Romanian Electricity Sector and National Energy Strategy Romanian

Romanian Electricity Sector and National Energy Strategy Romanian Reverse Economic Mission to USA – September 2010 Alexandru Sandulescu General Director – Energy, Oil and Gas Department Romanian Ministry of Economy, Commerce and Business Development

Romanian Electricity Sector

Romanian electricity sector Overhead transmission lines: 8800 km Transmission substations: 76 Distribution lines: 310127 km Distribution substations: 1296 Consumers: 8, 500, 000 National consumption: 54. 6 TWh (2008), 49. 9 TWh (2009)

Romanian electricity sector Electricity sector structure Transelectrica Transmission and system operator OPCOM E 1 E 2 E 3 Commercial operator E 7 E 8 Hidroelectrica T 1 T 2 T 3 8 distribution companies (DISCOs) Producer with hydro power plants T 6 Producers with thermal power plants Almost 20 municipal cogen producers Nuclearelectrica Producer with nuclear power plant More than 120 independent suppliers

Romanian electricity sector Electricity generation structure 2009

Romanian electricity sector Electricity generation variability

Romanian electricity sector Import Export Electricity export / import balance

Romanian Electricity Market

Romanian electricity market ü Fully liberalized from July 2007; ü No administrative barriers for imports and exports of energy or energy resources; ü Advanced electricity market compared with other countries in the region; ü Market operator – Opcom operating: ü Day Ahead Market ü Forward market; ü Green Certificates Market ü CO 2 Allowances market ü Market settlement. ü Balancing Market operated by the TSO, Transelectrica

Romanian electricity market Wholesale vs. retail electricity market producer centralized markets OPCOM wholesale market indep. supplier 1 indep. supplier 2 Supplier retail market eligible customer Customer at reg. tariffs

Romanian electricity market Wholesale electricity market BILATERAL CONTRACTS DAY AHEAD ON THE DAY SETTLEMENT Market Operator S S Simple Bids Day Ahead Market P G G Simple Bids MP Q Q Firm Volumes by Company TSO-market operator Balancing Market BM Volumes Simple bids by unit Adjustments to Day Ahead schedule G - generators S - suppliers Balancing Responsible Parties Physical Notifications Imbalance volumes by BRP TSO Meter data Metered Volumes

Romanian electricity market Wholesale electricity market – monthly traded volumes Balancing market Day ahead market Forward market Negotiated contracts Regulated contracts

Romanian electricity market Retail market opening Legal market opening Real market opening

Romanian electricity market Day ahead market – volumes and prices USD/MWh 70 60 50 40 30 20 Day ahead traded volumes Day ahead prices

Romanian electricity market Day ahead market – comparing to other markets

Romanian electricity market Future developments ü Adjusting market ü Intra-day markets Both are in testing phase Market coupling discussions with neighboring countries

Romanian Energy Strategy

Romanian energy strategy 2007 – 2020 Issued in November 2007 through GD 1069/2007 Consultation and agreement of all parliamentary parties In line with EU Policy document in energy (January 2007) Based on a Least Cost Development Study – Necessity of new nuclear units Currently under revision

Romanian energy sources potential The national fossil fuel reserves

Romanian energy sources potential The national renewable energy sources potential Source Annual potential To be used for: Solar 60 PJ/an 1, 2 TWh Heat Electricity Wind 23 TWh Electricity Hydro of which under 10 MW 36 TWh 3, 6 TWh Electricity 318 PJ Heat Electricity Biomass and biogas Geothermal 7 PJ Heat NOTE : these are theoretical potentials, real usable potentials are much lower due to technological, economical and environmental limitations or restrictions.

Challenges facing the energy sector ØThe environmental impact of using primary energy sources and of energy conversion technologies, especially the CO 2 emissions; ØThe finite world reserves of fossil fuels; ØThe increase dependency on imports of primary energy sources; ØThe increase in energy demand.

Romanian energy strategy 2007 – 2020 Answers to challenges Reducing CO 2 emissions by: ü promoting renewable energy sources Øelectricity targets of 33 % in total gross electricity consumption of 2010, 35 % in 2015 and 38 % in 2020 ü promoting nuclear energy Ø unit 2 Cernavoda of 600 MW commissioned in 2007 Ø unit 3 and 4 to be completed by a consortium ØNew NPP to be build

Romanian energy strategy 2007 – 2020 Answers to challenges Reducing energy dependency on imported fossil fuels by using a balanced energy mix and by: ü promoting renewable energy sources; ü promoting the use of indigenous coal, but using clean coal technologies, preferable with carbon capture and storage facilities; ü promoting nuclear energy (Romania still have natural uranium resources).

Romanian energy strategy 2007 – 2020 Answers to challenges Diversifying energy supply sources and routes by: ü promoting the Nabucco Project on natural gas; ü promoting the AGRI project; ü promoting the PEOP Project on oil; ü studying the feasibility of a LNG / LPG terminal in Constantza harbor; ü increasing the interconnection capacity on natural gas with Hungary and Bulgaria; ü increasing the interconnection capacity on electricity with Moldova, Serbia, Hungary and Turkey (submarine cable).

Romanian energy strategy 2007 – 2020 Answers to challenges Increasing energy sources storage capacity by: ü increasing the gas storage capacity from 2550 mil. CM in 2007 to 3935 mil. CM in 2012; ü increasing the oil storage capacity to fulfill 67. 5 days of consumption in 2011; ü construction of a 1000 MW pump – storage hydropower plant (mainly for daily, short term security of supply).

Romanian energy strategy 2007 – 2020 Answers to challenges Limiting energy consumption increase by energy efficiency measures: ü energy audits are mandatory for big industrial consumers; ü National Plan for Energy Efficiency was drafted in 2007; ü National programme for building insulation; ü Structural Funds to be used for energy efficiency projects. On an estimated 6 % yearly GDP increase, we expected a 3 % yearly energy consumption increase.

Promoting renewable energy sources

Promoting renewable energy sources Targets – share of renewables Directive 2001/77/EC (amended by 2006/108/EC) : ü 33 % of gross electricity consumption in 2010 Romanian energy strategy 2007 – 2020: ü 33 % of gross electricity consumption in 2010 ü 35 % of gross electricity consumption in 2015 ü 38 % of gross electricity consumption in 2020 Directive 2009/28/EC ü 24 % of gross energy consumption in 2020 (+6. 2 % from 2005)

Promoting renewable energy sources The national renewable energy sources potential Source Annual potential To be used for: Solar 60 PJ/an 1, 2 TWh Heat Electricity Wind 23 TWh Electricity Hydro of which under 10 MW 36 TWh 3, 6 TWh Electricity 318 PJ Heat Electricity Biomass and biogas Geothermal 7 PJ Heat NOTE : these are theoretical potentials, real usable potentials are much lower due to technological, economical and environmental limitations or restrictions.

Promoting renewable energy sources Distribution of the renewable energy sources potential I. Donau Delta (solar); II. Dobrogea (solar and wind); III. Moldova (microhydro, wind and biomass); IV. Carpaţi Moutain (IV 1 – Carpaţii de Est; IV 2 – Carpaţii de Sud; IV 3 – Carpaţii de Vest ( biomass, microhydro); V. Transilvania (microhydro); VI. Câmpia de Vest (geothermal); VII. Subcarpaţii(VII 1 – Subcarpaţii Getici; VII 2 – Subcarpaţii de Curbură; VII 3 – Subcarpaţii Moldovei: biomass, microhydro); VIII. Câmpia de Sud (biomass, geothermal and solar).

Promoting renewable energy sources National use of renewables Opertional: Ø hydro – 6440 MW Ø wind – 14. 9 MW Ø biomass/biogas – 8. 1 MW Ø solar – 0. 0088 MW Under construction: Ø hydro / 131 MW Ø wind – 1000 MW Ø biomass/biogas – 27 MW

Promoting renewable energy sources Green certificate market Electricity market Green certificate market Promotion of renewable energy sources - Green certificates market Producers Supplier Competition Producer on hydro Green certificates micro hidro Electricity micro hidro Label Producer using fossil fuels Producer with nuclear units Electricity Coal Electricity Nuclear Competition

Promoting renewable energy sources Green certificate market Promotion of renewable energy sources - Green certificates market ü mandatory quotas for suppliers (year / %): 2008 2009 2010 2011 2012 2013 2014 5. 26 6. 28 8. 30 10. 00 12. 00 14. 00 15. 00 2015 2016 2017 2018 2019 2020 16. 00 17. 00 18. 00 19. 50 20. 00 minimum and maximum price levels established by the regulator: minimum value 27 Euro / MWh maximum value 55 Euro / MWh

Promoting renewable energy sources Green certificate market Promotion of renewable energy sources - Green certificates market Number of certificates per MWh: ü hydro under 10 MW: 3 certificates (2 for old but refurbished hydro units); ü wind: 2 certificates till 2017, one starting with 2018; ü biomass / biogas: 3 certificates + 1 for efficient cogeneration; ü solar: 6 certificates. Green certificates are issued for: ü 15 years for new units; ü 7 years for second hand units if used in isolated systems; ü 10 years for refurbished hydro units; ü 3 years for old, un-refurbished hydro units.

Promoting renewable energy sources Green certificate market Promotion of renewable energy sources - Green certificates market Investments must be done before 2016 ! Penalties for non compliance of suppliers: 110 Euro per non acquired certificate Revenues from penalties to be used by Environmental Fund ANRE can adjust quotas if it is a high imbalance on the green certificate market

Promoting renewable energy sources Green certificate market Organized by Energy Market Operator - OPCOM

Nuclear electricity production

Nuclear sector Cernavoda NPP with: ü two CANDU 6 units operational ü two CANDU 6 units under construction A joint-venture, Energonuclear, to build units 3 and 4 in Cernavoda NPP: ü SN Nuclearelectrica 51% ü RWE Power România SA 9. 15% ü Enel Investment 9. 15% ü GDF SUEZ 9. 15% ü CEZ 9. 15% ü Arcelor. Mittal 6. 2% ü Iberdrola 6, 2%

Nuclear sector New NPP to be build ü Pre locational study done – 103 possible locations To be established: ü consortium of investors or other financing mode ü technology to be used

Conclusions

Conclusions Romania has an advanced energy market and an attractive environment for investments in energy sector – in line with EU legislation; Romania has natural energy resources, including unused renewable potential in wind, hydro, solar, biomass and geothermal; Romanian energy strategy basic answers to the new challenges are: ü Promotion of renewable energy sources; ü Promotion of nuclear energy; ü Promotion of indigenous coal with clean technologies; ü Diversifying the sources and routes of primary energy sources supply; ü Increase interconnection capacity (electricity, gas) and storage capacity (gas, oil); ü increase energy efficiency.

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