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AEI and FEL Romania explain the increases in electricity and natural gas

5 July 2021
Analyses

Today’s energy price is the result of the situation in the energy sector, emphasizes Dumitru Chisăliță, president of the Intelligent Energy Association (AEI): on the one hand, a deficit in power generation, and on the other hand, a deficient policy in terms of promoting domestic natural gas resources. “A combination of elements establishes the premises for the confrontation of the European Union (EU) and implicitly of Romania with a significant increase in natural gas prices, the effect of which will be felt also on the electricity market segment”, says b General Manager FEL Romania.

Future Energy Leaders (FEL) Romania, the youth program of the Romanian National Committee of the World Energy Council (CNR-CME), in partnership with the Intelligent Energy Association, launched an analysis of the causal elements of increased electricity and gas prices. The variation of the price registered on the daily energy exchange, according to the Electricity and Natural Gas Market Operator (OPCOM) – The Day-Ahead Market (DAM), in 2021 (January-June) vs. 2020 is + 181%, while cross-border energy import flows increased by 23.1% in 2020 vs. 2019. The study identifies some of the main reasons for the current situation:

  • accelerated increase in the price of CO2 emissions. Emission certificates are traded at over 55 euros, from an average of 24 euros. The energy sector is the hardest hit.
  • continuous increase in natural gas prices. Gazprom – one of the main players supplying Europe with natural gas, announces a price over 50% higher than last year.
  • reconfiguring the regional geopolitical equation after the decision of the Russian Federation to abandon the Ukrainian transport route in covering Europe’s gas demand
  • the return to normal levels of industrial consumption at the national level with the lifting of pandemic restrictions

According to Dumitru Chisăliță, President of the Intelligent Energy Association, “Romanian consumers are facing an increase in prices for all forms of energy. This is wrongly attributed to the liberalization of energy markets. We must categorically reject this hypothesis – liberalization does not increase or decrease the price – but only establishes the premises to accurately reflect the state and dynamics of the energy sector. Today’s energy price is the cost generated by the situation in the energy sector, characterized, on the one hand, by a deficit in generation and, on the other hand, by a deficient policy in terms of promoting domestic natural gas resources.”

Consumers pay in invoices the costs of purchase, storage (as appropriate), transport, distribution and regulated taxes.

However, of these, only the acquisition costs will increase, this aspect reflected in an increase of approximately 19% of an average natural gas bill, respectively of 6-7% at the level of an electricity bill.

On the natural gas segment, at an annual consumption of approximately 15 MWh / residential place of passive consumption, the average value of an invoice could increase from approximately 194 lei / month to approximately 231 lei / month.

On the electricity segment, at an annual consumption of approx. 1.18 MWh / place of consumption under universal service for residential, the average value of an invoice could increase from approximately 80 lei / month, to approx. 85 lei / month.

“As a result of the increase in the purchase price of energy, in the context of market liberalization, there is a possibility that this increase may be associated by actors in the energy sector, including final consumers, with a strictly commercial decision of energy and gas producers / suppliers to maximize their gains”, says Adrian Vintilă, Communication & Media Manager FEL Romania. “Analyzing the market influences, we find that the situation is much more complex, determined by objective factors and with implications for the national economy. That is why it is important to understand the phenomenon, identify the causes and inform stakeholders about the importance of their solidarity in the face of this common challenge.”

FEL Romania considers that the impact felt by the final consumer in Romania in the context of the increase of prices related to utility services (natural gas and electricity) can be mitigated by the following measures:

  1. On short term

  • continuing the end-consumer information campaign to encourage the identification of the most advantageous pricing and delivery conditions;
  • speeding up the efforts to identify and classify vulnerable consumers, with an emphasis on implementing measures to increase the energy performance of the housing stock;
  • encouraging the production of electricity on a pro-consumer basis through national support programs. As an example, we mention the Green House Photovoltaics.
  1. On medium-term

  • improving the portfolio of services offered by storage facility operators, by introducing the possibility to store natural gas on the basis of a multi-annual profile and granting discounts;
  • speeding up the issuance of legislation related to the Black Sea operations, the forecasted production in the Pontic area being able to balance the relationship between the demand and regional supply of natural gas in the medium and long term;
  • simplifying the process of becoming prosumer from a legislative point of view.
  1. On long term

  • securing strategic energy investment projects through NRRP, meant to solve the local electricity generation crisis;
  • preparation of the 11th round of concessions necessary to identify new perimeters with oil and gas potential.

About Future Energy Leaders Romania

Future Energy Leaders Romania (FEL Romania) is the youth program of the Romanian National Committee of the World Energy Council (NRC-WEC) and is part of the global network of Future Energy Leaders, developed by the World Energy Council. FEL Romania is a network of young professionals who debate ideas and develop projects. Among the objectives of the program are the professionalization of young people in energy and the development of skills necessary for the 4th industrial revolution, increasing the degree of employability and the greater presence of young people in decision-making positions. FEL Romania also aims to be a platform for communication and cooperation between the new generation and the current energy elite, cooperation that it considers vital for good development of the energy sector and how it interacts with other fields. FEL Romania aims to accelerate the transition to a clean energy economy and reduce the negative impact that energy has on the environment.

About the Intelligent Energy Association

The Intelligent Energy Association (AEI) brings together professionals in the fields of natural gas, hydrogen, electricity and energy efficiency. Its members advocate for increased transparency in the Romanian energy market, for streamlining energy consumption in all sectors of activity and for the responsible use of all resources.

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