We need to speed up investment in energy sources based on clean domestic resources and falling within the European funding program and the conditions imposed by taxonomy, Dan Drăgan, Secretary of State, Ministry of Energy, states in an exclusive interview with Energynomics. “Romania’s energy security and independence are the main pillars of energy policies and in order to maintain balance between the security of the National Energy System and the decarbonization targets we rely in the short-term including on coal capacities, while the new gas-fired capacities, hydrogen-ready, and renewable energy sources will gradually replace such capacities. Also, in the medium and long term, nuclear energy must be included in the Romanian energy mix option”, Dan Drăgan states.
How does the war in Ukraine affect the investments of Romanian energy companies and the energy mix in the medium and long term?
The energy crisis affects fossil fuel throughput (gas in particular) in countries that used to ensure Europe and Romania’s needs, especially in the short and medium term and to this end we need to speed up investment in energy sources based on clean domestic resources and which fall within the European funding programs and the conditions imposed by taxonomy. To this end, in order to eliminate energy dependence on Russia, ensure energy security and maintain the climate change goals, we try to expedite the development of renewable energy sources, including large hydro, development of storage capacities, nuclear energy and, last but not least (as we need to respect the efficiency first principle), energy efficiency measures.
Romania’s energy security and independence are the main pillars of energy policies and in order to maintain a balance between the security of the National Energy System and the decarbonization targets we rely in the short-term including on coal capacities, while the new gas-fired capacities, hydrogen-ready, and renewable energy sources will gradually replace such capacities. Also, in the medium and long term, nuclear energy must be included in the Romanian energy mix option.
Romania can ensure for a large part of the year its gas consumption from domestic production. It should be noted that Romania has continued to import gas to inject it in storage facilities, according to the general plan established at the level of the European Union. According to Regulation (EU) No. 1032/2022, adopted on June 29, stocks will be established in the gas storage facilities of the EU Member States before the winter season 2022/2023 and they can be shared between the Member States based on the solidarity principle. This is considered an important step in the direction of strengthening the security of energy supply of the European Union, in the context of the war in Ukraine.
The Regulation provides that stocks of at least 80% of capacity must be established in the underground gas storage facilities on the territory of the Member States, and 90% of capacity before the start of the following winter periods.
In Romania, on 30.08.2022, the gas stock in storage represented 72.97% of total capacity, Romania, therefore, exceeding the intermediary threshold of filling the storage units at national level, established at 57% for September 1, 2022.
What should the Romanian state do to accelerate investments and to ensure our energy independence from Russian supplies?
Regarding the state’s role to ensure independence from Russian energy supplies, first of all, I recall that Romania has analyzed its options to diversify sources and maintain a sustained dialogue with potential foreign partners (only insofar as they can be mentioned – Azerbaijan, Turkey, the US, Qatar, Egypt/international LNG market – Ed.). Identifying new partners is one of the main measures. Another important measure is the efficient use of domestic natural resources, an important part thereof representing the priority Black Sea investments: offshore hydrocarbons and renewable sources. At the moment, Romania benefits from gas from the offshore Black Sea blocks through the project of Black Sea Oil&Gas, a project of one billion cubic meters per year. We are also optimistic in terms of gas production from Neptun Block, following the recent completion of the transaction between Romgaz and ExxonMobil, which could indicate 2026 as the production horizon. At the same time, we mention the amendments to the Offshore Law, designed to establish a predictable and fair regulatory framework, which will strengthen the mutually beneficial partnership between the Romanian state and investors.
Investments in increasing the production of renewable energy are equally important, taking into account Romania’s potential in terms of wind energy, including offshore, in the Black Sea – an energy source that truly supports the sectoral integration process and, last but not least, with a real contribution to strengthening Romania’s energy security.
Eliminating dependence on Russia requires short-term measures, in order to cope with winter 2022-2023, as well as medium and long-term measures.
In the current context, particularly critical for the states with massive dependence on Russian imports, a Transelectrica analysis estimates the need to maintain certain generating groups in the context of reduced availability of electricity imported from the neighboring energy systems, in the following period. It believes that by keeping the entire fossil fuel energy park (including all coal-fired groups available) and importing, in theory, 3,000 MW (maximum capacity), the estimated peak load could be covered, with 2 coal groups of 330 MW remaining as backup.
In order to maintain additional capacities in operation, Transelectrica, as system operator, will conduct an analysis on the adequacy of the national energy system and propose a provisional mechanism for the implementation of a technical reserve for a brief period (winter 2022 – 2023) based on the Regulation (EU) 2019/941 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC
In order to identify medium and long-term measures, the TSO will order an adequacy study conducted by a third party, containing the technical backup mechanism for a medium and/or long period of time, based on the Regulation (EU) 2019/943 on the internal market for electricity. On this basis, the timetable for closing energy capacities by 2032 will also be reviewed, in conjunction with the plan to close coal-fired capacities and develop new investments in capacities based on natural gas and photovoltaic sources within the Restructuring Plan of CE Oltenia, approved by the European Commission by Decision C(2022) 553 final/26.01.2022.
What major investments does Romania consider?
In terms of pillars in the new investment strategy, the following directions will guide the Romanian energy sector:
- development of new generation capacities based on renewable sources, and low-carbon technologies, such as natural gas and, also, nuclear sources;
- encouraging the transition to renewable energy in rural and small urban areas;
- accelerating the process of digitization of energy grids;
- upgrading energy infrastructure and providing storage solutions.
As concrete actions, on 29.06.2022, the Ministry of Energy launched the state aid scheme for supporting investments in building green hydrogen production capacities in electrolysis plants. Other investment examples considered are investments in new capacities included in the Restructuring Plan of Complexul Energetic Oltenia, such as: Ișalnița: 850 MW CCGT (gas) – 2026, Turceni 475 MW CCGT – 2026 and 8 photovoltaic parks with a total capacity of 735 MW – 2024, completion of the investment for building a new energy capacity with an installed power of at least 1,290 MW, of which minimum 800 MWh baseload on gas and renewable energy from CET Mintia-Deva by the buyer Mass Global Energy Rom. It has the obligation to complete the investments by 31 December 2026. We also consider the investments of Hidroelectrica and Romgaz.
In the field of nuclear energy, which is a clean energy source and which will help reach the energy security targets for Romania and the decarbonization targets in the medium and long term, Romania has under development and planning a number of projects in the nuclear field, such as retrofitting of Unit 1 from Cernavodă NPP, completion of Units 3 and 4 project and involvement in the development and construction in Romania of the first small modular reactors, announcing at the COP26 conference, on 4 November 2021, the cooperation between companies SN Nuclearelectrica SA and NuScale.
Moving to offshore wind energy, we can state that, due to its geographical position and openness to the Black Sea, Romania has a high technical potential in this direction. It is estimated, based on the reports of the World Bank (WB), at a natural capacity of 76 GW.
In addition to the immediate necessity of primary legislation and secondary regulation in order to eliminate barriers to investment, a significant strengthening of related infrastructure – a prerequisite for investment – is also required. In the process of developing of the legal framework for offshore wind energy in Romania, the Ministry of Energy benefits from support from the World Bank and DG-REFORM by conducting a study whose goal is to provide a balanced and strategic analysis of the role that offshore wind energy could play in ensuring the energy needs and in reaching the sustainability objectives in Romania and the roles and responsibilities of the various public institutions to develop and implement this technology.
Is Romania ready – and to what extent are the Romanian companies and the network ready to cope with the new wave of investments in digitization and renewables?
In terms of investments in digitization, we know that the digital transformation of the energy system brings multiple potential benefits, but it also comes with risks and challenges related to the specifics of the energy system and the correlation of investments in the energy sector. For example, how to use simultaneously the old technologies with the new and smart technologies or how to address cybersecurity threats – these being able to affect energy supply, an essential service for society. There is a need for an integrated approach, in order to make sure that investments in digital technologies in the energy system are made and planned in accordance with the technological development of the energy sector throughout the production, transmission, distribution, supply and consumption chain. We need to be ready for the digital era.
Through the amendments to the Electricity and Natural Gas Law No. 123/2012, in order to transpose the provisions of Directive (EU) 2019/944, new notions were defined, such as active customer, citizen energy community, demand response, dynamic electricity price contract, priority dispatching, imbalance settlement period, energy derivative instruments, prosumer etc.; clarification of the notions of branching, connection, network extension etc. These notions/actions, defined in the new law, can only be implemented by digialtizing the energy sector. Therefore, digitization is not only a necessity but also an obligation.
Also, investments supported by the NRRP aim at increasing the process of metering the final energy consumption through digital remote management platforms, the provision of energy services by increasing the share of energy audits carried out at the level of industrial operators in the economy, the optimization of industrial technological processes through investments in ecological technologies and sustainable solutions, ensuring fair funding. Therefore, digitization is a commitment.
What should Romania do to attract more European funds, in the next period?
I will refer to the Modernization Fund (MF), a new funding instrument contributing to the objectives of the European Green Deal, by supporting a just transition, from a social point of view, to green economy. Investments proposed by the Member States are considered eligible for funding from the Modernization Fund with up to 100% of the eligible expenses, if the European Investment Bank (EIB) decides that they are priority projects, being selected through a competitive process. Romania has approximately 200 million EU ETS allowances allocated (for the period 2021-2030), worth over EUR 13 billion (using the current price of CO2 emission allowances).
In correlation with the NECP targets and the new decisions adopted at the European level, the Ministry of Energy has identified 8 key investment projects with funding from the Modernization Fund: renewables, CCGT, cogeneration, electricity and natural gas transmission and distribution infrastructure, nuclear energy, energy efficiency, hydrogen and biofuels.
Then, we have, of course, the National Recovery and Resilience Plan, where the energy component is found in Pillar I, with several reforms and investments that deserve a stand-alone approach.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in October 2022.
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