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RES DEPLOYMENT LEGAL INSIGHTS: PROPOSED OVERHAUL OF GRID CONNECTION RULES

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6 februarie 2024

Author: Tatiana Fiodorov, Managing Partner Fiodorov & Partners

On 1^st February 2024 National Energy Regulatory Authority (the “ANRE”) has published for public consultation the Draft Order approving the Methodology for the allocation of electricity network capacity for the connection of electricity generation sites, as well as amending and supplementing some orders of the President of the National Energy Regulatory Authority in the field of connection of users to the public electricity network (the “Draft Order”). The primary objectives of the Draft Order include the following:

The revision of provisions of the Regulation for the connection of the users to the public interest grid (the “Grid Connection Regulation”)^[1] concerning the establishment of financial guarantees to be provided for the grid connection permits (the “ATR”) issued for consumption and/or production sites with installed capacities greater than 1MW.

For additional information, kindly consult the details provided in Section A.

The implementation of the provisions of Article 25(2²⁾ of the Law on Electricity and Natural Gas No. 123/2012 (the “Energy Law”)^[2], which states that “If network operators do not have sufficient capacity to connect all the electricity generation capacities for which connection has been requested, they may apply market-based methods of allocating existing capacity to networks, according to the regulations approved by ANRE”. The new rules aim to allocate available grid capacity through market-based methods and promote a mechanism that ensures a competitive environment.

For additional information, kindly consult the details provided in Section B.

The revision of the Grid Connection the Regulation provisions regarding the ownership right over the transformer station for connection of generating sites with a voltage equal to or greater than 110 kV.

For additional information, kindly consult the details provided in Section C.

Stakeholders are invited to submit their comments on Draft Order to ANRE within a 30-day period as of the publication date. For information on contact data, kindly consult the Section D.

A. BONDS FOR THE GRID CONNECTION

As per the currently applicable legal provisions of the Connection Regulation, in case of a production site with an installed capacity of more than 1MW and for the grid connection of which grid strengthening works are required, the investor has to provide a financial guarantee (the “Financial Guarantee”) in the amount stipulated in the ATR, where the amount represents a certain percentage (up to 20%) of the grid connection tariff (the “Grid Connection Tariff”).

As per the provisions of the Article 9 of the Methodology for setting the tariffs for connecting users to the public interest electricity networks, approved by means of the Order No. 11/2014^[3], the Grid Connection Tariff for consists of 3 (three) components TI, TR and TU as follows:

Grid Connection Tariff = TI + TR + TU, as follows:

TI is the share of participation in the financing of grid strengthening works on the electricity network, necessary for the discharge of the power approved to the investor, should such reinforcements be necessary (the “Grid Strengthening Works”); The Grid Strengthening Works represent the works in the installations of the network operator, necessary to ensure the technical conditions for the discharge of the additional power approved for the connection of the investor. The Grid Strengthening Works also include the automation equipment and the communication path foreseen in the installations of the network operator to achieve the operational limitation;
TR is the component corresponding to the realisation of the connection installation (the “Grid Connection Installation”); The Grid Connection Installation represents the electrical installation between the connection point^[4] to the public grid and the delimitation point^[5];
TU is the corresponding component: (a) checking the user’s installation file and powering up the installation; b) verification and certification of the technical conformity of the PV Project with the requirements of the technical regulations in force (the “Analyses Component”).

Prior to the amendments of the Connection regulation by means of Order No. 4/2023^[6], the ATR has been valid until the issuance of the connection certificate, and could have early terminate its validity if, within 3 (three) months as of its issuance date, the investor did not constitute the Financial Guarantee.

As of 3^rd February 2023, up to the present, the law lays down that the investor is required to provide the Financial Guarantee mentioned in the ATR until the execution of the grid connection agreement, which means that the term for providing such has been extended from 3 (three) months) to maximum 12 (twelve) months as of the ATR date.

At the present, the Draft Order aims to change the principles above in 3 main perspectives:

scenarios in which the financial guarantee is required	The Draft Order aims to establish the obligation for grid operators to require, when issuing ATR for generation sites/consumption sites and production sites with approved consumption and/or evacuation capacities greater than 1 MW, that applicants provide financial guarantees in favour of grid operators, regardless of whether or not the connection solution provides for reinforcement works to be carried out upstream of the connection point.
the percentage of the financial guarantee	The Draft Order aims to establish a fixed percentage of 5% of the Grid Connection Tariff for the amount of the financial guarantee lodged by the applicants.
the due date for the financial guarantee payment	The Draft Order aims to set the obligation for applicants to provide a financial guarantee before the issue date of the ATR;

Regarding temporary regulations, the provisions on the Financial Guarantee included in the Draft Order (if entered into force) will be applicable for the grid connection applications from investors for which, by the date of entry into force of the Draft Order, no ATR has been issued. In the converse, it is important to note that power plants for which an ATR has already been issued will not be obligated to furnish a Financial Guarantee up to the grid connection contract date. Consequently, should the Draft Order enter into force, projects lacking financial viability for which the ATR has already been issued will continue to block grid connection capacity until the expiration of the ATR or of building permit, potentially resulting in delays and uncertainties in the release of capacity.

B. GRID CAPACITY ALLOCATION AUCTIONS TO BE IMPLEMENTED AS OF 2025

The proposed order seeks to overhaul the grid connection process for projects surpassing 1 MW, moving away from the current first-come, first-served model to a capacity allocation system through auctions, where allocation is determined by the highest offered price. These auctions are planned to be held annually, guided by a methodology and a comprehensive global solution study conducted by the TSO to assess available capacity and grid enhancement requirements. The allocation period spans 10 years, starting from the second year after each auction. The implementation of this mechanism is slated to commence in January 2025.

C. OWNERSHIP OVER THE TRANSFORMER STATION

The Draft Order stipulates that if the connection is planned to the grid with a voltage exceeding 110 kV, the newly proposed connection substation and line will be considered integral components of the transmission grid and meet the criteria for classification as reinforcement works. Regarding temporary regulations, these provisions will be applicable for the grid connection applications from investors for which, by the date of entry into force of the Draft Order, no ATR has been issued.