Green Deal on Ice: an interesting discussion with AHK members

Green Deal on Ice: an interesting discussion with AHK members

On the 15th of April, AHK Romania through its green tech platform econet romania organized the first online meet-up for its members in the field of energy and environment. The “Grean Deal on Ice” event was dedicated to company representatives interested in sharing experiences and perspectives in the context of the covid-19 crisis and discuss around the decrease in energy consumption, legal changes influencing Green Deal policies and incentives for investments in energy and environment infrastructure.

The guest speaker who broke the ice was Ms. Silvia Vlasceanu, General Manger of ACUE (Federation of Associations of Energy Utility Companies) who first engaged into the conversation with our members and presented the highlights of the period in the energy sector. The discussion turned afterwards around a wide range of subjects, that will be presented shortly here below.
Electricity consumption and electricity prices

After the establishment of the emergency state, the electricity sector is dealing with a decrease in consumption from companies (industry, Horeca) and an increase in consumption (however not comparable) from households. As an effect, the prices on the spot market dropped (for instance, to a level of 0,001 lei/Mwh on Sunday, 5 April). However, this reduction does not reflect directly into the acquisitions and sales of suppliers, as they usually buy in advance their volumes on the other long-term OPCOM platforms.

Article 8 from the Military Ordinance no. 4 has raised some questions by introducing a price cap (on March, the 29) during the emergency state, but without clearly defining what prices are impacted. It is assumed that the Government refers to the final prices to end-consumers in order to support especially industrial in the negotiations with their suppliers.

Prices for households are regulated at least until the end of 2020 (Governmental Ordinance No. 114/2020, Military Ordinance 1).As suppliers still have to recover their losses from last years due to the price cap, they are looking forward to seing how the regulation will evolve in the context of Covid-19.

Government Emergency Ordinance No. 29/2020

The Emergency Ordinance No. 29/2020 was enacted as first tax and economic action after the adoption of Decree no. 195/2020 on establishing the state of emergency in Romania. There was a large discussion around the article X, according to which payments of utilities bills in Romania could be deferred by companies having obtained the blue or yellow certificate from the Ministry of Economy.

According to sources from the market, there are not a lot of companies who asked to defer their bills until now, mainly because as their activities decreased, their consumption decreased and so the bills are not very high. Moreover, these bills still have to be paid at a certain moment in time, so the burden will not disappear. In addition, through the same ordinance, SMES in difficulty can have access to working capital loans/credit lines which can cover bills payment.

What worries most electricity suppliers and players in the energy sector is a possible enactment of the draft law proposal regarding the possibility for both companies and households to postpone for 12 months, upon simple request, the payment of their utilities bills. Moreover, the actors in the field were not consulted until now.

Working safeness is most important

The staff of energy distributors are in the front line and their employers have had rapidly to adapt to the current situation by providing them health equipment & ensure special work conditions.

Some companies whose clients are in the fields of energy distribution and transportation have their staff also working in the first line, undergoing several projects of maintenance or other interventions of strategic importance.

Green projects

Solar & wind: there are many projects in the market, which have been restarted, but will be hard to pursue them under the current sanitary situation and they will certainly be delayed.

However, the crisis is not the only barrier to their development. The National Energy and Climate Plan is moving slowly, although the RES targets are ambitious. There are 2 main types of barriers for green projects:

1) Commercial: long term contracts (PPA- Power Purchase Agreements) outside centralized markets have for a long time been prohibited by the Law 123; although ANRE has issued the Order 65/ 2020 to define long term contracts as contracts over a year, legislation needs further clarifications.

2) Technical – connecting to the grid is difficult (bureaucracy, connection prices are high)

The Modernization Fund, the new investment facility of the European Union under the revised ETS Directive, discussed since last year by the EU commission and the Romanian Government: the Fund was meant to support low-carbon investments in the energy systems of ten lower-income EU Member States, among which Romania also. Priority areas for the fund include renewable electricity, energy efficiency improvements, modernization of networks and energy storage, and supporting a just transition in carbon-dependent regions.

Perspectives after the crisis

As the Government has assured that big infrastructure projects will continue, services providers for the energy sector are relatively comfortable at the moment. However, they are worried that their partners and clients could lack cash if the law proposal for postponing utilities bills on a large scale will be enacted. There could be an undesirable domino effect.

The oil and gas market will have major convulsions that will spread all over the energy market.

However, there are financial facilities that could be accessed after the crisis to relaunch green projects, such as for instance the Modernization Fund. In this case, there is a stringent need to clarify from now on the conditions to access them.