Romania bets on both renewables and gas

Romania completed its second renewables auction in August and ~1.5 GW of solar PV and ~1.3 GW of onshore wind projects secured winning bids. The average exercise price for onshore wind bids was close to 74 euros/MWh and just over 40 euros/MWh for solar PV. 

A total of 4.2 GW of wind and solar capacity has now won subsidy contracts under a Contracts for Difference (CfDs) scheme in the first two auctions. This surpasses the national target of 3.5 GW set under Romania’s Recovery and Resilience Plan (RRP).

Aurora Energy Research said in a note published on 24th September that increased costs and stricter eligibility rules constrained wind participation in the second auction, which fell short of the 2 GW wind target. Romania’s third renewables auction will focus only on wind energy.

Romania targets 38% renewable energy in gross final energy consumption by 2030 and 44% by 2035. This compares with a renewables share of around 26% in 2023, from when the most recent data is available.

Eugenia Gusilov, director & founder at the Romania Energy Center (ROEC), tells Gas Outlook she is optimistic that the the projects selected in the second auction will be built and that Romania will reach or even exceed the renewables targets.

“These are de-risked projects, projects sheltered from the whims of the market, since CfDs offer a guaranteed price, “ she said, adding that Romania is no longer a new market for renewables.

“It is a developed market. You have the legal framework in place. The developers have the experience. They know what to do, what authorisations and permits are required. They have done it before, so there should be no surprises in this area.”

Monica Cojocaru, a Bucharest-based partner with law firm Schoenherr, also takes an optimistic view.

“I am confident that all projects having been awarded a CfD contract will come to life, as investors had to put significant performance guarantees and as such should have passed final investment decisions. The CfDs would ease access to project financing, which generally is difficult to secure merchant only,” she says.

Faster permitting needed

Renewables development in Romania is not without obstacles though and slow permitting remains an issue.

“The competent authorities could do a faster job. Oftentimes, this process is unjustifiably delayed. By the time you gather all the permits, the first ones issued may be expired and you have to restart the process all over again for the documents which have expired. Investors would most certainly appreciate a much faster working culture in state institutions, so that good projects are not unnecessarily delayed,” says Gusilov.

Cojocaru says there are still challenges to meet commissioning deadlines assumed under certain permits and agreements with the grid operator, but that there is flexibility around getting those extended subject to additional financial commitments from the developers.

“The construction phase does have its own challenges, in particular for wind projects, but nothing that would be a permanent blocker,” she said.

Gas production on the rise

Romania is also a producer of natural gas and in 2024 the country produced around 10 bcm, according to Eurostat. One question is if the renewables expansion will free up more gas for exports, particularly when OMV Petrom’s Neptun Deep project comes online in about 2 years’ time. First gas from Neptun Deep is expected in 2027 and the field will produced bcm/year once plateau is reached, according to developers OMV Petrom and Romgaz.

However, there are signs Romania may need a large chunk of these additional volumes for the domestic market. The country’s grid operator, Transgaz, has predicted that gas demand in Romania will increase in the coming years as chemical and fertiliser plants reopen and power generators switch from coal to gas.

Natural-gas fired power plants projected to come online in this period are the 1.7 GW Mintia project, owned by Mass Group Holding, a Jordan-based company run by Iraqi businessman Ahmed Ismail Saleh, two CCGTs with a combined capacity of around 1.3 GW  at Isalnita – owned by a subsidiary of Alro and Complexul Energetic Oltenia – and Turceni (also Oltenia). Additionally, Romgaz is building the 430 MW Iernut CCGT plant.

“These projects alone cover 5 bcm of new gas consumption per year,” says Gusilov. “That is in addition to what Romania is currently consuming. Then, Romania has the ambition to cover the entire natural gas consumption of the Republic of Moldova, which is 1 bcm/year. The country also has plans to restart production at some fertilizer plants and is going ahead with connecting new residential areas to the gas grid.”

Offshore wind on hold

Romania has set a target of 3 GW for offshore wind by 2035 but does not seem to be in a hurry to get the first projects built. Black Sea development is also being hampered by the war in Ukraine which brings about additional risks for investors.

“Romania is biding its time, preparing and hoping for an end to the conflict in Ukraine, sooner rather than later,” says Gusilov.

The regulatory framework also seems some way off. Romania’s Wind Offshore Law came into force on June 7, 2024 but other milestones have not been reached.

“Now, the secondary legislation has to be developed. In parallel with this, the government has to organize a tender for offshore wind in the Black Sea. This it has not yet happened,” says Gusilov.

Although the deadline passed in September last year, the energy ministry has yet to contract a perimeter study for offshore wind. Gusilov says the study is important because it will set the boundaries of perimeters to be put up for auction, establish the fiscal framework – taxes and royalties to be paid by investors – as well as advance some proposals for state-aid support schemes.

(Writing by Andreas Walstad; editing by Sophie Davies)