EU member states are currently in the process of revising their 10-year National Energy and Climate Policies (NECPs), following the legislative impact of the COVID-19 pandemic and the invasion of Ukraine. Continuing with our series, we take a look at Romania’s most recent targets, progress and expectations for the updated document.
In the 2020 NECP document, Romania set a target to increase the overall share of renewables in the gross final energy consumption by 30.7 per cent by 2030, which would translate to a cut in greenhouse gases (GHG) emissions by 43.9 per cent and 2 per cent (by 2030) for sectors in and outside the EU Emissions Trading System (ETS), respectively.
Whilst in energy efficiency, the 2020 plan set out a 2030 target to cut primary energy consumption (PEC) by 45.1 per cent and final energy consumption (FEC) by 40.4 per cent.
In addition, Romania’s Recovery and Resilience Plan (RRP), approved in September 2021, declared ending coal and lignite-fired power generation by 2032, along with establishing specific objectives for boosting renewable energy output.
However, since 2020, fossil fuels continue to play a significant role in Romania’s energy mix, while the share of renewables decreased in recent years. In the 2021 energy mix, natural gas accounted for 29 per cent (down from 31 per cent in 2011), coal dropped to 12 per cent (from 23 per cent in 2011) and oil increased to 31 per cent (up from 24 per cent in 2011) – renewables stood at around 20 per cent and have remained stable for seven years.
In June, the country’s biggest energy company, OMV Petrom announced the discovery of new crude oil and natural gas resources in the Oltenia and Muntenia regions, marking it as one of the biggest discoveries in recent years.
Slow progress on “unambitious” targets
Looking at the above, despite Romania’s 2032 coal phase-out plans, stronger efforts are needed in the deployment of renewables, according to the EU Commission’s 2023 country report. In its assessment of the 2020 NECP, the EU Commission considered Romania’s 2030 target in the 2020 NECP for the share of renewables as “unambitious.”
“Romania will need to substantially strengthen its renewable energy target in the updated NECP to reflect the more ambitious EU climate and energy targets in the Fit-for-55 Package and in the REPowerEU Plan,” the report read.
The same was noted by the Brussels-based association SolarPower Europe according to which “the NECP target does not fully reflect the potential for solar development in Romania.” Indeed, there is untapped potential for solar energy of around 29 gigawatts (GW) by 2090, which can be reached by auctions, tenders and prosumer development.
To some degree, the foundations to “substantially” increase the renewables target were laid out in Romania’s RRP. The plan seeks to simplify permitting for renewables, install 3 GW of wind and solar by June 2026, add 240 megawatts (MW) of renewable storage by 2025 and generate at least 100 MW of green hydrogen within the same period.
At the same time, Romania’s RRP lacked extensive measures in grid modernisation and skills development, which hinders the country’s rollout of renewables, the 2023 country report said.
Similar to the renewables target, the EU Commission assessed Romania’s 2030 energy efficiency targets in the 2020 NECP as reflecting “a very low level of ambition.” Moreover, based on the energy consumption trajectory for 2018-2021, Romania was not expected to be on track to meet these targets, which was noted in the 2020 document.
With these expectation gaps in mind, Romania’s RRP placed an emphasis on key energy efficiency measures. Among them is a flagship “Renovation Wave” fund, worth 2.7 billion euros. In the 2023 country report, the Commission called for a “swift implementation” of Romania’s “ambitious” energy efficiency plans in the RRP. As the Commission noted, the country has made a good start.
It will be interesting to see how these measures impact the country’s updated energy consumption trajectory and energy efficiency targets. Considering the Commission’s disappointing 2020 assessment, it is likely that these targets may be significantly boosted in the updated document.
Whilst not included in the RRP, it is also key to consider Romania’s planned expansion of nuclear energy infrastructure and deployment of small modular reactors (SMRs) towards the end of the 2020s and into the 2030s. As noted in the 2030 country report, ongoing investments in nuclear will increase the energy mix from the current 20 per cent to 36 per cent by 2030.
The expansion of the country’s sole nuclear power plant in Cernavodă in 2030 and 2031 is expected to double the contribution of nuclear energy in the energy system from approximately 20 per cent to 36 per cent. In December 2022, Romania’s then Energy Minister, Virgil Popescu emphasised the crucial role of nuclear energy in ensuring energy security and the achievement of decarbonisation targets – “Because decarbonisation can’t be done without nuclear energy,” he said.
Financing Romania’s green ambitions
Romania benefits from a wide set of EU funding pots. Among them is the RRP, with 14.24 billion euros in grants and 14.94 billion euros in loans and 41 per cent of its funding dedicated to projects related to the green transition. Thus far, the country has received 6.3 billion euros from the plan, requesting an additional 3.2 billion euros in December 2022 under a second instalment. These funds have not yet been granted, however, Romania’s stated willingness to push ahead with domestic reforms needed to unlock the funds may be a sign of optimism.
An even greater financing avenue for the country’s green transition is found in the EU’s Cohesion Policy. Between 2021-2027, Romania is planning to invest 21.7 billion euros in green energy, as part of its total allocation of 46.6 billion euros. It is worth noting that this also includes investment plans in-line with REPowerEU objectives set out in May 2022 (2.8 billion euros).
Romania is also among the 10 countries supported by the EU’s Modernisation Fund to meet their 2030 energy targets. The fund is jointly funded by revenues from the auctioning of two per cent of the total allowances between 2021-2030 and additional allowances transferred to the Fund by five beneficiaries which include Romania.
The country is also the Fund’s third biggest beneficiary, accounting for 11.98 per cent of the budget split. Three weeks ago, the Modernisation Fund distributed 1.1 billion euros to Romania – the largest beneficiary of that particular funding round, out of a total of 2.4 billion euros.
Interestingly, whilst the Oltenia region has recently emerged as a hotspot for new fossil fuel resources in Romania, it is also a key beneficiary of the Modernisation Fund for its green transition. In October 2022, OMV Petrom announced that, in partnership with state-owned lignite power producer, Complexul Energetic Oltenia, it will build four photovoltaic parks in the region – with around 70 per cent being financed via the EU’s Modernisation Fund.
Alongside EU funds, Romania has strong financing backing from major international players like the United States – and more broadly, the G7 – for the SMR deployment.
Can we expect an ambitious NECP?
Looking at the above funding avenues, Romania looks to be well-equipped to use the revision of its NECP as an opportunity to address gaps in its current “unambitious” 2030 renewables target, a still dominant position of fossil fuels and a stronger energy efficiency policy arsenal. Considering the “cash-for-reforms” structure of the key funding mechanisms (for example the RRP), a lot will depend on the country’s political will, however, at the moment, this does not look to be a major obstacle.
In terms of the role of fossil fuels, it is likely that the upcoming NECP document will set out further details of the 2032 coal phase-out and clarify the role of natural gas. Indeed, new data from climate pressure groups on Romania’s considerable financial aid for gas projects in recent years may also impact the shape of the final document. “Any project or scheme that adds new gas consumption blatantly contradicts the EU’s policy attempts to steeply decrease gas use in the EU before 2030,” analysts from CEE Bankwatch Network said in a report on EU funds for fossil gas in Romania.
In addition, whilst the energy trajectory from 2020 did not signal optimism, the EU’s record drop in energy consumption and rise in renewables in 2022 clearly demonstrates that with the right political backing, funding mechanisms and policy agenda, a paradigm shift in this area is more than possible – for Romania and the whole region.
The country’s nuclear infrastructure will also become a key actor in the country’s decarbonisation efforts, once completed. Taking this into account, a full picture of Romania’s clean energy landscape, similar to Poland, could be better reflected in policy documents with an outlook beyond 2030.