”) which also refers to and enumerates renewable energy sources such as wind power, solar energy, tidal and wave energy, geo-thermal energy, hydroelectric energy, biomass energy, etc.

Creating an E-RES Facility
To create a new E-RES facility in Romania, interested firms must fulfill certain requirements and obtain a number of documents and authorizations from the institutions and the local authorities authorized to provide them. Investors must secure from local administration authorities a city planning certificate (which includes a list of required documentation) and a construction authorization. These two documents apply to all constructions, not just E-RES facilities.

In accordance with Article 13 of Law 13/2007, building new energetic facilities (i.e., facilities for the production of electricity), as well as updating existing technological facilities, is accomplished on the basis of an incorporation authorization. The incorporation authorization is the technical legal document issued by the National Authority for Energy Regulation (“NAER”), by which a natural or legal person, Romanian or foreign, is given the permission to build or to update existing technological facilities for electricity production. The incorporation authorization is necessary only for power units with installed power higher than 1MW. The NAER establishes the duration for which the authorization is granted, correlated with the duration of the construction and functioning of the facility and the terms taken from the applicant’s documentation.

According to Article 15 of the Energy Law, NAER issues incorporation authorizations for the establishment of E-RES and licenses for activities such as commercial exploitation of energy production facilities, transport, the provision and distribution of energy, etc.

The production, transport, service system, distribution and supply of electricity, as well as the activities of administration for the centralized markets of electricity are accomplished on the basis of licenses granted by NAER by which a natural or legal person, Romanian or foreign, is given permission to commercially exploit energy facilities. The term for which the license is granted is for 25 years for the commercial exploitation of electricity production facilities.

The Energy Law provides that no authorization will be granted to companies that are undergoing judicial reorganization, insolvency or bankruptcy, or to those that have been sanctioned by a competent authority with regard to the withdrawal of their authorizations or licenses for a period of 5 years prior to the registration date of the new request.

Authorizations and licenses are granted on the basis of specific fees, approved by order of the President of the NAER. The holder pays an annual fee to the competent authority during the license duration, including during any time while it is suspended.

Authorizations and licenses can be requested by both Romanian or foreign legal entities. A foreign legal entity may request an authorization/license necessary for its activities only if it has established, in accordance with the law, a secondary headquarters in Romania for the duration of the authorization/license.

To obtain the authorization, the law provides that the applicant must submit a request to the competent authority, that has appended to it all of the deeds and documentation that prove the applicant’s fulfillment of all of the economic, financial, technical and professional conditions established for energy facilities and activities in the field. NAER issues its decision to grant or deny the authorization/license within a maximum of 30 days from the date when it has determined that the documentation submitted by the applicant is complete according to the law and the applicant has paid all the taxes and presented proof of payment.

Document analysis
Upon the submission of the application with the requisite documentation, the competent authority must analyze the documents appended to the written request for authorization/ license and, where appropriate, respond in writing, no later than 15 days after receipt of the request, informing the applicant about the need to resolve any deficiency in the documentation, correcting it or supplementing it.

Where appropriate, considering the quality and complexity of the data provided by the applicant, the competent authority may decide to convene a meeting with the applicant’s authorized representatives to clarify certain aspects of the submission that are not clearly described in the documents provided. They may also decide to hold an on-site verification of the accuracy of the data presented by the applicant. The conclusions of the verification are written down in minutes to be signed by both the applicant and the representatives of NAER.

In the event that within 60 working days from the date of the submission of the written request for the authorization/license, the applicant fails to provide to the competent authority the appropriate documentation requested (i.e., the data that was previously missing), the competent authority has the right to reject the applicant’s documentation and remove the request for registration from its work schedule.

After examining the applicant’s documentation, the NAER creates a report that includes a decision to issue or to refuse the issuance of the authorization/license setting forth the grounds, and a statement as to when issuance is deemed feasible and providing the period during which the authorization/license is valid. The report is presented to the Regulatory Committee of the competent deciding authority in a public session for approval. The place and date of the public meeting must be noticed at least five days in advance in the Public Meeting Schedule on the competent authority’s web page and by letters addressed to the applicant and to other interested parties.

NAER must also make available to the applicant or any other interested party the report to be submitted for approval to the Regulatory Committee. This report should also include the same information that will be mentioned in the authorization/license.

If the competent authority proposes in its report to issue the authorization/license, it prepares the accompanying conditions that will constitute an integral part of the document. The accompanying conditions are supplied to the Regulatory Committee which decides upon any amendments. The accompanying conditions have to abide by the relevant legislation. They contain obligations for the applicant, the description of the energy facilities for which it is granted, the territorial delimitation where the applicant has a right to develop its activity, the period for which the license will be valid, the rights of the applicant, interdictions, restrictions and duties of the applicant, conditions for the amendment, suspension or withdrawal of the authorization/license, and conditions under which the competent authority may sanction the applicant.

The Grant or Refusal of the Authorization/License
The report on the authorization/license application and any added terms are presented at the public meeting of the Regulatory Committee, whose proceedings are recorded on a CD to be archived and kept for at least 5 years. The decision on the issuance of the authorization/license is given upon a majority vote. The decision of the President of NAER is then forwarded to the applicant no later than 5 business days after the vote and is registered with the competent authority on the President’s decisions list, which is available on their web page.

The refusal of the competent authority to grant a license or an authorization, the lack of a response within the proper term and any other resolution of the competent authority that is considered by the applicant to be illegal or damaging, may be challenged at the Bucharest Court of Appeal, in the Administrative Litigation Department. In case the circumstances and conditions existing at the date of the issuance of the licenses and authorizations change, they are to be amended, in accordance with Article 22 of the Electricity Law.

Obligations of Incorporation Authorizations and Licenses
The holder of the incorporation authorization has the obligation to establish and apply measures that will protect persons, goods and the environment, as well as the obligation to obtain all the necessary approvals, accords and permissions required by law to accomplish the authorized energy-related activities. During the period of the license, its holders are obligated to maintain all of the conditions under which the license was granted, retain separate accounting records for each activity that is the object of the license, prepare and preserve financial warranties that permit the development of the activity and the assurance of the continuity of the service, and supply to the competent authority all of the necessary information for the development in good condition of the approved activity. The holders of incorporating authorizations and licenses have the obligation to abide by all the provisions and requirements that are established by the NAER in the licenses and authorizations and through any other specific provisions.

The Suspension and Withdrawal of The Authorization and License
If the holder of an incorporation authorization or a license, does not fulfill the obligations imposed on it in the respective authorization/license, the NAER may grant an additional term during which the applicant can fulfill his obligations, if the situation can be remedied, withdraw the authorization/license, if the situation can not be remedied or suspend the authorization/license for a period of time. The competent authority may also suspend the incorporation authorization/license if a general bankruptcy procedure is begun involving the holder. It also has the right to withdraw the incorporation authorization/license if the concession or rental of the energy facility ends or is cancelled or if it is sold by its owner.

The Obligations of Energy Producers
Energy producers have the following main obligations provided in the Electricity Law:

    *      to ensure the delivery of electricity under the terms imposed by the licenses, contractual provisions and in force legal provisions;
    *      to offer without discrimination all the electrical power available, and electricity and system technology services; and
    *      to fulfill from an operational point of view all of the requirements of the system and transport operator.

The Rights of the Energy Producers
Energy producers who comply with the provisions of the Electricity Law have the right to access electricity networks, and obtain and install their own cable infrastructure. They can establish their own prices for the services provided and adjust them according to the offer and request and they can also establish and maintain their own system of telecommunications with their production facilities, with the clients or with management.

Accession to the European Union forced Romania to adopt an energy scheme that obligates utilities to purchase annually from the producers of renewable energy a mandatory amount of energy to be sold to end users. Furthermore, since rural areas in Romania are still somewhat underpriced in comparison with land in other parts of Europe and investors can benefit from the European legislation in the field of E-RES -- which encourages and offers support to the production of this type of alternative energy -- Romania has seen a massive influx of investments in this area. These investments will support and strengthen Romania’s position as a net electricity exporter in a global environment where most countries are electricity importers.

The article was published based upon approval of:
Rubin Meyer Doru & Trandafir

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