Large Scale PV Projects in Romania

Author: Tatiana Fiodorov, Managing Partner of Axenti Fiodorov & Partners

Introduction

For all of us, it has become a normality that due to significant technological progress today we
have diverse energy sources. Increasing the renewable energy share quota in the energy mix is
demanded not only considering the decarbonization target, but also high and volatile oil prices in
the current political context, as well as the constant desire for energy independence. While the
investors are entering the markets aggressively and the evolution thereto is rapid, every single
jurisdiction has its structure and specific rules for doing business.
When entering the Romanian market, investors are encouraged by looking at the solar potential
(about 210 sunny days per year), geographical characteristics, and even supporting schemes
available. However, the unknown factor and timing present the most difficulties for investors.
While ready-to-build projects imply legal aspects to consider, mainly given the validity of the
permitting documentation and the proper exit, greenfield projects entail a thorough step-by-step
analysis performed in real-time alongside multidisciplinary teams of experts.
In this context, the question is what rules should stakeholders consider in today's frantic rush?
This article has the objective to present a realistic and responsive overview of the current status
of the Romanian photovoltaic energy market by considering the starting point and destination
and to answer the top 7 questions that arise during the authorization process for developing
large-scale photovoltaic power plants in Romania.

Top 7 questions that arise in solar greenfield investments

1. What’s the Romanian market starting point and destination?

Specifically, with regard to photovoltaic sources of energy by means of the Energy Strategy, the
Romanian Government targets an increase of photovoltaic energy capacities from the current
status of approx. 1,400 MW to 3.140 MW by 2030. At present, the solar share quota in the
national energy mix is 7.5%.1
2. Should a special investment vehicle be incorporated for each photovoltaic power plant?

Setting up the investment vehicle represents the very first step for doing renewable energy
business in Romania. The Regulation for granting licences and authorizations in the electricity
sector2 sets up that “the licensee may not hold two licences of the same type simultaneously”.
Thus, it results that for each production unit - photovoltaic power plant it is necessary to issue a
separate production and operation licence, consequently a company could not operate two
photovoltaic power plants simultaneously.
Establishing a company (e.g. limited liability company) has become in recent years a fast-paced
desire to implement due to the relaxation of the Trade Register requirements and digitalization.
Considering these, currently the incorporation certificates may be issued only within three
business days as of the submission of the files with the Trade Registry.
Useful advice for investors upon drafting the articles of association is to bear in mind that in case
the director of the Romanian SPV does not reside in the country, and the country managers have
no quality in the company, the last listed will not be entitled to represent the company towards
third parties. In this case, the remedy would be to either grant the country manager the quality of
director in the SPV or proxies to be issued during the implementation of the projects.

3. How to secure land rights for the power production installation, connection, and
collection network?

When implementing a solar project, the investors have to consider finding the adequate location
and securing land rights not only for the power production installation, but also for the
connection and collection network, i.e. transformer stations, overhead and/or underground
electrical lines.
As a general rule, under Romanian law a photovoltaic panel system represents an immovable
asset. This qualification results based on the provisions of the Civil Code3 and constant national
jurisprudence, according to which the photovoltaic panel system can be qualified as an
autonomous work with a durable character. From the perspective of Law No. 50/1991 regarding
the authorization of construction works (the “Construction Law”)4, the development of a
photovoltaic panel system would imply performing construction works having definitive
character, as the investment specificity imposes an unlimited duration of operation. In this order,
in light of the Construction Law provisions, the investor has to obtain a building permit. Further
on, for obtaining the building permit the evidence of real rights (in rem rights) over the lands
subject to the envisaged construction works shall be provided. In this regard, mention should be
made that real rights encompass inter alia ownership right, superficies right, concession right, use
and easement rights.
The most commonly used rights for solar parks are superficies and ownership rights (real rights
specific to private property), and the concession right when we have to deal with public
property.
In case the investment is subject to grid strengthening works, the investor also has to secure land
rights for the connection network. The land rights for cables and pillars may be secured either (i)
based on general provisions of the Civil Code5 by means of authentic passage easements, use and
superficies rights agreements or (ii) based on the provisions of electricity and natural gas law No.
123/2012 (the “Energy Law”). While the scenario mentioned at item (i) is recommended as in
this case the construction works can be commenced along with power plant construction, a piece
of useful advice would be to identify the location of the passageway corresponding to electrical
lines and pillars and perform the cadastral delimitation of such for avoiding paying for the area
of land plots which will not be actually used for electrical lines and pillars. By contrast, for
making use of the rights established under the Energy Law, the investor must have already
obtained the setting-up authorisation.6 Thus, the second scenario is less favourable in view of the
fact that the construction of the connection network may be delayed until the setting-up
authorisation date for the project.

4. How to structure the deal so that you don't delay the grid connection?

While the access to the grid is based on the first come first served principle, the necessity of
carrying out legal and technical due diligence on land status, even if not mandatory, derives from
the specifics of the construction works for the photovoltaic project. Technical & environmental
due diligence is recommended for checking the existence on the lands of impediments with
respect to the development, such as utilities networks, pipes, lands’ improvement infrastructure,
soil quality or environmental issues. Legal assessment on the lands’ status is important mainly
considering the destination of the lands, their location, encumbrances, litigations, pre-emption
rights, overlapping situation and the restitution claims filed by former owners of immovable
assets abusively taken by the Romanian State during the Communist regime.
Considering that due diligence implies inquiries with public authorities (such as City Halls,
Transgaz, National Agency for land improvements, National Company of Highways and
National Roads, etc.), if performing it before securing the land rights the project timeline is
inevitably delayed for at least 30-45 days. Consequently, this decision triggers delays in
accessing the grid, as for obtaining that access the developer has to provide an urban planning
certificate for the construction works scope, which is issued only after securing real rights over
the envisaged location. Thus, a proper assessment of the lawyers on the transaction structure
must be requested from the very incipient stages of the project.

5. Is the zonal urban plan mandatory for solar deployments in Romania?

The assessment of the zonal urban plan (the “PUZ”) necessity for developing a photovoltaic
power plant is made by reference to two aspects:

a) in terms of applicable legislation, the cases in which it is necessary to draft PUZ

documentation are established mainly within the Urban Planning Law No. 350/2001
(the “Urban Planning Law”)7, which includes no express provision regarding the
necessity of the PUZ for developing photovoltaic power plants. Of course, the public
authority is entailed to demand the investor to draft a PUZ in case it considers that the
general urban plan (the “PUG”) of the territorial administrative unit where the land plots
are located does not regulate the conditions for the authorization this kind of project.
b) if referring to the intra or extra muros location of the lands secured for the power
plant, it should be noted that under Romanian law, the construction works can only be
performed on the lands located intra muros (with certain exceptions). As per the
Construction Law, introducing the lands in the intra muros area may be performed only
through PUZ or PUG documentation.

Consequently, the assessment is made on a case-by-case basis. In case the lands are either
located extra muros or even located intra muros, the public authority considers that the
photovoltaic power plant deployment does not comply with the urban planning documentation
approved for the area of the secured land plots (PUG or PUZ ), the investor would be required to
draft a PUZ for including the lands in the intra muros area of the territorial administrative unit
and establish the function of the area for the specific scope of energy capacities deployment.
Considering that foresight and timing are crucial for securing investor confidence, mention
should be made that the law does not regulate a timeline for approval of PUZ. However, from a
practical perspective, collecting prior approvals and endorsements established in the urban
planning certificate for PUZ scope and the approval of the PUZ documentation is reasonable to
be expected within at least six months as of the date of the urban planning certificate date.
Useful advice for the investor would be to obtain an urban planning certificate for information
purposes (for the issuance of which no proof of real right is required) before securing the land
rights. This type of urban planning certificate shall mention the legal, technical, and economical
regime of the land plots.

6. Agrivoltaics: is the co-use regulated under Romanian law?

There are a number of studies on the compatibility and characteristics of agri voltaics that show
that a photovoltaic power plant is not incompatible with the exercise of agricultural or grazing
activity on the land where it is located, having a minimal environmental impact.
Under the Romanian legal framework, the construction works are allowed solely on the lands
having the use category “construction yards” (in Romanian “curți construcții”), and for this
scope, removal from the agricultural use needs to be performed for the entire area of the land
plots envisages for the power plant location. It follows that currently the possibility of the co-use
is not regulated, and investors have to envisage converting the lands’ agricultural use to
buildable.
Although in case of intra muros land plots having arable use category, the removal from the
agricultural circuit is made via the issuance of the building permit itself, with no specific
procedure to be followed in this scope (except for the conversion fee to be paid during the PUZ
phase, namely upon obtaining the endorsement on soil quality from the Ministry of Agriculture),
in case of intra muros pastures lands, the procedure for changing use category, shall include,
inter alia, the obligation of the investor to recover from the unproductive lands an area equal to
the one approved to be definitively removed from the agricultural use. Cumbersome procedures
are enhanced by the legal provisions8 which impose in charge of the extra muros agricultural
landowners the obligation to use such lands exclusively for agricultural purposes.
In these conditions, it seems obvious that co-use regulation is needed as soon as possible.
Deployment of large-scale photovoltaic power plants inevitably leads to the reduction of
agricultural areas actually used for cereal cultivation or pastures, with no substitution activity
planned thereto, whilst crop farming blocks renewable energy production.
At the present, the Romanian legislator’s intentions are good. We have at least two legislative
proposals pending: on the one hand, removing the ban on changing the use category of extra
muros agricultural lands (i.e. PL-x nr. 292/2021 having as object the amendment and completion
of the Law No. 17/2014), on the other hand, regulating the co-use of agricultural land and energy
capacities (i.e. PL-x No. 22/2022 having as object the amendment and completion of the Land
Law)9.

7. What are the peculiarities of the Land Book registration of the photovoltaic power
plants?

Under Romanian Law, the photovoltaic panel system represents a construction that must be
registered with the Land Book. The registration shall be performed based on the cadastral
documentation and the attestation certificate on the existence of the construction and their
development according to the building permit. At the same time, the cadastral documentation
shall mention the external contour of the area on which the solar panels are located and, which is
very important, the number of photovoltaic panels. The number of photovoltaic panels must
correspond to the number of modules licensed under the setting-up authorization and the one
mentioned in the technical project attached to the building permit. In case of positive
discrepancies of the actual status and the documents, there is a risk of the impossibility of
proving the ownership right over the entire photovoltaic panel system which may further impact
a potential asset deal.

Future Outlook

We strongly believe that Romania represents a very positive investment environment for large
scale photovoltaic projects and the market has immense potential for growth. However, to foster
solar energy and achieve the envisaged targets, the regulatory framework must be under constant
update for unravelling regulations or at least there should be less administrative barriers. Even if
the assessment is made on a case-by-case basis, the mismatch between the real estate and
renewable energy rules must be mitigated considering that both the available capacity in the
electrical network and compact suitable areas of land plots are increasingly limited. After
unlocking the ban on power purchase agreements, maybe the legislator shall consider allowing
on-farm solar generation?

References

1. https://www.anre.ro/ro/energie-electrica/rapoarte/puterea-instalata-in-capacitatiile-de-
productie-energie-electrica
2. Approved by Order No. 12/2015 issued by National Authority for Energy Regulations,
published in the Official Gazette, Part I no. 180 of 17 March 2015, as subsequently amended.
3. Republished in the Official Gazette No. 505 of 15 July 2011, as subsequently amended.
4. Republished in the Official Gazette of Romania No. 933 of 13 October 2004, as subsequently
amended.
5. Republished in the Official Gazette No. 505 of 15 July 2011.
6. The setting-up authorization (în Romanian “autorizaţie de înfiinţare”) is an administrative
deed issued by ANRE by which a person is granted permission to build or refurbish energy
capacities for electricity production. The setting-up authorization is distinct from building
permit issued based on Construction Law.
7. Law No. 350/2001, the urbanism law, published in the Official Gazette No. 373 of 10 July
2001, as subsequently amended.
8. Law No. 175/2020 (in force as of 13 October 2020), which introduce the Article 42(5) to the
Law No. 17/2014 on regulatory measures concerning the sale and purchase of extra-muros
agricultural lands and amending Law No. 268/2001 on the privatization of companies that hold
for management purposes lands that are the public and private property of the State and have
agricultural use and the establishment of the State Property Agency (Agenția Domeniilor
Statului), published in the Official Gazette of Romania, Part I, No. 178 of 12 March 2014, as
subsequently amended.
9. Law No. 18/1991 - the Land Law, as republished in the Official Gazette of Romania, Part I,
No. 1 of 5 January 1998, as subsequently amended.