Interest for long-term power purchase agreements (PPAs) in the Romanian market is high, especially as more renewable projects are expected to come on line soon, but regulatory instability, credit uncertainty and the lack of a guarantees of origin (GOOs) market pose challenges in their development.
The Romanian government has introduced about 15 separate interventions in its electricity market from 2021 until recently, while it is working on another one, Romanian Energy Suppliers' Association Afeer board member Radu Luca said at the Energy Trading Central and South Eastern Europe conference in Vienna today. The government is also expected to change soon, causing further regulatory instability and affecting commitment to long-term agreements. Both producers and offtakers need to understand the regulatory environment before entering a 10-year agreement, Ukrainian trading company D Trading's head of origination Martin Kreuzberg said during the panel discussion.
The introduction of the regulated centralised power purchasing platform at the beginning of the year has posed significant challenges to participants so far in 2023. This measure is expected to end in March 2025, but if deemed unnecessary, it might be repealed earlier, Romanian law company CMS Law's deputy head of CEE projects Varinia Radu said at the conference today. Despite the legislation not affecting new renewable plants, it gives the wrong signal to investors, she added.
But credit uncertainty is also another challenge for the spread of PPAs in the entire region. Credit issues result in parties having to provide higher collaterals and negotiations lasting longer, curbing PPA activity, Kreuzberg said. Price volatility also adds to the risk, he added.
Another challenge specifically associated with the Romanian market is that the country is not a member of the Association of Issuing Bodies (AIB) and GOOs are not tradable in the Romanian market. This limits PPAs in the country, as renewable producers cannot transfer GOOs to offtakers, Luca said. The country is working towards becoming an AIB member and plans to launch a separate internal GOOs trading market, Radu added.
Despite these challenges, interest in PPAs in Romania remains high, especially since a large number of renewable projects is expected to come on line within the next year. Romania wants renewables to meet 30.7pc of its power demand by 2030.