Energy capacity development - held back by prosumers and project speculators

George Marinescu
English Section / 22 septembrie

Energy capacity development - held back by prosumers and project speculators

Versiunea în limba română

Achieving the targets assumed for the year 2030 in terms of the energy transition implies the allocation of a lot of financial resources and the considerable increase of the investments started in the construction of new energy production capacities from renewable sources, but also in storage and in strengthening the transmission and distribution networks. That is why, in order to find out at what stage energy investment projects are in our country, BURSA Newspaper is organizing on September 26 the XIth edition of the "Energy in the Plug" conference, where the main topics of debate will be:

- PNRR - energy efficiency at an alert pace; green hydrogen, in stand-by;

- How do we reach the proposed decarbonisation targets? Are they realistic?;

- Green energy - between investment potential and reality;

- Economic development on the Black Sea platform: natural gas or offshore wind fields?;

- What will we do with the extracted gases after 2030?;

- Hydro, wind, photovoltaic or nuclear - sustainability of production under climate change conditions;

- Romania's nuclear program - status and perspectives;

- Investment priorities in the field of energy storage, transport, supply and distribution;

- Sectoral forecasts for winter 2023-2024;

- Financing ongoing investment projects - challenges and solutions;

- Schemes through contracts for difference and the operationalization of direct bilateral contracts;

- Ensuring energy projects;

- Energy - the most important sector at the Bucharest Stock Exchange; The opportunities brought by the status of a listed company for Hidroelectrica.

Sebastian Burduja, Minister of Energy, George Niculescu - President of ANRE, Teodora Preoteasa - Secretary of State in the Ministry of Investments and European Projects, Bende Sandor - President of the Commission for Industries and Services in the Chamber of Deputies, announced their participation in the conference debates. Istvan-Lorant Antal - the president of the Commission for Energy, Energy Infrastructure and Mineral Resources of the Senate, the executive directors of the energy companies operating in our country, the representatives of employers in this field of activity, brokers and other energy actors. Radu Oprea, the Minister of Economy, Entrepreneurship and Tourism, is also expected to attend the event.

The development of new energy production capacities from renewable sources is being held back at the moment by some of the prosumers, who instead of satisfying their need for self-consumption have turned into real energy producers, as well as by the speculators of some energy projects, said Sebastian Burduja, the Minister of Energy, and George Niculescu - the president of the National Energy Regulatory Authority (ANRE), yesterday, during the launch conference of the second edition of the "Code of good practices in the renewable energy sector", a work carried out by Romania Energy Wind Association (RWEA) in partnership with the Romanian Photovoltaic Industry Association (RPIA).

Sebastian Burduja, the Minister of Energy, said: "I very much support the idea of optimizing the market, of cleaning the renewable energy market. There are serious investors here. They are uncomfortable with those who do not play the right way. Transelectrica is uncomfortable with those who don't play fair. It has become a phenomenon in Romania, and we have to admit it, speculating with land (ed. - in order to make investments in energy production capacities from renewable sources). We have no interest (ed. - in the development of these energy projects), we have no knowledge, we have no idea what a solar park or a wind farm means, but we have some pennies from somewhere and we make a purchase of land. Then we want to multiply them quickly, because we are creative. Well, this kind of phenomenon meant the delay of serious investors, because they did not obtain ATRs (ed. - technical approval for connection), given that Transelectrica has the obligation to analyze all requests. It also meant costs for serious investors, because they found themselves in a situation where they were asked to strengthen their networks, and their own projects, which they really intended to implement, became unprofitable or much more difficult to be profitable , when you have, for example, additional costs of 10 million euros. And then the loading of the system by these speculators must be discouraged or eliminated. How can we do this? I think it's a proposal that you put on the agenda: let's collect a guarantee. I am working with the parliamentary committees to come up with a legislative proposal in this regard, in order to succeed together in cleaning up this important market".

Minister Burduja specified that, for the development of energy projects, there is still money in the market, including in the Modernization Fund: "We are discussing there 1.5 billion euros, which will be for self-consumption, but also for production. The first call that will be launched in the coming weeks will target administrative-territorial units, schools, kindergartens and others. (...) There will be another call, similar to Investment 1 of the PNRR (electricity production capacities from renewable wind and solar energy sources), which we will launch as soon as we complete the evaluations and contracts on Investment 1. The allocation will be still half a billion euros, so a substantial amount, and that's why I ask you to participate, be our partners, (...) let's achieve our goals".

The Minister of Energy also said that at the moment there are 740 projects submitted to Investment 1 of the PNRR, which are under evaluation and for which the signing of financing contracts has already begun. Mr. Burduja mentioned that these are very large projects aimed at production capacities even over 1 Megawatt and he gave an example of a project of 800 million lei in Giurgiu county.

George Niculescu: "A threshold must be imposed for the capabilities of prosumers"

For his part, George Niculescu, the president of ANRE, said that the role of prosumers is energy efficiency and bill reduction in a period of high energy and gas prices, not to earn money from this activity.

George Niculescu showed: "I encouraged and still believe in the role of prosumers as a measure of energy efficiency. I still believe that in order to reduce our utility bills, we need to turn to photovoltaic panels on the roofs of houses, like household consumers. However, I do not believe in oversizing the production facilities so as to excessively monetize this surplus energy that they produce. There are situations where, although the prosumer has a technical approval to connect only 5 kilowatts, he installs 20 kilowatts, because the roof allows it, but in this way he unbalances the distribution network. We thus end up in the situation where the tenth neighbor on the street can no longer connect, and if they connect, we will have problems with the low voltage distribution. That's why, I think, a threshold must be imposed for these capacities, a percentage of what you consume. We don't want to discourage this process, but we want it to be a measure of energy efficiency, not monetization of a situation. The Government's objective is to have more capacity installed and not a large number of megawatts traded on the market, in real estate-style transactions. We will see if there is a need to amend the primary legislative framework in Parliament or if ANRE only needs to amend the secondary legislation".

According to the president of ANRE, at this moment, technical approvals for connection are issued for over 8,000 megawatts in solar and wind projects, according to the data, for a capacity of 7,000 megawatts, the connection contracts being also obtained, a very important step in the realization of a project.

George Niculescu specified: "Looking in perspective and taking into account the fact that the success rate of these projects is 15 - 20%, I estimate that in the next 2 - 3 years approximately 3,000 - 4,000 megawatts from renewables should enter function in Romania, in the context in which Transelectrica received requests for projects of 20,000 megawatts".

Under these conditions, the head of ANRE considers that the storage part becomes extremely important, and the Authority intends to issue in the next period the necessary regulations that will ensure the framework for the storage part.

Sebastian Burduja: "We need a new energy strategy"

Regarding contracts for difference (CfD), Minister Sebastian Burduja stated that their implementation is a PNRR milestone that must be met by December 31, 2023, but which requires both the involvement of the European Commission as it is a state aid and a financing from the Modernization Fund with the approval of the European Investment Bank. In relation to the CfD, George Niculescu, the president of ANRE, mentioned that these contracts should also apply to the future offshore wind farms in the Black Sea, which will be realized after the bill for offshore wind passes the Parliament.

The Minister of Energy also referred to the Integrated National Plan for Energy and Climate Change (PNIESC), which should be ready by March 2024.

Sebastian Burduja showed: "In the preparation and approval of this plan we depend on other ministries and other state authorities, as well as the National Institute of Statistics, to complete the uploading of updated data on the European platform. Unfortunately, at the moment there is not much data and we need to upload at least a preliminary version of them, by March. However, I believe that we should have, before the PNIESC, an energy strategy. It would be logical to have this strategy until the end of 2023 or at the latest in the first part of next year, until March".

The representatives of producers, suppliers and distributors of energy produced from renewable sources claim, however, that the Ministry of Energy should assume certain objectives in the short, medium and long term.

Dana Dărăban, executive director of the Federation of Associations of Energy Utility Companies (ACUE) said: "I am very reserved about a new energy strategy, although I am convinced that we need it, but I wonder if we should not have a plan concretely with assumed targets, because, unfortunately, there is a lack of responsibility in the public area. Regarding the assumed targets for the year 2030, so far in the last six years energy distribution companies have invested 13 billion lei in projects in the field of natural gas and electricity. According to our calculations, in order to reach the targets programmed for 2030, we will have to triple at least the amount invested so far in the energy distribution sector".

The executive director of ACUE stated that there is a need for a simplification of the connection regulation, which he stated is "a colorful document with "17,000 changes"", and that the false concept of gratuity must be abandoned, "because there is no gratuity".

The ACUE representative requested standards for connecting prosumers and clear, simple rules, as well as encouraging investors to submit projects and attract funds.

Dana Dărăban expressed her displeasure that all calls for projects were delayed, that the applicant's guides appeared late, with many ambiguities, that the evaluations for the submitted projects are difficult and she showed that all this situation leaves its mark on the implementation of the projects, implementation for which the authorities do not want to offer any derogation from the set deadline.

The above situation shows a complicated scoreboard regarding the targets assumed by our country for the year 2030 regarding the energy transition, a picture that can become gloomy, if the fiscal changes that the Government wants to assume in the Parliament will come into force, because they will affect a lot of electricity distribution companies.

Code of best practice in renewable energy

The Romanian Wind Energy Association (RWEA) and the Romanian Photovoltaic Industry Association (RPIA) together with specialists in energy, technology, communication, legislation and regulations launched, yesterday, the Code of Good Practices for Renewable Energy in Romania, edition 2023. The supported document of key industry players locally and internationally includes market analysis, interviews, opinions and case studies and shows the need to accelerate investment in the sector.

In the context of RePower EU, in order to reach the new European targets, Romania needs an installed power of 11.5 Gigawatts in wind power, three times more than the existing capacity. Also, at national level, 11.1 Gigawatts installed in photovoltaic sources are needed, of which 6.1 Gigawatts in "utility scale" solutions and 5 Gigawatts in "non-utility" solutions, according to the latest study carried out by RWEA and RPIA in collaboration with Deloitte and E3-Modelling.

Liviu Gavrilă, RWEA vice-president said: "The energy transition is a complex, gradual process that depends on a number of variables. One of the main challenges, with a significant impact on national ambitions and associated benefits, is related to the objectives established through the PNIESC, which are currently far below the natural potential of our country. What if we turned challenges into opportunities by tapping into our country's extraordinary natural wind and solar potential? The coming years represent the perfect moment for Romania to start capitalizing on the energy transition, capitalizing on geopolitical opportunities".

In the same context, Andrei Manea, executive director of RPIA stated: "The coming years will represent a maturity test for the energy market in Romania. We have the perfect opportunity for renewable energy to become a catalyst for economic development. An energy system based on green resources, with a developed and digitized transmission and distribution network, with smart technologies and employment opportunities - this is what the future will look like if we continue on the right path."

The Code of Good Practices includes seven chapters that reflect the capacities installed in renewable sources in the country, investment and financing opportunities, legislative and regulatory changes in the last two years, market mechanisms, challenges related to the development of the national value chain and the labor market . The document shows that the new European targets increase the potential to create jobs in the economy. In a moderate scenario, Romania needs 20,000 new jobs to operate wind and solar farms by 2030.

Among the key actions reflected in the Code of Good Practices for accelerating investments in renewable energy are the expansion and optimization of the electricity transmission and distribution network, the intelligent use of European and national funds intended for the energy sector, the diversification of investment instruments, including through the conclusion of purchase agreements of long-term energy (PPAs) or the implementation of the contracts for difference (CfD) mechanism, encouraging the development of the national value chain and the labor market, but also a stable legislative and regulatory framework.

Sebastian Burduja: "I'm definitely not in favor of tax increases"

Sebastian Burduja, the Minister of Energy, said at the event organized by RWEA and RPIA, regarding the taxation of 1% of turnover for companies whose turnover exceeds 50 million euros, that he hopes to optimize the tax measures passed in the law on which the Government wants to take on in Parliament and that it is not a supporter of tax increases.

Sebastian Burduja said: "I am a member of the Government, I have to undertake the fiscal measures as proposed, but you can count on me to optimize these measures. We have received several addresses from energy companies, we will support their position, because we understand the arguments, and we will promote them at the Government table. What will happen in the Government meeting no longer depends on me. But I want to convey to you: I am categorically not in favor of raising taxes".

For his part, George Niculescu, the president of ANRE, stated that he received the legislative draft, but the authority was not asked for any point of view regarding it. The President of ANRE mentioned that the authority will discuss with the energy companies after the law enters into force, in order to find solutions for the companies that will experience a strong negative impact, an impact that is primarily expected on the electricity distributors in our country. We note that the simple tax of 1% on the turnover includes in it the charging of some taxes already imposed on energy companies.

Cristina Prună: "ANRE's role is to support small consumer bills"

USR deputy, Cristina Prună, vice-president of the Industry and Services Commission of the Chamber of Deputies, believes that it would be scandalous if ANRE is not on the side of the people who invest in small-scale energy production.

After the statements made by George Niculescu - the president of ANRE - during the event organized by RWEA and RPIA, Cristina Prună reacted on the official Facebook page: "The idea of the president of ANRE to limit prosumers, depending on consumption, only covers the incapacity of the system and the hidden interests of an ankylosed energy system. Romania has had an explosion in the number of prosumers in the last two years. Many have invested their own resources to reduce their energy bill and no longer rely on the state. Moreover, they feed the surplus energy into the grid, which helps the national energy production. This in the conditions in which Romania still does not produce enough energy. The installed power of the prosumers will reach approximately 1500 Megawatts this winter, i.e. the equivalent of the installed power of the two reactors at Cernavodă. The Ciolacu government has already dealt a first blow to prosumers by increasing the VAT to 9% for photovoltaic panels. It remains a low quota, but I fought a lot for Romania to have a 5% quota and we managed to be pioneers in the European Union in this regard. Hence the effervescence of prosumers. Modernization is imposed by the market, and ANRE's role is to support small consumer bills through decentralization and democratization. Energy storage is part of the solution, and for that we have submitted a project in parliament that is waiting to be adopted. The era of centralization has set!".