(analysis) How sustainable is the reorientation of the Republic of Moldova towards power purchases from Romania?

A legislative amendment in the Bucharest Parliament can create conditions for the Republic of Moldova to conclude long-term contracts for the import of large amounts of electricity from Romania, avoiding the so-called spot market, with prices that fluctuate daily. Otilia Nuțu, energy public policy analyst at the Expert Forum think tank from Bucharest, told Europa Libera in an interview that access to long-term contracts can strengthen a new reality, in which the Republic of Moldova does for the first time in history, massive purchases of electricity from across the Prut.

The change is taking place under the pressure of Russian aggression against Ukraine and the reduction of Russian gas supplies. It was possible due to the fact that the Ukrainian and Moldovan electrical systems are now synchronized with the European one. But it comes with higher prices and risks associated with carrying electricity.

“It is a very painful adjustment and it is a great pity that the previous governments did not want to speed up the interconnection projects (…). There were a lot of lost opportunities and now we are all paying, but we have a major crisis, which is making us all go crazy (…) and I think we will all come out much stronger. However, the costs will be big”, says Otilia Nuță.

Why is Romanian energy bought by Moldova on the spot market?

Starting from November 1, the Republic of Moldova purchases electricity for the first time on the Romanian stock exchange OPCOM, on the so-called spot market.

The state-owned enterprise Energocom buys electricity in sufficient quantities to cover most of Moldova’s consumption, given that in November the electricity produced on the basis of Russian gas from the Cuciurgan plant (MGRES), left, will no longer be delivered.

A new contract with MGRES failed and neither Chisinau, nor Tiraspol, nor Moscow clearly explained the reasons. It is no longer imported from Ukraine due to the destruction caused to the Ukrainian electrical system by the Russian bombings.

But thanks to the connection of the Ukrainian and Moldovan electricity grids with the European one, the Republic of Moldova can receive electricity from Romania, without the need to build expensive transformer stations for the imported Romanian electricity.

Massively, in Romania you can only buy electricity on the spot market.

It got here because of a “legislative problem” – emergency ordinance no. 119 of September 1, 2022.

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Promoted to protect the end consumer, the ordinance “over-taxes” electricity transactions in such a way as to collect as much money as possible, which is then fed into the end consumer protection scheme, allowing for price caps and compensation.

Because of the way it was formulated, says Otilia Nuțu, the legislation meant a “very brutal intervention” in the market, causing players to only conclude day-ahead contracts: for fear of losing out on taxes with long-term contracts, these players only enter into one-day contracts.

One-day contracts create “price unpredictability.” The prices at which the Moldovan company Energocom purchased energy from the Romanian spot market between November 1 and 4 varied from 100 to 350 Euro/MWh depending on the time of day – the most expensive is the electricity delivered in the evening hours.

Where did the contract with Hidroelectrica for the purchase of Romanian electricity at capped prices go?

Moldovan Deputy Prime Minister Andrei Spînu says that 88% of the electricity needed by the Republic of Moldova is now bought from Romania.

Apart from purchases on the spot market, for the month of November, Moldova still has direct contracts with the producers OMV Petrom and Nuclearelectrica. But the contracts provide for small amounts of current.

Hidrolectrica sells electricity at prices capped by law at 90 Euro/MWh, but it can only sell to domestic consumers in Romania.

Through a legislative intervention in October, however, Romania included the Republic of Moldova in this category of consumer, and Hidroelectrica could also sell over the Prut current at a regulated price.

How quickly can the energy reorientation of the Republic of Moldova be concluded?

The solutions we see now are short-term, “instant rags to get you through the winter.”

But it happened “in bigger houses too”. “Let’s look now at the desperation in Germany, after the Russian gas supplies were cut off – it was one thing if you had other sources of gas, it’s another if you find yourself running out of gas and having to produce electricity on fuel oil,” says Otilia Nuțu.

Because no preparations were made in time, the costs are higher, it means “money spent much faster and maybe not as well.”

The Republic of Moldova is looking for alternative sources of gas, buys on the spot market and stores in Ukraine, negotiates with Azerbaijan…

The Expert Forum analyst believes that the “adjustments” may take 2-3 years.

“We are building now what we have not built for years, but I think it is the only option and that we have nothing else to do at this moment: Russia is attacking with everything it can, not only Ukraine, but also the Republic of Moldova and, in general , all of Europe, trying to cause as much destruction as possible. And this is completely unacceptable”, says Otilia Nuțu.

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