Eugenia Gusilov: Ukraine and Moldova need energy support NOW!

– Ukraine desperately needs the help of its neighbors and of the entire EU to deal with the targeted terrorism towards the energy infrastructure. They are experiencing targeted hits meant to destroy the energy system of Ukraine, to plunge them into darkness and cold, maybe even make them freeze this winter. This is the actual crisis and the area towards which we have to turn our attention and efforts more than anywhere else – says Eugenia Gusilov, Romanian expert on energy issues, representing Romanian Energy Center.

Interview by Vladimir Mitev.

Watch the interview on YouTube, listen on SoundCloud or read the full transcription below.

Eugenia Gusilov discusses problems of electricity imports to Moldova and Ukraine, as well as the huge changes that Romania energy politics must undergo, now when the country became crucial to support its neighbours – continuously supplying its own population as well.

Welcome to a special discussion of Cross-Border Talks on the issue of the changing energy balances and situation in southeastern Europe with Eugenia Gusilov, an expert from Romania Energy Center. We are forced to start with the most pressing case. The Republic of Moldova is in a deep energy crisis after Russia bombed a number of Ukrainian energy infrastructure facilities. Moldova is now relying on support from its neighbors to the west, like Romania and Bulgaria. Eugenia, what is the situation now in Moldova in terms of energy, but also in terms of prices and burden on the households?

Hello, Vladimir. I am very glad to be here today and to have this conversation with you on this pressing energy issue in our region. You asked me about the Republic of Moldova. Moldova is confronting what is maybe the biggest energy crisis in its post-Soviet history. There has never been such a difficult situation in 30 years as the one through which Moldova is going through now. 

Why? Because the Republic of Moldova was reliant 70% for its electricity on the Cuciurgan power plant in Transnistria and for the rest of 30% there was a contract in which they were importing electricity from Ukraine. Because of Russia’s bombing of Ukrainian energy and civilian infrastructure there is no longer an option to import electricity from Ukraine. That is gone from mid-October. Furthermore, Russian gas supplies stopped flowing to Cuciurgan gas-powered thermal plant, which was supplying the remaining 70% of Moldova’s electricity consumption. 

The loss of that source left the Republic of Moldova in a very difficult spot in October 2022. In order to solve this issue the Republic of Moldova appealed first to an emergency contract that they have recently signed with Romania. It is a contract between Moldeletrica and Transelectrica – the electricity distribution companies of the two countries. But this contract is for supply of electricity in emergency cases only. So, it does not cover this structural deficit that Moldova is having right now.

Since mid-October, the electricity flows from Romania towards Moldova were done within this framework of emergency supplies. At the end of October 2022, Moldova also started buying electricity from the power market in Romania. The additional volumes that Moldova is currently buying from Romania are purchased at market prices. So this is the situation right now. In essence, Romania is propping up the Moldovan power system these days and in this period of time and is helping Moldova get through this crisis.

In terms of how difficult it is for Moldova… You know very well Moldova has seen an inflation, which is twice the inflation in Romania. They are struggling with the 30-35% inflation and it puts a significant pressure on their budget, on the cost of living, on the citizens and businesses. Romania itself is not in the best position in the sense that we have inflation too, but it is lower, about 15%.

Romania itself struggles with a deficit in power generation. I think that for the time being we are able to supply these volumes to Moldova, but going forward into the winter and if the temperatures drop, it may be difficult even for Romania to continue the supply of these volumes to Moldova, especially, as Romania, too, is an importer of electricity. We have a deficit in electricity production. So for the time being, Romania manages to help Moldova. But whether this will still be the case in December or January, February – months that are traditionally difficult months, when the demand for heating and electricity is the highest, this is where the trouble or the real problems could begin. We may not be able to continue this provision of electricity supplies in the winter months.

I would like to expand a bit on the issues with a number of questions. Do you expect that other European countries or maybe the EU as a whole could engage with the Moldovan government and provide some kind of support? Are there tools for that? Are there discussions for that? Secondly, Bulgaria might also be a part of this picture, as recently Bulgaria has signed a contract for delivery of natural gas to Moldova, and I was curious, what is the potential here? Can the gas be delivered immediately or are there some obstacles to that? And finally, just to clarify that Romania has all the infrastructure which is necessary to provide the complete quantity of electricity which is required by Moldova? I read contradictory information about that, like, for example, that these electricity lines don’t have sufficient capacity, but also there was information that it is already delivered what is necessary.

Well, we are supplying the most we can under the transmission capacity constraints. The maximum that the infrastructure linking Moldova and Romania will allow, Romania will supply it. But it’s true that Moldova’s demand may not be satisfied with what Romania is providing. And you have seen incredible and unprecedented efforts by the Moldovan government to convince its population, and they have this very strong, powerful public messaging in which they try to build up solidarity and convince businesses and citizens alike to participate in the energy saving effort. So, there are a lot of things that they are trying to do. They’re also acting on reducing demand and reducing consumption. They have managed, in fact, to reduce the gas consumption in September and October, compared to previous years.

I think it’s a very smart move on the part of the Moldovan government to reach out to Bulgaria. In fact, I don’t remember the last high-level Bulgarian visit before this visit of the Bulgarian president in Moldova. When was the previous visit at such a high level? And I think the Moldovan government is correct in trying to forge relationships and reach out to countries in the region and to start cooperation that is, possibly, long overdue. Now Romania does have the necessary gas transit capacity, but I think it is more a matter of learning how to conduct these natural gas imports through this infrastructure. Some of it is old, as you know, the Trans Balkan corridor and some other part of this is new infrastructure that is in place and it can be exploited. So natural gas can flow through this new infrastructure. But it’s now a question of learning how to commercially do this, how to access the gas, how to book capacity and to actually start the deliveries.

So I welcome this first step in the Moldovan and Bulgarian cooperation. And I hope Romania will provide on its part all the assistance required for this to become a reality and for us to see maybe the first volumes of natural gas coming through Bulgaria, through Romania to Moldova. Because as you know, the gas pipeline is in place. It has been completed, but it has been lying empty for about two or three years since they completed the Iași-Ungheni extension to Chișinău. So, the infrastructure is there now. We just have to start using it. 

And from that point of view, I think that these steps and this cooperation in our region cannot come soon enough because now is the moment when we actually need this to happen.

We know that there is a so-called Moldova platform and there are various ways in which European countries are engaging in supporting Moldova. Is there anything that can be done by other European countries in an organized way to support Moldova in this situation?

I think there’s always room to do more. And I think indeed the European Union, through its institutions, has a key role to play, not only in terms of sending the messages, but also helping and assisting in any way possible. To help these countries in our region, South-Eastern Europe, to start making these first steps in this direction. 

This can be financial support. This can be technical advisory support, because at the level of Bulgaria, Moldova, even Romania, to a certain extent, some expertise is lacking in terms of how do you import through other countries, how do you book capacities and transit the natural gas that you are purchasing through two or three other countries. I refer to gas supplies, which are not direct imports. So, I think where the EU can make a significant difference is in helping these countries learn these rules and know-how faster, because we are in a fast-paced environment and we do not have the luxury to spend six months or one year to learn how to do this. And I think this is where the EU should do more to support these countries.

Romania was very much interested in the completion of the Greece-Bulgaria interconnector or gas pipeline, because, as I understand, Romania may need some imports through it from Azerbaijan or other places. But I was curious to what extent is the Bulgaria-Romania interconnector, placed close to Ruse-Giurgiu, operational and can enter in force? Is it now active somehow?

It has been completed since 2016, so technically there is no issue with this interconnector. It is in a condition in which it can be operated. And I think some volumes do transit this interconnector. But I think, again, that it’s an issue of delay because Romania wants to access gas from Azerbaijan, maybe from some of the Greek terminals. And as far as I know, Transgaz, even in spring of this year, has contracted a law firm specifically for this reason, to teach them and to help them book capacity through Greece, through IGB, because they do not have the knowledge how to do that.

What capacity is Romania working on securing right now? What capacity does Romania need, especially in the case when also Moldova should be supplied with gas?

Well, I think Romania is competing for whichever capacity, spare capacity left by Bulgaria on this interconnector. I remember reading this summer that the Bulgarian government was interested in booking at least half of the capacity of this interconnector. Whichever is left, I think Romania would be happy to book that capacity to import into Romania and then further to Moldova. Moldova can also directly conclude this agreement with Bulgaria. I mean, whichever works first and faster.

Romania has liberalized its electricity market for households before Bulgaria, and in fact, there has been a problem with prices of energy for at least one year. Last winter there were incidents with a big number of invoices for payment of electricity. To what extent is this problem with energy prices resolved or how is it being resolved right now? What are the discussions about that and what are the solutions which Romania applies?

Yes, you are correct in the sense that Romania came up with a support scheme to compensate the suppliers. Romania did two things. It capped the prices at the end consumer and then provided compensation to the electricity and gas suppliers for the difference between the real price and the price paid by the consumers, by the end customers. This support scheme was first enacted exactly a year ago, so in November 2021, then it was subsequently changed in February 2022, then in March 2022 and then again in September 2022. So, they keep tweaking and playing with the various levels because the people or the end customers that benefit from this subsidized price, they fall within certain consumption profiles. So, if you have consumed, let’s say, up to 100 kilowatt per month last year, then you benefit from a subsidized price, which is 0.68 lei/kilowatt. Then if you consume, if your consumption falls between 100 and 255 kilowatt per month, then there is another price, subsidized price that applies. But if your consumption level exceeds, let’s say 255 kilowatt per month, then you don’t benefit from the subsidy.

However, there are categories and beneficiaries that are exempt. These are companies working in the food industry. These are, let’s say, hospitals, transport providers, public transport providers which use electricity like Metrorex (the company that manages the subway transport system in Bucharest). Then they included the Church on the list of beneficiaries that benefit from this subsidized price, which is a little bit higher (one lei per kilowatt hour). But the idea is that the government keeps going back and changing and changing and amending and discussing new amendments to this mechanism, to the support mechanism. They want now even to extend this support mechanism not until August next year (the current provision), but   maybe for the next two years. So this mechanism was three times changed already and all the time new changes are discussed on a continuing basis every week. And I think this is what creates more anxiety on the market and more uncertainty and does not convey a sense of confidence to consumers.

So, on the one hand, we have these real issues on the production side, deficit of production and the, let’s say, ricochet of the large European crisis, the natural gas crisis. But on the other hand, this is compounded in Romania by our local problems. For instance, for two years during the pandemic, some electricity providers did not go and did not read the index for consumed electricity by households. We have this provision, you can self-read this number and transmit it to the electricity provider every month so that your invoice reflects your actual consumption level or you don’t do that. And then the electricity provider sends someone, a person because we in Romania have not completed the smart metering, the installation of smart meters, which could convey remotely digitally automatically this number, how much you have consumed, how much kilowatts  per month. So that’s why we still have this system that relies on human beings, and they have to come. And once every four or five, six months, they have to read the actual number and then they send you an invoice with the difference. So, if they have  billed you more, they will deduct it. If they have billed you less, they will bill you more to reflect your actual consumption.

So now what we had during the pandemic is that some of these electricity companies did not do this regular reading of the meter. And on top of this crisis, with the spike in electricity prices and the people panicking and fearing over all these issues, we have all these exceptional situations because the electricity providers, the utilities were lazy and did not bother to go into the field to the client and read what the actual meter says. Now they are doing this regulation retroactively and this has scared a lot of customers because they suddenly have received bills of €2,000. There were some cases like this. The customers that encountered the situation first tried to solve this with their electricity provider. If they do not manage, then they can petition or they can write a letter to the regulator and can complain about it. And if this doesn’t solve the issue, then they can sue the electricity provider. But this has been one area of discontent among customers because this has created a lot of panic. People receiving bills that net the actual consumption with what people have paid (some have paid more, some less) for estimated consumption. But this is not something that should be done once per year or once every two years. The actual period by law is every four months. So as not to accumulate volumes and then to see these higher bills. The electricity and energy crisis is one thing and then our domestic self-management issues are another thing and they make this crisis worse because they exacerbate things that need not happen in the first place.

You were critical of the fact that policies are changing fast, being constantly redefined and also with regards to this procedural, let’s say, problem with the reporting of the consumed electricity. But does your energy center have general recommendations or advice for the way the crisis of energy prices can be resolved?

As a matter of fact, yes, we do have some recommendations. They stem from the fact that we realize by looking at the market, by analyzing what is happening in the market, we see that every big project which could have contributed to bettering Romania’s current situation in this energy market, all new projects that could have brought new electricity volumes on the market did not happen. So, whenever we talk about, let’s say Unit three or four of the Cernavoda nuclear power plant, yes, we are trying since 2009 to build them and 13, 14 years later, we still don’t have that. We are trying to build a new power plant, at Iernut, Romgaz is trying. It should have been finished two years ago and yet it is still not finished and will be finished now, they say, and promise next year, 2023.Then we could have had a significant alleviation. So, on the other hand, these are these big projects which belong to state owned companies which face delays, huge delays, which of course aggravate this crisis in the sense that we now have a deficit in power generation. But we could have been in a situation in which such deficits would not have existed because these investments would have been made on time. 

So, in terms of recommendations, seeing this difficulty on the part of the state-owned companies to carry through and implement the projects that would add significant electricity into the market, we recommend the government to supplement, to double, to triple, to quadruple the funds and to simplify and accelerate the process through which, let’s say, Romanians can become prosumers. Production for self-consumption and excess to be fed into the electricity – I think there’s a huge potential there and it is really, really sad the fact that we have had technically this provision that allows prosumers to exist in the law. We have had it since 2008 until 2018. For ten years it was only on paper because in practice the technical regulations were missing and the prosumers did not exist. Then finally this bottleneck was resolved and the consumers started appearing in Romania. Now, this is a very fast-moving phenomenon and it’s growing year by year. We have gone from zero prosumers three years ago to about 22,000 prosumers this year. Even the regulators expect them to reach 30,000 prosumers in Romania by the end of this year. 

So, I think in a country, in a state, with a government that has such difficulties with seeing through the investments in medium and large projects that could bring alleviation to the market and could supply the market with electricity, so that we can feed to Moldova without fearing that we might ourselves be left without electricity. I think if the macro projects, the big projects don’t work and we are not able to put them in place, at least allow funding and avenues for the, let’s say, the smaller consumers, for the medium sized consumers, that means households, small and medium enterprises(SMEs) to install units for self-generation and self -consumption. I think one part of the solution could have come from that direction.

We have cases, they have been widely reported by the press of people submitting the applications for installing rooftop solar panels in 2019, and their applications were not yet processed three years later. And this in the middle of the biggest energy crisis that our region has seen. So, I think that’s an area where the government could do more, so not stake everything on the big investment projects, but also allow some breathing room for the micro investments in energy.

There is also a lot of hype about the idea of nuclear modular plants. If I understand correctly, let’s say mini nuclear plants, which is an American energy project, and it said that it can be potentially even exported to the region if it’s a success in Romania. And apparently Romanian elites are interested in having more American investment. But what is your judgment on the potential of this project or what are the obstacles to it?

You raised a very important issue. Why? Because I think the SMRs could be a fantastic opportunity not only for Romania, but for the entire region. And as much as I’m happy to see the government being supportive and taking the right steps in this direction, the fact that this hasn’t been done anywhere else in Europe at this moment is the very thing that can delay and threaten the deployment of such a project, the fact that it’s the first of its kind in Europe. And that may also raise opposition, public discontent because people can fear things that are new and they do not completely understand.

So, I think the industry and the government need to get out there and be proactive from the very beginning so that they do not stumble into a situation in which the environmental movement mobilizes and educates the public in the opposite direction, in the direction of rejecting this new technology. And again, then we will miss another train. And I’m frankly so tired of missing opportunities.

And I’m thinking about the natural gas discovery in the Black Sea offshore. Ten years have passed. Nothing has happened in terms of developing the Neptune Deep, and it doesn’t seem likely that we will see a final investment decision as soon as we would like, not even next year and not certain that it will happen. So, I am very hopeful that we will have the wisdom to push this solution in a manner that will be accepted by society. And I so do not wish for Romania to miss again another opportunity because it didn’t engage all the stakeholders or shaped public opinion from the very beginning on this issue.

You mentioned Romania’s gas reserves in the Black Sea. I remember that a few years ago there was a lot of hype about the so-called BRUA gas pipeline, which should have started from Bulgaria passing through Romania to Hungary and Austria. What happened with this project, in fact?

A part of this project – the infrastructure that goes through the territory of Romania was built, as you know, with funding from the EU. What didn’t happen is the connection which should have connected with Bulgaria, Romania, Hungary and Austria. The extension of the Turkish Stream beat us to the market. So, they were faster in building it and they supplied the market. So, in a way, the market is not there for this transit route.

But it doesn’t mean that it cannot be reactivated or BRUA will not find its place in this new geography and energy. That’s a new geopolitical equation in which Europe is trying to access gas from Azerbaijan or from Greek and Turkish LNG terminals. We might repurpose it so that it will be used going forward. But, right now, I think it has contributed more to the development of the natural gas transmission system on the territory of Romania and not so much to supplying the region or increasing the regional security of supply.

Let us finish with a broader perspective on South-Eastern Europe and gas supplies, because we see that Greece is affirming itself as a supplier of gas. There will be a terminal for liquefied gas in Alexandroupolis and the gas connector with Bulgaria is complete. But on the other hand, Turkey and Russia seem to be cooperating very well also. And it looks like Turkey will become even more important with these deliveries of Azeri gas and maybe even Iranian gas under some circumstances. So, if you try to catch the tendency in our region, who are the winners, who are the losers, what is, in fact, the tendency? What happens with the gas supplies in our region?

I think what we are seeing is the biggest reshuffling of the energy and especially gas landscape that our region has seen in many decades. This is it, this is the moment that we are all living through right now. Various actors want to position themselves so they have as much as possible to gain from this new design that will emerge because the flows and the direction of gas flows are changing. Greece has a role to play, because Greece can tap into the international LNG market, but Turkey does that as well. Turkey too, has LNG import terminals. 

However, what Turkey wants is to be able not only to be a transit country for natural gas. That might have been their ambition ten years ago. What I see right now in the market is a desire by Turkey to be more than just a transit country for natural gas. They want to be resellers of natural gas. And I think here is the area where Turkey cooperates with Russia and hopes that the partnership with Russia will allow Turkey to become a seller of natural gas or a reseller of Russian natural gas. So that’s, I think, what Turkey is working towards, but not only staking and betting on Russian gas. I think Turkey also wants to be a reseller of the LNG that it currently imports. And Turkey could feed this LNG, regasify it and feed it into the European Southeast European Gas Transmission network and then it can reach in reverse flow 

Bulgaria, Romania, Moldova, why not Ukraine. It would make sense, but these are, let’s say, two maybe competing models. And Turkey is trying to forge a better place for itself in this new emerging gas infrastructure. And it’s trying to take advantage of Russia’s, let’s say, troubles in order to gain something from this for herself.

And what will be the role of Bulgaria and Romania in terms of gas deliveries and distribution in this change which we observe?

Our role is to learn as fast as possible how to access this natural gas from the, let’s say, LNG market, how to regasify it and how to transit it through our countries, not only for the benefit of our countries – the local Bulgarian consumption or local Romanian consumption, but we need to be able to also monetize it by exporting it or transit this gas further to countries like Moldova or even to Ukraine. In the current situation, look at the crisis and the magnitude of the crisis there. 

We have talked about Moldova today, but we have not talked at all about Ukraine and how Ukraine desperately needs the help of its neighbors and of the entire EU to deal with the targeted terrorism towards the energy infrastructure. What we see are targeted hits meant to destroy the energy system of Ukraine, to plunge them into darkness and cold and maybe even make them freeze this winter. This is the actual crisis and the area towards which we have to turn our attention and efforts more than anywhere else. How do we help Ukraine, how have we helped Ukraine in the last two or three weeks and how will we help Ukraine in the coming months given this relentless attack on its energy infrastructure?

So, we return to the beginning of our talk about Moldova and Ukraine. In what ways could Ukraine be supported by our region, by Romania and Bulgaria especially?

Ukraine now desperately needs generators. If we want to talk about immediate support for Ukraine, that’s what we should be talking about. Ukraine has received close to 500 generators through the EU Civil Protection Mechanism. And there have been countries that have contributed and have donated generators: Austria, Poland, Finland, France, Ireland. But that’s what we should be asking ourselves. How many generators did Romania donate? To my knowledge, nothing. How many generators did Bulgaria donate to Ukraine? Again, I don’t have the number, but solidarity and good neighborly relations in moments like this, when they are under constant attack and bombardments and rockets that target their energy infrastructure with the hope to leave them in the darkness and freeze them and leave them freezing in the cold, these are the moments when we should be helping and assisting Ukraine the most. And the generators are not military aid. 

These are not bombs and rockets and tanks. This is civilian help. And I think the measure of our relations with Ukraine and the measure of our support for Ukraine will be seen in moments like this and numbers will speak for themselves. Each country will be able to see the tally, who donated what. Who donated how many, in this case generators, to help Ukraine in this difficult moment when winter is knocking at the door.

Could Bulgaria and Romania play a role in the discussed economic recovery and revival of Ukraine, which is in fact an EU issue right now?

Absolutely. And both Romania and Bulgaria should be part of that effort. But until that moment comes, we should focus our efforts, time, attention and resources, however limited they may be, towards helping Ukraine overcome this much difficult moment in which they are right now.

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