about us | newsletter | contact | archive | members area

»
  Features:      COUNTRY FOCUS   |   SECTOR ANALYSIS   |

Energy plans lack vision and pragmatism

Renewable sources are essential for a country looking to move on from coal dependence, argues Jean Constantinescu, president of the Romanian Institute for Energy Development Studies

July 2008 - From the Print Edition

The Romanian Government’s energy strategy planned until 2020 lacks vision because it sees a 19th century country focused on conventional coal-based technology. The Government has not yet embraced the new European philosophy and is trying to imitate it in an inconsistent manner.
Coal is still considered a strategic resource of national importance, even though its quality in Romania is particularly low. Even the two traditional coal producers of Europe, the UK and Germany, have reconsidered their coal strategy. The UK has closed down mines and Germany is dramatically limiting its mining activity. Plus both countries have better quality coal than Romania. Quality is not the essential factor. The idea of coal itself is in question in the absence of a competitive clean-coal technology.
Romania has high potential in renewable energy to allow the country to comply with EU objectives to use more power from hydro, wind, solar, biomass and geothermal.
Geothermal energy is used in Oradea, west Romania. This technology was first considered in Romania in early 1970s, when pilot-installations well advanced for those times were built. Close to Bucharest there are also hot water resources which can be used to generate geothermal energy. But the locations for geothermal sources of energy are limited. Romania is not Iceland.
Heat pumps which use the Earth’s heat at small depths to warm households or small communities are widely used in the West and have also chances of success in Romania. This technology can be associated with renewables, even if it uses 15 per cent electricity to generate 100 per cent of energy needed.
Romania should set up the instruments and robust regulatory framework to build an energy environment that ensures honest competition.
This is the difference between the two Government incentive systems to encourage renewable energy, green certificates and feed-in tariffs. With feed-in tariffs, electricity suppliers must buy renewable electricity at above market rates to off-set the high costs of renewable power generation. Green certificates are tradable environmental commodities representing 1 MW/hour of electricity produced by green energy. The producer can sell this ‘certificate’ on a specific market in addition to its sale of electricity.
Feed-in tariffs were developed in monopolistic markets in west Europe following World War II. These are fixed tariffs regulated by the state and with the view to protecting investors well.
Later on, particularly in the mid-1990s, the EU imposed mechanisms of competition for all energy sources, and the de-monopolisation process began. It was decided that unconventional sources of energy providers should compete with each other, and the green certificates system emerged. Currently around seven EU member states use it.
I was president of the Romanian Energy Regulatory Authority (ANRE) when Romania decided to adopt the competitive format – green certificates. Public authorities should consider first protecting the consumer and only then the investor. The green certificates market does that.
Romania’s problem is that it has not yet finalised this system. Stopping in the midle is the biggest danger when a novelty is adopted. Then the critics say the system is wrong.
Firstly, Romania introduced a minimum price-threshold and maximum limit to green certificates which seemed to be small. The Government’s decision was not based on specific studies and did not offer a competitive advantage to Romania compared to a feed-in tariffs system. This discouraged investors.
Secondly, a quota system was introduced along with the green certificates. Every supplier has to purchase a percentage of green energy which they set at the beginning of a year.
If the supplier fails to fulfill this quota, it should receive a penalty from the regulatory authorities. But in Romania this quota system is not honoured. At the end of the year when the authorities realise the quota has not been fulfilled, they set a lower retrospective threshold to not upset the investors. In theory, the green certificate system should work but in practice, in Romania, it is not functioning as it should.
Thirdly, in this area Romania has a complex bureaucratic system which does not match EU members that use the feed-in tariffs system, where investors have a one-stop-shop to gain authorisations. This is not the case of Romania with its up to 90 permits to operate. The faster a company is established and a project is launched, the better a country develops.

The Diplomat/Wolf Theiss Experts Platform is a monthly essay written by an international or local expert on current topics of the day.
The opinions expressed herein are not reflective of any opinions of The Diplomat and Wolf Theiss as to agreement/disagreement or otherwise.



COMMENTS
There are 0 comments:

 
ADD A COMMENT
 
Name
Email
Comment
Validation Code
   
 
 

0 Comments  |  5969 Views
Daily Info
European Investment Bank celebrates 25 years in Romania with 13 billion Euro for economic and financial support

The European Investment Bank (EIB) has approved more than 13 billion Euro worth of financing and advisory services for Romania since it started its operations in the country 2...

E-Distributie Dobrogea invests 12 million RON for the modernization of the Abator primary station in Constanta

E-Distributie Dobrogea has begun an investment project worth around 12 million RON (2.6 million Euro) to modernize the primary station (high/medium voltage) Abator in the city...

Telekom Romania and Alior Bank launch Telekom Banking

Telekom Banking, a digital financial project in Romania, developed within the partnership between Telekom Romania and Alior Bank, one of the largest banks in Poland, aims to m...

ADM Capital sells Brikston Construction Solutions to Wienerberger AG

ADM Capital, an international private equity fund, acquired a 98 per cent stake in Brikston Construction Solutions (Brikston) in July 2014 and has agreed to sell its full shar...

PM Tudose: We will shortly come up with new form of split VAT collection

A new form of split VAT collection, which will respond to the requests made in this period by business representatives, will be presented shortly, Prime Minister Mihai Tudose ...

 
 
   
advertising

advertising

advertising

advertising

advertising

advertising

More on Features
German investments in Romania: Companies are worried about fiscal measures and infrastructure

Romania still offers good business opportunities, but in order to continue foreign investments and job creation, companies need a stable economic environment, legal stabili...

Chinese investments in Romania: Aiming potential

For many years, China has had only several large companies present and active in Romania, mainly in technology, energy, trade, farming and several newly announced ones in a...

Austrian investments in Romania: Companies are generally happy with market development

Austrian investors see Romania as an excellent investment destination and the largest market in South-Eastern Europe. Romania represents a resourceful country, dominated by...

Operational leasing on the road to growth

The Romanian operational leasing market went up by 7.5 per cent in the first semester of the year compared with the end of 2016, exceeding 64,350 units. During this period,...

US investments in Romania: Tremendous potential

One of the fastest growing economies in Europe, Romania is an attractive market for foreign investors in several industries, with potential yet to be developed. The Diploma...

French investments in Romania: Building on solid foundation

France and Romania became business partners in the early '90s and since then the bonds have been built on trust and mutual commitment. Currently, French investors have gain...

Transport and Logistics: Plenty more to come

The vacancy rate for logistics and industrial spaces in Bucharest is close to zero, with low deliveries of new projects and high demand in the first quarter. According to d...