Romania’s energy status in the region is an embodiment of its long and rich history, especially in the oil & gas sector. The oil industry is more than 150 years old in Romania, while natural gas has been extracted and used for more than a century.
This has created a proud tradition, as well as a quite extensive O&G infrastructure. Oil and gas production peaked in the 1970s, under the socialist system, but those levels were the result of unsustainable extraction, in a centrally planned economy. Indeed, after 1990, the hydrocarbons production declined significantly. At present, Romania imports about 65% of its crude oil, and 10% of natural gas – which, nonetheless, places it among the least energy dependent states in the EU.
Phasing Out Coal
The coal sector has had a major historical contribution to the country’s economic development. Two sorts of coal are mined in the country’s two main basins, respectively: hard coal in Jiului Valley, and lignite in Oltenia region. Hard coal was, alongside oil, the fuel that drove the Romanian industrial progress, which started only in the middle of the 19th century. With the addition of thermal coal power plants in the 1970s and 1980s, the valley turned into a hub of power generation. In the 1980s, the coal-fired plants started to cogenerate heat, which fueled the region’s district heating systems.
At present, though, the two coal companies – state-owned Complexul Energetic Hunedoara, mining and using hard coal for power generation, and Complexul Energetic Oltenia, doing the same with lignite – are facing deep economic difficulties. These have mostly to do with the unbearable price of the CO2 emission allowances within the EU ETS trading scheme, which reached close to €30 in April 2019. For every ton of emitted CO2, the coal-fired power plants must buy such an allowance.
The problem is compounded by the fact that the state has run out of legal means to subsidize the two coal companies. The difficulties faced by the lignite-fired plants represent a challenge for the Romanian energy system, since their yearly contribution of 24% to the country’s electricity production, on average – and actually about 40% in the winter months – is virtually impossible to supplant in the short run.
Doubling Down on Nuclear
Romania has relied for more than two decades on nuclear energy, which has been a bedrock of the national energy system. Further on, in the context of ambitious decarbonization targets, Bucharest is ready to double down on this type of low-emissions power generation.
Romania’s two nuclear reactors at Cernavoda, on the Danube river, operated by state-owned Nuclearelectrica S.A. (SNN), generate a steady 20% of Romania’s electricity production. The expansion of that nuclear capacity is a strategic option, as reiterated in the recent long-term national plans – the Romanian Energy Strategy 2019-2030 and the draft National Energy Climate Plan 2021-2030.
"The investments that we have underway are the biggest when it comes to the energy sector in Romania." Cosmin Ghita, General Manager of Nuclearelectrica
The life-extension of Unit 1, commissioned in 1996, is planned to take place from 2026 to 2028. For further development, there is a broad political consensus that the investment in two new reactors, whose construction started in the 1980s but was interrupted in early stages, must be finished. In 2014, a memorandum of understanding was signed between SNN and China General Nuclear Power Group (CGN) for the construction of two new nuclear CANDU reactors of 670 MW net capacity each. Little progress has been registered until recently when, in May 2019, a Preliminary Investors Agreement was signed, which has mandated the grounding of a JV project company, with a majority share owned by the Chinese part. The company will be established for a period of two years and the new units are expected to start producing in eight years, namely in 2027.
Meanwhile though, Romania ought to be open to the fourth generation of nuclear reactors, which are smaller, modular, safer, cheaper and faster to build and install. Such projects are in advanced approval stages in the US, where pilot plants will be constructed until 2025.
Considering the stringent long-term decarbonization goals of the EU, a safer, flexible and more affordable nuclear technology must be considered.This should be done alongside the build-up of renewables, the increase of energy efficiency and the overall ”smartening-up” of the grid, by means of digitalization and automated systems.
Renewables on the Rise
The renewables energy sector (RES) is the one in which Romania has seen the most spectacular investment boom over the past decade – mostly from 2010 to 2016, and especially for wind power. The country boasts Europe’s largest onshore wind park, namely the 600 MW CEZ Group-owned Fantanele-Cogealac, in the Dobrogea region.
This remarkable increase took place on the back of a generous RES support scheme, introduced through Law 220/2008. The law established a mandatory quota system, coupled with a trading scheme of green certificates (GCs). However, only two years into the application of the RES, the support scheme was curtailed.
Last year’s draft National Energy Climate Plan 2021-2030 submitted by the Romanian Government aims at a meek 27.9% target for 2030, a fact that has been widely criticized and eventually met with a rebuttal by the European Commission, which has strongly suggested a 34% target for Romania’s RES by 2030.
Hydropower Flows Strong
Hydro energy is the most important kind of RES in Romania. Indeed, state-owned Hidroelectrica S.A., with its around 6,500 MW of capacity, is the backbone of the Romanian energy system, given its major contribution not only to overall electricity production, but also to balance the grid, thanks to its hydro dams’ storage.
As most of the country’s hydro power plants were built between 1960 and 1990, the company needs massive refurbishment & modernization works. Moreover, Hidroelectrica plans to build about 200 MW worth of new capacities, pending the needed environmental permits.
Besides, the latest energy strategy draft published by the Energy Ministry in 2018 lists among the four ”projects of national interests” that are to be built the 1,000 MW Tarnita-Lapustes pumped storage plant. This, however, is a decades-old project that has so far proved uneconomical – not to mention its dim environmental prospects. It is likely, therefore, that any new pumped storage capacities with real chances are smaller-scale, geographically distributed and socially accepted. Such demands are, in fact, narrowing down considerably the list of serious projects.
Alongside such large-scale individual projects, Romania must embark on a deep transformation of its energy system by means of low-emissions power generation, digitalization of infrastructure, smart grids, automation and demand-side management, as well as clean transport, deep renovation of its buildings stock and, in general, increased efficiency in the use of raw materials of any kind. A massive reengineering of its systems is required, bolstered by serious investment. But no less important is the cultural and behavioral shift that has to be undergone by consumers of energy services, because efficiency has an indelibly user-related component.
Radu Dudau, Energy Policy Group