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How Romania can be ahead of the curve of the green transition – interview with Lara Tassan Zanin, head of the EIB Group in Romania

The total financing of the European Investment Bank (EIB) for sustainable energy projects inside the European Union reached an unprecedented 17 billion euros in 2022, highlighting the EU bank’s unwavering commitment to ensure access to affordable and secure energy at a time of extreme uncertainty. Out of these, almost 70 million euros were invested in Romania.

CEENERGYNEWS spoke with Lara Tassan Zanin, Head of the EIB Group office in Romania about the sectors that were more attractive, the challenges of bringing more private investments and the role of the State in changing people’s mindset towards the green energy transition.

“Mainly, our energy financing last year in Romania supported energy efficiency investments for households and SMEs,” Ms Tassan Zanin explains. However, she mentions progress has been made in a 150 million euros support to the national grid transmission operator Translelectrica to speed up much needed electricity transmission network upgrade. This has included also support from the European Investment Advisory Hub aimed at streamlining internal procedure to prepare and approve investment projects.

“Overall, renewable energy sources count for more than 30 per cent of the 17 billion euros EIB’s support to the energy sector,” she continues. “But when it comes to Romania, only 2 million euros were invested last year in renewables and only via financial intermediries.”

In fact, the EIB works in three directions: public funding; private direct funding either corporate debt or project finance (for projects of 50 million euros and more); and, for those SMEs and smaller investments, the EIB will lend the money to commercial banks which in turn will lend them to the clients.

“The interest is really high,” Ms Tassan Zanin points out. “We receive at least one proposal per week regarding renewables in Romania. Unfortunately, these are mainly projects that are not yet bankable for different reasons, permitting or licensing not yet available, output price volatility, lacking or unsatisfactory offtaking arrangements. So, there is a huge interest that doesn’t yet translate into concrete numbers in Romania or in the whole CEE region, compared to the EU average.”

In Romania, the main interest is around wind and solar energy, Ms Tassan Zanin mentions also hydropower and geothermal but so far these remain limited initiatives. The investments in peripheral areas are limited by the lack of grid penetration, although these would be the areas where investments are needed the most. Transelectrica said to be aware of this issue and is accelerating investment in those areas with lower grid penetration.

As the majority of the funds in Romania went for energy efficiency projects, it is good news that the European Parliament and the Council reached a provisional agreement to reform and strengthen the EU Energy Efficiency Directive, according to which, for the first time, the energy efficiency first principle was given legal strength.

“As the EIB, we will not be tremendously affected because we are already above the bar,” says Ms Tassan Zanin. “Our criteria are higher and stricter than usual standards. Only last year, the EIB support for energy efficiency investments went up from 4.7 billion euros in 2021 to 7 billion euros. So the new directive will affect what other players will do, for example raising the bar for other financial institutions. Especially we hope more energy efficiency investments will materialise for households and public buildings, municipality buildings, schools, hospitals and universities, while the industry is already driven to become more efficient while remaining more competitive at the same time.”

Regarding households, Ms Tassan Zanin underlines that most of the EIB investments are happening in Bucharest, where there are bigger buildings with a large number of tenants, whose majority is required to approve any kind of renovation. So far there were only two ways to make these renovations work: either by using a mortgage loan when buying the house or increasing the mortgage at a later stage.

“We are working with the banking sector to offer consumer loans with a 7- 8-year maturity (instead of 5 years) in case loans are used for energy efficiency works, so that instalments can be smaller and more people can afford these renovations,” she highlights.

“Until now, I must say that energy consumption has remained very high in the country,” she says. “We need a much higher attention to consume less and more efficiently and more openness and interest in setting up financial instruments to support energy efficiency investments. We are currently working with Regional Development Agencies in Romania to set up a Energy Efficiency Investment Fund using EU Structural Funds to leverage loans from the banks to single famoly houses across Romania.”

However, we cannot only rely on public investments and we need to attract more direct private investments as well. How?

According to Ms Tassan Zanin, first of all, by speeding up the deployment of EU funds (like the Resilience and Recovery Facility, the Modernisation Fund and the Just Transition Fund) and blending them with loans, equity, own resources or other forms of financial instruments. In the current economic environment, protecting investments and taking advantage of synergies between the public and private sector is crucial to boosting economic recovery and increasing resilience. This is not happening fast enough in Romania.

“For example, the call for renewable energy under the RRF was closed in June 2022,” she mentions. “And the Ministry of Energy is about to release results of over 1,000 applicants only now in May 2023, so they are still processing. At this pace, the private sector does not have the capability to understand how much support they will get and in what time frame. There is a clear interest in clean energy investments in Romania, but the country has to give the signal that private sector investments are prioritised at some point, complementing public sector and State Owned Enterprises investments.”

And this would partially address the uncertainty that emerged in a recent survey, according to which Romanian firms are more likely to suffer from high energy costs and the tightening of financing conditions, than their peers in other EU countries. In particular, the survey found that access to finance is worrisome: the proportion of Romanian firms facing financing constraints (15.2 per cent) exceeds the EU average (6.2 per cent) and is the highest on record in the EIB Investment Survey series.

“Secondly, I would invite Romania to step up its vision in Foreign Direct Investment attractiveness,” continues Ms Tassan Zanin, welcoming the new Foreign Investment and Trade Agency established under the Prime Minister. “If this card is well played, it is very important to attract the private sector. It is not only about giving grants but understanding what is the strategy of Romania, what the country is offering to investors, what are the conditions. This is true for all the sectors but innovation and green investments should remain high in the Government’s agenda, particularly when it comes to attract FDI.”

Finally, according to her, the third part of this recipe to attract more private investments is to decide which are the priorities and go after them, setting up preferential lanes, particularly for large investments in those regions that are most affected by the energy transition. The shift from coal to clean energy will inevitably make some labour forceredundant and in need to be upskilled, reskilled and being offered greener jobs by the newly attracted FDI.

Coming back to the green energy transition, Ms Tassan Zanin explains: “We see a limited understanding and knowledge, and limited access to information on positive impacts of green energy compared to traditional energy for the environment, the country and the competitiveness of the Romanian economy, particularly in the long term. Instead, green transition narrative in the country is fakenly only about increased costs for users, and green energy agenda being pushed by the EU at the expenses of Romanian economic stability.”

Indeed, Romania was used to very low energy costs for many years so they have a big catch-up to make and this jump looks even bigger for its citizens.

“Only by adding new renewable energy capacity, expanding the transmission grid and making it smarter, investing in storage facilities and energy efficiency will reduce balancing costs and will allow for a more affordable and secure energy,” she concluded. “If these investments will be materialised, in 5 years from now the costs of green energy will go down, it will be affordable and people’s mindest will be more inclined to green investments. This would allow Romania to be ahead of the curve of the green transition.”

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