Romania ranks first in the European Union (EU) in terms of the real burden of electricity prices, with a nominal value 21% above the European average, shows a specialized analysis published on Wednesday by the Smart Energy Association (AEI).

“In European energy price statistics, Romania often appears as the “modest student” nominally (in euros) below the EU average and below Western states. But when you put the same bill through the PPP (purchasing power) filter, Romania turns around and becomes the country with the highest costs and prices. It’s not statistical magic. It’s the simplest diagnosis of recent years, it’s not just how much you pay that matters, but how hard that payment weighs on your economy. Romania has a final nominal electricity price 21% below the EU average of the nominal price, but in reality it is 15% higher in PPP at the final price. The difference does not come from a “hidden” tax, nor from a single tariff. It comes primarily from the low purchasing power of Romanians, which “makes” the same amount in euros more difficult”, claims the president of AEI, Dumitru Chisăliță.

According to the specialist, although the components that form the nominal price of electricity show that Romania is “below the EU level” in almost all components (distribution, margin, taxes), in relation to purchasing power it appears that the amount of costs and the final price of electricity jumps “above” the average.

At a comparative level Romania vs Germany plus the Netherlands (dense networks, high load), Romania seems much below the nominal costs and prices (network, margin, final), but in fact, compared to purchasing power, it has commodity prices up to 84% higher.

Also, compared to Poland, Romania has approximately the same nominal price at the commodity price and has electricity distribution tariffs below the level.

“The commodity price of electricity without taxes and tariffs compared to purchasing power places Romania in 2nd place in the top of EU countries, surpassed only by Bulgaria. The market structure explains why the commodity is not cheap (…) The Romanian market has been strongly influenced by regional volatility, and protection mechanisms have been applied more to the final bill than to the formation of the wholesale price. Romania’s production structure, hydro and nuclear, offers competitive costs, but in periods of low hydraulicity or nuclear maintenance, the marginal price is dictated by more expensive technologies (coal and gas), and regional interconnections quickly transmit external shocks. Western markets, such as Germany or the Netherlands, have much higher volume, superior liquidity and sophisticated hedging mechanisms. Romania has a smaller and more volatile market, which can amplify marginal prices”, explains the head of AEI.

The specialized analysis reveals that the average electricity distribution tariffs in Romania, in relation to purchasing power, place our country in first place among the EU states.

“Distribution is an infrastructure with high fixed costs. In Romania, the distributed volume per customer is small, resulting in a high unit cost per kWh, a low network load, and low economic efficiency. Romania has a lower per capita consumption than Western economies, which means that the same fixed costs are divided into fewer MWh. In Romania, there is a dense urban area, but also an extensive and dispersed rural network. Low-density areas require many kilometers of network, have few consumers, which increases the cost per distributed unit,” Chisăliță believes, according to Agerpres.

In the expert’s view, the electricity distribution tariff can be reduced by increasing the load of distribution networks, smart electrification (heat pumps, EVs), new connections, reducing the degree of “under-utilization” of networks, which will lead to lower losses on the network, respectively more efficient CAPEX (investments, n.r.) through targeted investments and digitalization that reduces OPEX (Operational Expenditure/Expense, n.r.).

At the same time, electricity transmission tariffs in Romania in relation to purchasing power make us rank 1st in the ranking of EU countries, notes the cited analysis,

“Geographical dimension and system topology. In Romania, there is a transmission network spread over a large area, relief variation, production areas far from consumption centers, a need for regional interconnection. The transmission network must cover long distances and ensure system stability in a complex territory. Fixed costs are high. Transport is dominated by fixed costs. If the transit volume is not very high, the unit cost per MWh increases, economic efficiency decreases. Romania does not have the same volume of industrial consumption as Western economies. Thus, the infrastructure is divided into fewer MWh. Balancing and stability costs. The integration of renewables and regional volatility increase the costs of system services. In a smaller market, these costs can have a higher percentage impact than in large and very liquid economies”, states Dumitru Chisăliță.