The Contracts for Difference mechanism is a transformative initiative launched by Romanian authorities to bolster the development of renewable energy. Funded through Romania’s Modernization Fund, this scheme is designed to support the generation of 1,000 MW of onshore wind and 500 MW of photovoltaic (PV) capacity. Romania’s innovative approach is evidence of the country’s commitment to its green transition and the modernization of its national energy system.

CfD tender results and highlights

The inaugural round of the CfD tenders was a resounding success, with 10 wind and 11 solar projects securing subsidies. The weighted average prices achieved were €65 per MWh for wind and €51 per MWh for solar, affirming that renewable energy pricing can be competitive and sustainable.

Looking at the tender winners, it’s clear that there is significant international interest in Romania’s renewables sector. They include such green energy companies as Denmark’s Eurowind Energy, France’s Qair, Portugal’s Renovatio Group, and Israel-based Econergy and Nofar. Also among the winners of the first round of the CfD auction is the domestic significant market actor Electrica, with its 54 MW Crucea Est wind project. Dentons Energy team in Bucharest provided comprehensive legal guidance throughout the entire tender process, reinforcing our role at the forefront of renewable energy legal expertise (more details here).

What is a contract for difference?

A Contract for Difference, or CfD, is a government-backed financial instrument that provides stability and predictability to renewable energy producers. By guaranteeing a set “strike price” for a period of 15 years, the CfD minimizes the financial risks associated with market price fluctuations. This mechanism operates on a simple principle: When market prices are below the strike price, the CfD counterparty compensates the producer; if prices exceed the strike price, the excess is paid back into the CfD Liquidity Fund.

Strategic implementation and goals

The first tender was formally launched on 5 September 2024, targeting an installed capacity of 1,000 MW for onshore wind electricity generation and 500 MW for solar photovoltaic electricity generation. A second tender scheduled for 2025 is set to allocate an additional 3.5 GW of capacity, further advancing Romania’s renewable energy footprint. The core objectives of the CfD mechanism include fostering the development of solar and wind energy, ensuring financial security for investors and supporting Romania’s decarbonization objectives.

Key features and eligibility of the CfD mechanism

• Scope and capacity: The initial tender targets 1,500 MW across wind and solar PV technologies, with strike price caps set at €82/MWh for wind and €78/MWh for solar.
• Eligibility requirements: Eligible projects must utilize new electricity generation capacities, meeting stringent technical and financial benchmarks, including a participation guarantee of €20,000/MW and a performance guarantee of €75,000/MW.
• Revenue-sharing mechanism: To ensure that the parties are accountable and reap the financial benefits fairly, when energy is sold at prices above the strike price thresholds, the surplus is contributed to the CfD Liquidity Fund.

Tender process and impact

Managed by the Ministry of Energy, Transelectrica, and OPCOM, the tender process involves a rigorous two-stage evaluation—technical and financial—to ensure compliance and that bids are ranked effectively. This structured process not only enhances investor confidence but also accelerates the deployment of substantial renewable capacity, contributing significantly to Romania’s sustainability goals.

Conclusion

The CfD mechanism represents a significant step forward in Romania’s energy strategy, providing a robust framework for the growth of renewable energy while ensuring economic viability and environmental sustainability. As the country progresses with its green transition, such initiatives are pivotal in shaping a sustainable and prosperous energy future.