The new Romanian energy strategy explained by its coordinator

The Energy Ministry posted on the 19th of December, the Energy Strategy of Romania 2016-2030, with an Outlook to 2050. It has been a long-awaited document, on which stakeholders have for years pinned hopes about favored energy policies and from which decision-makers, public and private, expect guidance in the coming years.

Based on a rigorous and complex elaboration that spanned over more than one year, the strategy provides a diagnosis of the system’s strengths and vulnerabilities, as well as thorough long-term projections for the national energy sector. More than 300 experts were involved in the process.

The numerical modelling was done using the PRIMES/GEM-E3 suite of models – property of the Greek company E3M – employed with predilection by the European Commission for about two decades now in grounding its energy and climate policy proposals.

Shortly after submitting the draft version to public debate on the 15th of November, criticism started being voiced about both the form and the content of the document. For example, that the 112- page document should have been more concise; but that it should also cover many more aspects than it does; that it ought to present more concrete, quantifiable measures towards achieving the objectives; that it should be more specific about the available financial sources and mechanisms for energy investments; and that it should advance proposals for new support schemes, promoting specific technologies of energy production.

Other objections have focused on matters of content, questioning the strategy’s factual foundation, entry data into the modelling, as well as the way conclusions were reached. For instance, a recurrent objection has been that the modelling projections should have made more „room” in the energy mix for specific forms of primary energy (e.g., coal or biomass) or type of demand (e.g., electro-mobility or district heating).

Doubts were also raised about the strategy’s fundamental suppositions: its reliance on competitive market forces, instead of assigning the state more responsibility as regulator and investor. By contrast, others objected that the strategy envisages the possibility of substantive state interventions, such as the “contracts for difference” and other support schemes, thus tampering with market dynamics. It has also been questioned whether, as posited in the strategy, Romania should actually pursue a policy of bidirectional grid interconnectivity, especially for natural gas, considering that the country is almost self-sufficient in terms of domestic production, as opposed to continuing a policy of relative regional isolation and regulated energy prices.

More generally, it has been expostulated that the document is not bold enough to commit unconditionally to the „energy transition” to clean energy whereas, on the other hand, others wanted it to be more conservative and risk-averse, hence more centered on the use of domestic natural resources. Some also demur that it pays too much heed to EU energy instead of being more self-centered, and so on. The whole gamut of biases and interests have been put forth in such appraisals, but also candid and other-regarding proposals – albeit partial and suboptimal – of goals, priorities and actions.

As the coordinator of the strategy project, I will explain away most of such criticism. To that purpose, the present op-ed addresses objections regarding the document’s form and structure. As to the second sort of misgivings, about the strategy’s assumptions, scenarios, projections and inferences, they will be thoroughly addressed in several upcoming pieces.

Now, let us begin with the document’s supposed lack of concision. By the look of it, the strategy has about the same extent as other European countries’ recent energy strategies – Italy, Hungary and the UK offer apt examples, among others. There is a reason to it: as it addresses an audience broader than the narrow circle of energy professionals, a sectoral strategy needs a sufficiently developed explanatory dimension, apart from purely prescriptive discourse.

That is, a strategy paper cannot simply list pronouncements on objectives, energy policy and priority actions. In order to be intelligible and compelling, such prescriptive statements must be derived from a sufficiently rich background of data, trends, risk analysis and expert judgements. Indeed, the new Romanian Energy Strategy puts the fundamental strategic goals in a global, European and regional context that encompasses technological, geopolitical and climate policy trends. At the same time, it builds on the current status of the Romanian energy sector in terms of primary resources, energy infrastructure and markets, power generation and heat production, refineries and other petrochemical plants, as well as institutional make-up. Without grasping the defining trends of today’s energy markets, shaped mostly by technological breakthroughs and challenges of sustainability and decarbonisation, one can barely make sense of the strategy’s projections for 2030 and 2050, respectively. Likewise, without proper awareness of the energy sector’s strengths and vulnerabilities, it is hard to assess the adequacy of the priority actions underlying the strategy’s operational objectives.

Of special relevance to the energy policies advanced in the new Romanian Energy Strategy are the EU directives, regulations and strategic proposals, to which the document makes ample reference. In fact, the main EU energy and climate targets for 2030 regarding carbon emissions, RES and energy efficiency were built into the scenarios studied in the strategy’s quantitative modelling. As the latest package of measures, Clean Energy for All Europeans, published by the European Commission on the 30th of November must be thoroughly negotiated with the member states over the next couple of years, the rich data set generated through the strategy’s quantitative modelling will come in handy in sustaining Bucharest’s positions on what it can reasonably and fairly commit to as mandatory policy targets.

Regarding the levels of analysis and kinds of policy proposals, the strategy’s logical layout is as follows: it sets out five fundamental strategic objectives (energy security, competitive markets, clean energy, improved energy governance, and energy poverty mitigation) that shape governmental policy-making within the strategy’s timeframe – with 2030 as focal point, yet with a longer-term outlook to 2050.

These are interdependent strategic objectives, implying both that progress in one direction supports progress in the others, and that trade-offs must be made at times in the allocation of resources for the advancement of one strategic objective over the others. Next, the five fundamental strategic objectives are underpinned by 25 operational objectives, connecting the aspirational level with the pragmatic one.

Finally, the operational objectives are four turned into practical steps by means of 86 priority actions, which are informed both by the strategy’s development vision for 2030, and the nitty-gritty of today’s Romanian energy sector. The strategy ought to have a foundational function with respect to every other sectoral plan in the energy domain. Indeed, the document states that it is to be followed and buttressed by more detailed national action plans that will specify how national targets are to be met and how crucial investment projects are to be achieved. For its part, though, the strategy does not address specific investment projects, but rather entire energy sectors from the vantage point of their resources, infrastructure, capacities, technologies, demand, emissions, and investment needs.

The notable exceptions were the projects already in advanced stage of planning and negotiation (some of them with investment decisions already made), such as Nuclearelectrica’s two new nuclear units in Cernavodă; the BRUA gas pipeline, planned to connect the Giurgiu and Arad interconnection points; the Black Sea gas fields of OMV Petrom and ExxonMobil; the 600 MW supercritical lignite-based power plant to be built in Rovinari; the Iernut gas-fuelled power plant of Romgaz. All such projects have been counted in terms of their capacities and, respectively, technologies, level of emissions, and levelised costs per MWh.

Besides, as a matter of opportunity analysis, the 1000 MW capacity of pumped storage planned in Tarnița-Lăpuștești was also modelled in terms of aggregated demand for balancing services on the future electricity market, in various scenarios (it didn’t emerge as necessary until the late 2030s). Other than that, the strategy has taken a consistently holistic vantage point, analysing capacities, costs, tariffs, prices, emissions, and needed investments for the entire national energy system.

The strategy indicates financial sources and mechanisms that can be tapped into at national and European level to partly cover the mighty investments needed to meet Romania’s strategic objectives and to push its energy sector forward through the energy transition to 2030 and, more deeply, up to 2050. Nonetheless, it does not present project-based financial solutions, as demanded by some; nor does it set sectoral measures, with deadlines and quantified targets, as expected by others.

Again, such aspects must be pinned down in subsequent documents, to be elaborated at domain and enterprise level, in a fully consistent manner with the strategy’s general vision, objectives, and priority actions. The latter underscores the strategy’s dynamic nature. Indeed, it is much more than a simple paper. In order to be effective, the Romanian Energy Strategy has to become an institution in its own right, with dedicated human resources and adequate expertise.

The document urges, as a matter of fact, that the entry data and scenarios be checked and rerun at least every five years. The entire set of national action plans and other sectoral strategies (e.g. for transportation, industry, agriculture, environment, social inclusion and poverty mitigation, etc.) ought to provide concrete policy drivers and constrains, in a joint effort of mutual calibration, part of a broader framework of national strategic planning. Finally, a matter of procedural clarification: as per European legislation, the strategy document in its current form must undergo a procedure of strategic environmental analysis (SEA), under the authority of the Environment Ministry, procedure which will likely take about six months from its initiation – including a renewed 45-day period of public debate. The SEA results will thereafter become an integral part of the national energy strategy. At that point, the Government will be able to act in order to turn the final form of the strategy into legislation, either by passing a Governmental Decision, or by submitting it to the Parliament for debate and enactment.

Radu Dudău is Director of Energy Policy Group and project coordinator of the “Energy Strategy of Romania 2016-2030, with an Outlook to 2050”