Radu Dudau
Co-founder and Director
Energy Policy Group (EPG)

12 August 2019

Can you introduce our readers to Energy Policy Group since its founding in 2014?

Following a varied academic career ranging from physics to political science throughout Europe and the United States, the core of my work eventually gravitated around international relations, particularly in the energy sector and energy geo-politics. At the time, in the mid nineties, Romania found itself in the midst of a gas crisis due to trade relations with Ukraine and Russia.  There was a real demand for independent, quality analysis in the sector, to shed light on such a diversified and rapidly transforming industry – this culminated with the foundation of EPG in March 2014. 

 

What is the bird's eye view over Romania's energy sector at the moment, including oil, gas, as well as renewables?

Situated in South-Eastern Europe, Romania is endowed with plentiful natural resources. We have been exploiting and industrializing oil for over a century and a half, and gas for over a century, a pioneer in the region. Coal followed, on large scale, in the 1950s, as well as hydro-energy, and then nuclear, in the 1990s. Since 2010 onwards we have seen an investment boom in renewables such as wind and solar. Romania has a massive natural potential in the latter field, with plenty of room for growth coupled with high economic gains compared to what has been done so far. Overall, we have what has been referred to as a „diversified  and balanced energy mix.”

Significant investments are called for henceforth, both in exploration & production, as well as energy distribution, transportation and manner in which we are all consuming our resources. Romania, like many other states, is trying to transition to a more sustainable energy system, supported by a smarter, digital infrastructure, as is to be expected of any forward looking country in the 21st century.

 

The Romanian National Energy-Climate Plan 2021-2030 underlines some of the government's priorities, as well as commitments – what are your thoughts on the plan? 

The government stands to show more ambition in the area of renewables, particularly given the wealth of natural resources to back it up. In this context it is challenging to understand why our targets for renewable energy sources stand at 27,9%, below the 32% EU target. Hydropower is already the backbone of the country's energy system, and instead of unrealistic growth projections, it could much better use refurbishing work. According to recent studies, though, growth has the best potential to come from the solar and wind capacities. 

 

The government recently passed Government Emergency Ordinance (GEO) 114/2018 – what are the expected repercussions for the energy sector?

Key players in the industry have been urging legal and fiscal transparency and predictability for a long time, especially given the high capital investment and turnaround cycles typical for the oil & gas sector. Romania regrettably does not have the best track record in this respect. A case in point are the Black Sea gas reserves, where exploration decisions had to be delayed due to the volatile regulatory climate. Following this, the GEO 114/2018 came as a shock to the industry, and is likely to have severe consequences across the board. For instance, up to 2022, it puts market liberalization of gas and electricity on hold, and introduces an additional 2% tax for any trading and supply activities. In addition to practically blocking new investments, the legislation will also result in companies’ having to lay off otherwise qualified personnel. I see this as an all-out assault on the economy, as it affects, apart from energy, the banking, IT & communications, constructions, and several other areas, discouraging future investment and placing current projects on hold. It might be helpful for the companies to be more united in defending basic economic and business principles during such times, and more vocal with the authorities, before the harsh economic reality will on its own call for a re-evaluation of the new regulations. 

Furthermore, the new legislation sets Romania on a contrary path to the rest of the EU. My assessment if that we are facing a legislative anomaly fueled by the need to supplement tax income, that Romania will soon be sailing on calmer, more predictable waters, and that the GEO 114/2018 will ultimately be rescinded. Historically speaking, the country has been welcoming to new investments, and the plentiful natural resources attracted strong capital and know how. I believe that in a few months’ time Romania will regain a fairly predictable economic trajectory.  

 

Romania is indeed a country with the potential of reaching energy self-sufficiency –what are the strengths the country can leverage in its future development?

Once the country’s regulatory framework regains its sense of balance and predictability, several sectors have bright growth prospects. Gas in particular is a strength that must be honed by industry experts and state authorities alike, able to forge a long-term win-win deal between state and industry. Renewables as well, as mentioned, can and should be developed further, going to a good extent hand in hand with natural gas. 

Likewise, a smart, flexible infrastructure is yet to be developed in Romania and must be treated as a priority. With the right resources, a better developed infrastructure, and a favorable regulatory environment to smoothen the path, the only way is forward. 

 

On this note what is your vision for EPG, and for the country's industry overall over the course of the next two years?

There are EU funds that can support investment in clean energy. There is room for improvement in the country’s energy efficiency, a priority domain for both the government and investors. The government also has grand plans, including the construction of two new nuclear reactors at Cernavodă, backed by Chinese investors. The Energy Ministry also plans to build a large hydro pumped storage plant, among several others. 

At EPG we believe in a smart and efficient energy industry – a vision that integrates the country’s energy markets in the EU markets, away from an isolationist mentality. The final consumer eventually benefits most from a liberalized market. The main challenge up to 2030 is the planned phase-out of the coal sector and its replacement with sustainable and affordable alternatives. With the right investments, Romania can also promote efficient, high quality energy solutions and services. Finally, Romania has to stay attuned to European priorities.

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