28th of February, 2013 www.ispe.ro
Romanian Power System – the right time to act
Ph.D.(Eng) Carmencita CONSTANTIN,
Director of Energy & Environment Strategies Department, ISPE
28th of February, 2013 - ZF Power Summit ’13
Current situation of electricity generation in Romania
Electricity generation structure by resources type, in the last years (Source: RERA annual reports)
2009 and 2011 – dry years, with increased coal based electricity production (37%)
2010 – a rainy year, with increased hydro based electricity production
Electricity production from wind, biomass & PV
Source: NIS, Energy balances 2009-2011
Increasing RES contribution in the energy mix in the last years
PV
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28th of February, 2013 - ZF Power Summit ’13
Electricity generation structure in RomaniaISPE forecast
Scenario – considering NPP :
4 Units at NPP Cernavoda until 2030
Scenario – considering NPP :
4 Units at NPP Cernavoda until 2030Scenario – considering NPP:
3 Units at NPP Cernavoda until 2020
Scenario – considering NPP:
3 Units at NPP Cernavoda until 2020
Increase of NPP capacity
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28th of February, 2013 - ZF Power Summit ’13
Electricity generation structure in RomaniaISPE forecast (2)
Scenario - without NPP:
2 Units at NPP Cernavoda until 2030
Scenario - without NPP:
2 Units at NPP Cernavoda until 2030
Scenario - without NPP:
2 Units at NPP Cernavoda until 2020
Scenario - without NPP:
2 Units at NPP Cernavoda until 2020
Increase share of natural gas with 3% in 2020 and 7% in 2030 due to the recently discovered reserves in the Black Sea.
Same NPP capacity as today
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28th of February, 2013 - ZF Power Summit ’13
Future coal based electricity generation needs CCS or CCU deployment
Why Getica today?•Availability of the financing solution
• NER 300 financing instrument covers• 50% of the investment costs and• 50% of the operating costs for the first 10 years of operation
• This opportunity may not rise again•We need it in the nearest future•Industry horizontal development
Where is Getica today?•Under Governmental assessment process deciding whether
• to compete for the second call of NER 300, or• to apply for finance from other available sources (Structural and Cohesion
Funds, others)
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www.getica-ccs.ro
www.globalccsinstitute.com
www.bellona.org/ccs
http://www.minind.ro/evenimente/getica_css/index.html
28th of February, 2013 - ZF Power Summit ’13
Conventional power plants facing today electricity markets
Current market conditions for conventional power plants
RES plants operating mode
RES priority dispatch
Decrease in electricity demand
Flexible operating mode for conventionalpowerplants
Reduced operatinghours
Reduced incomes
Higher operating costs
Unprofitable conventional plants
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28th of February, 2013 - ZF Power Summit ’13
Taxation system restraining investments in the power sector
Evolution of the end-user electricity price break-down in Romania
Taxation development Market distorsions
Impediments in the development of energy markets
Increase of incentive component
Decrease of generation, transport and distribution components
Decrease of funds for investment
Proposal - A share of the incentive component should be allocated to
investment funds for GEN&T&D
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013
41% 39% 37%
29%27% 26%
6% 10% 13%
24% 24% 24%
Structure of the final end-user electricity price
Generation Transport & distribution Contribution COG Bonus, GC, plus accise VAT
28th of February, 2013 - ZF Power Summit ’13
Difficulty in raising funding for the power sector
Decreased attractiveness of the power sector
Soft demand, market
dynamics, policies
uncertainty
New taxes
Increasing risks
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Due to key factors, like new and diversified taxes, increasing risks, soft demand, changes in the market Due to key factors, like new and diversified taxes, increasing risks, soft demand, changes in the market dynamics, uncertainty of the results of the current policies in progress, the power sector becomes less dynamics, uncertainty of the results of the current policies in progress, the power sector becomes less and less attractive for the financial institutions to invest in. and less attractive for the financial institutions to invest in.
28th of February, 2013 - ZF Power Summit ’13
Financing the investments in the power sector
Raising funds from capital markets implies:
•ensuring the adequateness of expected return
•facing competition from other industrial sectors, the banking sector itself and governments
In a world of constrained capital resources, the power sector confronts with the following cause and effect problem:
Difficulty in ensuring the
adequate return
Evolution of risk profile
and analysis of the
emerging risks
Negative effects on the
overall financial
feasibility of investments
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28th of February, 2013 - ZF Power Summit ’13
Factors affecting the financial institutions perspective of the power sector
Market dynamics
Soft demand
Policies uncertainty
Introduction of large amounts of
renewable capacities
Need of balancing capacities
Banks find it difficult to commit
finance on a medium/long term
without PPA
Long economic recession and
increased energy efficiency
Extension of the soft demand
period from short to medium term
Banks fear a further decrease of
the energy demand
Most of the energy policies and actions are still in progress
with uncertain outcomes
Need of regulatory and policy clarity
Financial institutions will remain reluctant
and cautious until the policies’ results
become visible
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28th of February, 2013 - ZF Power Summit ’13
Increasing the attractiveness of the energy sector
Incentives provided to the conventional power plants
Wider introduction of capacity payment mechanisms in order to balance the renewable intermittency
Securing project’s revenues
through the conclusion of long term PPA Not appropriate for a competitive market
but
Required by financiers
Predictable regulatory framework, with clear foreseen policies’ results
The risks drivers must be properly managed and mitigated
Adequate remuneration of the risks in the expected profit
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28th of February, 2013 - ZF Power Summit ’13
The CO2 price – driver for investing in the power sector
RES support
mechanism
RES electricity generation increase
Decrease of conventional plants
electricity generationReduced
electricity demand due to economic crisis
Low demand of CO2
allowances
Low interest in cost-efficient
emission reduction
Distorted investment
signal
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28th of February, 2013 - ZF Power Summit ’13
Recent important ISPE projects
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ISPE contribution to the Romanian electricity generation fleet
ISPE projects abroad
• Technical assistance (feasibility studies, detailed design) for deployment of installations needed forcompliance to the environmental requirements - FGD plant, dense slurry disposal of firing residues,low NOx burners at: Oltenia Energy Complex, Hunedoara Energy Complex, Colterm Timisoara,Romag Termo, Braila TPP
Compliance to the environment requirements
• Technical assistance for:• modernization works foreseen in the National Investment Plan - 1635 MW• new electricity generating capacities - 4449 MW• reimbursement for already build capacities for 860 MW
New capacities and modernization of existing ones within NIP
• ISPE – part of the first Romanian Waste to Energy Project, currently in tendering phase for signingthe EPC contract
• Technical documentations for new RES capacities:• 21000 MW wind• 3000 MW PV• 1500 MW biomass
RES
• New utilities (compressed air, nitrogen, electricity, heat, cooling water) power plant running onliquid fuel
• Provided services: documentations from basic design to tendering documents
Yemen - New Power Plant for Aden Refinery Company of ~50 MW installed capacity
Interconnection line of 400 kV Reşiţa(România)–Pancevo(Serbia)
28th of February, 2013 - ZF Power Summit ’13
ISPE projects in preparation
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• Use of geothermal resources for medical, recreational facilities, providing heat,defrosting the airport runaways
Geothermal
• Proposal for the usage of hydrogen as backup for RES power plants
Hydrogen
• Proposal to use the municipal waste and mud from waste water treatment plants forelectricity generation
Biogas
28th of February, 2013 - ZF Power Summit ’13
Lack of qualified human resource in the Romanian power sector
Institutions: Government, Agencies
Universities and postgraduate level
Generation and T&D companies:
• Management: state aid rules, financing sources
• Operating staff: new technologies
Consultancy and designing companies: ageing human resource
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28th of February, 2013 - ZF Power Summit ’13
It is time for action !
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Electricity = infrastructure, base for economical and social development
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