ROMANIA: Modelling of the Romanian electricity sector, 2025-2040

To reach climate neutrality by 2050, the European Union has set a 55% emission reduction target for 2030 and the European Commission has proposed a 90% reduction target for greenhouse gas emissions by 2040. Romania, through its multiple strategies and plans, has set out a vision for gradually decreasing its emissions. While these documents reflect significant strides forward for the energy transition, especially by committing to a coal phaseout calendar by 2032, they are fraught with inconsistencies and partly rely on sizeable investments in fossil capacities. Various projects on nuclear and hydro energy are also constantly announced with limited assessment of their suitability in an increasingly decarbonised power sector. In this report, we assess Romania’s energy transition pathway. The European Gas Market Model and the European Power Market Model developed by REKK were utilised to understand the impact of Romania’s plans on emissions and the energy market and to see how Romania could resize its fossil capacity investments and achieve a carbon-neutral power sector in 2040. The models simulate a fully functional and liberalised energy markets to show the impact of different measures on wholesale energy prices.

Based on the modelling results several important conclusions can be drawn:

• Romania can reach a completely decarbonised electricity production mix in 2040 with no security of supply risks by aiming to have no more than 3.5 GW1 of total installed gas-fired capacities by 2030 and by focusing more on wind power and a higher deployment of storage technologies. In contrast, the investments outlined in Romania’s National Energy and Climate Plan (NECP) do not ensure a decarbonised energy sector by 2040. The Romanian power sector would emit 9.2 MtCO2 in 2030 (which can be halved in a lower-gas scenario) and 3.5 MtCO2 in 2040, at slightly higher wholesale electricity prices. Replacing natural gas with hydrogen in 2035 in the all-installed capacities (as outlined in Romania’s Long-Term decarbonisation Strategy) would mean that these assets would no longer be utilised. This is because replacing gas with hydrogen would significantly deteriorate the cost-competitiveness of these capacities, immediately reaching a utilisation rate lower than 0.1%, given the high fuel prices of 82 EUR/MWh in 2030, according to renewable hydrogen cost estimations presented in the draft National Hydrogen Strategy. There is therefore a significant risk that even ‘hydrogen-ready’ investments would continue to operate on fossil fuels for economic reasons, consequently not achieving their promised emissions reductions.
• A higher focus on wind energy (17.7 GW onshore and 7.3 GW offshore in 2040,
  compared to 13.1 GW altogether in official plans) can contribute to decarbonising the power sector by 2040. Romania appears to have a regional competitive advantage in wind production. The market value of wind remains higher than that of solar for all modelled years, while lower wind investments are expected in Hungary and Bulgaria.
• Even with higher renewable shares than presented in official documents, Romania’s power sector can deliver on security of supply requirements. The higher balancing reserve requirement can be accommodated through investments in storage (reaching 880 MW in 2030 and 3.4 GW in 2040) covered by existing hydro capacities, new storage installations and, until 2035, gas power plants. An annual installation of 800 MW rooftop PV and 120 MW in battery can further decrease balancing pressures and slightly decrease wholesale prices (by about 1.1 EUR/MWh in 2040).
• A high renewables scenario would also have a positive impact on the electricity trade balance. In either scenario, Romania becomes a net exporter of electricity from 2030. 17.5 GW of solar capacities as well as 17.7 GW onshore and 7.3 GW offshore wind is sufficient to achieve a decarbonised power sector by 2040.
• Existing hydro power facilities are key for balancing a renewables-dominated power sector. However, new investments in hydro capacities (including 300 MW in small hydro installations and a 1 GW pumped hydro capacity that would come online in 2032) would only have a limited effect on electricity prices and security of supply – assuming the mentioned battery storage investments are realised.
• Hard coal and lignite phaseout are manageable from a security of supply perspective, even with lower than planned investments in gas capacities. Based on market prices alone, the modelling results show that coal fired production will rarely be economical from 2025 (expected capacity factor of less than 1%).
• New nuclear energy capacities can contribute to achieving a decarbonised power sector, even if the planned investments suffer delays. The modelling results show that slight delays in the construction of new nuclear (two new conventional CANDU reactors and 460 MW of small modular reactors) do not pose security of supply risks, even in a lower-gas scenario of 3.5 GW installed gas capacities. Even with such delays, Romania would continue to be a net electricity exporter after 2030 based on the expansion of its renewable capacities, albeit the prices of electricity and CO2 would be slightly higher, because of the nuclear delay.
• Additionally, the refurbishment of Cernavodă’s Unit 1, scheduled for 2027–2029, which will take 700 MW out of the system, will not pose supply security risks, even in a lowergas scenario. This is because significant new renewable energy sources (RES) will begin operating, with solar energy nearly doubling from 4.3 GW to 8.2 GW and onshore wind increasing by more than 50% from 5 GW to 7.9 GW between 2025 and 2030. Natural gas capacities will increase by 500 MW, and battery storage will see an approximately fourfold growth in the same timeframe.

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