There is no future in Romania without natural gas, the only one that can ensure the energy transition

by Dumitru Chisalita, Intelligent Energy Association

Natural gas will continue to play an important role in the future. Therefore, the various studies show that in the following 10 years at Europe level gas demand will increase by around 7%. This trend will be much more developed at the level of Romania, according to studies by the Intelligent Energy Association, being likely to reach a level 50% higher than in 2020 (in the situation where the energy policies promoted at the moment are applied – switching to gas most coal-fired power plants and connecting 1.8 million household consumers). In absence of Black Sea gas exploitation, this situation will bring Romania in the status of net reliance on imported gas. Exploitation of important Black Sea resources will not be achieved sooner than 2025, but could cover in full the high demand that is looming in 2030 in Romania as a result of the intensive policy of connection of consumers and interchangeability of coal and gas.

All operators must adapt to the new trends determined by the Green Deal concept. I believe that diversification of activities will become mandatory, especially in the development of performing capacities for the extraction of natural gas and its treatment, in approaching exploitation of unconventional resources and in gas-fired power production capacities and obtaining blue hydrogen.

Probably the biggest challenges will be posed by the Taxonomy that will apply to future projects.

The current COVID-19 pandemic has strengthened the need to redirect capital flows to sustainable projects to make the economies, companies etc. more resilient to climate and environmental shocks. To achieve this, the concept of Taxonomy was introduced.

EU Taxonomy is a system of classification that sets a list of economic activities sustainable from an ecological point of view. Banks reacted the first, understanding that EU Taxonomy is an important factor for increasing sustainable investments and for implementing the European Green Deal.

In fact, future financing at affordable costs (and not only for investments) will only be granted to economic activities that qualify as ecologically sustainable. Therefore, companies in the gas sector must perform audits and establish their activities so that they comply with the Taxonomy Regulation, respectively through their activities to establish six environmental targets:

1. Climate change mitigation

2. Adaptation to climate change

3. Conservation and sustainable use of marine resources

4. Transition to a circular economy

5. Pollution prevention and control

6. Protection and restoration of biodiversity and ecosystems

In the following 10 years, I estimate that natural gas will grow in the primary energy balance in both EU and Romania. This increase in gas demand will naturally also bring an increase in the price of gas as commodity. To this must be added the increase in transmission costs, the gas following to be brought from greater distances to Europe. In Romania there is a similar situation. Black Sea gas has higher costs than onshore gas, the development of gas transmission and distribution systems will bring higher transmission and distribution tariffs, added to which will be the costs with socialization of free connection of new gas consumers. Therefore, following a study by AEI from November 2020, we estimate that in the following 10 years the gas bills of end-consumers could grow by up to 30% compared to the current price.

In my opinion, natural gas will not have a secondary role in Romania’s primary energy balance before 2040.

I believe the challenges of the next decade in the Romanian gas market, in the order of their difficulty, will be:

1. Taxonomy of companies in the sector;
2. Black Sea gas exploitation;
3. Energy poverty;
4. Human resources;
5. Continuity of gas supply;
6. Efficiency and effectiveness of services provided by companies in the sector;
7. Energy security;
8. Safety of gas use;
9. Taxation of methane emissions;
10. Reconversion of systems to allow access of other types of gases.

Transition from Gray to Green in energy and our lives will be achieved with great effort. The bills and taxes are always paid by population. And the population should expect a high energy bill towards 2050.

The warning, which we must be aware of, is given by the requirement that Romania must, according to the assumed agreements, switch by 2050 to the use of energy so as to ensure net zero emissions. This involves massive investments in replacing some of the current forms of energy with other forms of energy (renewable, hydrogen) and reconverting networks and equipment to use the new form of energy, including within households. Thus, we estimate that in 2050 the impact of massive investments on energy bills could reach higher prices than today by up to 44% to which are added investments that consumers must make with the change of indoor installations and equipment that ensures environmental and mobility comfort with at least EUR 10-15 thousand/household.

This situation, in the absence of drastic energy anti-poverty measures, would probably lead to the situation in which half of Romania’s population will be in energy poverty after 2050. This assessment also takes into account the fact that: Romania’s demography is declining, the aging population will increase after 2030, there is a shortage of funds from the Pension Fund for pensioners etc.

Intelligent Energy Association

The Intelligent Energy Association (Asociația Energia Inteligentă – AEI) brings together professionals in the gas, hydrogen, electricity and energy efficiency sectors. Its members advocate for a fair gas price and increased transparency in the energy market of Romania.

AEI is a non-profit organization whose main goal is to contribute to a better information of household and non-household gas and electricity consumers, so that they are better equipped to negotiate sale-purchase contracts and to be able to properly understand the bills they pay.

AEI is and will remain a dialogue partner for all market participants, whether they are suppliers, producers, operators, designers, constructors, institutions, regulators, ministries, politicians, employees within the system or media representatives.

Translation from Romanian by Romaniascout.