REGlobal presents an extract from EY’s report, European Green Deal: Decarbonizing the Romanian Energy Sector Through
Renewables which highlights the impact of the Green Deal on the European energy market and decarbonization of the Romanian energy sector,

Romania’s energy market and the Green Deal

Romania reached its 2020 EU renewables target of 24% of final energy consumption coming from renewables several years ago. In order to reach its 2030 renewables target of 30.7%, Romania plans to add around 7 GW of new renewables capacity, of which around 3.7 GW is projected to be solar projects, according to the plan.

In terms of energy consumption, in 2019, little over of 24% energy consumption originated from renewable energy sources, placing our country on the 10th place in the EU and above the union’s average level.

Romania’s energy mix

In 2020, electricity production in Romania was comprised of 12.4% wind power, 3.4% from photovoltaic solar panels, while 27.6% of the electricity production was coming from hydropower. In total, renewable energy production (wind, photovoltaic and biomass) amounted to 16%.

According to the data provided by the European Commission, Romania’s greenhouse gas emissions fell over 50% compared to 1990’s levels due to a significant reduction in energy demand and industrial activity, increase in energy efficiency and gradual compliance to more restrictive environmental standards. Energy still represents the main source, accounting for 2/3 of national GHG emissions, followed by agriculture, industry and waste management.

The electricity generation mix has undergone structural changes during the last decade. While coal’s share halved in the reference timeframe, renewables filled in most of the gap following available potential and the accelerated development during 2010-2015 and natural gas experienced a sustained growth from 11% to 18% as the energy transition fuel.

Low-carbon energy transition in Romania: private & public initiatives

Business opportunities in the Romanian renewable energy sector

In the past years, there have been several energy multinational companies very open to change that have embraced the sustainability agenda in their core business strategy. The introduction of the European Green Deal will clearly impact the activity of important actors in the energy arena and the need to reshape their investment strategy in the following decades has been acknowledged by multiple companies.

Romania has witnessed a decline in terms of renewable energy attractiveness, partly due to the lack of appropriate regulations and appropriate governmental support. According to EY latest Renewable Energy Country Attractiveness Index (RECAI), once among the top 40 most attractive countries in terms of renewable energy in 2015 (34th place), in 2020, our country has fallen below this top, being surpassed by European countries such as Poland, Greece and Austria.

However, several companies have announced their intention to invest in clean energy projects locally.

Transactions and future investments

Enel is one of the energy companies present in Romania that has expressed desire to decarbonize their energy mix by 2050, with renewables taking over fossil fuels in terms of electricity production.

Other visible developments in the market are leaning towards the transition to renewables: in 2020, Hidroelectrica acquired the Crucea Wind Farm (with a capacity of 108 MW) and STEAG Energie Romania from STEAG GmbH, while Electrica acquired the Stăneşti photovoltaic park.

There are also major transactions announced in 2021 on the local market, including a sale of CEZ assets in Romania to Macquarie Infrastructure and Real Assets, evaluated at 1.2 billion EUR. MIRA’s leadership has expressed the fact that Romania represents a very dynamic energy market and that the company is committed to invest in the transition towards low-carbon electricity.

Industry is also aboard the energy transition. GFG Alliance’s steel businesses , including Liberty Steel Galati, will be incorporated into a new global group – Liberty Steel Group, with plans to implement a carbon-neutral strategy by 2030. Green steel strategy will be a key element for the newly established group, focusing on electric arc furnaces to recycle scrap steel, as well as using renewable sources of energy. This green strategy will also explore environmentally friendly technology such as hydrogen-based steel-making.

These are just some of the acquisitions made by important energy actors, with many investments announced for the upcoming period.

Governmental action for renewable energy transition

At governmental level, last year Power Purchase Agreements were introduced, in order to boost investments in the renewables sector by deregulating the local electricity market, per EU common market regulations, thus allowing investors to minimize transactions risks. Until this legislative change, all electricity transactions could be carried out solely on the centralized market in a transparent, public, competitive and non-discriminatory manner. This restriction on freely negotiated PPAs was seen as the main obstacle preventing investments in new generation capacities, especially in the renewable sector.

Moreover, a Contracts for Difference scheme is currently assessed at the Ministry of Energy level, with financial support from the EBRD, in order to support investors interested in developing clean energy projects in Romania.

The New Electricity Law, where drafting process is currently ongoing and managed with support from EBRD, will include relevant provisions related to EU environmental legislation, system flexibility, increased interconnection and market liberalization that represent facilitators for the transition to a low-carbon economy.

What should Romania do in order to reach its Green Deal targets and thrive in the renewables arena?

Six recommendations for an integrated plan for the renewable energy transition

  • Updates on policies and legislation are necessary to stimulate investments – the right mix of legal and regulatory framework will favor a sustained deployment of renewable energy capacities.
  • At country level, strategic projects must to be defined, prioritized and tackled in the context of significant financing potential of Recovery and Resilience Facility and other EU Funds available.
  • Developing a resilient and flexible infrastructure shall be the centerpiece of renewables integration – a high degree of grid stability can smoothen the energy transition.
  • Adopting new technologies for energy storage, improving energy efficiency and increasing decentralized generation will increase the share of clean energy to be installed.
  • Specific market mechanisms need to be developed to ensure maximum benefits for participants and to harness the full potential of renewables integration.
  • Last, not least, an agile-based approach can prove successful for achieving Green Deal targets – assessing current state, setting the objectives, tracking progress, receiving feedback from the sector and adapting on the go are the key steps of the transformation process.

The full report by EY can be accessed here.