The energy transition requires major transformations in electricity and natural gas distribution infrastructure. The recently launched Valorem study starts from an urgent need for investment in Romania’s energy distribution networks, estimated at 1.5 billion euros per a year – 1.2 bn for electricity and 0.3 bn for gas. The analysis estimates annual investments of only 0.4bn per year in the current regulatory context; 1.1 bn represents additional capital that would need to be attracted.
Investments are considered essential not only to modernise infrastructure, but also to support reindustrialisation, digitalization and decarbonisation of the Romanian economy. Without a robust energy infrastructure, Romania risks missing out on major economic opportunities and lagging behind countries in the region in the process of economic convergence.
At the same time, Valorem argues that investments in energy infrastructure have an extremely strong economic multiplier effect, estimated at between 1 in 6 and even 1 in 10. This effect refers not only to the direct impact (hiring, procurement, taxes), but especially to the ability of upgraded networks to attract and sustain other economic investments: new production capacities, data centres, large industrial consumers, renewable developers. Without these investments, Romania will continue to import energy and high value-added products instead of producing them locally.
Unlocking these additional investments needed to modernise the networks can bring significant economic benefits for Romania, equivalent to an annual impact of up to 10.6 billion euros per year, equivalent to around 3.3% of GDP. According to the Valorem study, the total economic impact of the 10.6 billion was assessed in relation to 3 main pillars of economic growth: 1) multiplication/expansion of infrastructure projects; 2) increase in energy production and distribution; 3) stimulation of the economy by attracting new investments. The structure of the calculated positive impact includes significant fiscal benefits, avoiding over 4.6 bn euros in tax losses, 2.5 bn euros in net additional wages (which could support over 230,000 jobs) and up to 3.7 bn euros in net corporate profits that could be reinvested in the economy. According to the study, over 5 years, boosting investment in distribution networks could increase GDP by up to 16.5%.
The study carried out by Valorem for the ACUE Federation emphasises that without modern networks, neither prosumers, nor investors in renewables, nor heavy industry will be able to contribute to Romania’s economic recovery. Transport and distribution infrastructure becomes the equivalent of motorways for the economy – without it, development is fragmented and inefficient. Moreover, in the current geopolitical and economic context, where the EU is encouraging energy autonomy and the green transition, Romania needs to invest intelligently and proactively. “Modern and efficient grids make it possible to minimise losses, integrate renewable – often cheaper – sources, avoid congestion and stimulate real competition on the market. In other words, investments in energy infrastructure are not an obstacle, but are the very foundation of a sustainable, fair and predictable final price for all consumers”, emphasised Dana Dărăban, Executive Director of the ACUE Federation, during a debate on this topic.
Valorem also shows that, despite the general perception, the impact of these investments on the final consumer is modest: an increase of only 5 lei per year for household electricity and 8 lei for gas, with the possibility that, in the medium term, tariffs may decrease due to the reduction of losses and the efficiency of the networks. At the same time, there are important side-benefits: improved quality of service, reduced connection times, easier integration of green energy.
Distributors have invested significant sums in their networks, says Volker Raffel, president of ACUE and CEO of E.ON Romania, and have significantly improved quality indicators such as outage duration. “But new technologies are emerging that need to be upgraded and it is very clear that investments in energy infrastructure need to be accelerated. Any delay not only hinders the energy transition but also hampers economic growth,” warns Raffel. ACUE warns that the current regulatory framework and the approved level of return (6.94%) are not attractive enough to mobilise the necessary private capital. On the contrary, “the establishment of an appropriate regulatory framework for the future development of electricity grids will bring economic benefits starting now”, emphasises Volker Raffel.
About ACUE
ACUE is a representative federation in the electricity, oil, gas and energy mining sector, representing the interests of major companies in the production, distribution, supply of electricity and natural gas and related services. ACUE represents 23 companies in the energy sector, totalling more than 25,000 employees and an annual turnover of more than 5.5 billion euros.
About Valorem
Valorem Management Consulting brings together in its core team over 200 years of experience in management consulting in Romania, Europe and the USA. The team has worked in all relevant sectors of the economy; energy is one of the key sectors.