Dawn of a New Grid Connection Era

The changes introduced by Order 53/2024 are divided into two phases: (i) immediate changes aimed at resolving existing issues caused by the current rules and (ii) more substantial changes effective from January 1, 2026, which make a significant shift to an auction-based mechanism in allocating grid capacity.

1. IMMEDIATE CHANGES TO GRID CONNECTION PROCESS

1. New rules for financial guarantee

At the core of the new order is the modification of the financial guarantee rules to make it an efficient instrument that limits the artificial grid blockages caused by unfeasible projects or those lacking financing sources.

The financial guarantee (previously required before concluding the connection agreement) is now a prerequisite for issuing any new grid connection permit (ATR) above 1 MW and amounts to 5% of the connection tariff. Such guarantee is similarly required for updating existing ATRs when evacuation capacity is increased.

To ensure that the financial guarantee accurately reflects the investor’s financial capability and to standardize practices across different grid operators, the eligible forms of financial guarantee are now limited to (i) bank guarantee, (ii) term deposit and (iii) direct payment to grid operators.

Most importantly, and essential for the efficiency of this instrument, this change applies to all ongoing applications for which the ATRs have not yet been issued, not only to future applications.

The grid operator enforces the guarantee if the project is not progressing according to legal requirements (connection agreement is not signed, payments due thereunder are not made, building permit is not obtained by the legal deadline, the project is not completed by the connection agreement deadline, or the investor renounces the project).

2. Redo of Grid Calculations

The most debated topic during the public consultation, which elicited diverse views from the market is the mechanism of redoing the grid calculations at project testing stage. In our view, ANRE has adopted the most suitable mechanism that maximises the use of available grid capacity while ensuring that the connection conditions set in the ATR remain stable, regardless of other investors’ progress.

Under previous rules, if a project applied for on-grid testing before the completion of reinforcement works specified in the ATR, grid operator had to redo the grid capacity calculations by considering only highly advanced projects (operational projects or that had filed for on-grid testing), excluding other projects initially considered in the solution study. This approach raised concerns about “skipping the line” and potentially worsening ATR conditions for earlier projects developed at a slower pace.

The new mechanism allows “faster” investors to temporarily utilize the available capacity instead of keeping it blocked while waiting for earlier projects to complete. However, if earlier projects are finished and updated calculations reveal that reinforcements are necessary, these “faster” projects may be disconnected or limited to avoid impacting the connection conditions of the earlier projects. Specifically, the new mechanism involves the following principles:

• when filing for on-grid testing for a project (“Ready-for-Testing Project”) with outstanding reinforcement works in its ATR, the grid operator must redo the system calculations considering (i) highly advanced projects (those commissioned or having filed for on-grid testing), and (ii) projects with valid ATR issued before that of the Ready-for-Testing Project;

• in case of negative result (connection not possible without reinforcement), the calculation is redone by considering only the advanced projects (those commissioned or having filed for on-grid testing) with two options available:

• negative result (connection not possible without reinforcement): the Ready-for-Testing Project must wait for the reinforcement works to be competed – the planned reinforcement completion deadline must be notified by grid operator in 20 business days;

• favourable result (connection possible without reinforcement): the Ready-for-Testing Project will be commissioned but will be limited or disconnected if projects with earlier ATRs become ready for connection and the updated calculations indicate the need of the reinforcements specified in the ATR of the Ready-for-Testing Project – the necessary limitations and planned reinforcement completion deadline must be notified by grid operator in 20 business days.

An interesting addition in the final version of Order 53/2024 is the imposition of daily penalties of 0.01% on grid operators for delays in completing reinforcement works. Nevertheless, the applicability of these penalties is unclear as they apply to delays in meeting the planned deadline notified by grid operators in the context of recalculations (as per previous paragraphs above). There is ambiguity about what constitutes the “planned deadline” that can be notified by grid operators. If grid operators have flexibility in notifying an updated date as compared to that specified in the development plans on which the ATR commissioning date was based and, therefore, investments calendar had relied upon, this penalty may be ineffective.

3. Extending the Building Permit Deadline

Another change highly requested by the market was the implementation of a backup solution for cases where investors are unable to obtain the project building permit within the legal term due to factors beyond their control. Although the imposition of a maximum term (along with the ATR termination, if breached) had a positive goal – preventing grid blockage by stagnant projects, this term has proved to be challenging even for the most diligent and financially capable investors, largely due to various blockages incurred in the process (including delays from various authorities).

ANRE has addressed these concerns by granting a maximum 12-month extension right, conditioned on two requirements: (i) evidence that delay are outside investors’ control and (ii) a financial guarantee amounting to 5% of the connection tariff. The responsibility for assessing the fulfilment of these conditions lies with the competent grid operator.

To prevent irreversible ATR termination due to delays in processing the extension applications by grid operators, the new order provides a tacit extension of the building permit issuance term equivalent to the duration of such delays (without exceeding 12 months).

4. Transparency of Grid Status

A new obligation has been introduced for grid operators to submit to ANRE monthly information on ongoing grid applications/project to enable an assessment of the grid status. This information includes ATR issuance date, connection agreement execution date, deadline for issuing the building permit and whether it has been issued, testing application date and testing initiation date. Additionally, ANRE is required to periodically publish a report based on this information (exact periodicity is not specified).

5. Land Rights Duration

The duration of project land rights that must be evidenced upon filing the grid connection application should extend at least until the end of the year in which the commissioning date is requested. This change is significant considering the various land securing strategies in the market designed to protect against high income tax due in advance, upon signing superficies agreements at a time when project feasibility is yet uncertain.

6. Ownership of New Connection Installations

For new projects to be connected to 110 kV or higher voltage grid via new transformer/connection substations, these new substations and connection lines now qualify as reinforcement works and will, therefore, be owned by relevant grid operator. Nevertheless, the wording leaves ambiguity as to whether this applies to all new substations or only when this is part of a common connection solution for multiple projects. This principle applies only to projects for which ATRs have not been issued.

As a consequence of such qualification, investors will no longer have the right to directly conclude agreements for the design and execution of such substations and lines but can only designate the designer and contractor.

7. ATR Termination upon Expiry of Connection Agreements

The new order addresses a previous legislative gap that created significant issues and prevented clearing the grid of stagnant projects. Previously, the expiry of the connection agreements (due to investor’s failure to complete the project by the set contractual date), was not regulated as a cause for ATR termination (unlike the termination on other grounds of connection agreements). As a result, grid operators lacked instruments to enforce ATR termination even when connection agreements expired, and projects did not advance. Now, the termination of the connection agreement, regardless of the reason, triggers the automatic termination of the ATR.

8. Grid Connection Applications Ongoing on January 1, 2026

A critical consideration for future projects is that any ongoing grid connection application without an issued ATR on January 1, 2026, will be terminated. Given that the timing for completing the grid connection process is largely outside investors’ control and significant delays are common, this principle poses high risks for initiating new investments. However, this risk is mitigated by the obligation imposed by Order 53/2024 on grid operators to reimburse investors for all expenses incurred for the elaboration of the solution study and ATR issuance, if an ATR is not issued by January 1, 2026. This obligation is expected to incentivise grid operators to expedite the connection process.

2. COMPETITIVE GRID CONNECTION ALLOCATION MECHANISM

A second category of provisions aims to fundamentally change the grid connection process for projects of at least 5 MW by allocating grid capacity through an auction-based mechanism. This system will be implemented starting January 1, 2026.

Given the novelty and complexity of the new system, its full implications are yet to be assessed, including by considering the procedure to be issued by TSO for implementing this system (due in July 2025), as well as the alignment of the system's timeline with the overall project development process. Nevertheless, the main principles envisaged are set out below.

• Auction Timeline: Auctions are held annually (Year Y), for a 10-year allocation period starting from the second year after the auction (Year Y+2);

• Process:

• By January 15 of Year Y: TSO determines and publishes the available capacity for Year Y+2, separately for each zone of the transmission/distribution grid where no grid development works are needed;

• By end of February of Year Y: investors submit applications for capacity allocation in specific grid zones and for the year of the allocation period when the project is expected to be commissioned;

• By March 15 of Year Y: TSO registers all complete applications submitted by investors for each grid zone and each year of the allocation period, on a dedicated online platform;

• By June 15 of Year Y: TSO (i) conducts a global solution study to determine the necessary grid development works for all applications filed, including estimative value, duration and commissioning year and (ii) publishes the results of the study for each grid zone and allocation year, including the available capacity, capacity requested by investors, estimative value of development works, auction starting price and auction date;

• Starting July 1 of Year Y: TSO organizes daily auction sessions to allocate the available capacity for each year of the 10-year allocation period.

• Auction Starting Price: the auction starting price is calculated by dividing the total estimative value of the grid development works by the total available grid capacity (MW);

• Participation Guarantee: investors must provide a participation guarantee equal to 1% of the auction starting price multiplied by the auctioned capacity;

• Capacity Allocation and Price Calculation: the capacity allocated and price due by investors depend on the available capacity relative to the total capacity auctioned, as follows:

• If the available capacity (without the need of development works) exceeds the total capacity auctioned, all offers are accepted, and no price is due;

• If the available capacity (including that resulting from development works) exceeds the total capacity auctioned, all offers are accepted and the auction starting price is due;

• If the available capacity (including that resulting from development works) is less than the total capacity auctioned, offers are accepted only up to the limit of available capacity, and investors pay the auctioned price;

• Allocation Contract: selected investors must enter into an allocation contract with TSO (for connections to transmission grid) and with both TSO and DO (for connections to distribution grid) adhering to the minimum terms regulated by ANRE;

• Payment Guarantee: a 1% payment guarantee must be provided before signing the allocation contract to ensure payment of the contract price;

• Contract Payment Terms: 20% of the contract price must be paid within 30 days from the contract signing date, while the remaining amount no later than 4 months from signing;

• Delay Penalties: daily penalties of 0.01% of the contract price are due by (i) grid operator for delays in performing development works and (ii) by investors for delays in project commissioning;

• Termination for Late Commissioning: the allocation contract will be automatically terminated for delays in project commissioning that extend beyond 5 years.