Thermal Energy Forum 2016: Coveting new technologies
While 2015 was a very active year in terms of international reflection on energy and climate change, after the Paris summit last November, the need for new technologies emerged as an essential topic
Romania can catch up with the more developed states of the Union, if it benefits from the latest technology advancement, say local authorities and investors present at the "Thermal Energy Forum 2016," organised by The Diplomat - Bucharest. The event was held in mid-February, under the patronage of ANRE (Romanian Energy Regulatory Authority) and ANRSC (National Regulation Authority for the Public Utilities Community Services).
By Bogdan Tudorache
The thermal energy conference′s strategic partners included ARPEE (Romanian Association for Promoting Energy Efficiency) and COGEN (European Association for the Promotion of Cogeneration), while the gold partners were Adrem Invest, EY (Ernst & Young), Veolia and the partners - Bepco, BCR (Banca Comerciala Romana). The event was held with the support of AMR (Romanian Municipalities Association), Liga Habitat, ESCO (The Escorom Association of the Energy Services Companies of Romania), CRE (Romanian Energy Centre) and the World Energy Council.
The need for a clear strategy
According to the Romanian Association for Promoting Energy Efficiency (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 300 functional district heating networks, last year only 70 were still "alive".
"Nearly one year ago, our friend, professor Aureliu Leca passed away. For all those who had the pleasure of knowing him and working with him, we believe that the most important recognition of his work would be also a stepping stone for the future of energy efficiency and district heating in Romania: With the support of several associations, ARPEE launched its position paper - ′Romania needs a Strategy for Heat′," Verdebout says.
At the same time, the Romanian government launched a debate on energy strategy that was hailed by investors, including ARPEE.
"Romania needs a solid, coherent vision for the next 10-20 years, as well as solutions to local issues, such as building refurbishment, modernization of networks and production capacities, to increase energy efficiency and ensure energy security in a sustainable environment," says Verdebout.
Romania needs to be consistent with the world climate goals, and to better analyse the impact of conventional fuels on the climate.
"Biomass, high efficiency cogeneration, waste-to-energy (conversion), as well as modernizing the heat transport and distribution networks and refurbishing buildings and energy efficiency projects, are part of the measures that Romania needs to take into account in its strategy," Verdebout adds.
In the energy efficiency field, ARPEE is promoting the European Code of Conduct for energy performance contracts, a voluntary agreement signed by ESCO companies.
Also, last year ARPEE launched a position paper called "Romania needs a Strategy for Heat".
"While the EU′s district heating provides nine per cent of the overall heating, in Romania it is much more. In 2012 the main EU fuel was natural gas (40 per cent) - this level was much higher in Romania, followed by coal (29 per cent) and biomass (16 per cent) -in Romania biomass is very low, in some district heating centrals such as Suceava," he explains.
"As a conclusion, we expect that the EC strategy on heating and cooling to be transposed and adapted to the Romanian strategy and to provide the needed framework for future development of Romanian heating and cooling, including stopping energy leakage in buildings, maximizing the efficiency and sustainability of the heating system, supporting high energy efficiency in industry and supporting the benefits of integrating heating plants into high efficiency cogeneration," Verdebout concludes.
We have to cut carbon emissions by 80 per cent
Attending a Brussels conference on EU Energy Law and Policy, Ernst & Young′s local energy Partner, Valeriu Binig, witnessed debates on global warming and plans for the year 2050.
"We all know the COP 21 agreement on reducing global warming, and we discussed the consequences of the eventuality that we cannot reduce the warming by 1.5-2 degrees Celsius. One of the major threats would be climate migration for the Mediterranean and Saharan areas towards Europe," says Binig, the conference moderator.
Therefore, the EU has to reduce emissions of greenhouse gas by 80 per cent by 2050.
"It seems that only two or three activities that cannot be controlled, such as agriculture, may escape the decarbonation process. We knew that when we talked about eliminating the emissions in the power sector, but cutting only those is not enough - and when we talked about transportation- but even cutting there is not enough. The next step is decarbonizing the production of thermal and cooling energy."
The essence of the EC message is that Romanian authorities and pundits have to rethink thermal energy supply and the cooling production, by joining forces with the power sector. Therefore, Romania may still use natural gas for a while; however, the future means renewables and using electricity for everything, from heating to cooking and cooling.
"We start talking about electric heating and use of scale, and the power generation mix is re-thought to be covered as much as possible from renewable sources," Binig adds.
As such, the more flexible gas-based production will be kept for balancing the system, since the energy storage is yet too expensive. "The primary infrastructure of natural gas is already developed enough to face major interruptions from external sources, and investments into gas infrastructure after 2030 may be seen as wrong."
Another important move into the market is that the suppliers also become services providers in various areas, connected to their main activities. And while gas, power and even cable TV suppliers compete on these segments, they may also merge.
At the same time, to better regulate the market, the European Commission has released new proposals for a draft of measures which will shore-up prevention of gas crises and ensure better coordination and support between EU countries in any gas supply disruption, says Binig.
Gas currently covers a quarter of the EU′s energy consumption and the EU is the biggest gas importer in the world. The expected decline of domestic EU gas production will also impact on gas imports. Besides, gas is also seen to play a determinant role in accompanying the EU′s transition to a low carbon energy system since it is a back-up fuel for renewables when weather conditions hamper renewable energy production.
Romania is not ready to adopt new rules, responsibilities yet unclear
Up until now the EC did not stress too much the cooling and heating subject, and besides Cogen, that kept alive the link between the legal framework and the EU member states, the European Council did not lean too much on the subject, says Elena Popescu, general director, Energy and Environment Direction, Ministry of Energy, who was also paying homage to Professor Aureliu Leca, who dedicated many of his latest years to this domain.
But starting last year, when a new strategy for Energy and Climate for 2030 was launched, a signal was drawn, says she.
"If we talk about decarbonation and we set such ambitious targets, of cutting the greenhouse gases by 40 per cent by 2030, we can′t avoid mentioning this sector. Since 75 per cent of the fuels used by this sector are fossil fuels, and we talk about decarbonation, this must be considered a call to action."
The five-pillar Energy Union strategy, with energy efficiency as the most important of them, has a crucial role in cutting imports and ensuring EU security, and must bring together NGOs, authorities and the civil society.
"We must sit together, see what does and does not work, where we are and where clear responsibilities stand."
At the same time, the Romanian Ministry of Energy had to report to the EC about the Romanian cogeneration potential at the end of December, and that was not an easy task.
"The experience of the past few months, when we had to report to the EU about the cogeneration potential - an obligation given by Directive - proved pretty hard. We are not ready in any way, and we discovered what you already have known, that there are no clear responsibilities... Each tries to pass the problem to another institution, fearing infringement," Popescu says.
Authorities must all recognize that Romania′s heating and cooling industry did not undergo much-needed changes during past years.
"Paradoxically, all fingers blame the Ministry of Energy for this state, that it did not do much. We have the responsibility of the energy strategy, which includes the heating and cooling industry. We will take care in revising the strategy about this topic...but you should know that the larger responsibility should be of the local authorities, which must identify solutions for ensuring the cooling and heating of the population," she says.
Also a speaker at the conference, Cezar-Radu Soare, state secretary, Ministry of Regional Development and Public Administration, presented three programmes that went through the ministry. Thermal application 2006-2020 was one of them, the second was Increasing the energy performance of blocks of flats and a third was Thermal refurbishment of buildings via government-guaranteed banking loans.
According to the programmes, about 60,000 apartments in blocks of flats benefitted from 526 million RON for increasing their energy performance up to now.
Focus on future digital networks, forget about the rest
"I think that we talk about the energy strategy too much, while the time passes by," says Emil Calota, Vice President, National Energy Regulatory Authority - ANRE.
Although Romania has an obligation to comply with the Energy Union′s five-pillar guidelines, it talks rather than acts.
"We use a lot the horn and not enough the engine... we talk each year about a new energy strategy without clearing it. More, we consider it a national vulnerability, in the context of a global market and of the specific interests of investors coming to Romania," says Calota.
The new heating and cooling EU guidelines launched this February must take into account a paradigm change.
"We no longer talk about quantities of energy, but about energy flows. These ensure the concept of security of supply - which must not at all be translated as energy independence anymore."
Security of supply means ensuring the supply of energy in all its forms, and while the energy market became global, it means interconnections, flow exchanges and producers′ anonymity. The transition trend launched by the EU from conventional to unconventional energy, having in mind the 2030-50 horizon, means that Romania′s attention, from the legal and authorities′ point of view, must shift to networks.
"The energy transport and distribution become more important than the production sources. The grids will become the biggest challenge for all countries in the future. All networks will go digital. Starting soon, and up to 2030-50, starting with western countries, maybe even in Romania, the consumer will be able to choose on his personal computer the consumption curve, the supplier and have all of the needed information regarding energy consumption and use," he says.
Consumers will be also ready to produce and perhaps even also sell electricity to neighbours.
"Although going digital presents a risk under cyber security aspects, managing networks must become a priority to Romania as well, including adopting all of the smart solutions: smart grids, smart cities."
The debt war is still on
Although the EU objectives are generous, Romanian operators are more concerned about their current state and their surviving to the next day, says Gabriel Dumitrascu, president of the Autonomous Thermal Energy Distribution Bucharest - RADET. Dumitrascu is a supporter of the free competition and a decrease in state′s monopoly, for changing the legal frame and uniting the regulatory bodies that manage the thermal energy into a single entity.
RADET is owned by the Bucharest City′s Local Council, and is the largest thermal energy distributor in the country. It takes the energy from Elcen, a state company owned by the Ministry of Energy (97.5 per cent of shares). In turn, Elcen buys natural gas from Romgaz, that is 70 per cent controlled by the same Ministry and is now an open company after the 15 per cent IPO (initial public offering at the Bucharest Stock Exchange) in 2013.
While RADET ensures the heating of the Bucharestians, it accumulated a tremendous debt worth about one billion Euro towards Elcen (650 million Euro plus delay penalties), which, in turn, has a smaller debt of about 67 million Euro to Romgaz, its supplier. In fact, the debt war stands, some say, in a political background, with the newer management trying to solve past issues.
Gabriel Dumitrascu was appointed president at RADET last year, after previously resigning due to political pressure from his position in managing the State′s Energy Assets Privatization Authority OPSPI.
RADET covers 74 per cent of the thermal energy needs of Bucharest, with 8,600 condos, 567,000 flats and 1.23 million individuals. The network has 1,000 km of primary pipes, 3,000 km of distribution pipes and 4,000 distribution centres.
"We are confronted with large losses, but those can decrease if the network enjoys continuity," says Dumitrascu. Lacking financing for refurbishment and suffering from aging, the network cannot be maintained in a continuous operation for a longer period of time.
In 2015 the loss of energy into the system went up insignificantly to 27.6 per cent from 26 per cent in 2014, as the overall quantity of thermal energy produced surged slightly from 5.07 million Gcal to 5.09 million Gcal in 2015, and the sales dropped from 3.73 to 3.69 million Gcal in 2015.
"The loss reached 27 per cent. While the prices for distribution and transport remained the same since 2011, the producers price from Elcen went up from 151 to 186 RON per Gcal," he says.
Meanwhile, the so-much-needed investments into the networks are insignificant.
"No surprise here, investment allotment stands almost at zero."
ANRSC: Central heating loses ground fast
The centralized system of district heating loses ground, each year an average of 9.5 communities exiting the system, starting in 2010, according to Doru Ciocan, president, National Regulation Authority for the Public Utilities Community Services - ANRSC. If last year six communities left the system reducing the overall clients to 64 local entities, in 2014 the number of districts had previously fallen to 70 and all considering that in 1989 the communist regime saw 315 communities served. A number that has dwindled to 121 in 2009, also considering a new management of 3,180 nationwide councils, as opposed to 2,583 in 1989.
"If each year we will lose like we did the past one, about six units a year, we will soon not have a centralized thermal system," Ciocan says.
Starting in 1990, the centralized heating system lost about 56 per cent of the overall apartments in Romania, as people decided to install their own heating units. In 1992, the system engulfed 72,500 blocks of flats and 2.9 million flats with almost 8.5 million inhabitants, while now there are just 3.6 million inhabitants into 1.28 million flats connected to the centralized system. "That is just 44 per cent in comparison to 1992."
While Bucharest tops the system with 563,000 flats connected, each year about 3-4 per cent of the nationwide households disconnect from the grid. "In Bucharest, about 76 per cent of the population is served by the system, and the disconnected flats amount to just one per cent annually," Ciocan says.
According to ANRSC statistics, Romanian central area heats from household sources the most, with central Transylvania having just 23,700 units connected to the centralized system. The North -Western area of Maramures has just 96,400 units, The Banat and western area- about 107,000, while South and East Romania sees most of the households connected to the central grid, if Bucharest is included.
"There are 11 counties where the connection is ranging between 71 and 82 per cent, and Oradea has the only increasing client number as there′s no gas interconnection with the city."
Ciocan says that the main causes leading to increasing phenomenon of disconnection included the financial crisis but also "the massive increase of the price of energy resources. Also, the huge debts from both households and companies have led to the insolvency of some producers and suppliers, while the commercial centrals sellers were displaying "aggressive marketing" policies.
He sees the independent heating centrals as polluting sources that have consequences on population′s health and blames the importers for avoiding offering details about this issue. "I publicly disclosed a study of the Medicine and Pharmacy University of Cluj and The Romanian Academy of Cluj regarding the population contamination with pollutants."
At the same time, investments into centralized systems (SACETs) peaked in 2012 to about 450 million Euro (in excess of two billion RON) but only because the Beius town heating was developed, and in real terms, the overall 2012 investments without the Beius development were of just 264 million RON (about 59 million Euro).
"Investments dip year after year, dropping more and more to just around half of what was planned. This leads to an infrastructure decay," says Ciocan.
In 2015, the investments planned were realized in a 66 per cent ratio, dropping from 69 per cent in 2014. The 2015 investment figure was of about 172 million RON, or 38 million Euro, a net value larger than the previous year by five per cent (even if plans were more ambitious for 2014, the overall investment was smaller).
"Revisions and repairs have dropped due to lack of liquidities or bad management of the utilities of the 64 remaining operators."
Biomass is also in deficit. Of the overall 5.6 million Gcal produced annually from renewable sources, just 3.7 per cent are supplied by centralized biomass-based systems. "One of the centrals is in Vatra Dornei, and unfortunately the cost for fuels per Gcal is higher than that of classic natural gas′."
The energy for heating engulfs too much taxation
"Consumers pay a lot of taxes and are not exempted from double taxation, says Mihai Mereuta, president, Habitat Owners Association, a nationwide residential owners lobby group.
"We are consumers, and we pay for the services, the clerks, the surveys, the EU money, while the Gcal is paid three times, via local tax subsidies, via national subsidies and directly, and we pay for the social heating subsidy for those that cannot pay," says Mereuta.
And since consumers pay for a lot of subsidies without benefitting from the market changes they produce, Mereuta is not a supporter of the centralized heating system.
"Minding the consumer was not in the public agenda, and if we look at the nationwide situation, it is exactly due to this that the centralized system collapses," he says.
Consumers were not consulted, and haven′t been involved in the heating legal agenda. But even after coming into effect, the law is not followed, and Bucharest leads the way in this respect. "I think that all of the important articles in the Law 325 (the public supply with thermal energy law) were ignored in (by) Bucharest (authorities)," says Mereuta.
"Regulations on issues such as transparency and accessibility are poetry, only existing on paper, in Bucharest. Due to fact that the re-organizing of the heating system hasn′t been done yet, the local manager of EU funds does not exist - I am very curious who will supply the money, besides the City Hall."
He accuses the Bucharest city hall mayor, the City′s General Council and the Authority for Regulating the Public Services (AMRSP) as they "don′t clearly know what they plan for Bucharest."
Visiting a block of flats in Iasi with 50 per cent disconnected people, Mereuta has seen people investing into metering and systems without EU funding. He asks for support for individual metering and coverage of the cost metering equipment installation.
"I confirm the lack of interest by the public administration, in all of our local subsidiaries, regarding the centralized system. In Constanta and Timisoara, we have had heavy fights...In Constanta they tried to bury the system, but fortunately, and incredibly, they woke up in the last hour...Ending this December we must finish the (individual) metering or the installing of cost meters, as the EU norms ask."
Bodea, Adrem (ABBC): The decision must be local
"The Romanian Energy Centre (CRE) strongly sustains that the central heating domain is a local strategy issue," says Corneliu Bodea, CRE president and representative of Adrem Invest (ABBC).
Although critics may bring up the lack of competence of local authorities in approaching such complex issues, the final decision must belong to them "as there are not uniform solutions to correspond to all counties."
"I think that the central authorities must support the local ones at decisional competencies′ level, and with financing support and experts...The local conditions ask for the local authority to design the most suitable local strategy."
Therefore, owning a central system or not should be analysed in case by case scenarios.
"To refer to our Suceava central heating experience, we, although just investors into the new central, had to intervene into the distribution and transport systems, as the company that previously supplied the heat went into bankruptcy".
The bankrupt supplier had a five million Euro debt to the system, and investors saw the beneficiary′s money cut. "This shows the interlinked connection between the producer and supplier. This is why local authorities must follow this road."
Also, secondary regulation raises a further wall of problems for investors. "Interpreting secondary regulation prevents us from benefiting from our green certificates for the residual biomass, due to fact that the previous Law 122 provisions were asking for certification of origin for the biomass, and we cannot prove the biomass′s origin is local," Bodea says.
"It is impossible to prove that the pellets come from Romanian logs and this makes us lose a lot of green certificates. The secondary legislation provisions are unclear and difficult to apply. We live a period in which the public authorities are somehow frightened to interpret laws for the common public welfare...," he adds.
Therefore, the new Thermal energy law must take into account the public authorities′ need to create local strategies, he explains.
Saving up to 50 per cent of energy costs
While other municipalities fear conceding the heating services, Iasi city authorities signed a long term contract with Veolia, says Ana-Maria Icatoiu, commercial and communication manager, Veolia Energie Iasi.
"During 2009-2011 the Iasi heating issue was well known, as the heating started only after the coldest November and December days, when some money was received from the government budget′s reserves for fuel. That moment is history. And also history are the huge costs per flat of 1,000-1,500 RON, due to the common space payment issues," says Icatoiu.
In 2012 the public service was conceded to Veolia for 20 years by the Iasi City Hall, that remained a partner and owner of the central heating system. The municipality invests alongside the operator and recently spent about 54 million Euro mostly from EU funds into bringing the heat centrals up to the environment conformity. The operator also invested into making the production more efficient, she says.
The City Hall therefore replaced 11 km of pipes by using EU funds, while the operator replaced 12 km of pipes in the first three years of activity.
Also, the two entities applied for further EU funding via the Large Infrastructure Programme POIM 2014-2020.
"We have a first application worth 28 million Euro for the networks, with 25 km of main pipes and 50 km of secondary network, and another newer application that hasn′t been yet filed," she adds.
The concession in Iasi was done with clear performance indicators, permanently monitored by the City Hall and by the Management Authority. And results came. The collection performance did increase: while in 2011 the heat bills were paid just for about 35 per cent of value, nowadays the figure leaped to 93 per cent.
Also, if previously to the contract, 3,000 to 5,000 flats were disconnecting annually from the central system due to lack of satisfaction and trust, now they reconnect.
"The year 2015 brought back into the system large buildings, corporations, offices, hotels that reconnected, up to the equivalent of 60 four-floored blocks of flats. At national scale it may seem little, but for Iasi, after 10-15 years of disaster, it means a lot," also says Icatoiu.
Starting in 2013, Veolia conducted consumer surveys asking for encountered problems and customers′ expectations for the next 20 years. Also, disconnected consumers were targeted.
"There were four reasons why the customers disconnected in the first place. First, the heating started very late in the year, but this issue was solved as the coal needed comes to Iasi now from July to October each year. The second reason was neighbours′ decision to change the system′s settings at will and their refusal of payment," she says.
While the bad payers drove companies to cut the heating for entire units, the heat supplier wasn′t ensuring a proper enough temperature for the water and heat either.
"Isolations were faulty and blocks of flats were built 40-50 years ago. We thought about individual metering from the start, but we could not apply this immediately. We conducted investments to make sure the hot water doesn′t stop during the famous so-called ′revisions′ even during summer, that there are no interruptions into the system and that any issue is solved in a maximum of 12 hours and there are no more problems regarding the fuel," she says.
Veolia came up with two new solutions for the blocks of flats.
"We offered the customer solutions similar to the individual gas centrals, and this model does not exclude also having a gas heating central. However, most clients decided to go back into the centralized SACET system, which is more viable," Alexandru Teleru, general manager, Veolia Energy Iasi.
Veolia will change the 50-60-year-old pipes with new ones, offering individual users the same conditions by changing the plumbing system and introducing thermostats that regulate the temperature individually.
"This solution eliminates the losses into the system and the human intervention of neighbours′ systems, and does not force citizens to give up gas centrals," says Teleru.
Introducing the new systems, Veolia succeeded in saving up to 50 per cent of costs. Veolia′s investments are adding up to those of its consumers′, and they are amortized in four to five years.
Romanian keeps its energy-intensive system
Romanian energy-intense consumption shows the national system using more than twice the resources of the EU level, says Mihai Dogaru, chairman, the Agency for Energy Efficiency and Renewable Energy AE3R Ploiesti, Prahova.
"Talking about efficiency, we saw there is a lack of interest from the local authorities to lure in funds for the buildings′ energy refurbishment, and there′s also a lack of competence from the local authorities. We haven′t seen any progress. We talk about this, but we are not keen to take decisions, and when we take decisions, we do that reluctantly," says Dogaru.
And this faulty system reveals why the energy intensity indicator, which shows the gross energy consumption per gross domestic products (GDP) units in Romania at 335 kg of oil equivalent (kgoe)/ 1,000 Euro of GDP, while in EU the same indicator is of just 141.7 kgoe / 1,000 Euro of GDP.
"The energy efficiency in Romania is much below that of the EU," he adds.
As the overall energy consumption of the "tertiary sector" (the residential and office segment) in Romania is of 38 per cent, with 60 million sqm of buildings in the tertiary area, the same indicator in the EU comes down to just 21.5 per cent.
As Law 121/2014 regarding energy efficiency still undergoes changes, it may soon change the local limits that Romania assumed within the EU targets. The law provides so far a target of 19 percent reduction of use of thermal energy by 2020. "This law targets the public buildings, and since 3 per cent of them belong to local authorities, those must be refurbished each year, according to their budget."
Also, the energy services companies (Esco) firms have an important role in financing refurbishment programmes and saving energy.
In order to raise the public authorities and Escos′ awareness and knowledge, AE3R, in partnership with the German counterpart GIz launched an EU-funded programme on disseminating the importance of the Energy Performance Contracts. GIz has ten partners in nine countries, and the purpose of the programme is to train local specialists about local Performance contracts.
"The target-groups are the public central and local decision-makers, managers of buildings and companies and Esco firms. In Romania we target 200 people, and in Europe, an overall 2,000 people in nine countries. The typical EPC (engineering, procurement and construction) contract brings returns on investments via energy savings."
Main critical aspects encountered so far into the market included the lack of knowledge and expertise of the municipalities and of public services suppliers in the development and implementation of EPC contracts; the insufficient budgetary allocations by the public authorities that resulted in incomplete thermal rehabilitations. Meanwhile, thermal rehabilitation consists mostly (80 per cent) in civil works (thermal insulations) and there is an incoherency between investment recovery durations and contract durations. Also, AE3R decries a reticence of the decision makers to consider the EPC business models as a financing option.
"We are convinced that with our programme, the authorities will get enough support in reaching their objectives and at least in part will be more open to such proposals and no longer look at the EPCs as if they were UFOs. And if our proposals will be taken into account at local and central levels, we′ll go into the right direction," Dogaru says.
We mustn′t give up central heating
Romania has a national interest in its thermal system which it mustn′t give up, says Cristina Cremenescu, executive director, Cogen Romania. "Leapfrogging is important for Romania, as the fable shows, we must struggle to get out of the hole," says Cremenescu.
"We did not privatize the public systems, so giving them up means giving up the local economy. These systems mean jobs, a horizontal industry with equipment suppliers, and economy creation at the local level. When giving up these systems, the utility company that creates value locally becomes an equipment consumer." Even if keeping the local heat markets means opposing the electricity market heat coverage, considering the heating utilities to be of "national interest" is important for the consumers′ sake, she says. And Cogen is starting a new communication campaign "Hand in hand with the consumer" to emphasize the partnership between consumers, authorities and public companies, which "represent the solution for the thermal system," she concludes.