Contract Mechanism for Difference

The Government of Romania has, through Government Decision no. 318/2024, adopted the Contracts for Difference (“CfD”) mechanism, which grants operating aid for the operation of low-carbon electricity generation capacities.

Main ideas

• Technologies eligible for the CfD scheme are those using onshore wind resources, offshore wind resources, solar photovoltaic resources, hydro resources, nuclear resources, hydrogen and energy storage.
• This type of aid is granted under state aid schemes or under ad hoc state aid (for electricity generation projects for which a competitive selection process cannot be applied due to the specific nature of the technology)
• Any CfD scheme or ad-hoc CfD state aid and any related CfD contract is subject to authorisation and a state aid clearance decision by the European Commission.

Parties:

• The CfD auction process will be managed by Transelectrica as operator of the CfD scheme.
• The Romanian electricity and gas market operator (OPCOM) will act as the CfD counterparty.
• The legal entity registered for tax purposes in Romania, which has concluded a CfD contract with the CfD counterparty, is a CfD beneficiary.
• The National Energy Regulatory Authority (ANRE) will be responsible for issuing the relevant secondary legislation in this area.
• The Ministry of Energy will have overall responsibility for the regulatory framework, as well as the obligation to ensure that the CfD liquidity fund has sufficient funds at all times to enable the CfD counterparty to meet its payment obligations to the CfD beneficiary in full.

Operating mechanism:

Operating aid is awarded in the form of difference payments for energy produced, measured and delivered via the National Electricity System (NES), which is the subject of the CfD contract, as follows:

• by the CfD Counterparty (OPCOM) to the CfD beneficiary, where the reference price is lower than the auctioned strike price.
• by the beneficiary to the CfD Counterparty, where the reference price is higher than the strike price.

Price:

• In the case of a CfD scheme, the strike price for a CfD contract is determined by a CfD auction; while in the case of ad hoc CfD state aid, the strike price for an ad hoc CfD contract is determined by negotiation.
• The exercise price for a CfD contract awarded through a CfD auction may not exceed the maximum exercise price specified in the order initiating a CfD auction.
• However, the CfD beneficiary will not receive payment for the CfD difference for the quantity of electricity delivered to the NES in all periods in which the price per settlement interval in the relevant wholesale market, or, as the case may be, the average price in the relevant wholesale markets used to determine the reference price corresponding to the delivered output, is negative.

The CfD beneficiary has, among others, the following obligations:

• to demonstrate to the CfD scheme operator, by means of supporting documentation, that the capacity proposed for the project consists of completely new electricity generation capacity.
• to report, on a quarterly basis, to the CfD counterparty, the status of the planning, permitting, licensing, construction and commissioning of the project and other information that must be reported to the CfD counterparty under the CfD contract and to provide any additional information requested by the Ministry of Energy and the CfD counterparty.
• to pay annually to the CfD counterparty the amount corresponding to the surplus profit obtained from the bilateral contracts established by the ANRE decision in the cases provided for by Government Decision no. 318/2024. 

Note: the first State aid scheme in the form of contracts for difference applies to onshore wind and photovoltaic solar renewable electricity generation, with CfD tenders taking place from 10 April 2025 (the date on which Government Decision no. 318/2024 entered into force) and in 2025 on the basis of a CfD scheme.

Source: Decision no. 318/2024 approving the general framework for the implementation and operation of the support mechanism for low carbon technologies through contracts for difference