THE POTENTIAL OF THE RENEWABLE ENERGY MARKET IN ROMANIA

PhD Student Ichim CosminAlexandru Ioan Cuza University

Iaşi, Romaniaichim_cosmin@yahoo.com

Abstract

The exhaustion of fossil fuels and the probability that the World could end in collapse if it followed the same consumption typology are ideas stated since 1972 in the first report to The Club of Rome entitled The Limits to Growth. One of the changes that this first report asked for is the use of renewable energy sources (green energy) instead of fossil ones (grey energy). This topic has been long debated and at present a strategy has been reached for the promotion of renewable energy sources (RES). Since the integration in the European Union, Romania takes part in this strategy, being one of the most important players in this new born energy market. The article takes the form of a descriptive research and presents the economic, legal and geographical potential of the use of RES in Romania as a solution for a sustainable energetic future. As one can notice after reading this article, Romania is the perfect business environment for RES investors due to its geographic potential and to the regulatory actions it implemented.

Keywords renewable energy sources, fossil fuels,

1. INTRODUCTION

The Romanian energetic sector registered significant changes after 1990. We must mention in this respect the inheritance acquired through the construction of hydroelectric power stations, investments of which many persons tend to think that they had nothing to do with environment protection, although voices such as that of the American president Jimmy Carter also found an echo in Europe, and the oil crisis in 1973 affected everybody. In the 1990s there were heated debates at world level with regard to the climate change caused by the increase of the emission of greenhouse gases, followed by the signing in 1997 of the Kyoto protocol [2]. The rethinking of the energy sources comes as an answer to the emission of greenhouse gases, as well as to the exhaustion of primary energy sources and to the dependence on other energy producing states. Following a transition process which copied some examples of good governance, Romania tried to keep up with what was happening in Europe, managed to be accepted in NATO, ratified the Kyoto protocol in 2004 and became a member of the European Union in 2007. Drawing the attention of foreign investors, Romania found itself for the first time in a situation in which its geographic and geopolitical position provided it with a series of opportunities which

had to be capitalized on at their true values. The new energetic industry and, implicitly, the new resulting workplaces are, according to many researchers, a solution to the current economic crisis.

2. RESEARCH METHODOLOGY

This research is a descriptive and exploratory one and can be seen as a photograph of the Romanian potential of using RES. The data were gathered from primary and secondary sources. Among secondary sources, it is worth mentioning: OECD Factbook 2010, Eurostat 2009 and 2010, European Environment Agency, The European Community, Directorate-General for Energy and Transport, British Petroleum (BP) Statistical Review of World Energy 2010 and Romanian Statistical Yearbook 2010. The participation to fairs, exhibitions, forums and other meetings provided the opportunity of having some interviews with specialists in this field and of collecting primary data. Thus, we conducted the following unstructured interviews with specialists in the field: 14.10.2010- interviews with specialists in the field during the national seminar entitled Project ESPON 2013 for the support of the formulation of the territorial development policies and strategies, 5.11.2010- interview with Dr. Harma Albering, Policy Advisor on environment and sustainable development, with Dr. Paul Levels, the manager of the program SDC2C of the department of the environment and sustainable development from the Limburg province, the Netherlands, and with Dragoş Pîslaru, General Manager of GEA Strategy and Consulting SA with the Regional Investment Forum North-East Iaşi, 24.11.2010- interview with Mr. Arturo Rodriguez, General Manager of Veromar Impex SRL from Bucharest, Romania and Mr. Salvador Orti Ortin, Manager of EPD Solar Systems, Valencia, Spain and other participants at the RENEXPO South-East Europe 2010 fair organized in Bucharest and, last but not least, on 25.11.2010- interview with Ms. Nadina Stanciu, communication expert with the Romanian Energy Regulatory Authority (ANRE), Bucharest.

3. THE USE OF RES AS A VIABLE SOLUTION TO ENVIRONMENT AND ENERGETIC SECURITY PROBLEMS

3.1 Environment problems

The production of energy for transportation, heating, the production of power in heating power plants and in industry by burning fossil materials is the main cause of global warming as a result of the increase in the emissions of CO 2. The conclusions are well-known: over the last decades there was an increase of the emissions of CO2 related to the production of energy, by 75% in comparison with 1971 and by 20% in comparison with 1990, with an average rate of 2% per year [16]. The most recent report of the Intergovernmental Panel on Climate Change

[14], drafted by 2 500 experts who worked for a 3 years’ period, presented the following conclusions: we can be 90% sure of the fact that the activities of mankind determined the heating of the planet; during the last 100 years, the growth of the global temperature, in percentages, was of +0.74%; 11 out of the last 12 years were the hottest years in the last 150 years; the average temperature for the next one hundred years may increase by 6.30C.

It has been proven that climatic change has disastrous economic and social consequences. The melting of the glaciers, the destruction of crops and the impossibility of conducting farming activities, the increase of the degree of water acidity, the destruction of ecosystems and the rise of the level of the ocean are threats with a major impact on the inhabitants of this planet [15].

According to the data provided by the BP Statistical Review of World Energy 2010 (see figure number 1) and after their processing with the help of SPSS, we can state with 99% confidence that in Romania there is a direct and strong connection between the level of emissions of CO2 and the consumption of primary energy (Pearson coefficient = 0.996, normality of the distribution verified through the construction of the histogram, see figure number 2).

Source: BP Statistical Review of World Energy (2010)

Fig. 1. Level of CO2 emissions and of the consumption of primary energies at the level of Romania over the period 1990-2009

Primary energy consumption – CO2 emissions – million tons million tons oil equivalent

Fig. 2. Verification of the normality by building distribution histograms

primary energy consumption Romania (1990- 2010)

CO2 emissions Romania (1990- 2010)

As concerns Romania, the emissions of CO2 registered in 2009 a surprising decrease by approximately 50% in comparison with 1990, from 168 to 83 million tons. The cause of this diminution was the government’s privatization policy which led to the closing of several businesses which contributed to the high level of CO 2

emissions. The economic recovery at a European level, registered after 2000, contributed, according to Eurostat 2009, to the increase in the emissions of CO 2 by 75% in comparison with 1971 and by 20% in comparison with 1990, with an average rate of 2% per year.

At the level of the EU, the emissions of greenhouse gases increased by 77.6 million tons over the period 2000-2006. In absolute terms, the most significant growth of emissions of greenhouse gas was registered in Spain (an increase by 48 million tons), Romania (an increase by 18 million tons) and Italy (an increase by 16 million tons) in 2009, when compared with 2006. At the other pole, the most considerable decreases of CO2 emissions were registered in Great Britain (decrease by 18 million tons), Germany (decrease by 15 million tons), France (decrease by 14 million tons) and Belgium (decrease by 9 million tons) [7].

The worrying figures with regard to the increase of CO2 emissions registered after 2000 caused heated debates at a legislative and political level. The conclusion reached was that the energetic policy must support a lasting economic increase in line with the social context and with environment related objectives. The promulgation of GD 1535/2003, the ratification and signing of the Kyoto protocol and of law 220/2008, together with the commitments undertaken during the EU adhesion negotiations had a significant impact on the promotion of the use of renewable energy sources in Romania as an efficient alternative for the fight against climatic change. Under the Directive 2009/28/EC [4], which sets individual targets for each member state, depending on the 2005 level and on the level of income, Romania was imposed a quota of renewable energy of 24% until 2020.

With an increased efficiency from an energetic perspective, nuclear power is not seen by ecologists as a viable energy source because of the radioactive waste and of the risks involved by the inappropriate handling of nuclear power plants.

3.2 Problems related to the architecture of the energetic sector

In his book entitled Out of Gas: The End of the Age of Oil [8], argues that civilization as we know it will come to an end at some point during this century, unless we find a way of living without fossil fuels.

The rethinking of energy sources is a solution to the emission of greenhouse gases, as well as to the exhaustion of the primary sources and to the dependency on other states, two other significant factors that influence decision making in the energetic sector [12]. In his work entitled Renouveler la production d’energie en Europe: un defi environmental, industriel et politique, Pellion advocates for the implementation of a common energetic policy at the level of the European Union, similar to CECA 1951 and to Euratom 1957, given the fact that this sector uses fossil energy for 70% of its needs and is extremely dependent on other states. At present the EU manages to cover only 37% of the demand for gas and 18% of the demand for oil from its own production.

The exhaustion of primary energy sources (coal, oil and gases) and the dependence on other producing states are the factors that led to the rethinking of the architecture of the energetic sector at the European level, as well as at the level of our country.

The stock of hydrocarbon, gas, oil and coal needs hundreds of thousands of years to reach maturity, rhythm which is incompatible with the current rate of consumption. Without a radical change of behavior, the exhaustion of these resources cannot be avoided. Although some believe that experts cannot accurately predict the period when the stocks are exhausted [12], others have somber predictions which give birth to increasingly heated debates on the reconfiguration of the energetic sector. For example, BP Statistical Review of World Energy shows, as one may notice in figure number 3, that the primary energy resources will be available for: 45.7 years for oil (see figure number 3), 62.8 years for gas and 119 years for coal [1]. Things look gloomy for Romania, too: thus, at a consumption rate specific to 2009, the reserves of oil of Romania will only last for 14.2 more years, the gas reserves for 57.9 years and the coal reserves for 30 years.

OECD Former Sovietic Union Emerging countries World

Source: Adaptation BP Statistical Review of World Energy, 2010

Fig. 3. Availability of fossil reserves (years)

The only downturn of these estimates is that they rely on currently exploited reserves, without taking into consideration the new resources that may be discovered in time. However, the major impact of the concern for the environment may determine us to put an end to the exploitation of primary resources and may orient us towards energetic independence. This is the case of Ecuador, the first country to have received compensation for not extracting its oil, following an agreement with the UN. According to this arrangement, the amount to be received by Ecuador, 3.6 billion dollars (an average of 300 million dollars per year) will be transferred to a special fund which will be managed by the UN. The donors will be

YEAROIL

GAS

COAL

some developed and rich countries, concerned about ecological issues, namely: Germany, the Netherlands, Norway, Italy and the USA [9]. Whether it aims at protecting the environment or at promoting the market of renewable energy sources, already built by the donor countries, the agreement implies a change of the view concerning oil dependency.

As in many states of the European Union the demand exceeds by far the internal capacity of extraction of underground resources, these states become dependent on others with a greater production capacity. For example, EU can cover from its own production 37% of the demand for gas and only 18% of the demand of oil, resorting to imports for the rest. In 2009, Romanian citizens consumed: 211 000 barrels of oil per day in comparison with 93 000 barrels per day produced, 13.6 billions of cubic meters of gas in comparison with 10.9 billions of cubic meters extracted and 6.2 billions of tons of coal in comparison with 5.7 billions of tons extracted [1].

At present, the figures look encouraging for Romania; however, we must take into account the fact that, at the level of the EU, states such as Finland, France, Germany, Greece or Hungary do not have, according to the BP Statistical Review of World Energy (2010), any oil resources at all, being 100% dependent on imports. The political instability in some states and the problems that may appear with regard to the price of the products based on fossil sources are among the few reasons which may create circumstances favorable to the development and exploitation of renewable energy sources.

The new RES (modern biomass, water, geothermal, wind, sun energy, energy produced by currents, waves, and other sources of marine energy) have enough potential to meet energetic needs, are inherently decentralized and, consequently, they are unlikely to cause wars and conflicts like the ones we are already familiar with in countries rich in oil. Despite these advantages of RES, the current energetic systems still have strong prejudice when it comes to renewable energy.

4. CHARACTERISTICS AND CAPACITIES OF THE RES MARKET IN ROMANIA

The legislation elaborated by the regulatory, political and strategic authorities, the geographic potential, the opportunities provided by the economic environment and social acceptance are the main elements which support the promotion of renewable energy sources. The actors on this market are public authorities, big investors, energy suppliers, microgeneration equipment suppliers and the end consumer (households and industrial consumers). The research and development institutions which create the premises necessary for the development of the RES market also have a special place.

The main sources of renewable energy in our country are: hydroelectric energy – making use of the force of water in order to turn it into electrical energy (at present it ensures the largest part of the renewable energy in Romania); sun energy – it is the safest source of renewable energy, transforming infrared radiations into heat

or electricity; wind energy – it represents a viable solution for the production of electricity but, from the perspective of costs, it is more expensive than sun energy; wind energy uses the kinetic force of the wind in order to turn it into electrical energy; biomass – the biomass reserves are primarily comprised of wood waste, agricultural waste, household waste and energetic cultures; the production of biomass, apart from being a source of renewable energy, is also an opportunity for sustainable rural development; (at the level of the European Union, 4% of the necessary energy is assured by the biomass, which also leads to the creation of approximately 300 000 new workplaces in the rural areas as a result of the exploitation of biomass); geothermal energy – it can be exploited especially in resorts with hot springs; a PHARE project was completed to this end at Călimăneşti, Cozia and Căciulata ever since 1998.

4.1 Legislative framework for the support of investments in renewable energy sources

The exhaustion of primary energy sources (coal, oil and gas) and the dependence on other producing states are factors which led to the rethinking of the energetic sector at European level, as well as the level of our countries. As already mentioned, the production of energy for transportation, heating, the production of electrical current in heating power plants and industry, through the burning of fossil materials is the main cause of global warming as a result of the increase in the emissions of CO2.

Starting with the European Directive 2001/77/EC [5], the establishing of some objectives concerning Renewable Energy Sources (RES) through the Road map from January 10, 2007 [6] and of the target of 20% RES by 2020, under Directive 2009/28/EC [4] are the main attitudes adopted by the EU for the organization and implementation of the policies related to the use of RES. According to Directive 2009/28/EC, which sets individual targets for each member state, depending on the level of use of RES and on the level of incomes in 2005, Romania was awarded a quota of 24% RES by 2020. This directive provides the opportunity of selling the energy quantity produced from renewable sources to the states that do not attain their objectives.

In the European Union there are two alternatives for the promotion of the energy obtained from renewable energy sources [13]: the fixed prices system, which consists in the purchase, by producers, suppliers or consumers, of renewable energy at a fixed price, established depending on the renewable energy source used; the system of compulsory annual quotas, combined with the system of green certificates (document certifying a quantity of 1 MWh of electric energy from renewable sources, supplied in the network), where the governments establish the energy quota that is to be purchased by producers, suppliers or consumers, and the purchase price is established based on competition.

Events such as the promulgation of GD 1535/2003, the ratification and signing of the Kyoto protocol and law 220/2008, together with the commitments undertaken during the negotiations for the adhesion to the EU, have had a significant impact on the promotion of the use of renewable energy sources (see figure number

4). Law 220/2008 establishes progressive compulsory quotas for the purchase of green certificates from manufacturers by the suppliers of electrical energy.

Fig. 4. Important moments in the development of RES in Romania

For the promotion of the use of RES in households, the Ministry of the Environment implemented the Casa Verde program as of July 10, 2010, program which boosted the setting up of some specialized companies or the inclusion of RES equipment in the portfolio of already existing companies. By choosing renewable energy sources, consumers directly support the development of clean and little polluting energies that will contribute to the reduction of the impact that conventional energy has on the environment, leading at the same time to the increase of energetic independence.

4.2. Geographic potential

The success of RES investments is strongly related to the geographic potential provided by each of the areas in our country. The institute of energetic research and modernization ICEMENERG published in 2008, through the processing of data obtained from ANM, NASA, JRC, Meteotest and other specialized institutions, a study on the assessment of the current energetic potential of RES in Romania [10].

Kyoto Protocol 1997 Road Map for RES CE, 2007 – liberalization of the market

Law 220/2008 regarding the promotion of RES

GD no.1535/2003, The Strategy for RES

2001/77/CEKyoto Ratification by Romania 2004

primary energy consumption Romania CO2 emissions Romania (1990- 2010) the use of RES in total energy consumption

Legend

SUN RADIATION AREA SUN RADIATION INTENSITY (kWh/m2/year)

WIND POWER

Intensity

>1350 High1300-13501250-13001200-1250<1200 Low

Source: ICPE, ANM, ICEMENERG, 2006

Fig. 5. Potential of the sun and of the wind in Romania

The highest sun potential can be found in the area of Dobrogea and Câmpia Română (see figure number 5), in areas such as the north of Câmpia Română, Podişul Getic, Subcarpaţii Olteniei şi Munteniei, a large part of Lunca Dunării, the south and center of Podişul Moldovenesc, whereas Câmpia şi Dealurile Vestice and the west of Podişul Transilvaniei also have a good potential. Nevertheless, the use of sun radiations for the production of thermal and electrical energy is influenced by their power throughout the seasons, as they register, according to specialists, an average fluctuation between 1100 and 1300 kWh/m2/year [10].

The wind potential of Romania is 23 000 GWh per year (see table number 1), and the areas with an increased potential (see figure number 5) are those where the speed of the wind exceeds 6m/s (the mountain peaks, the seacoast of the Black Sea, the Danube Delta and the north of the Dobrogea region).

Hydroelectric energy has the highest exploitation potential in Romania, being available on the courses of the most important rivers in our country. The water resources provided by inner rivers are assessed at approximately 42 billion m3/year, but one can only count on approximately 19 billion m3/year because of the fluctuations of the river flow rates.

Biomass (pellets, grains, corn, sunflower, plum and grape seeds, soybean, rapeseed or sawdust, chopped woods, branches, vine or vegetal remnants) has the highest potential for thermal energy for household consumption; in addition, it can be used as a thermal agent for an entire locality (see the case of the centralized heating based on sawdust in the towns of Vatra Dornei, Gheorgheni, Vlăhiţa, Huedin and Întorsura Buzăului).

Table 1. Potential power of RES in Romania

Renewable source Annual potential power ApplicationsSun energy*thermal 60x106 GJ Thermal power

*photovoltaic 1 200 GWh Electrical power

Wind energy 23 000 GWh Electrical power

Hydroelectric energy*total 40 000 GWh Electrical power

*of which power stations with less than 10MW 6 000 GWh Electrical power

Biomass 318x106 GJ Thermal powerGeothermal energy 7x106 GJ Thermal power Source: Specialized studies ICEMENERG, ICPE, INL, ISPH, ENERO

Geothermal energy has, according to the specialists in the field, a high exploitation potential and can lead to the increase of employment in areas such as Crişul Negru-Someş, Borş, Oradea and Banatul de Vest, areas where there are many hot springs.

4.3. Economic and technological potential

The economic potential refers to the purchase power of the population and to the investors’ financial availability of investing in energy parks. The purchase power of the households depends on the following criteria: level of income, prices, savings, debts and credit availability [11]. The current economic situation affected both above mentioned factors because of the consequences specific to a financial crisis (high degree of indebtedness, decrease of incomes, unavailability of credits). The investors who chose to direct their funds towards such investments were attracted by the geographic potential of our country and by the regulation of the legal environment, which promised significant gains, with a level of capital efficiency which exceeded what the market offered and a relatively short period of recovery of the investments. In Romania, the green certificates enabled the producers of electrical energy to receive between 27 and 55 EURO (depending on the trading level) for each MW produced and given to the suppliers of electrical energy. The entry of microgeneration suppliers on the market was influenced to a great extent by the fact that people became aware of the business opportunity and tried to get in line with a trend which manifested itself at the level of the energetic sector.

The European industry of exploitation of renewable energy sources has already reached an annual turnover of 10 billion Euro, using approximately 200 000 employees. Europe is the world leader as far as RES technologies are concerned. The use of RES has a significant impact on the investments in the energetic sector. Although RES is, per unit of installed capacity, more intensive from the perspective of the capital, taking into consideration external costs which most investors try to avoid, investments in RES prove to be cheaper for society than the usual investments in the traditional energy sources.

The development of more clever and more efficient energetic technologies was spectacular over the last decades: technologies improved and costs registered a decreasing trend. The examples of photovoltaic, sun and wind energy are illustrative in this respect. As for expenses, investment costs for the wind energy diminished by approximately 3% during the last fifteen years. During an interview with Dr. Harma Albering, policy advisor on environment and sustainable development matters and with Dr. Paul Levels, the manager of the program SDC2C of the environment and sustainable department of the Limburg province, in the Netherlands, when asked what lessons Romania could learn from Limburg with regard to the promotion of RES, they made the following recommendations: to reduce costs, to boost our own production capacity and to increase investments which lead to the improvement of the energetic efficiency of households. For example, for achieving thermal comfort in an apartment, underfloor heating requires a thermal agent of at most 45 0C, whereas in case of the heating system based on the use of the traditional radiators, the thermal agent can reach 70-800C.

The technologies used for the exploitation of renewable energy sources and their development are an important factor for the development of the RES market and the fulfillment of the requirements involved by sustainable development. In addition, all new technologies also mean economic growth. Numerous are the researchers who support the hypothesis according to which the development of the RES industry is one of the solutions to the current economic crisis [3].

5. CONCLUSIONS

Romania plays an important role in promoting the use of renewable energy sources at a European level. The creation of employment opportunities, the long term decrease of production costs, energetic independence and the reduction of the emissions of green house gases are the key elements for driving sustainable growth through the use of RES. The healthy legal climate built for the promotion of RES has a significant impact on the promotion of green energy. This article does not take into consideration the social and cultural acceptance of this kind of technologies, which are also important for the success of the implementation of RES. Hence, more economic and social studies in this field are needed, given the novelty of this topic at the level of research in Romania.

References

[1] ***, BP Statistical Review of World Energy, 2010, available at: bp.com/statisticalreview, read 08.2010.

[2] ***, Kyoto Protocol to the United Nations Framework Convention on Climate Change, Kyoto, 1997, available at: http://unfccc.int/ resource/docs/convkp/kpeng.pdf, read 08.2010.

[3] Chontanawat J., Hunt L.C. and Pierce R. (2008) Does energy consumption cause economic growth: evidence from systematic study of over 100 countries, Journal of Policy Modeling, Vol. 30, pp. 209–220.

[4] European Commission (EC), Directiva 2009/28/CE a Parlamentului European şi a Consiliului din 23 aprilie 2009 privind promovarea utilizării energiei din surse regenerabile, de modificare și ulterior de abrogare a Directivelor 2001/77/CE and 2003/30/CE, Bruxelles, 2009, available at: http://eurlex.europa.ro/, read 07.2010.

[5] European Commission (EC), Directive 2001/77/EC of the European Parliament and the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the Internal Electricity Market , Bruxelles, 2001, available at: http://eurlex.europa.eu/, read 20.07.2010.

[6] European Commission (EC), Communication from the Commission to the Council and the European Parliament on a ‘‘Renewable Energy Road Map Renewable energies in the 21st century: building a more sustainable future, Bruxelles, 2007, available at: http://eurlex.europa.eu/, read 07.2010.

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[8] Goodstein D. (2004) Out of Gas: The end of the age of Oil, Norton Press, New York, 2004, p. 123.

[9] Gordon, D., Ecuador seeks oil compensation, BBC News, the 21th of September 2007.

[10] ICEMENERG (2009) Studiu privind evaluarea potenţialului energetic actual al surselor regenerabile de energie în România, available at: http://www.minind.ro/domenii_sectoare/energie/studii/ potential_energetic.pdf, citat 20.02.2011.

[11] Kotler P. and Keller K. (2006) Marketing Management. 12th Edition, Pearson Education, New Jersey.

[12] Pellion, A., Renouveler la production d’energie en Europe: un defi environmental, industriel et politique, Robert Schuman Foundation, Paris, 2008.

[13] Plumb, I. and Zamfir, A., A comparative analysis of green certificates markets in the European Union, Management of Environmental Quality: An International Journal, Vol. 20, No. 6, 2009, pp. 684-695.

[14] Solomon, S., Qin D., Manning M., Chen Z., Marquis M., Averyt K.B., Tignor M. and Miller H.L. (eds.) (2007) Climate Change 2007: The Physical Science Basis, Cambridge University Press, Cambridge.

[15] Stern, N., The Stern Review on the Economics of Climate Change, Grantham Research Institute, London 2006.

[16] World Energy Council, Energy and Climate Change Study, London, 2007.

Acknowledgement This work was supported by the the European Social Fund in Romania, under the responsibility of the Managing Authority for the Sectoral Operational Programme for Human Resources Development 2007-2013 [grant POSDRU/88/1.5/S/47646]