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Romania paves the way for agrivoltaics - Impact on E-RES development

Mihaela  Nyerges's picture
Partner Vlasceanu, Nyerges & Partners

Mihaela Nyerges is head of the energy practice group of Vlasceanu, Nyerges & Partners. She has over 18 years of experience in the legal profession, most of which working for the biggest law...

  • Member since 2022
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  • Jun 28, 2022
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One of the hottest topics these days in the Romanian energy industry is the newly law adopted by the Romanian Parliament for amending the Land Law no. 18/1991. After an intense involvement by the energy associations, the long-waited law was finally adopted and currently awaits promulgation by Romanian president.

The declared purpose of the new law is to remove the regulatory barriers in development of E-RES projects by simplifying the permitting process. Although it indeed solves several legislative problems faced by developers, the new law generates certain issues and uncertainties.

In a nutshell, the amendments to the new law consist in the following:

(i)        E-RES projects (PV, wind, biomass, bioliquid and biogas, storage capacities, transformer stations and other similar systems) may be developed directly on extra-murros lands with fertility class III, IV and V (which has so far been prohibited); and

(ii)      extra-murros lands with fertility class III, IV and V may be used in a dual system - both for the development of E-RES projects and for agricultural activities (except for arable land for which the dual system is prohibited).

In order to grasp the real impact of these changes, it is useful to provide an overview of the current situation.

I.         Status before the new law

Construction works may be performed only on lands which are qualified as intra-murros and buildable landsAlthough there are specific exceptions from this rule, none applies to E-RES projects.

However, most of the land in Romania which is suitable for E-RES projects is extra-murros agricultural land. Therefore, developing E-RES projects on these lands must follow a lengthy and costly process, consisting of the following main steps:

(i)         approval of a zonal urbanism plan (“PUZ”) for changing the destination of the entire project land from extra-murros to intra-murros and for approving compatible urbanism parameters; and

(ii)        issuance of the building permit (which automatically triggers the change of the land category from agricultural into buildable land).

The PUZ step may take around 9 months causing significant delays to the permitting process. Also, the PUZ fee is one of the highest costs of the permitting process and is payable at a time when the project feasibility may be still uncertain.

II.       Impact generated by the new law

Following the global trend, the new law mainly paves the way for agrivoltaic projects and solves some of the permitting inconveniences faced by developers. The practical effects brought by the new law for the development of E-RES projects are summarized below.

1.         The PUZ for changing the land destination to intra-murros is no longer necessary

In case of development of E-RES projects (PV, wind, biomass, bioliquid and biogas, storage capacities, transformer stations and other similar systems) on extra-murros agricultural land having the fertility class III, IV and V, there is no need to approve a PUZ for changing the land destination to intra-murros.

Instead, a special procedure for changing the land category from agricultural to buildable land should be conducted. However, such procedure is significantly shorter as compared to the PUZ, as the authorities should issue their approval within 45 days from the application date, or else the application is deemed tacitly approved.

An important question remains as to whether, following the new law, a PUZ is still required in the E-RES permitting process.

The reason for this question is that the purpose of the PUZ is two-fold (i) changing the land destination from extra-murros into intra-murros and (ii) setting out the urbanism parameters and functionality for the specific land compatible with the project. Even though the first purpose is clearly no longer necessary, questions remain as to whether a PUZ is still required for the second purpose.

The new law does not expressly provide the need for a PUZ, but only (i) to change the land category to buildable and (ii) to obtain the building permit. However, according to the construction and urbanism regulations, the building permit may be issued only if there is an urbanism documentation approved for the respective land (PUG or PUZ), regulating the legal, technical and economical regime thereof and if the envisaged constructions are compatible with such regime. Although there are specific types of construction works exempted, for which the building permit may be issued in the absence of an urbanism documentation, none applies to developing E-RES projects.

In general, PUGs regulate only the intra-murros area, not also the extra-murros therefore, no specific regime is ussually set out for such landsHowever, one could argue that the function of the extra-murros lands derives from the new law itself (industrial function), since it allows the development of E-RES projects on such lands. Under such an interpretation, the urbanism parameters set out in the local urbanism regulation (part of the PUG) would apply to these areas as well.

The removal of the PUZ for E-RES projects seems to have been recently in the attention of the legislator when amending the Construction Law no. 50/1991 at the end of May. However, perhaps due only to an unfortunate wording used, this legislative change lacks any practical effect.

If a PUZ is still required by authorities to regulate the area from an urbanistic perspective, ultimately, the new law does not bring a significant improvement to the E-RES projects timeline or complexity of the permitting process.

2.         Lower authorization fees for photovoltaic projects in case of dual system use

In case a dual system is implemented (developing of E-RES projects and performing agricultural activities), the change of land category from agricultural to buildable will no longer apply to the entire land allocated to the E-RES project, but only to the specific portion of land which can no longer be used for agricultural purposes.

In case of PV projects, this is highly significant as a higher pillar structure allows for agricultural activities/animal grazing underneath the panels and, hence, a much lower surface of land becomes affected. Therefore, the tax for changing the land category is substantially reduced in the case of these projects (although the unit tax per sqm remains unchanged).

3.         Delayed maturity of the fee for changing land category

The payment of the fee for changing the land category (which is currently due at PUZ stage) is postponed until the issuance of the building permit, which occurs late in the permitting process, when the feasibility of the project is a certainty.

4.         Easier permitting requirements for pastures

Pastures have been highly unexploited for E-RES projects due to the harsh permitting requirements. More specifically, extra-murros pastures may be used for E-RES projects only if a corresponding portion of unproductive land equal to that affected by the project is improved. In practice, this requirement proves to be a deadlock since unproductive land is extremely hard to find, while PV projects require a very high surface of land.

Although the new law does not remove such requirement, if dual purpose is implemented (E-RES projects and animal graving/feed production), the portion of land that will be affected by PV projects will be significantly lower and, therefore, the necessary surface of unproductive land will also be correspondingly reduced.  

III.     Limitations of the new law

Despite its positive impact, the new law introduces important limitations.

1.         The new law applies only to lands of maximum 50 ha

The permission to develop E-RES projects on extra-murros land is granted only for lands not exceeding 50 ha.

This limitation may trigger high impact on the economics of the PV projects, since high connection costs may be commercially acceptable only in case of high project capacity, which requires big surface of land.

2.          The new law applies only until December 31, 2026

The effects of the new law apply only until December 31, 2026. We estimate that, by this deadline, both the land category must be changed, and the building permit must be issued. The construction works may be, however, performed after this date.

The idea and the discussions behind the 2026 deadline is to stimulate the investments in E-RES development for the duration of the current EU budget allocation 2021 - 2027, in order to increase the funds absorption rate.

Nevertheless, considering the global trend, the E-RES deployment should continue after 2026. Also, considering the limited capacity of the grid and the fact that the strengthening of the grid is a time-consuming activity, the development of E-RES projects will need to be staged.

3.         No standards yet for agrivoltaics

The new law does not establish any standards for agrivoltaics. Therefore, we should wait for joint legislation on this topic, most probably from the Ministry of Energy and Ministry of Agriculture and Rural Development. 

Mihaela  Nyerges's picture
Thank Mihaela for the Post!
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Matt Chester's picture
Matt Chester on Jun 28, 2022

What's the ideal water type for agrivoltaics to work well? 

Henry Craver's picture
Henry Craver on Jun 30, 2022

Did this law face much political/activist opposition? I know Prince Charles is a great admirer of Romania's farmland. 

 

 

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