After 25 years of restructuring, Romanian power sector at a crossroad

In November 2016, the Romanian Ministry of Economy posted for public consultation a preliminary draft of the energy sector 2016-2030 with a year 2050 perspective.  It tackles all energy resources such as crude oil, natural gas, coal, biomass and energetic waste and includes special sections for electricity. It is thus an occasion for a review of the Romanian power sector and its evolution during the past 25 years.

From the beginning, it is important to note that the country’s energetic system was designed at national scale, during ‘50s, and at that time it took into account not only, on one side, the natural endowment of the country which disposed of virtually unlimited resources of low quality coal (lignite and low caloric hard coal), limited reserves of natural gas and crude oil supplies and good water resources but also, on the other side, an ever-increasing consumption of electricity. For decades, the country’s power system was engaged in a race against time to meet the huge demand coming from a developing economy and a population in process of urbanization.

Large power plants based on lignite and hard coal were built during ‘60s with the role of supplying the country a constant volume of electricity, with a continuous functioning regime. In addition, to deal with peak consumption periods or shortages of coal electricity, some large hydro power plants were built totaling approx. 5,2 TW of installed power and around 100 dams (out of which 89 large dams) playing a significant role also in preventing overfloods. Due to shortage of electricity caused by ever-growing consumption of the metal processing, machine-building and chemical platforms, cement factories, mining exploitations and irrigation systems, in 1978, it started the construction of the first nuclear power unit (finalized 20 years later).

Thus, in 1990, Romania had an integrated electricity system with an installed power of 23 TW of which 16,8 TW in thermal power plants (73%) and 5,5 TW in hydro (24%). In addition, some natural gas fired power plants were built in larger cities or on important industrial platforms to supply the households and the economy with hot steam for industrial purposes or for households heating in centralized distribution systems including Bucharest. The first nuclear power unit whose construction started in 1978, would be commissioned only in 1996, and a second unit a decade later.

After 25 years of restructuring the energetic system, mainly the power producers, by: i) shutting down the loss producing entities; ii) focusing investments on lower cost producers (hydro power plants, nuclear units and lower cost lignite fired plants) with the aim to keep price of electricity down to protect the population whose consumption decreased dramatically during ‘90s; and iii) promoting green energy (with generous subsidies schemes for wind and solar electricity producers, state aid meanwhile drastically reduced) especially after integration into EU in 2007 in accordance with European strategy, the installed power for electricity generation has remained constant at 23 TW but with a different breakdown: coal based power plants – 27%,  hydrocarbons – 21% (natural gas, heavy oil), hydro – 28%, nuclear – 6%,  wind – 13%, solar – 5%. In brief, the 25% reduction of coal fired power plants capacity was replaced by wind, solar and nuclear generated electricity.

Not only the power producers side has restructured during those past 25 years but the consumption as well. According to industry data3, in 1989, Romania registered the highest consumption of electricity of all times equal to 84 TWh produced domestically and additional 9 TWh imported. After 1990, the drastic restructuring of the industry which took place mainly in the period 1995 – 1999, through massive lay-offs and closures of assets especially of those energy intensive such as the metal processing industry, machine building units, petrochemical platforms, mining exploitations and dismantling of the irrigation systems, was reflected by more than significant reduction of the electricity consumption, from the all times high 93 TWh registered in 1989 to a minimum of 49 TWh in 1999 (when the country was closed to default).

Afterwards, the consumption of electricity resumed growth in parallel with the economy, but since the economic crisis of 2008, the GDP advance decoupled from electricity consumption reflecting the end of the restructuring process of the economy and the introduction of new technologies with a low demand for electricity. Consequently, the country’s electricity consumption has stabilized during the past years to around 60 TWh.

Concluding, it is important to observe that the installed capacity of electricity generation has remained constant during past 25 years although the country’s consumption has significantly decreased leading to the idea that some production capacities are underutilized (exports are limited). Thus, it would be important for any power sector strategy to first assess the perspectives of the electricity consumption based on a national long term development strategy. The theory of the ever-increasing demand is not anymore actual and the export of significant electricity volumes could not constitute a reliable argument for investments in the sector unless agreed via long term secured purchase agreements.

 

Note: This article was first published in the section Voices of http://emerging-europe.com/

 

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