Thermal Energy Forum 2015: Romania should turn up the heat

Romania's district heating network has seriously decayed over the years due to poor management and lack of investments in the sector. If more than 300 DHN units were functional in the early 1990s, last year there were only 70. "Thermal Energy Forum 2015" gathered major players in mid-February to emphasize ways to revive the picture. By Alexandra Lopotaru

2015-04-03 21:28:29 - From the Print Edition

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Romania needs a coherent thermal energy law, the infrastructure of the district heating network (DHN) should be rehabilitated, while more renewable energy resources need to be used to decrease the price of heat and to comply with environmental requirements. These are the conclusions of the "Thermal Energy Forum 2015", organised by The Diplomat - Bucharest in mid-February, under the patronage of ANRE (Romanian Energy Regulatory Authority) and ANRSC (National Regulation Authority for the Public Utilities Community Services).

The thermal energy conference had strategic partners, including ARPEE (Romanian Association for Promoting Energy Efficiency), COGEN (European Association for the Promotion of Cogeneration), gold partners - Adrem Invest, EY (Ernst & Young), Veolia and partners - Isoplus Romania and Nalco, being held with the support of AMR (Romanian Municipalities Association), EFIEES (European Federation of Intelligent Energy Efficiency Services), CRE (Romanian Energy Centre), Transelectrica and the World Energy Council.

The event was structured in two sessions. The first panel included topics such as the national strategic approach for the thermal energy sector, the regulatory frame for production, transport, distribution and supply of thermal energy, as well as local energy models, moderated by Valeriu Binig, partner at EY. The second session touched subjects such as the need for improvement of aid schemes for high-efficiency cogeneration and cost distribution systems, as well as promotion of the use of renewable energy resources, moderated by Ph.D.Eng. economist and energy expert Silvia Vlasceanu.

Seen by experts as "the Cinderella of Romanian energy strategy", the heating sector is currently experiencing a phase of profound destructuring. The local central heating system, a concept developed more and more among European cities, was gradually replaced in Romania by the individual heating system: if in 1990 315 DHNs were functional, last year - only 70 were left. In addition, the link between thermal energy producer - network operator - heating supplier - end users is seen as a "crisis management relationship". Opening the first session of the event, EY′s Binig highlighted the fact that the heating sector urgently needs the development of local strategies, subsequently implemented and funded with the support of the central authorities. "A deeper structuring is necessary and we need a central coordination of local strategies, which should be implemented with the support of the Government," said Binig. "I see the Government support under two forms: offering the expertise to define a local energy concept that should be agreed upon, as well as a financing support dedicated to the implementation of that energy concept," he added.

The moderator went on to say that, at EU level, the state aid schemes are in a process of being upgraded, with an increasing focus on activities that include services of general economic interest, from which heat investors could benefit. "Many of the economic activities components within the heating supply domain, especially the public ones, meet the Altmark criteria for granting such aid," said Binig. "There are also generous structural funds that can be transferred to such projects, provided they are well-defined and have a coherent implementation." However, the sector attracts more and more interest among players that seem to be willing to find proper solutions to develop the system, suggestions that are supposed to reach the Government′s ears. Next, The Diplomat - Bucharest presents such messages from major players in the heating sector.

RADET-ELCEN merger documents, ready by November

One solution to improve the heating sector in Bucharest is the fusion of thermal energy provider RADET with Electrocentrale Bucuresti (ELCEN), the largest producer of heat in Romania (with a market share of 40 per cent), so that RADET can erase the debts it has to ELCEN. The municipality will control and coordinate both production and distribution of heat and hot water.

The first step towards fusion was made in late September last year, by the division of Electrocentrale Bucuresti into three companies: Electrocentrale Constanta, Electrocentrale Titan and Electrocentrale Bucuresti, the latter remaining with four CHPs serving Bucharest. The next steps to be followed are the reorganization of RADET Bucuresti into a commercial company, the transfer of ELCEN Bucuresti shares from the private property of the Romanian state to the private property of the Municipality of Bucharest and the merger of ELCEN Bucuresti and the company resulting from the reorganization of RADET Bucuresti, to improve the quality of the public service at a bearable price for the population.

According to Adrian Cristea, the general director of the Municipal Authority of the Public Services Regulatory (AMRSP), the reorganization of RADET Bucuresti as commercial company could be accomplished by June this year, while the documents required for the RADET-ELCEN fusion could be ready in November. "In terms of RADET Bucuresti′s reorganization as a commercial company, important steps have been made and we hope that it will be completed by June this year, given the patrimony problems that have occurred in the meantime," said Cristea. "Regarding the transfer of ELCEN shares, we expect to have the government decision approved by the end of March, so as to move to the next stage in terms of RADET-ELCEN fusion and have all the necessary merger documents in November."

Cristea went on to add that, after the approval of the merger, an integrated system will be created and an experienced coordinator will be selected to achieve most of the system investments, amounting to 1.5 billion Euro. "The main objective of Bucharest′s municipality is to obtain the best price for citizens," said AMRSP′s GM. "The service integrated operation is likely to create financial resources to improve the field and, by providing an efficient management, practically we will get a better price for citizens and we will reduce the subsidies coming from the capital′s budget."

ARPEE: "Romania needs a strategy for the heating sector"

The Romanian Association for Promoting Energy Efficiency (ARPEE) is an association with 12 members that count more than 30,000 employees and more than 6.7 billion Euro revenues, representing around five per cent of Romania′s GDP. According to ARPEE president, Gerard Verdebout, Romania currently needs to improve the heating sector by applying a proper strategy, given the fact that the domestic system is declining year-on-year: if in 1990 there were 315 functional district heating networks, last year - only 70 were left.

"Today, Romanian district heating system has a cumulative debt of 5.46 billion RON, according to a comprehensive study prepared by ANRSC," said Verdebout. "We need to invest in this sector in order to improve it. Without investments in the district heating network, some operators and the system will collapse and it will deprive a lot of people - thousands of flats - of heating."

Thus, together with GOGEN, ARPEE stressed several recommendations for energetic policies based on three main ideas: a) the heat strategy should be fully integrated in the European and Romanian policy and strategy for energy; b) efficiency improvement in terms of production and distribution of heat, as well as the reduction of heat amount with thermal rehabilitation of buildings should be one of the main pillars of Romania′s Energy Action Plan; c) encouragement of the use of renewable energy, as well as waste to energy projects and the use of heat waste recovered from the industrial processes.

In terms of the latter aspect, Verdebout confessed that biomass and geothermal energy are RES that were not properly developed so far. While 52 per cent of the national potential of RES is represented by biomass and biogas, the current sources for heat production totals only two per cent. On average, Romania could produce annually about six TWhe and 25 TWht only from forest biomass. In addition, biomass could cover ten per cent of the total electricity produced in Romania and the current demand of heat produced by all DHNs in Romania.

"Romania remains one of the most inefficient countries in the EU in terms of energy efficiency and represents one of the EU countries with the highest level of CO2 emission per unit of electricity [kWhe], despite the fact that it has significant hydro and nuclear capabilities," said ARPEE president. "Urgent actions such as strategies and incentives are needed to put energy efficiency policies in the required direction. (…) If we apply the strategy we recommended, we will make more with less: more performance, more energy efficiency, more sustainable development with energy, with less emission and less cost."

Concession schemes are a key for success

The European Federation of Intelligent Energy Efficiency Services (EFIEES) represents an association of private companies that provide an overall energy management service to end-users. According to Jean Sacreste, member of the Board at EFIEES, central heating is one of the most efficient ways of producing and distributing energy to consumers, providing benefits both for production and demand. One of the main production advantages is represented by the possibility to mix fuels at the same time such as gas, coal and biomass, allowing the producer to be flexible.

"This is important, because, due to competition, prices of fuels evolve and one must be flexible," said Sacreste. "Other advantages in terms of production consist in security supply, environmental benefits - you can control pollution better - and cogeneration and cost efficiency." In terms of demand, however, EFIEES′s representative highlighted the fact that users do not have to make investments in the system because it is collective and no boiler maintenance costs are required. In addition, safety is increased with no risks of fire, pollution and intoxication.

"The main challenge is that centralised systems need to be managed to be highly effective, efficient in terms of cost and environmentally friendly," said Sacreste. "Because it is a mutual infrastructure, ‘brutal′ disconnections must be stopped to avoid instability and possible collapse of the system. Fixed and variable costs would be passed, in this case, onto a smaller number of clients that would pay a lower rate. This would generate both complaints among the connected customers and social difficulties, which would lead to the collapse of the entire system. In turn, this would lead to the need of massive investments to replace the sources with individual ones."

Sacreste further said that any DHN could be improved through concession schemes if municipalities would support the action. As an example of success, Sacreste presented the district heating network status in Vilnius, the capital of Lithuania. According to him, the Lithuanian heating system was in very bad shape in 2001, but the municipality took a decision that managed to revive it: they leased the DHN to a private company. Thus, the municipality signed a concession contract with Veolia Group in 2002 for 15 years and, today, around 90 per cent of Vilnius inhabitants (around 500,000 people) are connected to the system.

"So far, more than 150 million Euro investments have been done in the system, as well as a lot of comprehensive actions in terms of production, transport and distribution," said Sacreste. "With a comprehensive and tong-term approach and with the help of the municipality - the concession scheme was a success. This was possible only because the municipality supported this action. You could transform the Soviet-style network into a - maybe not very modern - but acceptable and quite efficient system."

Heat, a political issue

Founded in September 2011, the Romanian Energy Centre (CRE) exists to influence European energy policy in order to support and promote investments in the transition towards an energy system with low carbon. According to CRE president, Corneliu Bodea, also representative of Adrem Invest company, the Romanian energy system requires consistency, while Romania′s thermal energy sector has a political problem. The statement comes in the context of the 90-million Euro cogeneration plant in Suceava, designed by Adrem Invest to supply the heating system of the municipality, which is in danger of being permanently closed because of a financial jam.

"The plant has an output of 30 MWe and works on biomass," said Bodea. "The main purpose of the plant is to power the central heating system of Suceava, which has about 25,000 customers. (...) As a source of electricity, it is placed in a very favourable location, because north-eastern Romania has no source of electricity. However, it is in danger of being closed and this is absurd."

After one year from the start of the investment, in early October 2014 the Suceava power plant was stopped due to consumption of available biomass quantities, while the hot water and electricity supplies in Suceava system were blocked. "Taking a look at the proposed energy strategy initiated by the Energy Department, I realise that Romania′s thermal energy problem is a political one," said Bodea. "We have several studies showing that centralized energy cost is about 60 per cent of the cost paid for an individual heating system, thus the problem is not an economic one. Something happens and something causes people to turn to individual systems."

However, Bodea reported that the new Energy Minister Andrei Gerea recently said that he will reanalyse the energy strategy. "For the first time, I hear that the Ministry wants to align the energy strategy to Romanian industrialization strategy," added the president. "CRE intends to play a very active role and get involved in the problem of defining Romania′s energy strategy."

Portariuc: "We hope to receive financial support from authorities this year as well"

Beyond the problems the Romanian public administration is facing - public administration reform, public transport, energy efficiency - thermal energy plays an important role and raises several concerns, said Ovidiu-Iulian Portariuc, mayor of Botosani (Botosani county) and member of the Managing Board of AMR (Romanian Municipalities Association). The biggest challenge occurs in municipalities that have district heating networks, but have not started their rehabilitation. The solution, added the mayor, is financial support from the authorities.

"Our eyes are turning to the Government in the hope that we will receive financial support this year as it happened every year, so that we will not reach the end of 2015 unable to ensure the supply continuity of the central heating service," said Portariuc. "Although substantial amounts of money were aimed at this direction, the European Funds are insufficient. A firmer and a more coordinated intervention of central authorities is required in order to save what can be saved - if desired - from this central system."

Along with seven other municipalities, Botosani benefited of the first phase of SOP thermal rehabilitation, succeeding last year in the completion of the district heating system modernization, an investment of nearly 50 million Euro. Thus, system losses were reduced and the efficiency of the operator owned by the municipality increased, according to the mayor. In addition, two years ago, Botosani signed a partnership with IFC (International Finance Corporation) and accessed a loan of ten million USD for expanding the rehabilitation. The last modernization stage will be completed in the second phase of the operational programs within the 2014-2020 period.

"In the past four years, we managed to maintain a constant price per Gcal, last year decreasing it by almost five per cent; we are now in competition with another two-three cities in Romania for the lowest price per Gcal at the population level," said Portariuc. "Plus, we were able to reduce the amount of the subsidy. One of the biggest expenses of the local budget is the thermal energy subsidy."

However, the main problem Botosani is facing is represented by the reluctance of the citizens to return to the central heating system. Currently, in Botosani, from 30,000 apartments, only 10,000 are connected to the central system, the rest being disconnected in the last 15 years. "The reluctance comes from the unfortunate history of quality and continuity of heat services, when the district heating network - not modernized - did not allow the provision of services at certain quality parameters," said the mayor. "Our target is to double the number of customers in the next seven to eight years."

Support scheme to promote high-efficiency cogeneration to be changed this year

GD. 1215/2009, laying down the criteria and conditions for the implementation of the support scheme to promote high-efficiency cogeneration based on a useful heat demand will be changed this year, said Viorel Alicus, general manager of the Romanian Energy Regulatory Authority (ANRE). The bonus-type support scheme, which takes the form of a State aid, was put into operation since 2011 and provides a budget of 4.1 billion Euro by 2023. So far, nearly 25 per cent of the budget was consumed/

"Unfortunately, even if nearly one billion Euro was consumed so far, the effects are not significant," said Alicus. "We are at a cogeneration capacity of 3,800 MW, but changes and new investments are scarce. We [ANRE] have 37-38 operators acting in a cogeneration system and receiving this money. Thus, in order to enhance the scheme, one of the main goals that ANRE has in view is to encourage efficiency."

The improved scheme involves modification of the current provisions and the inclusion of new provisions, stimulating investments by applying bonus adjustments. The bonus adjustment can consider criteria such as the level of fund allocation, from the amount received as a bonus, for investments, upgrade or rehabilitation with the sole purpose of increasing efficiency, as well as bonus adjustment by a supraunitary coefficient to stimulate new investments.

"There are no investments that lead to increased efficiency of the whole system and we try to direct the bonus towards investments that can be more efficient," added Alicus. However, the solution to improve the current bonus-type support schemes cannot alone solve Romania serious cogeneration problem, said the general manager. A key role in this regard is played by local authorities.

They should ensure the development strategy of local heat supply systems, having a direct involvement in contracting and/or guaranteeing loans required by producers for investments, in particular: stimulating thermal rehabilitation of buildings powered from DHN, restructuring and modernization of transport and distribution systems of thermal energy and granting heating subsidies only for vulnerable consumers. "It is recommended that municipalities do not get directly involved in operating, but to entrust the management of cogeneration and district heating companies to the private sector, especially to energy service companies (ESCOs) or operators with experience," added Alicus.

Disconnecting from the central heating system, the bill of the connected people increases

In theory, a building can function only with a single heating system, but in Romania this fact is ignored. Thus, a heterogeneous context was created, in which the individual and the central systems coexist, causing a paradox: people with a good financial situation that afford an individual heating system disconnect form the DHN, causing the bill growth of the people connected, with a poor financial situation, said Mihai Mereuta, president of the Habitat Owners Association.

"The Constitutional Court makes it clear: your rights stop where they affect the rights of others," said Mereuta. "Disconnecting from the central heating system causes discomfort and problems for neighbours who are co-owners of the building. Thus, your right to take action on common installation stops from a very simple reason: you disturb the functioning of the heating system in your building. Through individual disconnecting, the bills rise just for those who remain connected. And the ones who stay connected are those who have no money and are poor. So, through this ′right′, instead of helping, we hurt those who do not have the resources to pay competitive energy." Mereuta went on and said that an energy strategy would bring predictability in terms of public budget spending and in terms of consumer behaviour. "Consumers will know what to invest in and in which direction their city or Romania is heading," he added. "Currently, we do not know anything and this is the fault of the authorities. The political decision was unfavourable to consumers."

According to the Habitat Owners Association president, local independent supervision entities subordinated to the local councils must exist in all cities where there are central heating systems and public services. "AMRSP [Municipal Authority of Public Services Regulatory] in Bucharest is a role model that can be followed in other cities," said Mereuta. "We requested the establishment of these entities in all cities where there are central heating systems and public services, but without any success." Furthermore, Mereuta added that the affordability of citizens should be taken very seriously, both on subsidies granted from the local budget, as well as on heating aid that should be made on the basis of social investigation for each housing. "We have the obligation towards the blocks designed to operate in a centralised system to provide an affordable cost to consumers."

Eight localities left the central heating system in 2014

Romania′s district network is on an accelerated downward trend, said Doru Ciocan, the president of the National Regulation Authority for the Public Utilities Community Services (ANRSC). In the period of 1997 - 2003, around 40 per cent of urban areas completely abolished the public services of heat supply provided in a centralised system. "In 2014, eight localities left the system, some of them with a population of more than 50,000 people," said Ciocan. "The cities are big and, by establishing other heating systems, they produce many imbalances for both the gas system and environment."
The causes of the decline start with the production, transport and distribution of heat facilities, which are partly outdated and obsolete, with high consumption and operating costs. In addition, the low level of funding sources compared to the investment needs in infrastructure leads to reduced energy efficiency in the production chain: transport - distribution - final energy consumer. According to Ciocan, most of the existing operators in Romania ended the year 2014 with negative financial results.

"The activity of the district heating network suppliers was under-financed," said Ciocan. "This issue together with high indebtedness led to the bankruptcy of major operators in terms of number of users, for example Galati, Bacau, Suceava and Piatra Neamt. Another cause was the failure of the users to pay for the services provided. Usually, people with low incomes make efforts and pay all their debts, but I have met some respectable people with substantial incomes that pay once a year."
To improve the current image of the DHN, Ciocan believes that cogeneration should be the fundamental principle for the restructuring of the production and distribution of thermal energy, while energy efficiency must increase across the entire chain: resources, production, transport, distribution, consumption. In addition, administrators should speed up the modernisation of infrastructure related to energy services of local interest, which involves replacing old equipment with new ones.

"The Heat and Comfort 2006-2015 programme should be in the attention of the territorial administrative units as well," added Ciocan. "According to the schedule, through the State Budget Law no. 11/2009 - heat part - 43.47 million RON were set aside for 2010, an amount from which local government authorities would have benefited after submission, review and approval of grant applications and technical and economic documents of public service of thermal energy supply."

Ploiesti has the lowest heat production tariff in Romania

By accessing the EU, Romania has assumed several obligations at a national level, including the reduction of the CO2 emissions by at least 20 per cent, the reduction of the primary energy consumption by 20 per cent and the increase of the renewable energy share to 20 per cent. The national objectives converge at the local level and the correct use of a central heating system may be one of the solutions for energy efficiency, according to Iulian Teodorescu, vice mayor of Ploiesti, Prahova county.

"Each local authority is obliged to contribute to achieving these national goals and we believe that the proper use of a central heating system may be one solution," said Teodorescu. "The concern for energy efficiency and for pollution reduction occurs not only locally, but globally. The trend of development the district heating networks can be seen all over the world." In addition, a proper management system can lead to a competitive price for thermal energy, said Teodorescu. As an example he pointed to Ploiesti, which records the lowest tariff for production, transport and distribution of hot water and heat. Since 2004, the city signed a 15-year management delegation contract with a private operator, Veolia Energie, thus Dalkia Termo Prahova was born with three shareholders: Ploiesti Local Council, Prahova County Council (6.4 per cent each) and Veolia Energie (87.2 per cent).

As a result, in more than ten years of activity, significant improvements have been made: the reduction of gas consumption required to produce one Gcal by 30 per cent, the reduction of CO2 and NOx by 45 per cent, the reduction of self-consumption of water by 50 per cent and the increase of supply rate continuity from 94 per cent in 2004 to more than 99.5 per cent. Moreover, out of 65,000 apartments in Ploiesti, 57,804 are connected to the network and more than 26 million Euro have been invested in the system.

"The technical results obtained following investments and efficient management led to the registration of the lowest rate in Romania for production, transport and distribution of hot water and heat," said Teodorescu. "We don′t subsidize in Ploiesti. The grant has disappeared. The heating aid is the only thing through which we help citizens and it is granted only under certain conditions. (...) Through the concession contract, the operator is obliged to invest 25 million Euro in the system by the end of the contract. After 11 years, however, investments have already surpassed 26 million Euro. We believe that persuasion can lead to a higher investment."

Thermal energy sector, of interest to financial institutions

Over the years, BCR has funded several projects in the energy sector, including high efficiency cogenerated projects in the private sector (42 Mwe and 110 MWt), renewable energy projects (410 MWe), as well as players in the central heating system linked to the local authorities. If national or local strategies addressing the domestic thermal sector will be established, the need for bank financing will arise, according to Ioana Gheorghiade, executive director for Public Finance and Infrastructure at BCR. "Financial institutions need to look further at this sector," said Gheorghiade. "We are interested in the thermal energy domain because BCR has financed the energy sector a lot, as well as local authorities, for all kinds of long-term investment needs."

According to the BCR representative, the number of connected households has halved from 1989 to 2014: if in 1989 there were 4,000 MW installed in central heating systems and 2.7 million households connected, currently there are only 3,600 MW installed and about 1.3 million households connected. The main problems that led to the present situation are the massive disconnections (two to five per cent of the total number of flats turned to individual heating systems), cogeneration used in only 20 out of 95 cities with DHS and a subsidized system, maintaining the inefficiency.

"According to our estimations, 2.5 billion Euro would be necessary to rehabilitate to around 4,000 MW," said Gheorghiade. "If we talk about bank financing, it is available for a period of about ten years, with a reasonable investor′s own contribution of about 35 per cent. One important aspect is that the operator should be integrated: to have both production and distribution."

According to Gheorghiade, almost 1.5 billion RON were available for the heating sector through European funds, money accessed only by seven municipalities: Oradea, Bacau, Iasi, Valcea, Timisoara, Botosani and Focsani. Regarding the local budget, 2.12 billion RON were allocated between 2006-2015 for the "Heat and Comfort 2006-2015" programme (heat network rehabilitation), with 70 per cent co-financing from the Government and 30 per cent provided by the local authorities.

For the next European funding programme, the draft paper 2014-2020 stresses two main tenets: 57 million Euro for cogeneration, for 50 Mwe projects (90 per cent natural gas, ten per cent biomass/biogas) and 85 million Euro for biomass, for 60 MWe (mainly for large industrial heat consumers). In addition, in another program, there are also 292 million Euro for energy transport and distribution. "Every bank that looks at funding looks at the generated income and at the source of repayment," said Gheorghiade. "Despite the available EU funds, the existing incentive schemes are not sufficient for cogeneration projects sustainability. Thus, a new or separate incentive scheme is needed."

Lalague: "The legal framework needs to be adapted"

Veolia Group, one of the leading players in resource optimization management globally, has over 200,000 employees worldwide, of which 3,000 are in Romania. Since becoming operational in Romania in 1995, the company made more than 400 million Euro of investments on the local market. Laurent Lalague, deputy general manager of the local branch, analyses the energy sector in Romania and highlights both its strengths and disadvantages.

Regarding positive sides, Lalague said that Romania has - albeit in low quantities - a wide range of fossil fuels of primary energy and minerals (natural gas, coal and uranium) and has significant potential in terms of renewable resources. Moreover, Romania depends much less on energy imports (21.7 per cent in 2010) than the other EU countries (52.7 per cent). "Another advantage of Romania is that it is close to achieving the Europe 2020 target," said the deputy general manager of Veolia Romania. "In five years, 24 per cent of gross final energy consumption has to come from renewable sources and in 2012 Romanian consumption reached 22.90 per cent."

However, in terms of thermal energy, Romania witnesses a less-bright situation. The efficiency of heating systems is very low, threatening the sustainability of systems in many cities. In 2010, the average heat losses in distribution networks were 29 per cent. According to Lalague, in order to be sustainable, the system should not register heat losses by more than ten per cent.
"Current systems have outdated equipment with low yield, which record losses in terms of transport and distribution of heat," says Lalague. "To be almost viable, we must reach a level of ten per cent. (...) Many CHPs are insolvent and will go bankrupt." Moreover, he continued, low efficiency is due to the disappearance of the use in parallel of steam and hot water on an industrial scale, which reduced service quality, led to increased costs for users and imposed an unsustainable burden on local budgets.

One solution to improve the thermal sector is adapting the legal framework, says Lalague. "The EU has made some very clear Directives regarding public services and concession contracts, but Romania has not transposed the Directives into a national framework," said Veolia′s Lalague. "The problem is that Romania can receive infringement and can reach an institutional deadlock. We hope this doesn′t happen and we will try to find solutions to prevent the sanctions."

According to Lalague, the two most important changes to the law of community services of public utilities no. 51/2006 are the following: a) establishment of two types of delegation contracts that could be assigned to management delegation of public utility services, including a concession contract and a public procurement contract and b) establishment of assignment procedures of delegation contracts for management delegation of public utility services - according to the rules of public procurement. "In addition, the current tariff methodology - cost plus fee - is not suitable to support investments, because it doesn′t represent the economic reality based on cash flow," said Lalague. "All banks and international investors use other methods of investment analysis, such as the discounted free cash flow, ROCE [return on capital employed] and WACC [Weighted average cost of capital]."

A government entity, responsible for the heating system, needs to be established

The transfer of centralised heating supply systems to local authorities has led to serious disturbances and a lack of concern for the modernization and development of these systems, according to Vasile Muntenita, president of the European Association for the Promotion of Cogeneration (COGEN). Moreover, a state institution with clear responsibilities and duties about public services, especially in terms of population heating, does not exist in Romania and the situation needs to be changed, said COGEN′s president. "The agenda for the next period provides discussions and interventions to the state bodies to create a government entity with responsibilities for this system," he added.

Muntenita further recommended the acceleration of thermal rehabilitation of buildings and acceleration of the modernization of infrastructure related to energy services of local interest, which involves replacing old equipment with new and more efficient ones. "The modernization solves both the problem of physical deterioration of equipment, as well as the obsolescence issue," he said. "The pace of investment in heat production and distribution systems should be correlated with the rates of local, regional and national development."

Another subject touched by Muntenita was the rural thermal sector that was neglected so far by all players. According to him, many research and social studies need to be done in order to find optimal solutions for the segment. However, urban areas face also several social problems that could be solved by specialists. "We should seek the help of sociologists," said Muntenita. "Besides rural areas, sociologists are needed in cities too. There are several hard to solve phenomena, such as the departure of the population to work abroad. Their flats remain cold and can cause disturbances in the activity of the heating system."

As a conclusion, Muntenita highlighted other requirements for the sector′s improvement, such as the public heat supply in central systems which must increase energy efficiency throughout the chain (resources, production, transport, distribution, consumption), renewable energy resources that need to be used more to decrease the price of heat and to comply with environmental requirements and the support scheme to promote high-efficiency cogeneration, which needs to be reviewed.

Thermal energy law, under scrutiny of Romania′s Parliament

Rodin Traicu, member of the Commission for Industry and Services within the Chamber of Deputies, assured the heating industry that Romania′s Parliament is developing the thermal energy law, the main concern being to make it "as good as possible, with wide public consultation." "There have been four public debates so far within the Commission for Industry and Services, where important players were invited: associations, representatives of gas supply and distribution companies, regulators and consumer organizations," said Traicu. "The main concern is to make a law as good as possible, with a wide public consultation. The law can be perfect, so it is amended permanently due to changing conditions."

Key of success: adapting to clients′ needs

Following an international call for tenders in 2012, the Iasi municipal council appointed Veolia Energie Romania to operate the city district heating network. The contract is for the generation, transmission, distribution and supply of heating for a period of 20 years. According to Lavinia Saniuta, the general manager of Veolia Energie Romania, out of 85,000 apartments designed to be connected to a district heating network, less than half are linked to the system. The solution to increase the figure is to establish credibility and to permanently adapt to clients needs. "The trend for DHN connections in Iasi is decreasing because the former operator didn′t make the system credible," said Saniuta. "In order to improve the picture, all players need to work together to find a common interest. No matter what kind of problems we have, we need to constantly adapt to the clients need."