Clare Nuttall in Bucharest -

Romania almost doubled electricity exports in the first half of 2014, as Bucharest seeks to take advantage of power deficits elsewhere in Southeast Europe to establish the country as a regional energy hub. However, with other countries looking to boost their own domestic capacity, it could be difficult for Romania to profit from higher production in the longer term.

On September 15, Serbian Minister of Energy and Mining Aleksandar Antic announced the country will receive electricity and coal exports from Romania for this winter, should they be needed. Serbia has already had to raise its electricity imports this year, after serious flooding forced the closure of a unit at Kostolac, the country’s second largest power station, as well as several hydropower plants. In mid-September, parts of Serbia and neighbouring countries were again hit by floods, raising fears of further damage to power generation infrastructure.

Romania has stepped in to make up the shortfall; in the first half of 2014, Romanian electricity exports were up by around 85% on year, according to grid operator Transelectrica, with Romanian power exports to Serbia reaching six-times the level recorded in January-June 2013. “Cross-border flows registered significant increase of exports to Hungary and Serbia, the main reasons being the reduction of electricity price on Romania’s market and the export operations to the more expensive markets from Hungary and the Balkans. The export to Serbia increased after the floods impacted several generation capacities in this country last May,” Transelectrica’s report said.

More room to export

Romania’s electricity surplus is set to increase this year. Production is rising in part due to heavy investment into renewables, thanks to generous subsidies in place until the beginning of this year. Despite a fall in electricity prices, investments into new generation capacity – including building two additional units at the Cernavoda nuclear power plant – are being considered.

Changing consumption trends have also freed up more power for export. “Electricity consumption patterns have changed in Romania. Services are now a major contributor to GDP, and their consumption is relatively low compared to the industrial sector,” the EBRD's senior banker for power and energy utilities, Mihnea Craciun, tells bne.

Romania is now looking to open up new markets for electricity exports. In April, Romania struck a deal to export €1bn worth of electricity – some 2.5 TWh or 5% of total production to Albania. There are also plans to build new connections with Moldova, which currently gets most of its power from the NGRES thermal power plant in the separatist Transnistria region.

However, the real prize in the region is Turkey, and Bucharest is pushing for the construction of a sub-sea transmission cable under the Black Sea to allow direct exports to the Turkish market. An agreement on electricity interconnections between the two countries, paving the way for the €650m cable to be built, was signed in January.

A direct link to Turkey would be an important step in Bucharest’s ambitions to become an energy hub for the region – an aim that encompasses oil and gas as well as electricity.  However, to achieve this, new infrastructure is needed, and with Turkey now investing into domestic capacity, it is unclear whether support – and more importantly funding – for the project will be forthcoming from the Turkish side. “Southeast Europe is a region with a historic deficit. Before the crisis an increase in consumption was expected, and most countries in the region needed new capacity,” Craciun says. “There are high hopes that Romania could become a regional hub but for this to happen, importing countries would also have to be willing to invest in interconnections. However, it is clear that other countries prefer to increase their own energy security by building capacity at home rather than investing into import infrastructure.”

Longer-term strategy

Despite these concerns, the Romanian government is currently working on plans for a longer-term energy strategy that is likely to aim for increased exports of electricity, as well as oil and gas. Due to be drafted by October, the strategy will set out policy on a range of issues including electricity production and export, nuclear energy and shale gas.

At the same time as boosting electricity exports, Bucharest also wants to develop Black Sea offshore hydrocarbons resources, in a bid to end dependence on Russian gas exports for both Romania and neighbouring Moldova. President Traian Basescu said September 3 that Petrom and ExxonMobil would have to invest between $4bn and $5bn to develop the Domino-1 field, which could give the country energy independence by 2018-19.