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Romania’s Energy Strategy

The final Energy strategy document published by the Energy Ministry reads more like an energy outlook than an energy strategy. To be fair, the effort to gather statistical data, engage in modeling, scenario and sensitivity analysis must be commended as is a much-welcomed break with the hitherto monopoly of one state institute (ISPE) that authored all Romania’s energy strategy documents in the past. However, in this opinion article I would like to focus on some aspects that can be improved.

It is noteworthy that of the 5 stated fundamental goals, ‘combating energy poverty and protection of the vulnerable consumer’ comes 5^th (last, after ‘energy security’, ‘competitive markets’, ‘clean energy’, and ‘modernization of energy governance’). At the same time, the first of the 5 principles on which the document is based is “the consumer comes first”. But, if the consumer is at the top of policy action, shouldn’t energy poverty reduction be the top goal of a country such as Romania, where, may I remind approx. 100,000 households are not even connected to the electrical grid, where 90% of rural consumers rely on firewood for heating, a country with 40% of population at risk of poverty or social exclusion (highest % in the entire EU), the highest rate of monetary poverty in the EU (25% of population in 2014), worst rate of material deprivation (second only to Bulgaria), highest % in the EU of in-work at-risk-of-poverty rate among employed persons (i.e. unable to make ends meet despite having a job or, in other words, the “working poor”). Should not the Romanian citizen, therefore energy poverty reduction, be the first priority? In the five central areas of intervention outlined, energy poverty reduction is again last (5^th after ‘generation capacity and electricity mix’, ‘gas supply infrastructure’, ‘role of biomass in heating of households’, ‘high efficiency cogeneration and modernization of district heating’). The priority areas of intervention (as currently outlined) seem to reflect more the result of a lobbying process rather than the true priorities of Romania. As important as the renewal of Romanian power generation capacity is or the upgrade of Romania’s gas infrastructure (necessary first and foremost for the export of natural gas), energy poverty reduction in a country like Romania should come first both in terms of key goals as well as key areas of intervention. As a comparison, the 2015 UN Sustainable Development Goals (SDGs) lists “no poverty” as its top goal, ahead of “affordable and clean energy” (# 7), “decent work and economic growth (#8), “industry, innovation and infrastructure” (#9), “sustainable cities and communities” (#11), “responsible consumption and production (#12) and even “climate action (#13).

Second, the document states that one of its principles is technological neutrality. While the desire of the state to not engage in picking winners and losers is understandable, the market being obviously much more efficient at this, it does not mean that the state should remain completely neutral and not signal its preferences or priorities for policy support in any way. Even if you have scenarios and projections, a strategy should clarify the position of the state on various matters. For instance, in the final document you can read that “it is improbable to see an uptake of heat pumps in the absence of a support scheme from the state” (pg. 81). Isn’t the purpose of an energy strategy to clarify the stance of the government on this issue? Whether the state will support or not the use of heat pumps or geothermal energy for individual heating? As it currently stands, this is left to the interpretation of the reader. A strategy should outline the key priorities for policy action, formulate what is the view of government and provide clear policy signals. As useful as an energy outlook is, a national strategy is not an energy outlook. Instead, it has to offer clear guidelines for the future work of policymakers and business and clarify what Romania intends to do in the energy sector going forward. On some issues there is clarity. For instance, the document stresses the importance of renewables but does not indicate there shall be further support after the current RES scheme ends. Also, it signals its support for nuclear (“Romania is one of 14 EU Member States that maintain the use of nuclear in its energy mix”, “All scenarios assume the long term use of hydro and nuclear in Romania”). In other cases, ambiguity prevails: “in the rural, areas, without further support measures, the transition to heating based on natural gas will take place slower”. Again, shouldn’t the strategy shed light on the future policy action in this regard?

Certainly, a strategy can be built on the “all of the above” principle. However, in the case of Romania (where we have a backlog of unresolved issues in energy), a priority exercise is an absolute must. Otherwise, for all its pluses, the energy strategy risks to become an overly ambitious and/or unrealistic document, reflecting pressure exercised from domestic or foreign companies, EU Directives and Regulations, climate commitments rather than addressing specific Romanian problems (combating energy poverty, protection of the vulnerable consumer, modernization of district heating). If the document were to put Romanian citizens first, the order of the same 5 areas of strategic intervention should look otherwise: 1. Energy efficiency of households & energy poverty reduction; 2. Improved quality of energy services in the countryside (in the sense of reducing the use of firewood); 3. Development of high efficiency cogeneration and modernization of district heating; 4. Upgrade of gas infrastructure; 5. Upgrade of power generation capacities.

My third point concerns district heating, an area where the state of affairs is outright depressing. The strategy aims to retain “at least 1.25 million apartments connected to district heating in 2030” (pg. 5) – less than the number of apartments (1.329 million) connected to district heating at the end of January 2015! Indeed, post-communist Romania has witnessed an alarming trend of disconnections from district heating systems (DHS) in the past 27 years: of the 315 towns which has district heating systems in 1989 just 60 remained operational in 2016. Why is then the strategy so modest in the exact field where it should be most bold? Why just aim to freeze the number of disconnections, why not reverse this trend altogether? When apartments in urban areas disconnect from DH due to high cost and bad quality service, most switch to individual natural gas-fired alternatives, but it is unsettling when apartment owners switch to burning firewood (15% of households in the urban area rely on wood logs). Heating is an area left to national policymaking, so when will it stop being treated like the Cinderella of the Romanian energy sector and receive proper policy attention?

Finally, in terms of actions required to achieve energy security (pg. 12), energy poverty reduction is listed under long term goals. Given the poverty indicators that Romania has in the EU, this should be the object of immediate short term (as well as long term) attention and policy action. Reducing energy poverty should be the overarching objective and Romania its champion in the EU. For what is more important than the energy security of your own citizens? Is regional cooperation and bidirectional gas flow on interconnection points truly more important than Romanian citizens who lack access to electricity or proper heating? Inevitably, a priority list means focus on some items to the detriment of others, a choice, which by definition cannot please everyone, yet has to be made.