Acasă » Electricity » Energy independence: Romania can help Republic of Moldova

Energy independence: Romania can help Republic of Moldova

4 April 2022
Electricity
Bogdan Tudorache

We spoke with Alexandru Săndulescu, EU High Commissioner for Energy – Mission of the High Councilors of the European Union to the Republic of Moldova. The main topics were the supply of natural gas to the Republic of Moldova, the interconnection of electricity grids, investments in renewables, as well as the objectives undertaken by the Chisinau authorities for this year.

What must the Republic of Moldova do to ensure the need for its resources (gas, energy) as cheaply and efficiently as possible? What major investments are being considered? But green investment?

The Republic of Moldova is 100% dependent on imported natural gas. For electricity, about 80% of the needs of consumers on the right bank of the Dniester are provided by the MGRES thermal power plant located in Transnistria or can be imported from Ukraine. About 67% of gross energy consumption is imported, the only national resources being renewables, especially biomass. This info reflect a significant exposure to the prices of electricity and natural gas in international markets. But let’s take them one at a time.

On the natural gas supply side, currently, the only supplier is Gazprom, which has a gas supply contract with Moldovagaz, a vertically integrated company de facto 64% owned by Gazprom. The contract was signed in October 2021, for a period of five years. For the time being, the contract price, established on the basis of a formula with indexation to both spot prices and the market variation of the prices of some petroleum products, is lower than the price of gas that could be purchased from gas exchanges, including BRM Romania. In order to reduce dependence on a single gas source, the Republic of Moldova has acted in recent years in two directions:

Diversification of supply routes, where the main role is played by the Iași – Ungheni interconnector, which was extended to Chisinau (commissioned in August 2020), and by completing the expansion works on the Romanian side in October 2021 became operational throughout full capacity. The works on the Romanian side consist of 165 km of pipeline, Onești – Gherăiești – Iași and two compression stations in Onești and Gherăiești. Another supply route is provided from December 2019 by the possible use of the T1 – Trans – Balkan gas pipeline in reverse flow.

Implement the relevant acquis in the field, including a legislative and regulatory framework to ensure a functioning gas market. The new rules were successfully tested during a gas supply crisis in October 2021, when another supplier, Energocom, had to buy 17 million m3 of gas through short-term contracts from European traders.

In other words, currently, natural gas consumers in the Republic of Moldova can be supplied by other suppliers, there is in place the regulatory framework including the procedure to change the supplier, there are alternative gas supply routes in Ukraine and Romania, the only obstacle to entry market of other suppliers is the price of gas offered. Although the price in the Gazprom contract is still lower than in the European gas markets, by introducing the spot component in the price formula and increasing its share to 70% in the summer months, the price differences from other potential suppliers become smaller, creating the premises for real competition on the Moldovan natural gas market.

What role can Romanian and Ukrainian gas deposits play in this sector?

An important objective of the natural gas policy is to increase the security of supply by creating gas stocks in the underground depots of neighboring countries. For the first time in the history of the Republic of Moldova, 50 million m3 were stored in Ukraine in October 2020, but in the absence of a legal obligation in this regard, the stock was liquidated in the spring of 2021. New amendments currently being approved by the Natural Gas Law, no. 108/2016, will oblige the suppliers of last resort to have stocks of gas dimensioned to ensure the national consumption for at least two winter months. At the same time, the Government will be able to impose a public service obligation on a gas supplier or trader to store amounts of gas with a state reserve role, the financing being provided by the state.

In terms of electricity, over 90% of the consumption of the Republic of Moldova, including large industrial consumers in Transnistria, is currently provided by the MGRES thermal power plant located in Cuciurgani, Transnistria. The thermal power plant with an installed capacity of 2520 MW uses mainly natural gas, some units can also operate on coal or fuel oil, but the stocks of alternative fuel are very limited. The price of current contracts with regulated tariff suppliers and transmission and distribution system operators is USD 53.5 / MWh, almost three times lower than the prices in the Ukrainian electricity market, the only foreign market that could be accessed. The opening of the electricity market had reached 9.6% in 2020 and estimated over 10% in 2021, but with the exit in December 2021 of the main competitive supplier, Furnizare Energie SRL, virtually all consumers returned to regulated tariffs in 2022. All mechanisms for supply switching and consumer protection are in line with EU practice.

As for natural gas, the Republic of Moldova is working to increase interconnection capacity, specifically to achieve interconnection with Romania.

What is the status of these projects?

Two projects are underway that have become competitors:

  • Asynchronous interconnection, which provides for the construction of a 600 MW back-to-back installation in the Vulcănești power station which is connected by a 400 kV line with the Isaccea – Romania power station.
  • Synchronous interconnection with Ukraine to the ENTSO-E mainland network.

In January 2022, the construction of the Vulcănești – Chisinau 400 kV power line began, a line that ensures the strengthening of the southern area of the national transmission network. This power line is required regardless of the interconnection mode, synchronous or asynchronous.

Regarding the synchronous interconnection, the ENTSO-E studies completed in 2021 indicate this variant as being feasible, and the isolated operation tests are scheduled for 2022, starting with the winter tests between February 24 and 26. The isolated operation involves the temporary disconnection of the electricity networks in Ukraine and Moldova from those of the Russian Federation and Belarus and the performance of a series of tests. If these tests of isolated operation will be a success, the year 2023 will become a year of testing in interconnected operation, and from 2024 it will be possible to make commercial exchanges of electricity with EU countries, through Romania.

Regarding the mechanisms of the wholesale electricity market, ANRE Moldova has been issuing Electricity Market Rules since 2020, a document very similar to the Commercial Code of the Wholesale Electricity Market in Romania. The mechanisms for balancing and paying for imbalances are currently being tested.

Is there a real potential for renewable energies in the Republic of Moldova?

Renewable energy sources had a share of 23.8% of gross energy consumption in 2020, compared to an assumed target of 17%. On the electricity side, however, the share is much lower, only 3% of total gross electricity consumption, compared to an indicative target of 10% also for 2020. The Republic of Moldova has a system for promoting electricity produced from renewable sources based on three pillars:

  • Net metering, for producers with installed capacities below 200 kW;
  • Fixed tariffs (feed-in tariffs), for producers under 1 MW, or 4 MW in the case of wind installations;
  • Fixed prices, established following auctions, for investment projects above the mentioned thresholds.

The maximum capacity to benefit from these support mechanisms is limited, GD no. 401 of December 2021 provides in this regard for the period until 2025:

  • 120 MW in wind sources, of which 105 MW will be auctioned and 15 MW will be with fixed tariffs;
  • 130 MW of photovoltaic solar, of which 60 MW through auctions and 70 MW will be stimulated with fixed tariffs, especially on building roofs;
  • 145 MW in installations based on biomass waste, biogas, waste to energy, all at fixed rates;
  • 5 MW in small capacity hydro sources.

From the above data results a policy to encourage investments in predictable renewable sources, based on biomass/biogas, the electricity system of the Republic of Moldova having limited balancing capacities. At the same time, investments that use second-hand equipment are not accepted in the promotion system. However, they can be installed in Moldova, but the energy produced must be sold exclusively competitively on the market. At the end of 2021, in the Republic of Moldova were installed on the right bank of the Dniester River 14,475 MW solar PV, 73,387 MW wind installations, 6.3 MW biogas installations and 16.2 MW in hydro units.

What are the influences of the Fit for 55 policy on investment projects in the Republic of Moldova?

The effects can only be positive, but let’s take them one at a time. The Republic of Moldova has set very ambitious targets for reducing greenhouse gas emissions, to which the energy sector contributes 68%. The reduction firmly committed to the UNFCCC in 2030 compared to the 1990 reference year is 70%. As line of action, increasing the share of renewable sources in the energy mix is already a key objective of energy policy in the Republic of Moldova, a country with potential still untapped in this area. Increasing integration of renewables into the competitive energy market and improving market rules under the new Community legislation is another goal, and new adaptations of Community energy market legislation to a significant share of renewables can only help. Another line of action is to increase energy efficiency and reduce energy consumption, especially in buildings. A project financed with 75 million euros by European banks and with an EU grant aims at the thermal rehabilitation of public buildings. Residential buildings will follow, for this purpose, a new condominium law is being adopted.

What should Romania do to help Moldova as much as possible? Is Moldova ready – and to what extent are companies ready to cope with the new wave of digital and renewable investment?

Romania is the gateway to the European Union of the Republic of Moldova. Integration in the internal energy market can be achieved only by interconnecting with Romania the natural gas and electricity networks, by connecting the short-term electricity markets. The Republic of Moldova does not yet have a wholesale electricity market operator, but there are offers of experience transfer and support from both Opcom and BRM. The rules of the wholesale markets for natural gas and electricity are almost identical to those in Romania, the licensing regime is easier, practically all the conditions are created for traders and suppliers in Romania to cross the Prut River. The market coupling must be prepared in advance, and 2022 is a good year to start.

In terms of investment, investments in the use of renewable energy sources are expected in the Republic of Moldova, especially in predictable sources – biomass, biogas, waste to energy, as mentioned there is a real problem in ensuring the balancing of more than 150 MW installed in variable sources. Here is a new investment opportunity, namely a gas-fired power plant, with the main role of providing system services. Regarding digitization, I noticed in Moldova a high degree of digitization of public services, worthy of a European country.

In addition to investments, one area in which Romania can help the Republic of Moldova is energy security. In this regard, at the joint meeting of the governments of the two countries held on February 11, 2022, a Memorandum of Understanding was signed between the Ministry of Infrastructure and Regional Development of the Republic of Moldova and the Romanian Ministry of Energy, regarding the cooperation in the field of energy security, a document that provides a series of aid measures in cases of energy crisis.

What are the consequences of the Law on Price Caps, on the increase in energy and gas prices, on investments in the next period?

Like most European countries, the Republic of Moldova has been affected by substantial increases in natural gas prices and consequently heat and electricity prices. However, the authorities’ approach was different, prices were not capped but amounts were allocated from the budget plus an EU grant of 60 million euros to partially compensate for price increases, on the invoice, directly to consumers. Thus, at the first increase in natural gas prices in November 2021, by about 140%, the state bears on average 67% of the gradual increase depending on consumption, for the first 150 m3. There are also supporters of thermal energy, where 80% of the price increase for 1.5 Gcal consumed per month is also offset.

At the same time, after the second gas price increase in January 2022, the Government also established a compensation program for non-household consumers, thus compensating 100% of the price increase for the first 500 m3 consumed per month. Through this system, the energy companies were not affected, and the investment environment continued to be attractive.

What are the main targets and policies pursued by the Republic of Moldova this year?

The Republic of Moldova, as a signatory to the Energy Community Treaty, undertook in November 2021 a commitment to transpose the applicable European regulations from the “Clean Energy for All Europeans” package and other regulations by the end of 2022. Practically the commitment involves revising the laws of electricity, gas, energy (establishing the regulator), energy efficiency, renewable energy. At the same time, the Government Action Plan provides for the organization of tenders for large investment projects in the field of renewable sources for the second half of 2022. The year 2022 is also a decisive year in terms of synchronous interconnection to the ENTSO-E network, being a year of trials. Ambitious targets are also in terms of energy efficiency, this year will be thermally rehabilitated public buildings totaling 12% of the total (as heated area), and 30 public buildings and 10 blocks of flats will return to central heating in Chisinau.

—————————————-

This interview first appeared in the printed edition of Energynomics Magazine, issued in March 2022.

In order to receive the printed or electronic issue of Energynomics Magazine, we encourage you to write us at office [at] energynomics.ro to include you in our distribution list. All previous editions are available HERE.

Autor: Bogdan Tudorache

Active in the economic and business press for the past 26 years, Bogdan graduated Law and then attended intensive courses in Economics and Business English. He went up to the position of editor-in-chief since 2006 and has provided management and editorial policy for numerous economic publications dedicated especially to the community of foreign investors in Romania. From 2003 to 2013 he was active mainly in the financial-banking sector. He started freelancing for Energynomics in 2013, notable for his advanced knowledge of markets, business communities and a mature editorial style, both in Romanian and English.

Leave a Reply

Your email address will not be published.