Thursday, April 14, 2011

Romania must take steps to better harness energy: experts

By Mihaela Rodina (AFP)

BUCHAREST — Romania boasts gas, oil and wind resources that can make it a major European player but it needs large-scale reforms and investment in order to fully harness this potential, experts said Wednesday.

"Romania has a capacity for self-sufficiency in gas, as well as an important nuclear and wind-power potential ... but the network must be modernized and this calls for substantial investment in the coming years," Yvonnick David, the coordinator of a study drawn up by French and Romanian experts, told AFP.

In 2010, the gas production of the two major local companies Romgaz and OMV-Petrom accounted for 83 percent of consumption. Imports of Russian gas were halved compared to 2008.

The hydro-electricity output rose by a quarter while wind power for the first time became an important source of energy following the commissionning of Czech group CEZ's first turbines of what is expected to become Europe's largest wind farm.

Romania's decision to open up its wind-power market has triggered fierce competition among investors, several of whom target the Dobroudja region, described by experts as one of the best sites in Europe.

Thanks to these natural riches, energy prices are among the lowest in the European Union. But experts and investors warn that this may turn out to be a poisoned chalice.

"Keeping prices low may seem to be beneficial to consumers," a report by the Romanian Center for European Policies (CRPE) said.

"But in the long run this poses a major threat to the country's energy safety because investors are no longer willing to spend money, not knowing if they will recover their investment, while the state-owned Romanian companies register sky-high losses," it added.

The experts' study, entitled "Energy, an Opportunity for Romania," set forth ten proposals on improving energy efficiency as well as implementing European standards into Romanian legislation.

The experts propose such measures as saving energy by improving the thermal insulation of apartment blocs built during the communist regime, updating plants, defining the rules for wind-power generation and guaranteeing access to local gas supplies.

Last week, the European Commission formally requested Romania, alongside Italy and Poland, to bring its national legislation on regulated end-user energy prices in line with EU rules.

The request was welcomed by David who said Romania will have a hard time "pursuing this low-price policy and raise the necessary funds for modernizing its ageing plants."

He stressed that the lack of predictability had made three energy groups - GDF Suez (France), RWE (Germany) and Iberdrola (Spain) - pull out of the Cernavoda nuclear project.

The three companies had been partners, since 2008, with Romania's Nuclearelectrica for the development of units 3 and 4 of Cernavoda.

But in January "they said: we cannot take that risk," David, who is the CEO of GDF Suez Energy Romania, stressed.

Uncertainties related to the profitability of the project, expected to cost four billion euros, and the government's plan to set up two energy champions underlay their decision.

The US ambassador to Romania Mark Gitenstein has also criticized the authorities' efforts to reorganize state-owned energy companies into two "national energy champions".

"It's like rearranging the deck chairs on the Titanic," he said recently.

The move "is not only an inefficient use of valuable resources" but also a policy that would significantly impede competition, he stressed.

Gitenstein said Romania needed around 10 billion euros to modernize the energy sector and "thereby unleash its most important strategic assets."

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