The Prosumer – A New Actor in the Electricity Market

Law no. 184/2018 approving Government Emergency Ordinance no. 24/2017 for the amendment of Law no. 220/2008 regarding the establishment of the promotion system for energy production from renewable energy sources came into effect on 23 July 2018.

What is a prosumer?

The regulatory act introduces the concept of prosumer, defined as the individual or entity that concurrently (i) produces electricity and (ii) fully or partially consumes the electricity thus produced. The electricity that is produced in excess of the consumption needs or, as applicable, the electricity consumed in addition to the quantity produced is sold to, purchased from respectively, the electricity supplier with whom the prosumer has entered into an electricity supply contract.

In other words, the prosumer is a mixture between an electricity producer and an electricity consumer and not an ‘island” disconnected from the electricity network.

According to the legal provisions, prosumers can be residential, but they can also be commercial prosumers, provided that in the case of these latter ones the production, storage or sale of energy does not represent their primary business or professional activity.

While the law clarifies certain aspects that are essential for the legal treatment of the prosumer and for the implementation of this concept, there still are areas that will need to be further cleared up.  Last but not least, the effective implementation of this concept will depend on the successful cooperation of the other actors in the electricity market, upon which in fact the law imposes certain specific obligations.

Thus, we know that the prosumer may exploit renewable sources, including in cogeneration, although photovoltaic sources are more likely expected to be preferred due to the technology being more accessible in terms of costs. We also know that the purpose of energy consumption from one’s own production is not limited by the law; it can cover various forms of residential organizations (including apartment buildings, residential areas, owners’ associations, therefore not limited to one-family residences), commercial purposes (including multifunctional or shared shopping or industrial areas, provided that the electricity production, storage and sale represents a secondary activity), or public or private purposes (for instance schools, state hospitals, local administrations etc.).

Incentives: what and to whom?

At the same time, under the new law, specific incentives are recognized to prosumers holding units for the production of electricity from renewable sources with an installed power of maximum 27 kW. These:

(i) have a right to be taken over the electricity produced in excess by electricity suppliers with which they have concluded supply contracts; the electricity will be sold by prosumer according to the law, at a price equal to the weighted average price recorded in the Day Ahead Market in the preceding year; obviously, prosumers have a right to purchase the electricity consumed in addition to their own production from the same supplier;

On the contrary, the price above is not recognized to prosumers having production units that exceed the above-mentioned capacity.

may sell the electricity produced as described above without having an obligation to register and authorize the operation of production units held by them. This incentive is

(i) recognized exclusively to natural-person prosumers, excluding any organization form, including self-employed persons, individual undertakings and family undertakings.

Thus, commercial prosumers have an obligation to register and authorize the operation of their production units. Yet, the exceptions set forth by the Regulation for the Issuance of Licenses and Authorizations in the Electricity Sector approved by Order no. 12/2015 of the National Regulatory Authority in the Energy Area (e.g. ANRE does not issue setting-up authorizations for electricity production capacities smaller than 1 MW) should remain applicable.

(ii) have a right to be connected to the grid by electricity distributors; yet, the law does not establish a preferential regime; the acess to the grid, as well as the guaranteed/ priority access to the grid are set forth both by Energy and Natural Gas Law no. 123/2012 and by Law no. 220/2008 on Setting a System for Promoting Energy Production from Renewable Sources, and also by the secondary legislation.
(iii)are exempted from the obligation to yearly and quarterly purchase green certificates for the electricity produced and used for their own final cunsumption other than the own technoological consumption of the power plant; yet, for the electricity in excess delivered to the grid, prosumers do not seem to benefit from the same incentive.

What’s next?

In implementing the law’s provisions, the National Regulatory Authority in the Energy Area (ANRE) is expected to draft and issue norms. The draft Order for the approval if the rules for the sale of electricity produced in units for the production of electricity from renewable sources with an installed power of maximum 27 kW has been published and is currently under public debate. Alongside the approval of the order, the extent to which the system introduced by the new law is subject to authorization as state aid should be  clarified. The preliminary position made public by the authorities is that, in its current form, the system does not require an authorization as state aid scheme, but such position has not been made formal.

The draft order aims at clarifying aspects related to the acquisition and installment of metering installations (smart metering / distance metering devices) as well as aspects related to the extent to which the green certificates scheme applies in relation to the excess electricity produced by the prosumer.

The effective implementation of the legal provisions on prosumers also depends on support measures for the purchase of technology. Thus, the Guidelines for Funding the Program for the Installation of Photovoltaic Panels for Electricity Production to Cover the Required Consumption and to Deliver the Surplus to the National Grid is under approval. Despite that its launching was announced for October, the approval is being delayed.

Last but not least, if the number of prosumers grows significantly, this could have an effect on the traditional operation method of grid operators. If the expenses related to maintenance and investments in the grids remain constant or are increased, they will be supported from higher fees paid by those who do not qualify as prosumers (whether because they canot afford the costs or because the use of a production system is not possible for them), which compells these categories to support to some extent the pronsumers’ access to the grid. Depending on the sucess of the new concept’s implementation, this cross-subsidization effect may need to be taken under consideration.

Avocat  Alexandru Pruteanu