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27 de noviembre de 20237 minute read

Romanian renewable energy market – what’s changed and where is it heading?

Following the European Commission’s REPower EU initiative in May 2022, the Romanian renewable energy market has found itself lagging behind the development milestones set at both European and national level. According to Eurostat, in 2021 Romania had only a 23% share of renewable energy sources (solar and wind) of total installed capacity, significantly below the EU’s target of 42.5% by 2030.

This has, in turn, led to a push from both investors and regulators to identify and eliminate the obstacles that have historically affected project development. Significant (but inconsistent) steps have been taken over the past two years, all of which continue to generate debates between the actors in the market.

 

Significant regulatory changes – and the side effects

One of the main obstacles and delaying factors in the development of renewable energy projects is the lengthy and heavily bureaucratic authorisation process of the construction works. They are largely due to outdated regulations which came into force in the 1990s (when Romania switched to a market economy). So they’re unfit or inconsistent in addressing the specificities of renewable developments.

In this respect, the legal framework has been significantly amended – amendments that were supposed to facilitate and speed up the permitting process for renewable energy projects. But the results are somewhat mixed.

The regulatory changes affecting renewable energy projects started in July 2022 with the Land Law no. 18/1991, effectively ending a period of uncertainty on the possibility of developing renewable projects outside buildable areas. But the amendment came with a new 50 hectare limitation and an unclear wording on how this area is determined. Developers have been consistent in interpreting this limitation as referring to the affected areas of the land plots (eg parts removed from agricultural circuit). But the lack of an express legal wording has led, in practice, to delays on the authorities’ side and inconsistent applications. Additionally, while no regulations were in place expressly restricting or prohibiting multiple developments outside buildable areas, investors could consider structuring their developments in separate 50 hectare projects (authorised as independent objectives, separate from each other).

The same law also gave a regulatory basis to the “dual use” concept (also known as agrivoltaic). It essentially allows agricultural land (save for that categorised as arable) to be used in a dual system, both for producing energy from renewable sources and for agricultural production. This allows for only the land effectively occupied by the developed objectives to be removed from the agricultural circuit, while the rest can remain designated for agriculture. At first sight, this concept seems easy to understand, especially by investors whose presence is spread across the globe and who may already be accustomed to it in other jurisdictions. But reality taught us that for the public authorities involved in the permitting process, its clarity and application are still rough around the edges.

In January 2023, construction regulations were also amended to eliminate one of the most costly and time-consuming steps of the works authorisation process – the requirement for approval of planning documentation (PUZ) when developing renewable project outside buildable areas. This change effectively reduces the overall permitting process of projects by around 6 to 12 months and saves investors the costs related to PUZ (drafting, obtaining endorsements and approval).

However, what these regulations omitted to expressly regulate is the solution for projects exceeding 50 hectares, where a PUZ for transferring the land to the buildable area was still required. But the lack of express legal provisions on the matter has again led to a conservative approach by some authorities, who are reluctant to approve projects over 50 hectares.

The most recent regulatory change came into force in June 2023, eliminating the requirement for a PUZ, regardless of whether the land is located inside or outside buildable areas. The same law also allows for multiple investment objectives (which adds to the inconsistent approach, as it lacks a legal definition in that context) to be developed on a single plot of land, as well as allowing investors to obtain multiple building permits for each objective, based on a single urbanism certificate. These new provisions do not provide any exclusions on the type and placement of investment objectives which could be developed on a single plot of land, so they could be interpreted as an implicit recognition that multiple, independent renewable energy projects (each falling within the 50 hectare threshold) could be developed on the same or neighbouring plots, outside buildable areas.

As a result of all these recent changes, the authorisation process of the construction works can now completely skip the planning documentation phase (eg approval of Zonal Urbanism Plan – PUZ) and start directly with the building permit phase, regardless of whether the land is located outside or within the buildable area of a locality.

However, the discussions on renewable energy development regulations are far from over, as after a long process, Romania is preparing to bring into force a new Urbanism Code, which is expected to replace the major and numerous construction regulations – with the current Code draft far from having achieved its objectives of clarification and streamlining. As the draft is still being challenged and subject to amendments, we expect to see strong debates on its impact in the next 6 to 12 months.

 

Code of Good Practice for Renewable Energy – an example of cooperation

While the formal legislative process can be convoluted and inconsistent, (sometimes) raising more issues than it manages to solve, private sector initiatives could be used as an example of how developers and regulators can cooperate to achieve their common interests (in this case, hitting renewable energy milestones).

Such is the case with the 2023 Edition of the “Code of Good Practice for Renewable Energy in Romania,” a project initiated by the Romanian Wind Energy Association (RWEA) and the Romanian Photovoltaic Industry Association to provide guidance to existing and potential investors in the renewable energy market, also co-written by the DLA Piper Romania Real Estate and Energy teams.

The Code represents a step forward, as it entailed the cooperation and contribution of a significant number of authorities with attributions in the energy sector (such as the Minister of Energy, National Authority for Regulation of Energy and the Competition Council), energy distributors (such as Transelectrica and the Association of Energy Utility Companies), international renewable energy developers and financing institutions (such as the National Bank of Romania, EBRD, EIB and World Bank), all of whom aligned their positions and gave extensive but structured insights into the progress and expectations from the renewable energy market.

Although the Code is prepared in relation to the Romanian legislation market, we would highly recommend it for any investors interested in the EU region, as the insights in it may be relevant in a regional context – read the English version of the Code here.

 

What comes next?

Although consistent steps have been taken to move procedures from complex to simple, there’s still more work to be done and measures to be taken. It’s true that, with respect to any process, each of the parties involved has a determined role, experience, skills and liability. But, in this specific case, the collaboration between the public authorities and the market players is essential for a deeper understanding of the renewable energy market and its actual needs.

Following a better understanding of the factual situation, the next important step is to align all the relevant pieces of legislation, to leave as little room as possible for interpretation – the ultimate purpose should not be to go to court for a third party to establish which is the correct interpretation, but to have no need for an interpretation altogether.


1 Renewable energy statistics - Statistics Explained (europa.eu)

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