Romanian public energy policies have meant, especially in recent years, a simple transposition into national law of rules and regulations contained in the text of European directives, documents drawn up and validated by the Community institutions with too little contribution from the authorities, consumers and businessmen in Romania. The mere reaction to effects is proving more expensive than involvement with clear positions and supported by economic arguments, on their own and through ad-hoc political alliances, on issues arising spontaneously or major issues, with strategic lengthening.
In light of the Energy Union constitution, laborious financing mechanisms and instruments (e.g. Connecting Europe Facility, Horizon 2020 program, the Strategic Investment Fund launched by the European Commission) and rising social needs as a result of policies of budgetary austerity too harsh for a number of European countries, gaining competitiveness has become crucial for the Romanian energy sector, Bogdan Badea, former Secretary of State in the Ministry of Energy under the leadership of Andrei Gerea, explained to energynomics.ro.
“The stake of the coming years is great for the energy sector. Many of the capacities we rely on are reaching the end of their lifespan. We need a further serious approach on the investment plan and replacing equipment with outdated technology, as to ensure our energy security. Foundations and mechanisms of the Energy Union are being created at European level, with fundamental impact on the functioning of the common energy market. If so far Romania has analyzed its energy market only from its own perspective, now the sector and the players should be judged by region. Analyzing competition in the area, strong and financially settled, it’s necessary for Romania, benefiting from capital of knowledge, human resource, technical capacity and advantageous geographic position, to create very quickly strong players in the energy market, in order to be able to maintain and even strengthen its position. In order to achieve it, it takes coherence in action”, Bogdan Badea argues.
The energy strategy is still lacking a consultant
The former Secretary of State pointed out that one of the guidelines of the ministry, despite funding and human resource constraints, was Romania’s involvement in all the significant discussions in the field. One of the big issues remained unresolved during 2012-2015 is the completion of the National Energy Strategy.
“At the end of this year, there are several important decisions to be made globally. Therefore, we chose to wait with the selection of the consultant for the National Energy Strategy, in order to have all data on the table. Although the energy strategy is especially an eminently political decision, proposals of scenarios may appear correctly only if data on the market available for the consultant are complete”, Bogdan Badea explains.
Regarding the strategy, the Delivery Unit team of the Prime Minister Chancellery, led by Ioana Petrescu in collaboration with the World Bank, submitted to the Ministry analyzes of energy demand, production capacity and other elements necessary for the decision. Although still kept internally, the mentioned assessments will be published in a transparent manner in the final document, Bogdan Badea claims. A second line of action is represented by the consultant, still unselected, but whose task is clearly defined. “The consultant must conduct a complete analysis of the legislative framework, together with a comparative assessment of the other EU member states, in order to understand the climate in which we position ourselves and measures which the political decision-makers should have the courage to assume publicly”.
Reintroducing the direct contracts gradually becomes a necessity
The constraint to trade electricity exclusively on OPCOM energy exchange, although a commendable and courageous initiative in 2012 to enhance fair competition and transparency of transactions, has reached the limits of development and only an unbiased and objective analysis could contribute to a decision regarding its elimination, the former Secretary of State assesses.
“The REMIT instrument (reporting the quantity and price of electricity trades on the wholesale market – Ed.) is one of the European evolutions that could provide again insights for business development through long-term bilateral and direct contracts. Whether we are talking about consortia registered in the race for building the Tarnița hydropower plant or the majority investor for the project of the future nuclear reactors 3 and 4, projects which had stalled, each of them have requested in negotiations long-term contracts, as guarantee. We obviously need to consider the reintroduction of bilateral direct contracts, doubled by an extremely transparent mechanism to avoid a situation of <new wise guys in energy> type. It’s not excluded that for any type of measure proposed (direct long-term contracts, guaranteeing a price for energy delivered or other elements that provide bankability for a project) to have internal resistance”, Bogdan Badea claims.
Cannibalization of energy sources, a risky situation for the system
The electricity generation sector is still significantly controlled by the state. Except for the gas-fired CHP plant of OMV Petrom and investors arrived suddenly and for a limited period of time in the renewable segment, as a result of a generous support scheme, private investments in electricity generation are inexistent. The Romanian energy system lies in the technical parameters and ensures the national end-consumption thanks to production units mostly built more than 30 years ago. Their age, together with distorted competition and lack of appetite for state or private investments for substitution, create a situation with high risk for the survival of companies with an important share in the production structure.
Bogdan Badea explains: “In the electricity sector there is fierce competition, but not really fair, since various energy sources have reached cannibalization and exclusion. Currently, a rainy year means a poor year for coal and the vice versa; therefore, I don’t know how valid is the idea that these companies are still operating according to a competitive mechanism. In fact, one of the big mistakes that Romania has made is building producers based on a single source. In 2008, we tried to build a company which would have included Electrica, energy units Rovinari and Turceni and Hidroelectrica. It would have led to a company with a turnover of EUR 20bn and an operating profit estimated at around EUR 1bn. Unfortunately, in 2009, the new government gave up the project.
In my opinion, the need for multi-source players is at least equally topical as in 2008. In a last analysis, it’s about portfolio optimization; you have a low cost, so you have an attractive final price. We need to be aware that part of the reason why electricity is in fact cheap now for production is represented by the fact that the overwhelming majority of production units, especially owned by the state, have recovered for a long time the money invested in their construction”.
From the moment when market coupling occurred, survival and not development controls the agenda of most companies. “However, a positive element for Romania in the deeper connection to national and regional European markets from a technical and commercial point of view is gaining the status of observer by Transelectrica in the group of states that make up the Central-European electricity market. With tenacity and perseverance, access to the Central-European market can be gained by Romania in the next 1-2 years”, Bogdan Badea said.