The new mechanism, which is expected to go live as of 1 January 2025, builds on existing principles in the Energy Law, authorising grid operators to implement market-based capacity allocation methods where they lack sufficient capacities to connect all applicants.
Separately from the capacity allocation mechanism, the Draft Order puts forward an amendment to the financial guarantee system by extending the obligation to present financial guarantees to grid operators whenever the developers apply for technical connection permits (and not only when grid reinforcement works kick in).
The Draft Order was released for public consultation earlier this month. Interested parties may submit comments as part of the consultation process until 2 March 2024.
Capacity allocation auctioning sessions
Under the new rules, the transmission system operator ("TSO") will operate a dedicated auctioning platform for allocating available grid capacities in the 110kV and medium voltage networks of the distribution and transmission systems. Auctioning sessions will be open to producers for capacities greater than 1MW.
Auctioning rounds will be organised annually (year (N)) for the allocation of available grid capacity corresponding to a 10-year period, which starts to elapse in year (N + 2) (the "Allocation Period").
The auctioning calendar for year (N) will include: (a) publication by the TSO of available capacities (until 15 January); (b) applicants filing capacity applications (16 January – 28/29 February); (c) performance by the TSO of a global solution study determining required grid reinforcement works to satisfy all capacity applications (16 March – 15 June); (d) publication by the TSO of the auction announcement (including conclusions of the global solution study, available grid capacity – including that resulting from development works, amount of requested capacities, estimated value of annual grid reinforcement works required, auctioning price and date for each bidding session (until 15 June); (f) bidding sessions being held daily for allocating the capacity available in each year of the Allocation Period, in chronological order (from 1 July).
Available capacities in the transmission and distribution grids will be determined based on existing ANRE procedures. The TSO will publish on its website, by 15 January of year (N), all available grid capacities relating to year (N + 2).
The starting price will be set based on a global solution study prepared by the TSO, identifying additional grid development works required for meeting capacity allocation demand for each grid zone and for each year of the Allocation Period.
Capacity allocation contract
Applications for capacity allocation must be submitted annually between 16 January and 28 February for each zone of the power grids and for each year of the Allocation Period.
Applicants must pay a participation guarantee, equal to 1 % of the starting bid price multiplied by the requested capacity (MW). Upon execution of the capacity allocation contract, the pre-paid guarantee will be refunded to the successful bidder.
Successful bidders will enter capacity allocation contracts with the relevant grid operator. The contract price will be equal to the allocated capacity multiplied by the award price. The price will be payable in instalments, within four months from the signing date.
To ensure compliance with the obligations undertaken in the capacity allocation contract, both the grid operator and the producer will be subject to delay penalties equivalent to 0.01 % per day of the capacity allocation fee in the event of delays in commissioning grid development works (for the grid operator) or delays in energizing the facilities where the grid development works are completed (for producers).
New financial guarantee regime under the existing connection regulation
Separately from the capacity allocation mechanism, the Draft Order introduces amendments to the existing connection regulations. In particular, the obligation to provide financial guarantees to the grid operator is now extended to all cases when applying for connection permits, irrespective of whether the connection solution requires grid reinforcement works.
The financial guarantee due by producers will be capped at 5 % of the grid connection fee (as opposed to 20 % under the current regime) and must be paid to the grid operator before the issuance of the grid connection permit.
The new regime responds to the conclusions of a recent report by the Competition Council and ANRE assessing potential regulatory barriers to investments in the renewable energy sector. The report acknowledges the common occurrence of investors obtaining connection permits without genuine intentions to commission their projects into operation but rather to sell them as "ready to build". This practice has led to the artificial exhaustion of grid capacity and is deemed a potential obstacle for new investors seeking access to the market.
authors: Vlad Cordea, Cristina Olariu