The energy companies support the entire support scheme, which has a significant impact on cash flow. „As such, we are facing an acute lack of funds to support investments. This is an alarm signal because, if investors like us, with 1.4 billion euros invested, will no longer be able to invest, it will be extremely difficult for Romania to achieve its goals assumed at the European level in terms of renewable energies ”, claims Eric Stab, President & CEO of ENGIE Romania, in an exclusive interview for Energynomics.ro.
How does the war in Ukraine affect the investments of the main foreign investors and what should the Romanian state do to allow an acceleration of investments and to ensure our energy independence from supplies from Russia?
The energy crisis we are facing today is a European one, but Romania has the chance to have a lower exposure compared to the other states, thanks to a lower dependence on Russian gas. This advantage can be preserved and even optimized in the context of the development of new renewable sources of energy production to complement the assets currently owned and operated by the state or private investors.
Thus, the crisis we are currently going through, beyond the short-term implications, can be a catalyst for the development of investments in renewable energy. The generation of investments in this complex context, characterized by multiple challenges, is a subject as important as it is difficult since in a volatile market context, the stability and predictability of the legislative and regulatory framework for renewable energies must be ensured.
The development of renewable energy, and I mean here not only renewable electricity but also the development of green gases, beyond the environmental advantages, will mitigate the impact of price increases on customer bills as it will make energy production less dependent on fossil fuels and better balance market demand for energy. For this, however, the industry needs support schemes and action plans to stimulate investment in these renewable sources. Also needed is the development of the legislative framework for the production and consumption of green gas, as well as regulations to facilitate connection to electricity networks at a competitive cost.
On the other hand, the minimum necessary conditions for any investment are the existence of sufficient funds and a predictable legal framework. As is known, the energy companies support the entire support scheme, which has a significant impact on cash flow. As such, we are facing an acute shortage of funds to support investment. This is an alarm signal because, if investors like us, with 1.4 billion euros invested, will no longer be able to invest, it will be extremely difficult for Romania to achieve its goals assumed at the European level in terms of renewable energies and build the installed capacity it needs.
Romania must use the significant subsidies available for the energy transition, through European programs. Some steps have already been taken, but greater visibility and sometimes transparency on future allocations is needed.
What are the most important pillars of ENGIE’s new investment strategy? What major investments are being considered?
An investment strategy must be based on a robust cash flow. Starting from this precondition, at ENGIE Romania we have three central pillars of the investment strategy, which I will detail immediately.
The central point of the investment strategy continues to be the development of renewable energy production capacities, so necessary to achieve the energy transition. ENGIE Romania has, today, 120 MW of installed capacity in operation, wind and solar, which places us in the 6th place among the top players on the local market. Our ambition is to continue to develop this capability. That is why we have projects totaling approximately 600 MW in the works, in various stages of analysis.
Another important pillar is the expansion and modernization of the distribution network. Since privatization, we have expanded the network by 7,500 km, equivalent to the Bucharest-New York distance, and we want to continue investing, provided that they are recognized. We have also increased the pace of connecting consumers to the natural gas network, to give you an order of magnitude, in 2021 we connected 90,000 new customers to our network.
A third area of interest is the implementation of decentralized renewable energy production solutions for customers. We have noticed an increase in the appetite for this type of solution determined by two reasons: one of a pragmatic order, being an optimal solution to mitigate the price increases experienced by conventional energy and another to contribute to decarbonization, an increasingly important topic most present in all fields. An example of such an approach to accompanying customers is the agreement concluded with Saint-Gobain for the construction of the largest photovoltaic park on an industrial road in Romania, located on the land of the glass factory in Călărași. The amount of green energy estimated to be produced will represent approximately 20% of the plant’s electricity requirement and the avoidance of over 2,400 tons of CO2 per year.
Also, another fourth point of interest is the development of renewable gases, in synergies with our natural gas infrastructure, but here we are in the preliminary stage of evaluating the opportunities.
What are the new LNG gas terminals and new pipelines that can help Romania and the Republic of Moldova to overcome this crisis?
The diversification of supply sources was, even before the crisis, our constant concern and we advocated all the time for the development of instruments that would ensure a liquidity of the wholesale market that would ensure competitive prices, but also energy security in the area.
Liquefied natural gas is a solution for this diversification and I can give you the example of France, where a large part of the consumption need is provided by LNG. Returning to our country and the LNG import opportunities, for the moment, Greece remains the only option, being the closest European country, with new LNG terminal projects, the Revithoussa one being already operational and ensuring gas imports from countries such as USA, Egypt, Algeria, and with an operational Greece-Bulgaria interconnector.
We are glad that the Romanian authorities have also taken into account, in the framework of the development plan for the national natural gas transport system for the period 2020-2029, the construction of a terminal for liquefied natural gas on the shore of the Black Sea, which will be connected to the transport networks from the Isaccea-Negru Vodă area.
What must Romania do to attract as many European funds as possible, in the next period? Is Romania ready – and to what extent are Romanian companies prepared to face the new wave of investments in digitization and renewables?
We really have the opportunity to build, with European funds, the production capacities from renewable energies which are, in the current context, indispensable for achieving the energy transition and for fulfilling the objectives assumed for Romania through the Green Deal. Thus, the plans for these capacities should be established through a detailed analysis of the way we want the Romanian energy sector to look in the future and the resources that Romania has and can capitalize on.
Until these new production capacities are completed, we see that the European Union considers natural gas the transition fuel of the energy transition. In turn, however, this fuel will have to decarbonize. And for this purpose there are European funds available, I mean the Modernization Fund, where we have allocated a significant amount and we can have a dedicated line for the development of green or blue hydrogen and biomethane. In order to realize all these ambitious projects, it is necessary for Romania to lean, in the next period, on the legislative framework.
All these new projects involve state-of-the-art technologies that are quite advanced in other countries. In France, for example, biomethane is a solution quickly embraced by more and more farmers who are harnessing organic waste to produce gas. We hope that this solution will be adopted as soon as possible in our country, and even if today Romanian companies are perhaps less familiar with these solutions, I trust that they will be adopted gradually. As for other solutions like green hydrogen production, I think we are at the beginning of the road and it will take some time before it will be developed on a large scale, including with European funding. The ability to generate eligible projects vis-à-vis the priorities announced by these European funding instruments is, indeed,
What is the optimal mix that Romania must support in the next period and in the medium term, taking into account the consequences of the conflict in Ukraine on the markets?
The way the world energy markets have evolved, combined with the fact that climate change has made its presence felt this year more than ever, leads us to only one conclusion: the future of energy must be green. The development of renewable energy is, therefore, the answer to this crisis, and Romania has a very good potential both hydro, wind and solar for the renewable industry to know a boost. On the other hand, I am convinced that natural gas will remain an important source in Romania’s energy mix until 2030 and beyond. And I say this because there is currently no other equally clean and rapidly deployable energy source to replace it. I am referring here to the fact that natural gas replaces coal and lignite while ensuring the necessary flexibility of the electricity system to compensate for fluctuations in renewable energy production or end-consumer energy demand, especially in the cold season. It is simple energy to transport and store, and the natural gas transport and distribution infrastructure can be used and adapted in the future to integrate green gases (biogas, bio-methane, hydrogen), generating important savings for authorities and consumers in relative to the investments that should be made in alternative technologies.
The pace at which these technologies will be adopted will depend, to a large extent, on the policies that will be implemented. We need cooperation between companies, between transport operators in the field of electricity and natural gas, we need the Ministry of Energy and the regulatory authority. Therefore, we need to have a common understanding of what the regulatory framework means, and here I am referring, in particular, to the technical rules on the development and integration of hydrogen, whether we are talking about blending hydrogen and natural gas, or we are talking about dedicated networks.
For these reasons, I reaffirm on this occasion, that natural gas is the transition energy of the energy transition and that, together with renewable energy, it will achieve the decarbonated energy mix of the future.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in October 2022.
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