As in other European countries (Spain or Italy), the incentive scheme raised sufficient concern (Arcelor Mittal took into consideration closure of business in Romania and Europe due to high energy prices) so as to be re-assessed and modified, following major complaints about increase in electricity pricing determined by the green certificates and lack of investments in the Romanian industry (sub-contracting, acquisitions of equipment).
Following the three years boom, with renewable energy being in the spotlight for foreign investors, the fast pace for development and the lack of a national strategy in energy led to significant concerns with regards to grid stability and infrastructure. The lack of express government support and of active search for equity partner in order to upgrade other types of technologies, which is vital for balancing the energy market, determined also the imposed technical slow down on renewable energy investments.
Interest shown by China Huadian Engineering towards Rovinari materialized through signing a memorandum of understanding in spring 2013. This looks like a breath of fresh air for the Romanian energy market and it is expected to be the largest investment in the last decades (600 MW installed capacity and EUR 1 billion). There is no shortcut to the process, the next steps envisaged including a feasibility plan, evaluation of contribution in kind of CE Oltenia company and negotiations with the Romanian state (the majority shareholder). Nevertheless, the involvement in a project of this magnitude, in Europe, is a statement about the capabilities and interest of China in the energy market worldwide.
Briefly analyzing the evolution of Romania energy in the recent years, the consumption decrease is a source of concern from economic perspective, as it confirms a lack of industrial production growth. For instance, we saw only a 7% increase in H1 2013 compared to similar period in 2012. Thus, new plants seem to lack market reasoning.
Coal-fired power plants and the increase in efficiency is a major topic for international organizations. Looking closer to a high profile investment in Romania in Rovinari and its currently foreseeable execution, it can be expected that a large capital investment could only be deployed if secured by a supportive legislative and fiscal regulatory market, but most of all, by a kick-back in consumption.
It appears that the local energy market may not be competitive enough for the new project, considering the recent re-organization in the coal-fired sector in Romania, which is why the new plant is expected to export energy in the region.
IN THE MEANTING, THE GLOBAL PICTURE CHANGES
China is the top global consumer of coal globally and is constantly building power plants, having extensive resources of lignite and hard coal. Considering the low-carbon global trend and the high level of greenhouse emissions of coal-fired plants, the Chinese utilities were thoroughly considering innovative methods for counter-acting: carbon capture and storage (CCS) as an option for the investments in “high efficiency, low emissions” (HELE) technologies: pre-combustion (treat fuel before combustion to extract pollutants), post-combustion (treat gases after the process) and oxy-fuel (burn the coal in an oxygen atmosphere).
Average worldwide efficiency level for coal-fired plants is approximately 30%. Improved technology achieved efficiencies of 38%, reaching reductions in emissions of more than 20%. According to IEA, Highly efficient technologies, not yet used at large scale, reached more than 40% efficiency, exceeding 30% reduction of CO2 emissions. Moreover, during 2011, approximately 50% of newly built coal-fired plants use HELE technology (pulverized coal combustion units – higher steam pressure and temperatures), which implies an efficiency level of up to 45%.
Nevertheless, despite the wider use (double in the last 10 years), it is still too expensive for plants smaller than 300MW and three quarters of existing coal-fired power plants are more than 25 years old. Larger scale use is expected to take place in the following 10-15 years.
The carbon capture and storage is an interesting new concept that has already caught attention from major players in the coal-fired power (China and USA).
CHINA AND EUROPE - FAR APART
According to Global CCS Institute reports, there are more than 10 CCS projects in China, for all three technologies. At the same time, there is an important lag for Europe, the determinant being the carbon price, which does not pay off.
The EUROCOAL representative states that “the European Emissions Trading system (EU ETS) should be the primary incentive to invest in CCS”. The trading price for CO2 during Q1 2013 was approximately EUR 4/ton, but estimations show that a price of minimum EUR 40 would incentivize investment in carbon capture. The other side of the coin with regards to increase in CO2 price would be an “unacceptable” electricity price increase for European consumers.
Multiple opinions address the fact that the EU ETS failed to penalize coal-burning plants. As a result, there are considerable coal-burning plants under construction in Europe (German, Turkey and Poland). In countries where geologies are not favorable for carbon storage (old mines or former exploitations) and the scale of projects is not large enough to support CCS technology, improvement in efficiency could still be viable and sustainable.
At European level, a coordinated approach should include public communication on costs implied by reducing or removing coal from the sources of energy generation, together with going public on the steps undertaken to reduce the greenhouse emissions.
LOOKING FORWARD
While gas is expensive in Europe, shale gas is still controversial and green energy works only in conjunction with other energy sources and not by itself, it appears only natural to make use of the existing coal resources.
Nevertheless, authorities should give important consideration to the energy strategy for coal sector. The full cycle, from mining to coal fired plants is in danger due to lack of competitiveness and important operational losses.
With a view towards the expected closing of important mining explorations (Petrila – by 2015, Uricani and Paroseni by 2017), as set by the European Commission, and the lack of investments in re-habilitation of the coal-fired plants, it is difficult to assess the level of reliance on coal for energy production in Romania on the long-term, especially in the drought periods when hydro power will be scarce. All these take us to basics: the lack of a long-term energetic strategy for Romania.
