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Public and private investment seems to re-gain a proper focus»

Consumers will lead the energy market in the future

Interview with Georgios Stassis, Country Manager Enel Romania

2018-06-18 14:14:36

How would you describe the Romanian energy industry in 2017 and what do you expect for 2018?

2017 was not a "business as usual" year in the energy industry in Romania. It was a challenging year due to the volatility on the wholesale electricity market at the beginning of the year, which showed who are the suppliers who kept their commitments to customers and those who did not. Enel showed that it is a dependable supplier, which can guarantee that it observes its commitments to all its customers.

As for 2018, it represents for the Romanian energy industry the turning point, the beginning of the change of paradigm which can be seen all over the world. The key words for our industry are digitalisation, consumer empowerment and paradigm shift, which we truly embrace. It has begun and is more and more visible.
This transition will take 5 to 10 years maximum and in this fast changing world, the utilities need to adapt quickly. The one which will be able to adapt will survive.

We believe that the consumers will lead the energy market in the future, and companies must nurture this and invest in digitization.
So far, the concept has been focused on building up big things, large equipment and tools, large networks, and then, at the end of the chain, there was the consumer who was passive throughout the whole chain. This chain is now changing dramatically.
The future of the energy sector is a future in which consumers will lead the market, and we are already taking steps in this direction. We are moving towards being much more than just an energy supplier, bringing innovation and digitization closer to our customers. Thus we can contribute to the creation of an energy system in line with the recent technological revolution.

What are the main market challenges for this year in your opinion?

The main challenge, and not only for this year but also for the next years, is to prepare for the paradigm shift and embrace the benefits of the new technologies. There will be a new regulatory framework in place for the energy field in 2019-2023, and given the new technologies and their disruptions, the new regulatory cycle should embrace digitalisation. There is no room for a 10% cap on investments of the distribution operators in Information technologies and on smart meters. The future digital networks need to be encouraged, for all the benefits they bring to consumers and to the security of supply.

We have been talking for several years about disruptive changes in the energy sector and we know that digitalisation and electricity are like twins and will evolve together, to the benefit of the consumers.

The changes brought about by digitalisation mean that we need to be prepared for the longer term, for what is coming in the next years. Romania is not evolving as an island but is instead linked to the wider changes in the world.

Enel Group believes that the future of energy is related to consumer empowerment. We will no longer have just consumers, but members of a future power eco-system, which not only consume energy, but can produce energy or can provide services such as balancing during peak demand, energy storage and others. Furthermore, an electric vehicle is basically a battery on wheels, one which can be used to inject energy back into the grid when you do not use it, and you can get remunerated for that. Such technologies are being tested right now across Europe.
Nobody believed 5 years ago that if one owned a car, one could become part of the electricity sector. We need to be ready for the new systems.

What kind of measures should be taken by authorities to encourage the market growth and stability?

I believe that Romania is well positioned to be at the forefront of the energy transition. It has the right endowments to be able to take advantage of the inevitable transformations in the energy sector and turn them into opportunities for the entire economy. This means, like I previously said, that also the regulatory framework needs to push for digitalisation, for smart meters, remove barriers related to IT investments of distribution operators, and push for new services, like demand response – which is such a good way to face peak demand, at lower costs.

It is encouraging to see that the Government acknowledges the opportunities that lie ahead for Romania in the field of energy, as the programmes and strategies for the sector prominently mention electricity as a key strategic lever for the future of transport, heating and cooling and the promotion of smart digital grids as the best way to make all these possible. Decarbonisation and air quality are also on the list of priorities while ensuring adequate access to energy for the most vulnerable members of society continues to be of paramount importance.

The country's future looks promising in the field of energy, but in order to make sure all this potential will be fulfilled, Romania needs to start taking bold decisions to attract significant investment. It is no secret that there is an intense global competition for capital, especially in developing and emerging economies. Romania can be a winner in this race, if it presents a solid business case.
If there will be ambition, competence and perseverance in translating the Government's programmes into reality, Romania is set to become one of the European leaders in the energy transition, transforming its economy in the process.

What are the main market segments that have seen a successful evolution last year and why?

On the electricity distribution side, our three companies E-Distributie Muntenia, E-Distributie Banat and E-Distributie Dobrogea, continued the heavy investment programme which allowed them to remain at the top distribution operators in Romania in terms of quality of service.
On the electricity supply side, our significant commercial efforts allowed us to become the market leader mainly due to our excellent performance on the free market segment, where we reached 1 million customers. Our products have been recently redesigned, in order to meet the needs of the modern day consumer, who wants a simpler and more streamlined experience with the energy supplier. Thus, we aim to further increase our customer base on the free electricity market.
The liberalisation of the electricity market proceeded further as planned, and it was completed at the end of the year. We made significant commercial efforts, which were fruitful, as we became the largest electricity supplier overall and on the free market.
2017 marked another important milestone for us, as in April Enel entered the Romanian gas supply market for residential customers, with the benefit of having a single supplier for both electricity and gas. On the distribution side, we continued our heavy investment programme, which made our distribution companies the leading grid operators in Romania in terms of quality of the service.
Our renewable energy division also performed well, and electricity generated volumes rose from 1.23 TWh in 2016 to 1.36 TWh.

What kind of development strategies are you planning to apply to cope with client needs this year?

As you know, the liberalisation process of the Romanian electricity market has been finalised and that the market has become fully deregulated also for household consumers as of January 2018, one of the main challenges we see in the supply sector is to attract and retain customers in such a competitive environment.
But this is also an opportunity, to further diversify our offers and leverage on the know-how and expertise of being part of a large multinational Group. We want to expand our portfolio with more innovative services in accordance to the digital revolution, in order to accelerate the transition to sustainable mobility, conscious and efficient consumption, and the generation of electricity from renewable sources, helping individuals, cities and companies as well.
At Group level, there is a new division called Enel X, which is also been established in Romania. Enel X was specially created in order to accelerate the transition to sustainable mobility, conscious and efficient consumption, and the generation of electricity from renewable sources, helping individuals, cities and companies as well. We are preparing a pipeline for projects in Romania as well, based on the 4 categories: e-mobility, e-home, e-cities and e-industries, and we are looking forward to being in a position to announce the first ones.

What were your 2017 turnover and profit and how many employees do you have? What are the figures for 2018?

As the Enel Group showed in its presentation of financial results, revenues in Romania were last year 1.18 billion euros, and EBITDA was 232 million euros. We have approximately 3,100 employees in Romania. We cannot disclose specific estimates for this year financial results.

What is the investment plan for this year and what are you trying to accomplish? (please, give us details on value, project, purpose)

For 2018, out of almost 200 million euros that are being allotted for investment in Romania, around 170 million euros are aimed at distribution networks. Besides modernisation, we are moving ahead with tele control, with smart meters, in order to take the grids closer to the smart grid concept.

Smart meters are at the base of a smart grid. E-Distributie companies in Romania have almost entirely digitised primary stations and are leading in the quality of distribution service (SAIDI). In order to further improve quality of service and move towards a full smart grid, the next natural step is to roll-out the smart meters.

We have already installed 300,000 smart meters in our distribution areas with the declared purpose to install smart meters for our entire customer base of 2.8 million customers, depending also on the regulatory framework.

Digitalisation is also important on the energy supply side.

Soon, the entire contracting process could be carried out exclusively digitally, with the help of Optical Character Recognition (OCR) technology, which allows the concluding of utility contracts faster, based on mobile devices such as smartphones or tablets. This greatly simplifies the experience of those who choose our services.

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