The electricity crisis is taking us back to the communist era

25 sep. 2019 English Section
The electricity crisis is taking us back to the communist era

Virgil Popescu: "Romania is almost in the same situation it was in before 1989"  

The crisis situation in the electricity sector is the result of the major shortage of investments in the energy system

We are very near to going back to the way things were in the communist period, when electricity was being cut off voluntarily due to the insufficient supply, specialists in the market are saying in unison.

Their opinions come as we are going through an electricity crisis, and we import significant quantities of energy, at historic prices. On Monday and Tuesday, they have reached the level of 750 lei/MWh, on the OPCOM spot market, a high level also reached on September 19th. Meanwhile, Romania imports electricity at maximum capacity on the interconnection line with Hungary.

"We are in a major crisis and a major crisis is expected to take place this winter", says Virgil Popes-cu, the vice-president of the Commission of Industries and Services of the Chamber of Deputies. The official told us that Romania is about to end up in the situation it was in before 1989, due to the lack of investments in the energy sector.

Virgil Popescu told us: "No investments are being made in the electricity sector, unit 1 of Cernavodă has been shut down abruptly, the fact that Hidroelectrica is operating at maximum capacity still isn't helping, because we have imported more than we imported anyway even when the reactor was active. I don't know what will happen this winter, and the shortage of electricity in the market is clearly reflected in the price of energy, on the Day-Ahead Market. We are not producing enough electricity, and the situation will be very dire this winter, because the maximum import capacity is 2200 MWh, and consumption will be a lot higher than that. For instance, last year, we have consumed 11,000 MWh. Considering that now, when we haven't reached a consumption of 8000 MWh, we import energy, what are we going to do this winter? At this moment, the reserve in the accumulation lakes of Hidroelectrica is dropping, because it only produces as much as it needs to compensate for the output of Unit 1 of Cernavodă. Thus, in winter, when it will really need to handle those production spikes, Hidroelectrica won't be able to cover the demand. The situation of electricity in Romania is tragic".

Virgil Popescu told us that if we end up in the situation where we no longer have the electricity to cover the demand, there is a government decision which tells us what procedure will apply, namely the electricity supply of major industrial consumers will be shut down, and the electricity will be diverted for the use of the population. "If we end up with such a crisis, we will be in a situation we haven't been in since the period of Ceauşescu, when we had voluntary blackouts".

The deputy also told us that Transelectrica hasn't made its planned investments either: "How could it meet its investment plan with a man like Caraşol who had a fake degree as a general manager? He had previously served as investment manager at Transelectrica, so he handled the investments in the National System for the Transport of Energy and he was fined by the ANRE for not making those investments, even though the company had the financial resources to make them".

No investments have been made in years in the production of electricity either. We won't have new investments in the sector as long as the law on energy and natural gas will include the stipulation that the entire production needs to be sold on the OPCOM exchange, Virgil Popescu further said. "It would seem that there isn't an actual desire in starting new investments in electricity. Nobody can finance a new investment if they aren't allowed to conclude contracts for the advance sale of electricity - Power Purchase Agreements. In this context, I will propose a draft law which stipulates that will exempt new energy investment projects from being required to sell on the OPCOM, because otherwise, Romania will enter a major electricity crisis. The draft law is being drawn up, I will be presenting it to my colleagues, in the internal structure of the party, and put it up for debate".

Ovidiu Demetrescu: "At least now, at the last minute, the investments should be started!"

The bill has come due for the failure to invest in the energy sector, says Ovidiu Demetrescu, an energy expert, who said: "It is obvious that we are lacking a capacity to produce electricity and under these circumstances, as well as in the context where a reactor from Cernavodă has exited the market unexpectedly, we have had to urgently import energy to mitigate the deficit.

Hidroelectrica does not have enough hydraulicity, perhaps due to the extended drought, does not have enough water in its lakes and has no means of producing at nominal capacity. The lakes haven't been cleaned in a long time, and Hidroelectrica is also behind in its investments. We are overdue everywhere in investments and major maintenance. As a result, we are gradually losing the ability to produce energy and we will be forced to import. But we don't even have where to import from, because Transelectrica hasn't made any investments in the interconnection line, either. All of this comes as a result of the government fumbling the ball. Right now for instance, we don't even have an energy minister..."

Under these circumstances, energy producers "have caught us wrong footed and with a deficit and they are maximizing their profits by selling us electricity at very high prices".

Among other things, the specialists mentioned that Romania used to be an energy exporter, even in 2018: "Since the end of 2018, the balance started changing, because a number of production facilities stopped working and because where green energy is concerned, we depend on nature. But it also needs to be pointed out that in the national energy system we have no storage, because no investments have been made in that area either, and we are now paying the price for the chaotic decision process".

As a result of this crisis situation, there are two alternatives - either a blackout in the system, when it becomes unstable due to some general problem, or controlled shutdowns, namely the decoupling of some consumers, meaning we start to turn off power because we can't deal with the consumption, just like we did back under Ceauşescu. I think this is a crisis situation. We keep talking about the natural gas in the Black Sea instead of pumping it out and to make gas based plants with quick start and shutdown, which could mitigate the lack of storage. We keep talking about the royalties and other things, but if we keep it up like that, then the commercial value of that natural gas will drop and it won't be viable to remove it.

We keep leaning on coal, but it doesn't much of a future. Nobody finances coal anymore. We won't be able to keep coal-based plants for more than ten years, due to prices and costs for that source. Moreover, the whole world has engaged in the process of reducing carbon emissions".

Ovidiu Demetrescu warns that we need at least 2000-3000 MW for natural gas plants, as the plants around Bucharest, with the exception of CEZ Vest, are old and need to be retooled. "The investment in Iernut will be completed next year, that of Mintia is set to be launched, and it will be ready two and a half years from now. These are investments with a long implementation cycle.

At the same time, the renewables investments can be executed faster, but it is absolutely necessary to have the long term Power Purchase Agreements in place. When you get financing for a project over a 10-15 year period, for any such kind of investment you need a PPA like this over the same period. Otherwise you won't be able to get financing from anyone. Market prices fluctuate, we cannot use it as a guarantee".

If we don't start investments right away, we will be paying a very high price, Ovidiu Demetrescu concluded. "At least now, at the last minute, the investments should be started!"

Jack Cutişteanu: "We are on the brink of a crash"

Our energy system is nearing collapse, and Romania doesn't even enough capacities for the production of electricity, says Jack Cutişteanu, CEO of Petprod.

He told us: "This is a set of circumstances where several factors have combined and caused the price of electricity to go up: draught - there is no water, the hydroelectric output doesn't exceed 1500-1600 MWh, while the potential is a lot higher, the Danube's flow is at 2300 cubic meters/sec., while the multiannual median is 3800 cubic meters/sec. Furthermore, we have a major deficit on the rivers within the country, where hydroelectric plants are located, because it hasn't rained since June and the reservoirs keep getting lower. This is where Transelectrica has a very important role because it needs to have a water reserve for the coming winter. The wind farms haven't produced that much either because there have been very hot days. So we are in a place where wind doesn't blow, there is no water, and a unit at Cernavodă is shut down. Furthermore, we have a problem with the production of electricity when we don't have any reserves. In Romania, the generation of electricity has been suffering for many years because of the investments that haven't been made. We rely on the coal generation units which for the most part are old and rely on inferior coal, and thus produce expensive energy".

As far as the imports of electricity are concerned, Mr. Cutişteanu thinks that it is preferable to import when it is cheaper than to produce. "We import energy because we don't have enough, or if we could produce a little more it would be more expensive than the one we're buying from abroad, but we can't produce, we lack what we need to do so, there is no water, and on top of that there are other aspects. What I've been saying for a long time is that we are on the brink of collapse - it can happen at any time, and then there will probably be consumption restrictions, because if you can't manage production, then you restrict consumption. We'd better pray a hard winter, with a long frost, doesn't come. It is not an alarm signal, because we are already in the midst of the odyssey. We don't have generation capacities, we don't have energy, and we have to have a reserve at any time, which can come in when necessary. That's about how things are."

Unit 1 of Cernavodă has been "shut down in a controlled manner", last week, following a problem. A press release by Nuclearelectrica (SNN) - which manages the plant of Cernavodă - shows that the reactor was shut down "for remedial works for a process parameter": "According to the norms and procedures of the Nuclear Electric Cernavodă plant, the remedial works can only be performed while the unit is off. SNN will issue a press release once those maintenance works are completed. The works are going according to the plans and procedures of the plant, without any impact on the personnel, the environment and the population".

On the Transelectrica website, in the category of accidental shutdowns, the main cause behind the shutdown of Unit 1 is presented as "leaks of heavy water in the main cooling system of the reactor". According to the latest information coming from the companies involved, the reactor of Cernavodă was supposed to be restarted on September 24th, after it had been announced that Unit 1 would resume operation on September 20.

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