Sneak peek into energy's future
In the light of the new National Strategy currently being debated, where Romania faces new challenges regarding the energy market, The Diplomat - Bucharest organized in late November the "Investments for ensuring Romania's long-term energy security"
In the light of the new National Strategy currently being debated, where Romania faces new challenges regarding the energy market, The Diplomat - Bucharest organized in late November the "Investments for ensuring Romania′s long-term energy security" conference to stress the connection between political stability and investment plans, to underline the current problems of the related sectors and ways of solving them, but also to talk about business strategies of the major Romanian energy companies for the next years.
By Petre Barac
lthough there are many things to do in terms of legislation, some of the local players believe that the energy sector can find the right path of development through predictability, flexible regulations and political agreement of all parties.
The elite event was supported by The Diplomat partners that include gold partners Hidroelectrica, and partners BCR, Nuclearelectrica, Romgaz, Transelectrica, and the support of ANRE (Regulatory Authority for Energy), ACUE (Federation of Associations of Energy Utility Companies), AFEER (The Association of Electricity Suppliers in Romania), RO CIGRE (International Council on Large Electric Systems), and the World Energy Council. The conference was moderated by Valeriu Binig, partner of EY Romania.
The Diplomat - Bucharest presents next the main topics of the "Investments for ensuring Romania′s long-term energy security" conference that bring to attention the evolution of the energy market in Romania and solutions to improve its development.
Corina Popescu, Ministry of Energy: "We are facing many challenges, but we need to make sure we get the right amount of investments for the energy sector"
Human determination is the most valuable resource from which we should start making energy projects for developing this industry, said Corina Popescu, Secretary of State, Ministry of Energy. "We are facing many challenges, but we need to make sure we get the right amount of investments for the energy sector," she added. "We now have a draft for the energy strategy, with both positive and negative feedback. We expect further comments on the document but we think this is a wake-up call for the investments that we need in this sector."
In her opinion, the energy strategy should be regarded as a document that aims to show strategic objectives for the Romanian energy sector.
"It is very clear that we need investments in the manufacturing sector. We also need investments to complete the interconnection of electricity and gas networks. It is a tough period, but this can also lead to a ′revival′ of the energy industry."
Popescu talked about the resources to finance the necessary investments and that we must learn the lessons of the past.
"I hope all future investments are coordinated, not just for the sake of making them. I do not want to hear any more about investments that are not being finalized. Things must be correlated. The energy strategy is the cornerstone which contains some large strategic directions."
The Secretary of State believes that investors will come to Romania once they can see a proper strategy for the local market. "The strategy is only a foundation for the energy sector and it should not be regarded as a document that contains all the answers," she concluded.
Daniela Lulache, Nuclearelectrica: "We want to talk about investments and market, not investments versus market"
"I would like to see that Romania has some goals or objectives regardless of any energy strategy," said Daniela Lulache, general manager of Nuclearelectrica.
"I understand that one of the scenarios considered in developing this strategy is one that does not involve any change in the energy market in Romania," she added. "Assuming this scenario is a development one, I dare say that it is a situation that will not generate any form of investment appetite. Any of these projects that we consider strategic or a priority are impossible to implement. We want to talk about investments and markets, not investment versus markets."
According to Lulache, whatever the energy mix Romania aims to achieve, the role of nuclear energy will remain consistent for the future.
"We make substantial investments every year in nuclear security. Nuclearelectrica′s budget varies between 50 and 100 million Euro per year when it comes to security both in primary and secondary production."
Lulache also talked about revamping unit 1 from Cernavoda. "We have the approval of our shareholders. These are projects that need a very long time, not just for construction but for preparation. According to our data, the refurbishment itself will take place during 2025-2027 and the reactor will be shut down for a year and a half to two years. The total investment is currently estimated at 1.2-1.5 billion Euro."
By the end of 2017, Nuclearelectrica wants to finish the technical analysis for the project and to search for financing.
"We are on schedule, but the big problem is the feasibility of the project in current market conditions, because attracting additional funding can be a challenge," said Lulache.
Silvia Vlasceanu, ACUE: "ANRE must come up with new regulations for the distribution sector"
One talks about this energy strategy, but one should not jump to conclusions because one does not have the final form of the document, said Silvia Vlasceanu, general manager of ACUE.
"We do not know the future plans of the politicians or the next government′s intentions. We also do not know whether this strategy will remain the same," she continued. "For now we have debates on issues that are a bit unknown. We do not know what will happen in January."
According to Vlasceanu, Romania is still in the phase where every energy company supports their own investment plans.
"For the first time since 1990 we are in the development phase of a study on the technical condition of the distribution network," she added. ACUE wants to make a full analysis of the distribution system′s current state, hoping that it will be useful for authorities when taking decisions and drafting new regulations.
"For now, the lack of cooperation between the authorities has a direct impact on the distribution network operators′ activity. ANRE must come up with new regulations," she concluded.
Petronel Chiriac, Hidroelectrica: "The energy strategy is a good document to begin with"
The national energy strategy is a good document to begin with, but more specific explanations are required, according to Petronel Chiriac, member of the management board of Hidroelectrica.
The company is working on an investment plan until 2022, with a total budget of around 800 million RON (177 million Euro) for new production capacities. Besides that, Hidroelectrica is having some issues with one of their projects, given the new dimensions of protected areas.
"We were sued by several NGO′s on the Bumbesti-Livezeni project," he said. "Basically we are in a position where we could be forced to stop the investment, which is quite worrying. Obviously we will defend our position, because the building permit has all the necessary approvals. Given the new dimensions of protected areas, I hope there will not be the case to stop this investment."
Hidroelectrica also has a plan for refurbishing the Vidraru project, following an investment worth 80 million Euro. The deadline for completion and designating the contractors is March 2017.
"We already have four competitors, from Romania but also from Russia and China," said Chiriac.
State-owned energy producer Hidroelectrica is the most profitable company in Romania, after announcing a gross profit of 1.1 billion RON (244 million Euro) in the first nine months of 2016, with a turnover of 2.4 billion RON (533 million Euro).
New gas deposits found by Romgaz
Vasile Carstea, director of the Ploiesti Branch of Romgaz, talked about the Sarmasel project, worth about 238 million RON (52.8 million Euro), which will increase the active capacity from 800 million cubic meters per cycle to 950 million cubic meters per cycle.
The investment also implies a new installation for compressing and drying the natural gas and will increase the quality of gas delivered and daily delivery capacity of the deposit from six to nine million cubic meters per day.
Furthermore, the project will raise the storage capacity of the deposit in the case of consumption peaks.
"We finished the first stage of development and now we prepare for the second one," said Carstea. "For now we have everything we need to put it into practice. We have a 2025 strategy built for 2025."
According to the same source, Romgaz found some new gas deposits near Braila, in an effort to overcome the vulnerabilities of gas supply in certain areas.
Florentina Raducanu, Transelectrica: "We need a friendly environment for investments"
Romania needs a more favourable and friendly environment for energy investments, said Florentina Raducanu, director of investment division from Transelectrica.
"The available resources and the know-how are not enough for future investments if we lack flexible regulations," said Raducanu. She talked about the investments of Transelectrica to improve the current transport network. The company has a budget of around 5.1 billion RON (1.1 billion Euro) to build more than 1,000 km of new network lines and to refurbish 40 electrical stations. Transelectrica is the Romanian Transmission and System Operator (TSO) which plays a key role in the Romanian electricity market. The company manages and operates the electricity transmission system and provides the electricity exchanges between the central and eastern European countries as an ENTSO-E member (European Network of Transmission and System Operators for Electricity). Transelectrica is responsible for electricity transmission, system and market operation, grid and market infrastructure development ensuring the security of the Romanian power system. It also serves as the main link between electricity supply and demand, constantly matching power generation with demand.
Maria Manicuta, ANRE: "Next month [December], we will submit the tariff proposals for the eight electricity distribution operators"
"As a country, we must change our mentality and should not destroy what others are building, as it usually happens with strategies," said Maria Manicuta, director of ANRE. She claimed that an energy strategy must present feasible projects on the short and medium terms and should consider both the EU policy and development directions the EU provides through its energy policy.
"The Romanian energy market is a rigid one; however, the integrity of transactions on this market is given as a positive example. At European levels, all energy developments go to the increase of the transactions′ transparency levels. We must have a more flexible energy market, without abandoning the concept of transparency. A consistent business environment should benefit from clean energy - from all points of view - that contributes to the development of investments."
According to Manicuta, it is very difficult for a legal framework to combine the private interests with the public ones. "Within ANRE, we have the obligation to check the development and operation manner of energy infrastructure and prevent companies with monopolistic nature to show their dominance."
She also said that ANRE needs to control costs through regulatory charges, that fair price which should be linked to a certain level of quality. Obvious progress has been made in terms of energy market regulation. "Next month [December], we will submit the tariffs proposals for the eight electricity distribution operators," Manicuta concluded.
Valeriu Binig, EY Romania: "The energy strategy is technologically neutral"
Valeriu Binig, partner at EY Romania, said that the energy strategy is technologically neutral, because there is no mention of whether we want to promote one technology over another.
"We should not forget the country′s primary energy production," he said. "We must not forget that - with sustained efforts - Romania has chances not to exhaust its proven natural gas resources."
According to him, Romania has onshore gas resources, which have not been highlighted yet, but which can help avoid depletion of existing gas resources and which can contribute to Romania′s regional role of energy resilience supplier. "There have been discussions on the establishment of strategic stocks of natural gas that Romania could provide to other countries."
Binig also said that we have an energy strategy that has included some fundamental elements such as technological neutrality and interest in consumers.
"We find ourselves in a period of debate carried on all levels. Several priority projects have been highlighted and we will see what the final electric power price will be on the wholesale market in the next decade. We must see what kind of mechanisms we find to ensure credibility for potential financiers to start investment projects. A decision must be taken now to have an insight into the future."