GUIDELINES

FOR THE PRODUCER OF ELECTRICITY FROM RENEWABLE ENERGY SOURCES (E-RES)

SUMMARY 1. WHY PROMOTING THE ELECTRICITY PRODUCED FROM RENEWABLE ENERGY SOURCES? 2. NECESSARY STEPS FOR STARTING-UP A GENERATION CAPACITY BASED ON E-RES, TRADING THE E-RES AND BENEFITTING FROM THE E-RES PROMOTION SYSTEM 3. I WANT TO START-UP AN E-RES GENERATION CAPACITY. WHAT PAPERS DO I NEED? 4. TO WHOM AND HOW SHOULD I SELL THE E-RES? 5. THE E-RES PROMOTION SYSTEM IN ROMANIA 6. HOW CAN I GET AND TO WHOM SHOULD I SELL THE GREEN CERTIFICATES? 7. WHO DOES WHAT? 8. OTHER USEFUL INFORMATION

ANRE 2009

1. WHY PROMOTING THE ELECTRICITY PRODUCED FROM RENEWABLE ENERGY SOURCES?

The promotion of electricity produced from renewable energy sources (E-RES) is a high priority of now-a-days for reasons of environmental protection, increase the energy independence from imported electricity by getting a wider range of energy sources as well as for other reasons of economic and social cohesion. The Directive 2001/77/EC of the European Parliament and of the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market represents the first step of European Union in complying with the Kyoto targets of reducing the greenhouse gases. Romania was one of the first EU candidate countries transposing the Directive 2001/77/EC provisions into its own legislation (see GD no. 443/2003 with modification of GD no.958 / 2005). Its indicative target for 2010 was fixed at 33%, representing the share of E-RES in the gross national electricity consumption. After that, through GD no.1069/2007 regarding the approval of the National Energy Strategy for 2007-2020, there were established the indicative target of 35% for 2015, respectively of 38% for 2020 representing the share of E-RES in the gross national electricity consumption.

Glossary of terms
Setting-up autorization technical and legal document issued by ANRE, which, as a result of the application formulated by a Romanian or foreign private/legal entity grants it the permit to develop or refurbish and to operate installation for transmission, distribution and generation of cogen electricity and thermal power. Modernized power plant power plant where it took place a set of works which leads to an increase of the technico-economical and environmental characteristics of at least 30% from the replacement value of the plant. Annual demand of green certificates the number of green certificates corresponding to the legal annual quota. This demand is obtained by multiplying the mandatory quota with the gross national electricity consumption of that year. Green certificate document proving that 1 MWh of electricity is produced from renewable energy sources and supplied into the electricity network. The green certificate may be traded on the bilateral contract market or the centralised market of the green certificates, separately from the associated electricity quantity. Electricity produced from renewable energy sources E-RES electricity produced by plants using only renewable energy sources, as well as the proportion of electricity produced from renewable energy sources in hybrid plants also using conventional energy sources and including renewable electricity used for filling storage systems and excluding electricity produced as a result of storage systems. Electricity supplier Legal entity, possesing a supplying license, which trades electricity on the electricity market License technical and legal document, issued by ANRE that grant to a Romanian or foreign private/legal entity the permit to trade the electricity and cogen electricity or to deliver services needed by the coordinated operati on of the national energy system Imbalance physical notification - a physical notification with production, import and received contractual exchanges not equal to consumption, exports and supplied contractual exchanges of the market participant

2. NECESSARY STEPS FOR STARTING-UP A GENERATION CAPACITY BASED ON E-RES, TRADING THE E-RES AND BENEFITTING FROM THE E-RES PROMOTION SYSTEM
obtaining the authorisations and approvals needed for buildingup the generation capacity, building up the generation capacity, obtaining the generation license, obtaining the qualification certificate for the electricity priority production, registration at the Electricity Market Operator (SC OPCOM SA) for selling E-RES on the DAM (Day Ahead Market), registration at TSO (CN TRANSELECTRICA SA) for obtaining the green certificates (GC), registration at the Green Certificates Market Operator (SC OPCOM SA) for registration in the GC Register and for participating on the GC market, The E-RES producer may sell the E-RES on the ele ctricity market, as any other electricity producer, obtaining the market price. For covering the entire generation costs and for obtaining a reasonable profit, the producer receives a green certificate for each MWh of electricity supplied in the electricity network. This green certificate may be traded within the price limits legally set-up.
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Each month the E-RES producer: Receives GC from TSO for the E-RES supplied in the electricity network Sells GC within a bilateral contract or on the centralized market of the green certificates, Receives the money for the sold GC Inform the green certificates market operator about the sold GC within the bilateral contracts Glossary of terms
Annual GC offer the number of green certificates issued by the TSO during a year Network operator the distribution operator, the transmission and system operator - TSO Distribution operator operation entity owning, operating, maintaining and developing the electricity /thermal distribution network Electricity market operator legal entity ensuring the trade for the electricity quantities on the electricity market, which determines the prices on the Day Ahead Market. The electricity market operator is SC OPCOM SA Green certificates market operator legal entity ensuring the trade of green certificates which also determines the prices on the centralised market of the green certificates. The operator of the green certificates market is SC OPCOM SA Transmission and system operator legal entity, possesing a transmission and ancillary services license. The TSO is CN TRANSELECTRICA SA Centralised market of green certificates legal framework for trading the GC between market participants, organised and administrated by SC OPCOM SA, based on specific rules Bilateral market of green certificates the bilateral contracts negociated between E-RES producers and electricity suppliers, designed for selling/buying of the green certificates Day Ahead Market centalised market for selling and buying electricity which is administrated by SC OPCOM SA Market clearing price the price which the transactions on the day ahead market are concluded at, in a certain trading zone, during a certain trading interval Priority production the elec tricity qualified production of a producer/generation configuration, for which preferential sale rights are granted

3. I WANT TO START-UP AN E-RES GENERATION CAPACITY. WHAT PAPERS DO I NEED?

Legal documents issued by the local administration authorities such as: city planning certificate includes also details about all the notifications to be obtained; building authorisation Legal documents issued by the network operator the E-RES producer will be connected to location approval issued according to the Methodology for issuing the location approval, ANRE Order no. 48/2008; technical connection approval issued according to the Regulation on users connection to the local electricity network, approved by GD no.90/2008. Legal documents issued by ANRE setting-up authorisation according to the Regulation on electricity sector licensing and authorising, approved by GD no.540/2004, further completed and modified, approved by GD no.553/2007 ; only for power units with installed power higher than 1 MW. E-RES generation license according to the Regulation on electricity sector licensing and authorising, approved by GD no.540/2004, further completed and modified, approved by GD no.553/2007 ; qualification certificate for the electricity priority production according to the Regulation for qualification of the electricity priority production from renewable energy sources, approved by ANRE Order no. 39/2006.

4. TO WHOM AND HOW SHOULD I SELL THE E-RES?

E-RES may be sold: within bilateral contracts, to electricity suppliers or eligible consumers, at negociated prices; within bilateral contracts, to electricity suppliers,at regulated prices, according to the provisions of art. 3 from Order ANRE no. 44/2007; on the centralized Day Ahead Market (DAM), at the market clearing price When selling E-RES on DAM: E-RES has priority on the electricity market transactions; if its E-RES is not accepted during a certain dispatch interval (the generation-consumption is balanced only through bilateral contracts), the E-RES producer submits physical notifications for imbalance and receives the price set up for such situations.

Glossary of terms
Electricity network all the electricity lines, including their support and protection elements, the sub-stations and other electric power equipment connected to each other. The electricity networks may be a transmission network or a distribution network Mandatory quota system system for promotion the E-RES, meaning electricity suppliers buying mandatory E-RES quota for selling it to their clients Renewable energy sources renewable nonfossil energy sources (wind, solar, geothermal, wave, tidal, hydro-power, biomass, landfill gas, sewage treatment plant gas and biogases)

5. THE E-RES PROMOTION SYSTEM IN ROMANIA

Who benefits from the promotion system? E-RES produced from wind, solar, geothermal, biomass energy, waves, hydrogen as well as the electricity produced in hydro power units with installed power less or equal than 10 MW, put into function or modernized starting with 2004. Which elements the promotion system consist of? Romania has adopted the mandatory quota system combined with the trade system with minimum and maximum price limits legally set up for the green certificates. What does it mean mandatory quota? For each year between 2005 and 2020, the mandatory quota for E-RES the electricity suppliers have to comply with are set up by law. The electricity suppliers demonstrate the compliance with the quota system by the number of green certificates they buy each year. This number has to be equal to the mandatory quota value multiplied by supplied electricity quantity. In case the suppliers do not comply with the annual mandatory quota, they will pay to the TSO 70 Euro for each green certificates they were unable to buy.

Legal framework Primary legislation on RES The Electricity Law no. 13/2007, with the subsequent amendments GD no. no.1069/2007 regarding the approval of the National Energy Strategy for 2007-2020 GD no. 443/2003 regarding the promotion of electricity produced from renewable energy sources GD no. 1429/2004 regarding the approval of the Regulation of guarantee the origin of electricity produced from renewable energy sources GD no. 1892/2004 regarding the system for promotion of electricity produced from renewable energy sources GD no. 958/2005 in order to modify GD no. 443/2003 regarding the promotion of electricity produced from renewable energy sources and to modify and complete GD no. 1892/2004 regarding the system for promotion of electricity produced from renewable energy sources GD no. 750/2008 for the approval of the regional state aid scheme for exploitation of the renewable energy sources GD no. 1661/2008 regarding the approval of the National Programme for increasing energy efficiency and using the renewable energy sources in public sector in 2009-2010 Law no 220/2008 to set the promotional system for production of energy from renewable energy sources* * The provisions of the Law no. 220/2008 considered to be or susceptible of state aid will enter into force after receiving the authorization decision from the European Commission. Secondary legislation on RES The Procedure for monitoring the issuance of the guaranties of origin, approved by ANRE Order no. 23/2004 The Regulation of organisation and functioning of the green certificates market, approved by ANRE Order no. 22/2006 The Procedure for allocation the amount of money collected from the suppliers for quota non-complience, approved by ANRE Order no. 62/2009 ANRE Order no. 44/2007 for establishing the manner of commercialization of the electricity produced from renewable energy sources in units qualified for priority production Procedure for monitoring the green certificates market, approved by ANRE Order no. 38/2006 The Regulation for qualification of the electricity priority production from renewable energy sources, approved by ANRE Order no. 39/3006

6. HOW CAN I GET AND TO WHOM SHOULD I SELL THE GREEN CERTIFICATES?
GC are issued by TSO according to the Procedure of issuing the green certificates, approved by ANRE. GC are issued following the producers request and after he obtains the qualification certificate for priority production from ANRE The E-RES power units for priority production are qualified: o annually o for the entire E-RES production o for the entire capacity The E-RES is qualified as uncontrolled priority production except: o the E-RES produced from biomass o the E-RES produced from geothermal sources o the E-RES produced from hydro sources from power units with at least 1 day control on the water flow 5

 The E-RES producers receive monthly from TSO one green certificate for each MWh of electricity delivered into the network. The green certificates are allocated based on the data supplied by the network operators the producers are connected to. The E-RES producers may sell the green certificates: within bilateral contracts to electricity suppliers, at negociated prices; monthly, on the centralized market of green certificates, organised and administrated by the green certificates market operator. The price for traded green certificates must be comprised between the minimum and maximum values. Betwen 2008 and 2014, the minimum and maximum prices for green certificate are 27 Euro/ certificate and 55 Euro/ certificate, which are calculated at medium exchange rate from Romanian National Bank for December in the preceding year.

7. WHO DOES WHAT?

ANRE Monitor the development and the functioning of the green certificate market Allocate the amount of money collected from the suppliers for quota non-complience, resting on a specific procedure TSO: Issue on monthly basis the green certificates; Inform on monthly basis the E-RES producers, ANRE and the green certificates market operator about the producers receiving the GC and their hierarchy; Invoice and collect the money from the electricity suppliers not complying with their mandatory quota; GCMO: Publish annual prognosis of national offer and demand of green certificates; Register the bilateral contracts and the information concerning the transactions between the ERES producers and electricity suppliers; Create the GC Register and keep it up-to-date; Register the participants to the green certificates market; Ensure a proper functioning of the green certificates market; Publish on monthly basis the cumulated demand and offer of green certificates from the beginning of the year; Send a monthly report to ANRE regarding the evolution of green certificates market. Distribution operators: Send to the producers on monthly basis the E-RES quantities supplied by these in the network

8. OTHER USEFUL INFORMATION

The primary and secondary legislation dedicated to E-RES may be found on the ANRE website, www.anre.ro, on Renewable energy sources. Information on electricity prices on DAM may be found on the OPCOM website, www.opcom.ro. Information on the issuing procedure of green certificates may be found on the TSO website www.transelectrica.ro.
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 Information on specific procedures regarding the functioning of the green certificates market may be found on the green certificates market operator website (GCMO), www.opcom.ro. Following the official request to ANRE, the E-RES producer receives guarantees of origin for the E-RES supplied in the network.

Reccomendations
For learning more about trade mechanisms of the priority production, you may find useful information in the Commercial Code of the wholesale electricity market, appro ved by ANRE Order no. 25/2004. You may find important primary data necessary for starting up and building an investment in renewable energy sources (for example wind velocity or solar radiation in Romania) by getting in contact with the National Meteorological Administration or the research institutes in energy sector.

Mandatory quota* set up by Law no. 220/2008

18.00%
16.80%

16.00%
14.40%

15.60%

14.00%
12.00%

13.20%

12.00%

10.00%
10.80% 10.00%

8.00%
8.30% 8.30% 8.30%

9.00%

6.00%
5.26% 6.28%

4.00%

2.00%

0.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

*Mandatory quota annual percentage of the gross national electricity consumption, in a progressive dynamic for complying with the national target on 2020