Energy Industry Review - December 2018 / January 2019 by Energy Industry Review

COMMENT

Forcing the destiny The energy security stake

t the turn of the years, Romania, the seventh country of the European Union in terms of size, makes its balance sheet for 2018 and establishes its priorities for the year starting with the presidency of the EU Council. While in terms of image it is a matter that no longer needs arguments, many comments can be made about our country’s energy strategy.

Daniel Lazar Senior Editor

In a world increasingly dependent on Gulf oil and Russian gas, the Black Sea gas discoveries are growing in size and attention of the domestic decision-makers. We are facing a huge chance of becoming an important regional player in a Europe that is more and more troubled by Brexit, the yellow vests movement, populism and mistrust in unity. We can have a decisive role in the energy equation of at least the Balkans if we know how to play skilfully the card we have in our hand. We are not allowed to be humbled before others’ opinions, to be just executives and settle for little. Starting from ministers and state officials to the specialists we have, we all have to ‘play great ball’, as they say in sports. It’s a chance we are not allowed to miss. Or, specifically, we are ‘doomed’ to win the game having as stake the national energy security. And, with some chance, we can even become energy exporters. We have a draft Energy Strategy of Romania for 2018-2030, towards 2050, which treats current and global issues and designs the evolution of the Romanian energy sector in view of eight strategic

objectives. These are: clean energy and energy efficiency; ensuring access to electricity and heat for all consumers; protecting the vulnerable consumers and reducing energy poverty; competitive energy markets, the foundation of a competitive economy; modernizing the energy governance system; increasing the quality of education in the field of energy and continuous training of human resources; Romania - regional energy security provider; increasing the energy contribution of our country on the regional and European markets by capitalizing on the national primary energy resources. So, things are said bluntly: we want to start playing strongly at the regional level, this being an important moment, not only for the Romanian energy sector, but for all the Romanians, because they will be the main beneficiaries of the implementation of the energy strategy measures. Moreover, we are aware of the need to have in the future professionals in the energy sector. “It’s not enough to invest in new production capacities if we fail to make sure we have the qualified staff to operate them,” Energy Minister Anton Anton pointed out. These are the premises of a period that MUST coincide with a spring of unravelling the Romanian energy sector. We are not allowed to settle for little, because we can be even regional energy exporters. The current politicians could enter the history book with capital letters for knowing to get the best of the tough negotiations they will have with the big players in the field at global level. Or not... We wish them good luck!

Content Net-zero news

Opinion The Energy Transition Commission issued a report in November, 2018. The think tank had but one goal in mind: stopping the global warming short in its tracks, and bringing it as close as possible to 1.5°C and as far as possible from 2°C.

Prosumer’s legal regime

Opinion Romania made a first step and included several high-level provisions in the amendment adopted on 20 July 2018 to the Law no 220/2008 regulating the green energy support system. In late November 2018, ANRE released for public consultation two draft orders which are intended to lay the foundations for the actual integration of the power delivered by such small producers into the network and its financial set off.

Higher gas taxes

Opinion The higher taxation of gas, a historical correction, shouldn’t limit exclusively to satisfying the current generation, but should also allow the future generations to benefit from gas discovered more than a century ago. At the same time, it is necessary to stop the action through which the higher taxation of gas is only a tool to get more money from people’s pockets.

Best energy mix for years to come

Interview We are reviewing, together with Adrian Constantin Volintiru, CEO of Romgaz, the key milestones of the evolution and future development directions of the largest gas producer and main gas supplier in Romania.

Revolutionising oil & gas tracing and tagging

Oil & Gas

Natural gas - key to future power grid

Oil & Gas Natural gas will overtake coal as the No. 1 power generation technology by 2025, according to a new analysis by GE Power, and will continue to hold that position through at least 2040. And as the energy mix changes, says GE, the whole electrical grid will become leaner, cleaner and more flexible. 4

New non-toxic tracing and tagging solutions feature unique spectral signatures, can be detected even in extremely low-level concentrations, and are suitable for subsurface applications.

Linking gas prices to Vienna exchange

Oil & Gas New amendments eliminate the deduction of royalty and limit the deductibility of investments recognized in the calculation of the windfall tax.

Energy Ministry putting NECP under discussion

Power The Ministry of Energy of Romania has posted on its own website, for consultation, the draft Integrated National Energy and Climate Plan 2021-2030. The plan reflects the set of national preferences, features and priorities, taking into account Romania’s right to set its energy mix. By respecting this approach in determining national targets, the plan was designed to facilitate the selection of the most effective policies, measures and commitments that will help achieve the national targets outlined in this plan.

Coal-exit plans for Europe at COP24

The Climate and Energy Agenda

Analysis The European Political Strategy Centre has devised a set of 10 trends that may hopefully alter our view on the flimsy balancing act between energy and climate. Putting things in balance, this should be the strategy for the coming years. Energy and climate don’t have to exclude each other.

Environment By signing the Paris Agreement, the European Union (EU) has joined the international community in officially committing to the goal of limiting global warming to “well below 2°C and to pursue efforts to limit temperature increases to 1.5°C above pre-industrial levels.” For the EU to achieve this goal, it will need to rapidly decarbonise its power sector.

Solar Decathlon in Dubai

Energy Charter Conference in Bucharest Renewables boom

Construction

Renewables

Solar Decathlon, the most important international competition of solar houses, took place during 14-29 November, 2018 in Dubai. The EFdeN team, Romania’s representative in this competition, ranked fourth in the overall ranking worldwide, bringing the country’s best historical performance.

Globally, the capacity of one TW installed in wind and solar energy sources was exceeded in mid-2018, according to international statistics. Investments in this area will continue at a sustained pace over the next few years, so that by mid-2023 the second TW of wind and solar energy will be achieved. 5

Event Romania hosted during 27-28 November 2018 the 29th edition of the Energy Charter Conference, as President of this international forum. Our country is the first state of the European Union to take over the Presidency of the Energy Charter since the establishment of this international platform for debate and decisions in the energy sector. The Conference has gathered ministers and officials in the energy sector from over 30 countries.

NEWS

OMV PETROM REWARDS 96 YOUNG OLYMPIANS

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Join us on Linkedin Energy Industry Review Publisher: Lavinia Iancu Business Development Manager: Marius Vladareanu © OMV Petrom

Sales Manager: Valentin Matei Scientific Board: President: Prof. Niculae Napoleon Antonescu PhD Members: Prof. Lazar Avram PhD; Assoc. Prof. Marius Stan; Prof. Ionut Purica PhD; Alexandru Patruti PhD

96 young people with high performances have been rewarded, within the Petrom Olympiad Gala, which took place on 13 December, 2018 at Petrom City. They received prizes, scholarships and trophies totalling 20,000 euros for national and international performance throughout the year. Outstanding results in science, technology, research, health, communication, art or sports have been personalized with the awards: Money Jump, Asia Experience, Smart City, Smart Scholarship; trophies Golden Career, High Performance, COM ZON and the distinction the personality of the year 2018. Together with the Olympiad winners, students at Oxford and Cambridge present in the hall, the outlook of Smart World and the role the Romanian Olympians could have in this 5G world have been outlined. Florin Bercea, President of F.S.L.I. Petrom-Energie, appreciated the capacity of this Program to guess the future, by listing some of the science

and technology projects generated slightly ‘ahead of time’ by the Petrom Olympians: Cisco Academy, Knowledge Caravan, Scientific internships at CERN, NASA, Silicon Valley, Tokyo, Australia, Singapore, London or Los Angeles. At the first OMV Petrom Olympians award ceremony since she took over the position of CEO, Christina Verchere pointed out the need in the Smart World for the skills for which the Romanian young people were rewarded: logic, perspicacity, scientific thinking, research and technological innovation, appreciating the interest of young people for these components. PETROM OLYMPIANS is a CSR program of OMV Petrom, which annually rewards the national and international performances of children of employees in the petroleum industry. Over 3,200 young people have been rewarded, supported and trained in national and international vocational careers in Europe, Asia, Australia and America. 7

Senior Editor: Daniel Lazar Journalists: Adrian Stoica, Vlad-Adrian Iancu Digital Manager: Justin Iancu

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NEWS

EXXONMOBIL TO ACHIEVE UL’S ZERO WASTE TO LANDFILL SILVER VALIDATION

xxonMobil announced on 11 December, 2018 its global network of lubricants blending and packaging plants, which manufacture all Mobilbranded products, has received the Zero Waste to Landfill Silver validation from UL, making it the first petroleum products company to secure this validation. The company’s lubricant operations are successfully diverting over 90 percent of the waste produced in its global plant network from local landfills. More than 50,000 tons of waste produced per year are being redeployed into new, productive uses that will bring greater value to the environment and the economy. This achievement demonstrates the company’s

commitment to reducing environmental impacts and enables commercial and retail consumers more sustainable choices through Mobil-branded lubricants. “Reducing environmental impact is an important focus for ExxonMobil and a core part of our commitment to operating responsibly everywhere we do business,” said Terry Neal, global lubricant operations manager at ExxonMobil. “Achieving UL’s Zero Waste to Landfill at the silver level is an accomplishment toward our goal to ‘Protect Tomorrow. Today.’ and further demonstrates our commitment to bring all consumers high quality solutions to meet their business objectives.” To achieve the validation, ExxonMobil implemented a range of waste diversion

techniques and strategies across its lubricant production network. Spe cifically, the company identified 14 types of waste produced at these facilities that could either be avoided entirely, reused or recycled. “Customers and consumers can feel confident they are making Mobil lubricant purchasing decisions that help fulfill their personal and business goals, including choosing partners that share in a commitment to reducing environmental impacts,” said Bennett Hansen, global lubricants marketing director at ExxonMobil. ExxonMobil began developing this waste management program in 2012 and by 2015, had implemented it across the globe.

‘ROMANIAN GAS - ILLUSTRATED EDITION’

he end of 2018 has brought an expected gift to the oil and gas specialists in our country, by launching the album „Gaz de Romania: editie ilustrata” (‘Romanian gas - illustrated edition’ t/n), at the headquarters of the National Bank of Romania. The authors are Gheorghe Stanescu, Mihail Minescu and Catalin Nita. The paper is an insight into the history of 110 years of natural gas in Romania, especially in the Transylvanian basin. The event was aimed at bringing to the fore the impact of the oil and gas industry on the Romanian economy and society. The program of the event, opened by NBR Governor Mugur Isarescu,

included 3 presentations, held by as many personalities in the oil and gas industry: professors Gheorghe Calcan, Dumitru Chisalita and Vasile Iuga. There are many events related to the Romanian natural gas that we should remember, taking into account Romania’s leading position in Europe and in the world when it comes to gas extraction, transmission and processing. The most important is the one that took place 110 years ago: drilling executed in Sarmasel area, on 26 November 1908, a success as important gas reserves have been discovered. It was here that the first exploration and production well in the Transylvanian basin was drilled and it represents the beginning of the 10

development of an essential economic sector in the development of modern Romania. The history of Romanian gas is synthesized and accompanied by more than 200 vintage images, most of them being present in the two representative national museums (National Oil Museum in Ploiesti and Natural Gas Museum in Medias), the Library of the PetroleumGas University of Ploiesti and also in the authors’ collections. With this album, the authors aimed to highlight the importance of the oil and gas industry for over a century and the need to continue to pay due attention to this national wealth which, through a better use, will be a real source of prosperity for Romania.

AASTA HANSTEEN FIELD IN THE NORWEGIAN SEA STARTED GAS PRODUCTION

he deep-water gas develop ment is located in the north ern part of the Norwegian Sea, 300 kilometres from the mainland of Norway and in water depths of 1,300 metres. Equinor is the operator of Aasta Hansteen with a 51% stake and OMV (Norge) AS has a 15% interest in the field. The other partners are Wintershall Norge AS and ConocoPhillips Skandinavia with a 24% and a 10% share, respectively. Aasta Hansteen production will provide reliable gas supply to the European

market. The total gross estimated recoverable reserves, including Snefrid North discovery, which has been included in the development, are approximately 324 million boe (55.6 billion cbm) and 4.1 million boe of condensate (0.6 million cbm). The production will reach a plateau of approximately 20 kboe/d net to OMV. Gas from Aasta Hansteen will be transported via pipeline to Norway and then further exported to the European market. The condensate will be loaded to shuttle tankers and transported to the market.

The total capital investment in the Aasta Hansteen project is approximately EUR 4 bn (EUR 600 mn net to OMV). Aasta Hansteen has the world’s largest SPAR platform, a floating platform with a vertical cylindrical substructure moored to the seabed. The gas is produced from seven wells in three subsea templates. Subsea tiebacks will increase life of field and they will use Aasta Hansteen’s infrastructure. The Snefrid North discovery will extend the plateau production and has an expected start-up towards the end of 2019.

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NEWS

SEMPRA ENERGY AND PGNIG TO EXPORT U.S. LNG TO EUROPE

ort Arthur LNG, a subsidiary of Sempra Energy, and the Polish Oil & Gas Company (PGNiG) announ ced on December 19 they have entered into a definitive 20-year sale-and-purchase agreement for liquefied natural gas (LNG) from the Port Arthur LNG liquefactionexport facility under development in Jefferson County, Texas. The announcement is an important milestone as Sempra Energy pursues its long-term goal of exporting 45 million tonnes per annum (Mtpa) of North American LNG. “This agreement marks an important step toward Poland’s energy independence and security,” said U.S. Secretary of Energy Rick Perry. “As demonstrated with the launch of the Strategic Dialogue on Energy in Poland last month, the Trump Administration remains committed to increasing energy diversity,

advancing energy security, strengthening national security, and creating a future of prosperity and opportunity in Poland and throughout the region.” “This agreement with PGNiG represents an important expansion of our portfolio of contracts for LNG exports and major step forward in the development of our Port Arthur LNG project,” said Jeffrey W. Martin, chairman and CEO of Sempra Energy. “Last month, we began the commissioning phase of our Cameron LNG liquefaction-export facility in Louisiana. This agreement, along with the great progress on Cameron LNG, continue to validate our growth strategy as we advance our vision to become North America’s premier energy infrastructure company,” he added. “Our activities show that we consistently implement our strategy,” said Piotr Woźniak, president of the management board of PGNiG. “Another long-term

contract not only allows us to develop LNG portfolio with a view to delivering to Poland, but it gives us, in the near future, the possibility of trading in LNG purchased on a global scale. I am glad that Sempra Energy is among our American partners. I am convinced that we will have good long-term cooperation.” While financial terms were not disclosed, the agreement is for the sale and purchase of 2 Mtpa, or approximately 2.7 billion cubic meters per year (after regasification) – enough natural gas to meet about 15 percent of Poland’s daily needs. The agreement is subject to certain conditions precedent, including Port Arthur LNG making a final investment decision. PGNiG plans to deliver cargos to domestic customers in Poland or trade LNG on the global market, once operations commence

POLITICAL AGREEMENT ON THE EU’S FUTURE ELECTRICITY MARKET

ew rules for making the EU’s electricity market work better have been provisionally agreed by negotiators from the Council, the European Parliament and the European Commission on 18 December, 2018. This concludes the political nego tiations on the Clean Energy for All Europeans package and is a major step towards completing the Energy Union and combatting climate change, delivering on the priorities of the Juncker

Commission. Negotiators were able to reach political agreement on the new Electricity Regulation and Electricity Directive. This agreement follows previous agreements on the Governance proposal, the revised Energy Efficiency Directive, the revised Renewable Energy Directive, the Energy Performance in Buildings Directive and the Regulations on Risk Preparedness and the Agency for the Cooperation of Energy Regulators (ACER). The new electricity market design 12

proposals, a Directive and a Regulation, aim to adapt the current market rules to new market realities. They introduce a new limit for powerplants eligible to receive subsidies as capacity mechanisms. Subsidies to generation capacity emitting 550gr CO2/kWh or more will be phased out under the new rules. Furthermore, the consumer is put at the centre of the clean energy transition. The new rules enable the active participation of consumers whilst putting in place a strong framework for consumer protection.

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COAL REGIONS IN TRANSITION: NO ONE LEFT BEHIND

n 11 December, 2018, the European Commission hosted the 6th EU Energy Day within the margins of the United Nations Climate Change Conference (COP24) in Katowice, Poland. As part of the programme, an indepth discussion was held on the Coal Regions in Transition Initiative. Launched in 2016 under the Clean Energy for All Europeans package, its aim is to address the specific social and economic concerns of regions relying on coal mining as the main source of economic activity and employment. Speakers included Miguel Arias Cañete, European Commissioner for Energy and Climate Action, Jerzy Buzek,

Chair of European Parliament ITRE Committee, Members of the European Parliament Maria Spyraki and Florent Marcellesi, Markku Markkula, First VicePresident of the EU Committee of the Regions, Grzegorz Tobiszowski, Deputy Minister of Energy of Poland, Izabela Domagala, Member of the Board of Silesia Voivodship and other participants. “The transition to a more sustainable future has to be fair and should leave no region and no citizen behind. All Europeans should benefit. Our coal regions in transition initiative helps European countries, regions, communities and workers to the take on the challenge of the required economic diversification of the clean energy transition. We will support them with EU funds but

it is also necessary for private money and new investors to come to coal regions to be part of this transition. That is why the EU is also mobilizing international business and finance leaders, including international financial institutions, to support coal regions,” Commissioner Arias Cañete pointed out. Discussions focused on progress made on the EU Coal regions in transition project launched by the European Commission. Over the past 18 months, 6 Country Teams have been launched bringing together experts in energy and climate policy, regional policy, employment, research and development and in structural reforms in order to work with pilot coal regions in Slovakia, Poland, Greece, Romania, Czechia and Spain.

WORLD’S HIGHEST VOLTAGE OF 400 KV WITH XLPE INSULATED DC CABLE

umitomo Electric Industries announces that it has completed the connection of a high-voltage direct current (HVDC) interconnector cable system between the United Kingdom and Belgium after the high voltage test. An inauguration ceremony was held at the Belgium substation site on December 5, 2018. This system, which is scheduled to be in commercial operation in the first quarter of 2019, will transmit the world’s highest voltage of 400 kV with crosslinked polyethylene (XLPE) insulated DC cable. J-Power Systems Corporation (JPS), a subsidiary of Sumitomo Electric, signed a contract in 2015 for design,

manufacturing and construction of HVDC interconnector cable system between UK and Belgium with Nemo Link Limited, a joint venture between Elia (Belgian TSO) and National Grid (UK), to exchange electricity up to 1,000 MW between the UK and Belgium. Nemo Link connects the two countries’ power grids over a total length of 141.5 km with a combination of 130 km HVDC submarine and 11.5 km land cables manufactured and installed by Sumitomo Electric and JPS. This new interconnection increases security of power supply for both countries, allowing the import and export of electricity, as well as supporting the integration of renewable 14

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OPINION

Net-zero news Harder-to-abate sectors in the spotlight

Vlad-Adrian Iancu

es, the world has just finished talking about this; we’re not a broken record mind you, but we do feel the need to insist on this one. We rehash the issue because it’s definitely a big deal. In a moment of make-or-break such as this one, it pays to insist on a topic. So again, we’re focusing on the possibility that net-zero emissions become a reality, the underlying process and implications and finally what it is that makes these hard-to-abate sectors (heavy industry sectors and heavy transport) tick and how we can use it to our advantage. In a Tom Cruise-esque style, the Energy Transition Commission issued a mammoth like proportions report, properly entitled ‘Mission Possible’, in November, 2018. The think tank, made up of the foremost experts in energy production, energy usage, equipment supply, investing, NGOs and academics had but one goal in mind: stopping the global warming short in its tracks, and bringing it as close as possible to 1.5°C and as far as possible from 2°C. 16

It might seem like a slight margin but it is a crucial one. The kicker is that in order to achieve this, we have to reach net-zero CO2 emissions by mid-century. Let’s talk feasibility! As mentioned, the biggest challenge will be faced in the harder-to-abate sectors like the cement, steel, plastic and different heavy transportation methods. These are the big consumers of energy, not always clean one and they account for 30% of total global CO2 emissions. But thanks to innovative technologies there is a possibility and the report tells us that economically we’re fine: only 0.5% of global GDP will be required. But remember that each and every energy or industrial system will have to achieve net-zero by itself, no offsets purchasing from other sectors in the late stages. In the beginning at least, purchasing offsets from the land sector could prove valuable, in that companies could use that money for financing to support investments in more sustainable land use like preventing deforestation and facilitating reforestation.

According to the Energy Transition Commission, there are three sure-fire ways of dealing with our transport and industry carbon footprint. The first one consists in reducing the demand for carbon-intensive products and services by way of a circular economy (basically reusing and recycling as much as possible) and modal shifts (replacing transport means), as well as logistics efficiency. The second deals quite recurrently with energy efficiency and the third one takes on the deployment of decarbonization technologies across all sectors, with the most viable ones being: electricity, biomass, carbon capture and hydrogen. Globally we could reduce the demand in the four major industry sectors (plastics, steel, aluminium, cement) by 40% and even by 56% in developed economies like Europe by 2050. In less developed areas it may take approximately 10 more years. But in order to realize this we need to use pre-existing materials better and reduce the materials requirements in key value chains like transport, buildings and consumer goods via improved designs for the products, a longer lifetime and new service-based and sharing business models, car sharing for example. Another example would be that of recycling in the cement industry: improved building design is said to reduce total demand by as much as 34%. Of course, this can only be achieved by better relationships between companies which cooperate in the value chain and stronger policies that create incentives. In transports the way to go would be switching from trucking to rail and shipping, and from short-haul aviation to high-speed rail which might deliver as much as a 20% reduction on emissions. But improved logistics efficiency and driving modal shifts will require greater cooperation between companies for the former, which will be facilitated by big data computing, and an improved public transport infrastructure for the latter. In what pertains to energy efficiency, the biggest value it brings lies in the potential of reducing emissions from older industrial installations, particularly in developing countries. From the point of view of transportation, it seems there’s plenty of room for improvement: energy efficiency can be improved by 35 to 40% without radically changing the technology. Depending on future innovations, the percentage may even go higher especially in shipping and aviation as longer functionality for engines and vessel/airframe could mean a cost reduction by not switching to a new fuel. If we refer to decarbonization, we need to take into account the specific location and available resource for each industry as prices for available zero-carbon electricity may vary. As such, a vital role is expected to be played by hydrogen but not only in the industrial areas: residential heat and flexibility provision in the

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OPINION

power system. Thus, a significant investment in infrastructure may be required for the international trade of hydrogen and ammonia. Since renewable electricity is increasingly cost-competitive, in a matter of 15 years it will be possible to maintain electricity systems in which 85-90% of power is provided by wind and solar, combined with batteries for the shortterm backup and peak technology like dispatchable hydro, biomass or fossil fuels with carbon capture. Speaking about carbon capture, it is likely to play a relatively reduced role in the power sector, but will nevertheless be essential in achieving total decarbonization in the cement, steel, chemicals and hydrogen production. Biomass will have to be tightly regulated, in order not to interfere with land use policies and agriculture, and will see its biggest influence in aviation where a zero-carbon equivalent of jet fuel is paramount to decarbonizing long-haul flights. Apparently, 42EJ of biomass would do the trick. In the transport sector the game changer will most likely be the electric drivetrain (with energy storage either in battery or hydrogen form) which will most likely replace the internal combustion engine. As electric trucks are likely to become costcompetitive with diesel and gasoline during the 2020s, thereâ&#x20AC;&#x2122;s no need for natural gas and biofuel to be more than a transitional resource. From the point of view of costs, it also looks good, with a total incremental capital investment from 2015 to 2050 of USD 5.5 to USD 8.4 trillion in the industrial sectors (equalling 0.1% of aggregate GDP over the mentioned period), less than 5% of businessas-usual investment in transport infrastructure and no major incremental investment in aviation and shipping. Of course, with the emergence of better, newer technologies, these costs could furthermore drop significantly. In regards to the final consumer, the impact on prices is expected to be rather small. The most significant increase

would rear its head in aviation, a 1020% increase in ticket prices may be required if biofuels and synthetic fuels remain significantly more expensive than conventional jet fuel. The cost may be felt by companies at the intermediate product level: zero carbon steel may cost 20% more per tonne than conventional steel. In the case of internationally traded intermediate products, international carbon prices and regulations should be the norm. Given these conditions, the harder-toabate sectors should benefit from public support in order to continue innovation and investment strategies especially in long-distance power transmission, railway infrastructure, port and pipeline infrastructure and so on. However, there will no doubt be some winners and some losers in this transition, with local economic development and employment being affected. As we mentioned, the final consumer wonâ&#x20AC;&#x2122;t take much of a hit but poorer households in developing countries may feel some backlash. Of course, all this should be mitigated through timely transition policies which should also regulate international competition in order to avoid harmful effects or movement of production location due to high domestic carbon prices. Some solutions comprise: downstream taxes instead of upstream, border tax adjustments, free allocation within emissions trading schemes or compensation schemes. Furthermore, policy should count on the market to drive the research while it focuses on the already mentioned four complementary directions. But even if money or policies are not an issue, as governments should push for the change via loan guarantees or reimbursable advances and public procurement, availability might be. Some of the technologies we crave are not yet on the market and some, for example cement kiln electrification, might not see the light of day for another decade. Also, while carbon capture technologies are employed 18

today, they capture only 80-90% of the CO2 stream. In order for these technologies to become a staple for our fight against carbon emissions, both private investments and public policy need to be aligned. One of these massive investments will be in the transport sector via batteries and improvements in energy density, thus charging speed and battery life will become more important than cost reductions. Just by a battery density improvement of 2 to 3 times, electric vehicles will become dominant even for long-distance surface transport. For long-distance shipping and aviation, a 5 to 10 times increase would make electrification feasible. As we mentioned, cement kiln electrification would be a real game changer along with electric furnaces and further developments in electrochemistry for the steel and chemical industry. Speaking about the chemical industry, the emissions generated by industrial processes could be eliminated by way of electrification, biomass combustion or carbon capture or sequestration but the real end game would be figuring out what to do with end-of-life emissions produced in aviation, shipping, plastics and fertilizers. As such, scientists should focus on biochemistry, synthetic chemistry, hybrid chemical routes and chemical recycling of plastics. Developing new materials could also push the initiative further by using timber or pozzolan-based concrete in lieu of Portland cement or using cellulose-based fibres as a substitute for plastic. Wining the climate war, just as any type of war, requires first and foremost having a united front. Whether or not the public, the government, companies and even small producers and consumers will come together under a common banner remains to be seen. The stakes however remain pretty high. And it would be a shame to not even try when we know victory is possible. After all, we try for the impossible on a daily basis.

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OPINION

Prosumer’s legal regime General considerations Background

Daniel Vlasceanu Partner at Vlasceanu, Ene & Partners

Within the context of the vivid European discussions on the prosumer’s legal regime, Romania made a first step and included several high-level provisions in the amendment adopted on 20 July 2018 to the Law no 220/2008 regulating the green energy support system (‘Law no 220/2008’). Further on, in late November 2018, National Energy Regulatory Authority (ANRE) released for public consultation two draft orders which are intended to lay the foundations for the actual integration of the power delivered by such small producers into the network and its financial set off. At the time of writing this material, said orders (which undoubtedly bring essential clarifying elements) are supposed to enter into force as of 1 January 2019; however, certain aspects included under said orders still require adaptation.

as legal persons (including public authorities). Art 1 para 2 of the draft Order1 (released by ANRE for public consultation) regarding the sale of energy generated by prosumers (the ‘Draft Order’) spells out which conditions2 must be met in order to obtain a prosumer certificate: I. prosumers must not have power generation as their main activity; II. the maximum power of the installation must not exceed 27 kW per place of consumption; III. the generated power is used for own consumption and only the surplus is delivered into the network; IV. measurement of generated power must be made using smart meters/ long distance readable meters.

Facilities and main aspects of the What does it take be certified as a prosumer? prosumer’s regime A prosumer is a client owning (or using) a renewable energy generating installation whose primary activity is not energy generation and that can consume, store and sale renewable energy (as per the definition under Law no 220/2018). Prosumers can be both natural as well 20

In an attempt to remove formalities, 1 Available at: https://www.anre.ro/ro/energie-electrica/ legislatie/documente-de-discutie-ee/ – as accessed on 15 December 2018. 2 It would not harm to add that the client is not entitled to take power from the network and resale it.

OPINION

the last amendment of Law no 220/2008 explicitly enables the natural person prosumers to develop the power sale activity without any registration (however, a certification is required in order to conclude the sale contract – as detailed below). Prosumers are exempted from the obligation to acquire green certificates for the energy they produce for their own consumption. The natural person prosumers are also exempted from any fiscal obligation related to the energy they generate for their own consumption or sale (Art 14 paras 66 and 67 under Law no 220/2018). Also, the Draft Order sets forth that (under certain circumstances) the cost of installing smart meter(s) by the natural person prosumers will be borne by the Environment Fund.

Sale contract and financial set off The prosumer may conclude a sale contract, as per the template attached to the draft ANRE Order3 specifically meant to approve (and released for public consultation on 22 November 2018), for the generated energy with his existing contractual supplier (Art 14 para 6 under Law no 220/2018). Such supplier has a legal obligation to acquire the energy generated by the prosumer against the weighted average Next Day Price of the previous year as published by OPCOM (a debate can be made as to the commercial reasonability of such limited price…). The distribution operators certify the qualification as ‘prosumer’ (Art 2 under the Draft Order) and are competent to issue a certificate specifying the consumption and production place. The energy sale contract can be concluded only on the basis of such certificate (Art 3 para 1 of the Draft Order). The suppliers must specify under

3 Available at: https://www.anre.ro/ro/energie-electrica/legislatie/documente-de-discutie-ee/ – as accessed on 15 December 2018.

each invoice the set off between the produced and the consumed energy. If the value of the energy delivered into the grid is higher than the value of the energy taken from the grid (i.e. the prosumer must receive the difference amount), the value is reported to the next invoice. Such mechanism can be applied for maximum 12 months (at the end of such 12 months, the prosumer receives his amount, if the case). Reporting values to the following invoice cannot be made in case of natural person prosumers if the reported amount exceeds 100 RON; in such cases, the difference is paid by the supplier without being reported to the next invoice.

Final remarks Prosumerism is part of smart living - a complex revolutionary concept still in its early stages. Express recognition of the prosumer’s existence (within the legal framework) was a substantial step forward for the Romanian legislator. Yet, considering the sheer novelty of the topic as well as the intrinsic unpredictability of the prosumers’ behaviour4, putting in place the necessary secondary legislation to complete the prosumer’s legal regime is a challenge for ANRE. Also, applying said regulations might subsequently prove to be a challenge for the suppliers and distributors. Given (i) the incentives granted in particular to private natural persons to install residential green energy systems combined with (ii) the massive cost reduction of the necessary technology witnessed in the last years, we believe that prosumers will soon become an important stakeholder in the realm of the renewable energy market and, as such, putting in place from the beginning the right legal framework is of paramount importance. 4 The draft contract template released by ANRE for public consultation includes an annex with the estimated power quantities to be delivered in the following 12 months, but relying on such estimation may be quite doubtful. 21

OPINION

Higher gas taxes Key elements

Dumitru Chisalita Judicial Technical Expert in Oil & Gas

he higher taxation of gas, a historical correction, shouldn’t limit exclusively to satisfying the current generation, but should also allow the future generations to benefit from gas discovered more than a century ago. At the same time, it is necessary to stop the action through which the higher taxation of gas is only a tool to get more money from people’s pockets. These days there are heated discussions on a draft law on the approval of Government Emergency Ordinance no. 25/2017 amending the content of the annex to Government Ordinance no. 7/2013 on the establishment of the tax on windfall gains obtained as a result of price deregulation in the gas sector. I searched without success this draft law to be able to express my opinion pertinently. I was surprised to notice that it does not exist in the public space, proving the secrecy around this draft for a law with public nature. As someone reported, you can obtain secret protocols faster than this draft law! Managing in the end to read this draft law, I was able to notice that its intention was as correct as possible. Thus, soon we will celebrate 110 years since the discovery of natural gas on the current territory of Romania. The foundations of the gas industry have been laid more than a century ago, and the peak activity for the development of this industry took place in 1960-1980. Thus, 22

we are today in the situation of benefiting from the work and investments of our parents and grandparents, ripping the benefit brought by these generations. This situation determines a difference between the production cost of ‘historic’ gas and the selling price of gas on the wholesale market in the recent period. Thus, in my opinion, the citizens of Romania should absolutely correctly be the ones to benefit first from this difference between the price of gas established on the market after gas market liberalization (2012) and the production cost, for ‘historic’ gas. But, at the same time, the future generations should also benefit from this capital achieved by our predecessors. From this point of view, the draft law has shortcomings. My opinion is that the current draft makes a historical correction, but it is limited only to satisfying the present generation, through this higher taxation of gas. The higher taxation of gas can be accepted as a historical correction, but it shouldn’t limit to satisfying the current generations, but the future generations as well. Another important element of this draft law is the diversion of the purpose underlying GEO 7/2013, i.e. the creation of a fund for vulnerable consumers. Although the concept of vulnerable consumer has been defined by law for 6 years, although we have had for 5 years a legislation for the

OPINION

establishment of a financial basis for reducing energy poverty, although the overcharge base has increased in the recent years, although we are in the phase of legislating new overcharges, although the number of vulnerable consumers has increased substantially over the past few years etc., we still lack the interest of solving this important problem of vulnerable consumers. Another element introduced by this draft law is linking the higher taxation to the price on the Vienna exchange. It is a second signal this year, this time much stronger, of forcing an alignment of gas prices to the price on Vienna exchange. Adopting the decision for the Vienna exchange to be the exchange for trading Romanian gas is an option, but it must be assumed and presented specifically to the public and not be carried out in a nontransparent manner, as the facts prove: the price at which the royalty owed to the state is calculated is the price on Vienna exchange, collaboration between BRM and the Vienna exchange for the joint development of certain products, the draft law on the higher taxation depending on the reference price established on the Vienna exchange etc. The option to align the Romanian gas market to the Vienna exchange must be assumed publicly, especially that the steps in this regard are visible. But assuming this direction must be presented correctly with its pros and cons, as well as with the strengths and weaknesses it brings. The example of European countries that have joined an exchange from a different country is large enough to show that it is not a utopia. But this direction must eliminate permanently the antagonistic directions, included in a populist manner in various programs and strategies: Romania – Gas Hub, Romania – Energy Independence etc. What’s serious is that lies, misinformation, fake news etc. are used in this draft law to support it. Thus: 1. Misinformation according to which the price of gas on the Vienna exchange is higher than the price in Romania is a serious lie by omission, in fact knowingly comparing the average

price on the Vienna exchange with the intra-day market price, instead of comparing the average price on the wholesale market in Romania with the average price on the Vienna exchange. In accordance with the Natural Gas Price Bulletin in Romania, Q3 2018, the average price of natural gas sold on the wholesale market in Romania through BRM in Q4 2018 – RON 80.67/MWh, and the price of gas on the Vienna exchange in Q4 2018 – RON 134.89/ MWh. Applying the elements from the draft law would determine a producer for these data to actually collect RON 80.67/ MWh and pay to the state RON 79.70/ MWh (taking into account the cost elements presented by the Oil and Gas Employers’ Federation). 2. The high production cost for marginal fields, which are in a large number in Romania, would determine the closure of these fields, with a major decrease in gas production in Romania and increased reliance on gas imports. 3. The high degree of concentration on the gas market and the inelasticity of natural gas demand in Romania, as the history of the recent years proves it, determine the full transfer of any ‘costs’ to the end-customer. This situation overlaps the authorities’ tendency to relate and align to the Vienna exchange, which can be interpreted even as an invitation to producers to align with the Vienna exchange, to be able to continue to operate. Thus, taking into account the previously presented prices, there is a possibility for the gas acquisition price to suffer after the approval of the draft law on higher taxation an increase by up to 30%. Summarizing the effects on gas price increase, after the application of the new draft law on higher taxation of natural gas, but taking into account the price increase that should have taken place in October 2018, postponed for 1 April 2019, we can estimate that the price of gas will suffer an increase by up to 40%. What’s worrying in this form of the draft law is the price to be paid for gas by Romanians within 5-10 years. 23

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BEST ENERGY MIX Gas and Renewables The largest gas producer and main gas supplier in Romania celebrated, at the end of last year, five years since its listing on the Bucharest Stock Exchange (BSE), as well as on the London Stock Exchange. This was one of the largest offerings for shares conducted by the Romanian state through BSE. Starting 2013, the companyâ&#x20AC;&#x2122;s shares have been traded on the regulated market managed by BSE under the symbol SNG and on the main market for listed financial instruments of LSE (London Stock Exchange), as Global Depositary Receipts (GDRs) issued by the Bank of New York Mellon under the symbol SNGR. Today, Romgaz is in the top of transactions, and the price per share has increased by 15% compared to the offering price. We are reviewing, together with CEO Adrian Constantin Volintiru, the main milestones of the evolution and future development directions of the company.

IN 2018 ADRIAN CONSTANTIN VOLINTIRU TOOK OVER ROMGAZâ&#x20AC;&#x2122;S MANAGEMENT FOR A FOURYEAR TERM, AS CEO. HE HAS DECIDED TO LEAVE HIS MARK ON THE COMPANY BY MAKING INVESTMENTS THAT WILL LAST OVER TIME.

player on this market and a benchmark for European competitors.

A retrospective of the past five years from the moment of listing shows that Romgaz is in the top of transactions, and the price per share has increased by 15% compared to the IPO price. What are the most important benefits of listing on the capital market? Romgaz listing on the Bucharest Stock Exchange and London Stock Exchange has been an important moment in the company’s history. Listing has increased the degree of transparency and communication with investors, the business environment and public in Romania and abroad. Romgaz has assumed its responsibilities arising from the company’s listing, i.e. reporting and communicating the important events in the life of the company to the stock exchange. We shouldn’t forget the image boost from which a listed company benefits. Institutional and individual investors, the press in general, the business environment monitor closely the company’s evolution and help enhancing the reputation, promoting and developing our business.

Dear Mr. Adrian Volintiru, your career path covers the entire chain of activities in the energy sector, from Upstream to Downstream, both in the state area and in the area of private companies. What is currently your vision on the Romanian and European energy sector in the context of the action plan for fulfilling the sustainable development targets? What is Romgaz’s position in this landscape? Romania currently has all premises to become a regional player in the energy sector. For this purpose, Romgaz aims to be an active, profitable and competitive player on the gas and power production market. The Romanian energy market could be integrated around 2019-2020 in the market of the European Union, in conditions in which the project of creating a common European energy policy will be accelerated. Romgaz needs to find its role of important

Last spring, in the margin of the SEE Upstream 2018 conference, Sorin Gal - Director General, National Agency for Mineral Resources, said that the potential of Romania’s onshore hydrocarbon reserves exceeded the potential of hydrocarbon reserves in the Black Sea. He also mentioned the discovery of the Caragele field, the largest hydrocarbon discovery of the Romanian state over the past 30 years. What

THE ROMANIAN ENERGY MARKET COULD BE INTEGRATED AROUND 2019-2020 IN THE MARKET OF THE EUROPEAN UNION. 26

is currently the production potential of Romgaz and the reserve replacement ratio? Romgazâ&#x20AC;&#x2122;s tendency is to increase gas production to ensure a fair price for the end-consumer. At the same time, we are considering replacing consumed reserves with new gas reserves. Fortunately, here the results are spectacular: at this moment the reserve replacement ratio is over 70%, with the assumption that in 2019 it will approach 100% in conditions in which the world replacement ratio is just 30%. Caragele is the largest onshore gas field discovered over the past 30 years in Romania and the estimated reserve is around 25-27 billion cubic meters of gas. The Caragele field delivers daily into the system 700,000 cubic meters of gas, and the tendency is to increase production by mid-December (the interview took place in early December 2018 - Ed.), to 1,000,000 cu m per day, with the completion and commissioning of the gathering pipeline of 16km. Depending on the results of research studies, the estimated daily production could increase as of 2020 to 1,700,000 cu m per day. The investments proposed for next year in Caragele field consist of drilling 15 wells and surface technological installations at 10 wells, worth a total of around EUR 45mln. The future exploration efforts are currently focused on planning and executing drilling for confirmation and potential increase in the volume of the estimated resource with investments of over EUR 100mln.

What does the program for 2019 include regarding rehabilitation works executed on mature fields and geological research works in exploration blocks in order to balance the natural decline of production? What are the areas of interest? Romgaz annually makes sustained efforts to balance the natural decline of production through rehabilitation works executed both on mature fields and geological research works. Mature fields in the rehabilitation process are those ensuring about 45% of the companyâ&#x20AC;&#x2122;s total gas production. For 2019, the work program includes the performance of specific operations, such as interventions and repairs, with various degrees of complexity at the wells producing with difficulty. As regards the exploration program for 2019, it will focus on drilling works in the blocks where Romgaz is titleholder in the Transylvanian basin and in the Moesian Platform. 27

What will Romgazâ&#x20AC;&#x2122;s involvement be in 2019 in the offshore segment? As it is known, Romgaz is associated through a Joint Venture Agreement, as nonoperator, with a 12.2% interest together with Lukoil Overseas Atash VB (87.8%) in EX Trident Block, the deep area of the Black Sea. We will continue in the following period, together with our partner, the exploration works started and we are analysing collaborations and opportunities of exploration and exploitation of offshore blocks in the Black Sea.

In terms of tapping gas resources, the Ministry of Energy aims - besides the development of the gas network for population or switching the power plants currently operating based on coal to gas - the revitalization of the petrochemical

industry in Romania. What is in your opinion the optimal version for Romgaz - taking over a chemical fertilizers plant, the construction of a new one, the conclusion of a partnership etc.? We cannot discuss yet about an optimal version. We have started a market study and, depending on the outcome of this study, we will analyse all options we have and we will make a decision. We are still in the stage of analysis of opportunity. However, we want to multiply gas value on the value chain and we are always thinking about diversification. The eloquent example in this regard is the investment in Iernut, our intention to continue with Mintia and, obviously, to identify new business opportunities, including investments in the petrochemical segment. Here, the discussion is about the modality of taking over certain plants already existing or starting Greenfield investments. Depending on the outcome of the study I previously referred to, we will be able to make the most advantageous decision for the company.

An important objective of the European Commission is economy decarbonization, which means that in the future the focus will not be on the large hydrocarbon reserves, but on the technological solutions for integrating sustainable energy. Long-term investments will obviously be necessary, aimed at not only economy decarbonization, but also at creating a favourable framework for innovation, research and development in the clean energy field. How does Romgaz relate to the 3Dâ&#x20AC;&#x2122;s (digitalization, decarbonization, decentralization) of transition to a clean energy? What new energy capacities do you consider? Romgaz is already considering technological solutions for the integration

INTERVIEW

REGIONAL COOPERATION IS ESSENTIAL TO IDENTIFY THE BEST SOLUTIONS AND PROJECTS, ESPECIALLY IN TERMS OF ENERGY SECURITY. ENSURING INTERCONNECTIVITY PROVIDES THE POSSIBILITY OF DEVELOPING SUSTAINABLE PARTNERSHIPS BETWEEN THE EU MEMBER STATES.

of sustainable energy, and the economy decarbonization process and finding innovative solutions in the energy sector are part of the sustainable development strategy of the company. The prefeasibility study is already completed and we have launched the tender for the technical and conceptual feasibility study for a new power plant, in Mintia (Hunedoara County). I would like to physically start this project in 2019. Mintia power plant should be similar to that in Iernut. We recall that Romgaz is currently investing EUR 270mln (without VAT) in the construction of a power plant in Iernut (Mures County), with a capacity of 430MW, which will become operational in 2020. We are also interested in green energy production, which means the diversification of Romgaz’s portfolio. Currently, Romgaz does not have the proper know-how for this activity, so first of all we are analysing the market, then the opportunities and options we have, either Greenfield, or acquisition. In fact, a renewable-natural gas energy mix seems the best solution for the years to come. The advantages of a gas-renewable energy portfolio are multiple. As production from renewable sources is intermittent, back-up is needed for it. After hydropower plants, gas-fired power plants can have the quickest reaction to balance the National Power System (NPS). Thus, on the one hand, Romgaz will have the possibility to sell electricity packages at very advantageous prices (renewable energy, especially wind energy, is the cheapest).

What are the priority directions for Romgaz’s development for the following period? What are the sectors targeted by investments and what is the average rate of equity invested? Romgaz will focus in the following period on finding onshore fields and on energy diversification. Romgaz is consolidating its position not only domestically, but also at regional level, and will focus in the following period on two major objectives, i.e. finding onshore fields, to replace the current exploitation, and energy diversification. We have as strategic development directions: wind power, compressed natural gas, a new power plant, the discovery of new fields and, last but not least, offshore operations in the Black Sea. 29

We are interested in the present and the future and I believe that only by investing massively in large scale projects can we become competitive at regional level and a trustworthy partner in this area of Europe. In conclusion, Romgaz will take steps to fulfil both the objectives proposed in the development strategy of the company, and those in the national energy strategy, to act as a trustworthy partner in the region and, not least, act as a main player of cross-border cooperation to the benefit of all participants to the European energy market. Regional cooperation is essential to identify the best solutions and projects, especially in terms of energy security. Ensuring interconnectivity provides the possibility of developing sustainable partnerships between the EU member states.

What future projects will you include on the agenda for 2019? Are there projects/ partnerships of interest for Romgaz at European level? What signals do you have in this regard? Currently, the Project ‘Development of Sarmasel gas storage facility’ was promoted on the 3rd list of PIC (Projects of Common Interest) of the European Union by S.N.G.N. Romgaz S.A. In October 2018, steps were taken by S.N.G.N. Romgaz S.A. to be taken over by F.I.G.N. DEPOGAZ Ploiesti S.R.L. and Romgaz approved the takeover of the status of project promoter by DEPOGAZ. This was announced to the European Commission, the Ministry of Energy and ANRE.

You have a rich experience in the field of strategic planning and business flows optimization. What are, in your view, the ingredients of a successful business model on a competitive market? Indeed, with the new market regulations,

We should not forget that natural gas is the fossil fuel with the lowest greenhouse gas emissions.

which favour higher competition between gas sources, Romgaz’s business model needs to consider elements such as flexibility in decision-making in the entire chain of operations carried out, in order to continuously adapt to market conditions, as well as to explore business development opportunities at strategic level. Focusing on creating added value for the company and thus for shareholders remains a continuous concern of Romgaz in all activities carried out. Priorities are to ensure gas production in a sustainable manner, through research projects, providing quality services to customers, within and in order to reach objectives including at government level. Customer confidence, supply safety and compliance with all market conditions, competition are the decisive factors for building a long-term win-win partnership.

Not long ago, experts declared the beginning of the ‘Golden age of natural gas’ for mankind. Although gas is an important pillar of the energy mix and will still 30

remain an important energy source, there are however a number of concerns in terms of the future role of gas in energy generation, given the new targets for carbon emissions, renewable energy and energy efficiency. How do you see the role of natural gas in the future, both in Romania and globally? The role of natural gas will remain important both in Romania’s energy mix and, especially, in the global energy mix. At EU level, natural gas is a transition fuel that can support reaching the targets regarding the reduction of greenhouse gas emissions. We should not forget that natural gas is the fossil fuel with the lowest greenhouse gas emissions or, if you will, is the ‘greenest’ fossil fuel.

OIL & GAS

Natural gas - key to future power grid As the world confronts the threat of climate change, its energy mix increasingly represents a blend of sources, including renewable ‘fuels’ like solar and wind. But the sun doesn’t always shine and the wind doesn’t always blow, yet we want light at the flick of a switch. So, power producers seek out reliable ways to generate electricity that bridges the gap when the sun goes down, and helps supplant more traditional fuels like coal. Enter natural gas: It’ll overtake coal as the No. 1 power generation technology by 2025, according to a new analysis by GE Power, and will continue to hold that position through at least 2040. And as the energy mix changes, says GE, the whole electrical grid will become leaner, cleaner and more flexible.

t’s only natural: More and more, the old hub-andspoke model of power generation is being joined by a distributed system consisting of both renewables and fossil fuels. Natural gas is the cleanest-burning fossil fuel, and plants fired by it are able to throttle up quickly to meet sudden demand. Gas-fired plants are also quick to install and inexpensive relative to other sources. “As the world moves toward a combination of centralized and distributed resources, while increasing environmental sustainability and lowering the environmental footprint of the energy systems, natural gas generation technologies will serve both as a bridge to the past and the foundation of the future,” GE concludes. Installed capacity of gas-fired power plants will climb in the next two decades

as the structure of the power industry continues to shift from one based primarily on central generation resources to a hybrid system comprising both centralized and distributed resources, according to a new analysis by GE Power. The company released the report — which incorporates the latest New Policies Scenario from the International Energy Agency’s recent World Energy Outlook — at Power-Gen International, an annual summit of energy-industry professionals held on December 4-6, 2018 in Orlando, Florida. That shift to a hybrid system, along with digital innovations and the need to address climate change, means electrical grids will become more efficient and cleaner by 2040, relying increasingly on natural gas. This energy transition will also require power infrastructure and 32

markets to be more flexible in order to handle variations in the demand and supply of energy, a role natural gas power plants are increasingly able to handle. “Gas-fired power plants are the only fossil fuel technology set to grow in almost all regions, thanks to the low up-front investment cost for new plants, the increasing availability of gas and the role of gas in (power) system flexibility,” said the International Energy Agency in GE’s analysis, “Gas-Fired Generation in A Transformed Energy Landscape.” Along with solar and wind, natural gas will provide the majority of new global supply in the coming years. Over 1,500 gigawatts of new gas-fired generation capacity are expected to be added to global power networks by 2040. New gas demand will be driven by China, which will see its gas demand quadruple by 2040

OIL & GAS

under the IEA’s New Policies Scenario projection, which is based on the 2015 Paris climate agreement. China will combine with India and Southeast Asia to provide 60 percent of future energy investment. All told, IEA expects the world’s installed electric capacity to reach 12,480 GW by 2040, of which natural gas will supply 22 percent, the most of any single fuel source. Renewables and nuclear power will supply 59 percent, with coal and oil meeting the remainder of global needs.

Key reasons for the acceleration in gas plant construction • Among the reasons for the acceleration in gas plant construction is the ability of these plants to adjust quickly

to accommodate both fluctuations in demand and variable renewable energy supply. For instance, a 570-megawatt 7HA.02 GE combined-cycle power plant powering 500,000 U.S. households can start in less than 30 minutes, ramp up or down at 60 MW per minute and turn down to less than 200 MW while maintaining emissions limits. Such agility is essential to balance out variable wind and solar supply levels. The fact that gas is the most clean-burning fossil fuel — it releases about 50 percent less CO2 than coal and far fewer other pollutants — means it’s also desirable for meeting environmental objectives. • Another factor driving the demand for new natural gas plants is the fact that the up-front capital investment required for a gas plant is less than other options

per kilowatt of installed capacity. In the U.S., on average, a simple-cycle natural gas plant costs about USD825/kW, compared to USD1,100/kW for utility-scale solar, onshore-wind costs of USD1,350/kW and USD3,025/kW for offshore wind, according to Lazard’s Levelized Cost of Energy Analysis. Installing gas is also a relatively quick process compared to other generation sources — technicians can have a 30-MW simple-cycle plant shipped to a remote area and generating power within weeks. It is clear that as the world navigates the energy transition, faces the pressing need to tackle climate change and addresses the desire to provide electricity to the nearly 1 billion people without it today, natural gas will continue to be an important part of the global energy portfolio.

TURNKEY SOLUTION FOR YOUR PROJECT Complete and functional in the shortest delivery time • Fencing and security: mobile fences, guard houses, security hut, manned security 24/24, alarm system and video surveillance • Utilities: electric generators, fresh and sewage water supply, waste empty services, waste tanks • Communications: internet, data, phone, IT solutions • EHS solutions: fire extinguishers, smoke detectors, first aid kits, FPE kit, lighted signs, signs • Work spaces: offices, meeting rooms, lockers • Accommodations spaces: dormitories, canteens, laundries and dryer spaces • Sanitary spaces: sanitary units, eco toilets • Storage solutions: lighted storages, units with shelves and secure locks • Equipment: telehandler, crane, nacelle, light towers • Project management, maintenance / guarantee, delivery and installations services

SIBIU Branch Depots: Cluj, Sibiu, Timisoara No. 30 Turda Street, Sibiu, Sibiu County T: 0269.224.555 F: 0269.253.201

BUCHAREST Branch info.ro@algeco.com www.algeco.ro

Depots: Bucharest, Constanta, Iasi No. 4 Bucharest Ring Road, Magurele, Ilfov County T: 021.457.44.55 F: 021.457.46.53

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CEDIGAZ INSIGHTS Underground gas storage in the world - 2018 status CEDIGAZ, the International Association for Natural Gas, has released its ‘Underground gas storage in the world - 2018 status’. The figures show a slight increase in global working gas capacity and the readiness of the storage industry to continue investing in this key asset to support the expansion of the global gas market and accompany the trend towards more variable renewable energy sources.

t the end 2017, there were 671 underground gas storage (UGS) facilities1 in operation in the world (unchanged from the end of 2016). Only three new storage facilities were commissioned in 2017, in China, Turkey and the United States. But at the same time, some sites were closed in the

1 Some individual storage sites are grouped into storage clusters ( for instance in China and Russia). If counted as individual sites, there were 686 storage sites worldwide. Some storage facilities are inactive, mothballed or closed (41 UGS). If added, the world total was 727 UGS.

United States and Europe. The global working gas capacity has slightly increased to 417 bcm, up 0.4% from the end of 2016 (415 bcm revised). In mature markets (North America, the European Union (EU) and the Commonwealth of Independent States (CIS)), storage capacity is stagnating, or even decreasing. Thanks to additional capacity in Turkey, total European capacity increased marginally. Turkey’s Tuz Lake gas storage facility, which is expected to increase capacity from 1.2 bcm to as much as 5 bcm per year, was opened in February 2017. EU working gas capacity decreased again in 2017 (103.9 bcm at the end of 34

2017 compared to 104.4 bcm at the end of 2016), although the decline was much lower than that observed in 2016. Over the past two years, EU working gas capacity has decreased by 6.3 bcm due to the closure of storage facilities in Germany, Ireland and the UK. The temporary closure in 2016 of the Rough depleted field was confirmed as a permanent one in June 2017. This sharply reduces UK storage capacity, and notably its seasonal storage capacity. On the contrary, the storage market is driven by expansions in the Middle East (Iran) and China. The global peak deliverability rate increased to 7,251 million cubic meters

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per day (mcm/d) as of end 2017, up 1.8% from 2016. Most of the increase is due to flexible UGS in Europe and North America.

North America leads the market UGS has been developed in five regions: North America, Europe, the CIS, Asia-Oceania, and the Middle East (mostly Iran). North America concentrates more than two thirds of the sites, with 388 active storages in the US, and 62 in Canada. They have a combined working capacity of 161 bcm (38.5% of the world total), and a peak withdrawal rate of 3,781 mcm/d (51% of the world total). There are 142 facilities in Europe (107.7 bcm, 2,047 mcm/d), 47 in the CIS (119.6 bcm, 1,203 mcm/d), 28 in Asia-Oceania (17.6 bcm, 184 mcm/d), and 3 in the Middle East (11.4 bcm, 81 mcm/d). There is also one small UGS in Argentina.

China plans huge storage expansion With the spectacular rise in its gas demand in 2017 to 235 bcm, up 15% over 2016, and the rapid implementation of the coal-to-gas policy, gas shortages across China have exposed the key bottlenecks of the Chinese gas market: its still underdeveloped gas transport system and a serious lack of storage capacity, as well as a lack of adequate incentives for investment in the gas industry. The gas shortage has been a catalyst for accelerating gas market reforms and the construction of key infrastructure necessary to the continuation of the rapid development of the gas market. At the end of 2017, China had 14 UGS in 27 reservoirs. CNPC operated 11 UGS in 24 reservoirs with a combined working capacity of 17.4 bcm (designed capacity). Sinopec operated 2 UGS with a working gas capacity of 1.5 bcm (designed capacity). In addition, the first phase of a salt cavern UGS project at Jintan in Jiangsu province, owned by The Hong

Kong and China Gas Company Limited (Towngas), had been completed and commenced operation in 2017. Information about China’s effective working capacity varies but according to the International Gas Union, total working capacity reached 10.5 bcm at the end of 2017. The maximum withdrawal capacity is estimated at 151 mcm/d. Most facilities use depleted gas fields. Only a few facilities use salt caverns which require higher building costs and longer construction periods. During the four months of the heating season in 2017-18, China withdrew 7.4 bcm, an increase of 21% compared with the same period in 2016-17, and the daily withdrawal rate reached 90 mcm/d, equivalent to 11% of peak daily gas consumption. UGS accounts for only 3% of gas consumption, which is not compatible with China’s rapidly developing natural gas demand and imports. This means there is very limited ability to respond to the seasonality of gas demand or to supply issues. To tackle the lack of gas storage, the government has prioritised the development of storage infrastructure and set specific targets in its development plans. The working gas capacity of UGS is planned to be raised to 14.8 bcm by 2020 and to over 35 bcm by 2030. Although this would mark a large increase, this would still represent a tiny share of gas demand (less than 5% in 2020 and some 7% in 2030). Development of gas storage (underground gas facilities and LNG tanks) and peak shaving mechanisms are the key focus in easing seasonal infrastructure bottlenecks. CNPC has vowed to raise its total working underground gas storage capacity to 15 bcm by 2025 (11 bcm in 2020), able to meet 10% of the peak seasonal demand. CNPC will invest over USD10 billion to build seven new gas storage clusters and improve existing storage bases. The seven UGS are located at Daqing Shengping, Pingdingshan, Huai’an, Chuzhou, Liaohe Lei-61, Lujuhe at Dagang and Baiju in Zhejiang province. 35

Daqing Shengping UGS in northeast China will serve the Russia-China East Trunk Line. In addition, PetroChina Southwest Oil and Gas Field Company plans to build eight UGS facilities in three phases in the Sichuan province and the municipality of Chongqing. The facilities, with a total capacity of 21 bcm, would cost more than 21 billion yuan (USD3.3 billion). PetroChina has started building two facilities in 2018 (Tongluoxia and Huangcaoxia UGS with a working gas capacity of 1.28 bcm). Sinopec has also announced a huge development of its storage capacity, mainly in the central Henan province. In 2018, its UGS working capacity has be increased thanks to the commissioning of Wen 23 UGS. In addition to Wen 23 UGS, Sinopec plans to build 16 facilities at the site of non-operating oil and gas fields in the province, such as the Zhongyuan oilfield. The total new capacity has been reported at 55.6 bcm. The expansion of UGS will help stabilize seasonal demand and price fluctuations in the wider Asian LNG markets. However, due to the long lead time necessary to develop UGS, the new sites will not solve the immediate seasonal imbalance between supply and demand. In the meantime, the government is promoting a compulsory peak shaving mechanism for 200 mcm/d of supply, half of which would be provided by the three NOCs and the other half by local governments. The level of the peaking mechanism corresponds to 20% of future peak gas demand. The NDRC issued a decree in March 2018 requiring suppliers, distributors and local governments to build gas storage facilities for peak shaving purposes to avoid future supply cuts to industrial users during the heating season. Gas suppliers — mainly state-owned companies— will be required to have storage facilities able to meet at least 10% of their contracted sales by 2020. City gas distributors must have storage equal to 5% of their annual supplies within the same time frame and local governments will need to have enough storage to cover three days of

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consumption in their administrative regions.

Iran expects to start three new facilities shortly Natural gas is vital for Iranâ&#x20AC;&#x2122;s economy, notably under renewed US sanctions. Natural gas provided 67% of total energy supply in 2017 when gas consumption reached 209 bcm. The residential and the power sectors are the largest consumers. Natural gas demand is highly seasonal. Demand spikes in the winter months when temperatures are low and natural gas is used for heating. In January 2018, gas demand hit 550 mcm/d, well over the average range of 420 to 470 mcm/d. This regularly leads to domestic demand outstripping supply. In response, industrial consumers have repeatedly been cut off from supplies to ensure households are provided with enough natural gas. To overcome the seasonality issue and optimize its gas transmission system, Iran has embarked on a huge UGS storage development. Iran expects to bring its UGS capacity to 14 bcm by 2020 and the peak withdrawal rate to 120-130 mcm/d. In the longer term, about 10 percent of the countryâ&#x20AC;&#x2122;s annual gas consumption should be stored in UGS facilities. At the end of 2017, Iran had two UGS in operation, with a working gas capacity of 8.1 bcm and a withdrawal rate of 76 mcm/d. The country commissioned its first UGS facility in August 2012, the Sarajeh UGS, built in a depleted gas field. Located 40 km southeast of the city of Qom and 140 km from Tehran, the facility has a working capacity of 3.3 bcm and a maximum withdrawal rate of 36 mcm/d when the full development will be completed. The project is carried out jointly by NIGC and NIOC. A second facility in a depleted gas field, the Shourijeh UGS, was commissioned in 2014. Located in north-eastern Iran, 25 km southeast of Sarakhs, the facility has a working capacity of 4.8 bcm (full development) and a maximum withdrawal rate of 40 mcm/d. Three other facilities are under

construction. The Yortsha (or Yurtesha) aquifer reservoir in Khorasan Province is expected to have 570 mcm of working gas capacity and 4.8 mcm/d of peak withdrawal capacity. The Nasrabad UGS, near Kashan, built in salt domes, will have 2 bcm of working capacity when fully developed. Construction started in March 2013. Studies on Ghezel Tapeh UGS started at the beginning of 2013 and NIGC published an engineering, procurement and drilling (EDP) tender for drilling and completion of an appraisal well in Qhezel Tapeh reservoir in February 2015. The facility developed with Khazar Oil Company will have a working capacity of 1.2 bcm. When fully developed, the five above-mentioned facilities will be able to store 11.9 bcm. In addition, several other storage facilities are planned in the country (Babaghir/Bankul UGS in Ilam Province, Mokhtar UGS in Kohgiluyeh and Boyer-Ahmad province and Ahmadi UGS in Fars). Studies are also underway for the construction of a storage facility at salt dome in Kashan, Isfahan Province.

in 2012 favouring the development of storage. Austria is also among the Top Ten storage-holders thanks to the completion of the Haidach expansion and the commissioning of the 7Fields UGS in 2013. In terms of deliverability, the US and Russia remain the leading countries with withdrawal capacities of 3,344 and 808 mcm/d, respectively. Germany ranks third with 668 mcm/d.

Historical evolution: the growth continues its slowdown Global working gas capacity has increased significantly since 2010 (+67 bcm, or +19%). All regions participated in this growth until 2015. However, since 2015, the growth has moderated and even reversed in some regions. Asia-Oceania and the Middle East are the only two regions where growth in storage capacity is still significant. In Europe, only Turkey is building substantial storage capacities. The stagnation of storage capacity in mature markets has occurred despite the increase in their gas consumption.

Top Ten league

Depleted fields dominate, but UGS in salt The United States is by far the most caverns is key to deliverability

important country in terms of installed working capacity, with 134 bcm out of a global volume of 417 bcm. Together with Russia and Ukraine, with respectively 72 bcm and 32 bcm of working capacity, Canada and Germany (26.5 bcm and 24 bcm respectively), these five countries concentrate 70% of the worldwide capacities. Italy, with 18.4 bcm of working capacity, remains in the sixth place, while France ranks seventh. Major changes have occurred since 2010: The Netherlands, China and Austria have entered in the Top Ten league. The Netherlands entered the league in 2015, following expansion of storage sites associated with the Groningen field and the commissioning of a large seasonal field (Bergermeer). China also entered the league in 2015 as several new storage facilities were commissioned in 2014 and 2015, following the policy adopted 36

The breakdown of underground gas storage by type of storage shows the dominance of depleted fields, which allow storing large volumes of gas and are mainly used to balance seasonal swing in gas demand. With 492 facilities in the world, depleted fields represent 73% of the total number of sites and 80% of global working gas volume. However, market liberalization has brought some important changes in the gas storage market. Today, flexibility is a key asset in liberalized markets. This trend can be seen in the growing importance of salt cavern storage in North America and Europe. This type of storage allows high injection and withdrawal rates, and the working gas can be cycled several times per year. At the of end 2017, 104 salt caverns facilities were in operation in the world (76 in 2010), representing 15% of the world

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total. Although salt caverns account for only 8.5% of global working gas capacity, they can be rapidly cycled, and they deliver up to 25% of global deliverability. A closer look on the type of facilities in operation in the world reveals important disparities from one region to another. Even if porous reservoirs (depleted fields and aquifers) largely dominate the total number of storage facilities in all regions, their share falls to 65% in Europe, where salt caverns represent a higher proportion than in other regions. Conversely, the CIS holds only three salt cavern facilities, AsiaOceania only four and the Middle East none.

Storage projects The capacity currently under construction has significantly increased in 2017, following major projects announced in China. At worldwide level, there are 45 storage projects2 under construction adding 38 bcm of working capacity (compared with 25 bcm at the end of 2016). This includes 16 new storage sites (17 bcm) and 29 expansions (21 bcm). Despite the lower number of projects under construction compared to past yearsâ&#x20AC;&#x2122; reports (48 projects in 2016 and 58 projects in 2015), the numerous projects in China have revitalized the storage market. China alone accounts for half of the capacity under construction. All other regions, but Central and South America, participate in the additions to storage capacity. It is worth noting that Europe ranks second, but capacity under construction is concentrated in Turkey, where expansion of current storage sites and a large new project will significantly increase storage capacity by 2023. Most of the projects under construction in the world will be completed by 2020/25. The shift of storage investment to new emerging and growing gas consuming countries (mainly China and Iran) has continued with the

2 Each phase of a multi-phase storage expansion is considered as one UGS project (when such information is available).

two countries now representing almost 60% of all capacities under construction. Additions to withdrawal capacity are largely dominated by Europe reflecting the focus towards highly flexible storage in the region. By type of storage, salt cavern projects dominate in mature markets, while storage in depleted fields dominate in emerging markets. There are only two UGS in aquifers currently under construction (in Russia and Iran). Environmental issues make their construction more difficult and their relative low flexibility makes them less suitable to market needs in liberalized markets. Salt caverns projects represent almost 40% of projects under construction (17 projects). Most of them are built in Europe (mainly Turkey), but emerging markets (China, Iran) are also building this type of UGS. The working capacity (12.2 bcm) of salt caverns projects accounts for 32% of the total capacity under construction and their combined withdrawal rate for 47% of the total deliverability.

Identified projects would add 64 bcm, but remain uncertain At worldwide level, there are 97 identified projects at different stages of planning (planned and potential). If all built, these projects would add 64 bcm of working capacity. Altogether, there are 142 projects under construction, planned or potential, totalling 101 bcm of working capacity. This figure shows the readiness of the storage industry to continue investing in this key asset to support the expansion of the global gas market and accompany the trend towards more variable renewable energy sources. However, the figure is much lower than in 2013 when 236 projects totalling 153 bcm of working gas capacity were either under construction or identified. This is due to two factors: in mature markets, numerous projects have been put on hold or even cancelled. In new and growing markets, there are numerous projects, but they are not identified precisely. 37

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Lubbers is changing Lubbers Logistics Group expands products and services portfolio Lubbers Logistics Group, one of Europe’s leading players in specialized transport and logistics for the Oil & Gas industry, is expanding its services to other complex industrial sectors. At the same time the company launches its global project services division with Lubbers Global Freight. What started as a regional road transport business in 1929, has grown into a renowned company with 14 international facilities across Europe, recently adding Amsterdam Airport Schiphol.

Global growth and service differentiation To consolidate its position and guarantee future growth, Lubbers broadened its focus. Whilst continuing to build their presence in upstream O&G transport, they expand their services for specialized transport and logistics to other complex sectors. The aim is to capitalize on their strong knowledge base and experience as an operator by offering project-based global freight solutions. This service is sold in conjunction to their European road network and with an active search for partnerships with the forwarding & logistics industry Lubbers wants to offer maximum added value to their customers.

New branding and brand structure to match clients’ needs Lubbers updated and refreshed its branding to reflect the way they tailor

services to their clients’ needs. As part of their repositioning Lubbers introduced three labels, each with a separate and recognizable new logo: specialist Road Transport throughout Europe, Global Freight services and a Projects & Services unit offering expertise and personnel for extraordinary logistics.

Value added services Modern transport and complex global logistics go beyond knowing the best routes and connections. It’s also about rules and regulations, the right equipment, safety requirements, paperwork, project management, etcetera. Whatever the need, Lubbers can help with any or all of the following services: Customs. The knowledge and expertise to arrange all customs formalities. Dangerous goods. Trained and equipped for global DG movements. 38

Lifting & hoisting. The equipment and trusted partners to lift your heavy stuff. Packaging. Professional packaging to ensure smooth transits and safe delivery. Route surveys. Lubbers clears the way for out of gauge. Storage & handling. All locations: long opening hours, handling equipment (such as 16T forklift trucks) and safely secured (AEO). Out of gauge. Specialized in unusually large transport. Permits & escorts. Carefree passage for any transport.

QHSE, simply part of Lubbers’ DNA Lubbers grew its business in a market with extremely high Quality, Health, Safety and Environmental standards: the oil & gas sector. This is reflected in the certifications Lubbers holds: ISO 9001, ISO 14001, OHSAS 18001 and AEO.

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Road Transport Lubbers Road Transport takes care of all road transport. No matter how urgent, dangerous or exceptional the goods, Lubbers knows how to get them where they need to be. Standard, dangerous and exceptional transport with hotshot, urgent or groupage services. Lubbersâ&#x20AC;&#x2122; network covers Europe, with 18 support bases in 8 countries and a vehicle fleet that consists of 156 trucks and 360 trailers.

Projects & Services Excellent logistics is about so much more than moving things from A to B. As global experts in complex logistics Lubbers Projects & Services have the specialist knowledge, people and equipment, even for the most extraordinary projects: turn-key onshore rig moves, carefree pipeline logistics, staffing and pay rolling, expert consultancy and offshore container rentals.

Global Freight Every sector and every activity has specific requirements for global logistics and freight forwarding. Lubbers Global Freight tailors end-to-end solutions to meet the specific business goals of its clients. Global Freight delivers complex, dangerous and out of gauge cargo to any place in the world with an extended global network, regional knowledge and personal & flexible approach.

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Innovative non-toxic solution Revolutionising oil & gas tracing and tagging 40

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dvances in technology are removing the need for harmful tracer chemicals in upstream oil and gas exploration and production. New non-toxic tracing and tagging solutions feature unique spectral signatures, can be detected even in extremely low-level concentrations, and are suitable for subsurface applications. Uzi Breier, CEO of ASX-listed tech company Dotz Limited (DTZ), said the company’s innovative tracers and taggants offer a cost-effective and environmentally-friendly alternative to

highly toxic fluorescent and radioactive dyes. “Our Fluorensic tracers are watersoluble, resistant to photo-bleaching and can detect reservoir and formation damage, hydrocarbon flow paths and water dilution effects, without the potential risk of harmful chemicals or chemical presence in formations,” he said. “Tracers are the only sure way of measuring where injected water goes within the reservoir, tracking flow paths and detecting unflushed areas. Our Fluorensic tracers are useful for quantifying contamination of downhole formation fluids, measuring reservoir production and identifying optimisation targets.” Improved or Enhanced Oil Recovery (IOR/EOR) projects based on tracer survey results can then remodel the reservoir or reengineer wells and completions to optimise production. The emission spectrum of any specific Fluorensic signature used in injection fluids can be detected in tested flowback water measured at the wellsite using portable lab. Fluorensic is visible to the naked eye under UV light at 1ppm saturation. More diluted concentrations are visible using a portable lab kit. “The signature of injected water is unique, so it positively identifies the source of water at the injection well or completion point. The retrieved injected water from any given well in the reservoir therefore reveals the unique spectral signatures and concentrations of Fluorensic when tested in the portable lab, helping to determine flow paths within the reservoir from injection points,” Breier added. Breier also mentioned that the company’s tracers can also be inserted into the injected frac water used for cracking tight reservoir rock or shales and for the transportation of proppant that hold the fractures open. Dotz has demonstrated the benefits of its Fluorensic tracers in a successful field trial in Payne County, Tulsa Oklahoma, where its tracers were added to fracking fluids that were injected into a well. Despite extreme pressure and temperatures, Fluorensic tracers were clearly detected in parts per billion (PPB) 41

levels and in real-time with the company’s in-field detector. Dotz’s cloud-based InSpec portable readers are mobile phone-friendly and, in a world-first, allow for immediate on-site results, rather than needing to wait three days for a lab. When implemented into thousands of wells, real-time results offer substantial cost and time savings which can often mean the difference between whether a drill-hole collapses or blocks up or not. “Fluorensic is unique in its ability to remain stable in all downhole environments and can withstand pressure and temperatures of up to 300 degrees. It does not absorb or damage the reservoir formation, nor does it cause any negative impacts to the environment.” Meanwhile, the company’s ValiDotz taggants are ideal for use in midstream and downstream areas. The nontoxic taggants can be inserted directly into crude oil and oil-based derivative products, making them ideal for security or product integrity in downstream shipping, transportation and points-ofsale. ValiDotz have distinctive molecular signatures with four layers of security colours, colour combinations, patterns and forensics – and cannot be reverseengineered. “The company’s markers do not affect the properties or appearance of the tagged product and can be easily integrated into existing processing , requiring minimal investment in equipment,” Uzi Breier underlines. ValiDotz offers product identification certainty for manufacturers as well as protection from dilution or counterfeiting. With almost infinite encoding combinations, a signature can be created for every client, batch or lot number. Dotz is initially targeting the US market with its end-to-end tracer, taggant and world-first, instant on-site verification solutions, which is home to more than 13,000 fracking drills. Other key markets for Dotz’s Fluorensic and ValiDotz products are Australia, Canada and China.

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Government links gas prices in Romania to Vienna exchange New legislative amendments to discourage investors After less than five months since the promulgation of Law no. 7/2013 on the establishment of the tax on windfall gains obtained as a result of price deregulation in the gas sector, the Executive plans to amend it. Driven by the desire to bring more money to the budget, the outcome of this approach could prove to be a fatal choice in the long run. The measure will generate a significant increase in gas prices, as it forces onshore gas producers to pay higher taxes and duties to the state budget, and these additional costs will be transferred in gas prices.

Text by Adrian Stoica 42

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n early December 2018, the Committee for Industries and Services of the Chamber of Deputies issued a positive opinion for a legislative initiative, belonging to the president of the committee Iulian Iancu, which proposes in essence the extension of the offshore gas taxation system to the onshore segment. The new initiative, which proposes a series of amendments to the Government Emergency Ordinance no. 25 of 30 March 2017 amending the annex to the Government Emergency Ordinance no. 7/2013 (which in the meantime became Law no. 7/2018) establishes that the tax on windfall gains, obtained as a result of price deregulation in the gas sector, will be calculated at the reference price of gas on the spot market in Austria, thus ignoring the actual price at which gas extracted in Romania is sold on the domestic market. Also, the proposed amendments eliminate the deduction of royalty and limits the deductibility of investments recognized in the calculation of the windfall tax.

“Deductibility of royalty, an error” While in terms of elimination of deductibility of royalty the measure is correct, because otherwise what would be the reason of paying this tax to the Romanian state, the remaining amendments are questionable. “The approach regarding the Offshore Law should be a unitary approach, meaning that we cannot allow a double deduction. We

allow the deduction of investments, but we don’t allow the deduction of royalty. In my opinion, the deduction of royalty is against the reason of introducing the royalty as payment, as tax. In the end, the royalty, after we fought over it, that it is high, that it is too low, in the end it is us who pay it,” deputy Iulian Iancu said during the debates in the Committee for Industries and Services. He believes that the deductibility of royalty is an error.

Additional costs, transferred in bills According to the current regulations, all taxes applied to natural gas extracted in Romania are paid at the reference price established by National Agency for Mineral Resources (NAMR), and it takes into account the reference price in Baumgarten. This is a unique situation globally, in which the reference price of gas is calculated based on transactions made in another country where there are no deliveries of gas extracted in Romania. According to Deputy Virgil Popescu, member of the Committee for Industries and Services, this is Gazprom’s price, but it also includes storage services. “Through this method of calculation, we pay a price dictated by Gazprom. It will clearly lead to pressure on costs and invites producers in our country to increase prices,” Virgil Popescu said.

Undermining energy security, a way too high risk On the other hand, the signal of unpredictability sent to the market 43

through this amendment should also be discussed, after the Onshore Law had been promulgated in July this year. But after less than five months, it is planned to amend it, generating a major impact on economy and population. Creating another fiscal framework will create difficulty for companies that hold onshore petroleum concession agree ments concluded with the Romanian state, thus straining the investment climate. We are talking here about investments of billions of dollars in the medium and long term which will most likely be postponed under these circumstances. The Romanian state will reach in the end the conclusion that what goes around comes around, because the direct effect of reducing investments will be a significant decrease in gas production. In conditions in which currently the domestic production, coming from onshore fields, covers around 90% of domestic consumption, postponement of investment projects will result in a diminishing of Romania’s energy security, with all the adverse effects that come from here - increased imports and especially returning to reliance on Gazprom. A way too high risk for any Government.

Unbearable effects for economy and industry According to an analysis of the Oil and Gas Employers’ Federation (FPPG), linking taxation to the reference price on the Vienna exchange would have

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dramatic effects for the Romanian gas extraction and processing industry. Thus, taking into account the reference price in November 2018 - of RON 121/MWh and the average price of RON 90/MWh on the Romanian Commodities Exchange for deliveries in November 2018, the effective tax rate of windfall gains is 640%, according to calculations made by the Oil and Gas Employers’ Federation. Thus, at a windfall gain of RON 5, companies are forced to pay a tax of RON 32. The calculation shows that, by taxing a windfall gain determined in an arbitrary manner by linking it to a reference price that is not realized by producers on the domestic market, the Government forces the increase in prices for consumers. According to the KPMG study, “Impact of the onshore oil and gas exploration and production industry on the Romanian economy”, one billion euros invested in the onshore Upstream segment generates taxes and duties to the state budget of EUR 1bn, contributes to creating or maintaining 45,900 jobs and has an impact of EUR 3.2bn in the GDP. The expected amendment of the fiscal legislation will bring in the short term more money to the state, but as an adverse effect it will determine the loss of a large number of jobs, the decrease in revenues to the state budget in the medium and long term and will endanger Romania’s energy security. Last but not least, it will lead to an increase in gas prices due to a reduction in investments and, consequently, in production.

Benefits for the state In turn, Wood Mackenzie points out that Romania already has the highest level of the state’s benefits rate (67%) of gas production, compared to other European states. Proposals to change the tax regime for onshore gas could lead to an increase in the state’s ‘rate’ to over 100%, which would make the onshore gas projects unfeasible.

Uncompetitive fiscal regime The Romanian Petroleum Exploration and Production Companies Association (ROPEPCA) believes that the proposed fiscal amendments hit both the Romanian gas extraction and processing industry and energy consumers. “Today, the entire gas production of Romania, which ensures an energy independence of over 90% from imported gas, comes from onshore fields. Changes to the fiscal and regulatory framework of the upstream onshore industry, unexpected and excessive in recent years, only endanger the domestic petroleum industry, as well as the investment climate, sending negative signals to the entire business environment on the lack of stability and predictability,” according to the President of the Association Saniya Melnicenco. According to an analysis conducted at the level of the association, the effects of the proposed fiscal amendments will lead to discouraging investments, a decrease in domestic production and increase in gas prices. On the other hand, “through the expected amendments, which determine a further increase in the tax burden, Romania becomes the country with the least competitive tax regime for the onshore gas sector in Europe. Such an uncompetitive fiscal regime will determine a significant decrease in investments in Romania. Without massive investments, the domestic gas production will continue to drop and Romania will be forced to rely on imports, which will lead to a reduction in energy security and will affect the balance of payments,” the representatives of ROPEPCA also warn; the association brings together 15 of the most important titleholders of onshore petroleum concession agreements concluded with the Romanian state.

Transgaz’s program could be put on hold Transgaz has announced that it would start an ambitious development program aiming at the construction of over 3,200km of pipeline connecting all localities of the country to the national gas system and subsequently to the distribution network, to help relaunch investments in the country. 44

In December 2018, the largest tender of this year in the country was launched, a tender worth around EUR 300mln for the construction of Tuzla - Podisor pipeline, which will take over Black Sea gas. This is the pipeline that will take Black Sea gas to Podisor station, in Giurgiu County, and this gas will be consumed domestically. For now, the reluctance of companies that hold exploration licenses in the Black Sea to continue investments due to the fiscal framework adopted through the Offshore Law (which at the initiative of Deputy Iulian Iancu will also apply to onshore production) could keep rural Romania captive to wood heating for a long term.

Could the Offshore Law be amended as well? The Committee for Industries and Services of the Chamber of Deputies wants an article of the Offshore Law reworded, as it allows loopholes for exemption from the higher taxation. For this purpose, the Committee has sent several letters to the Standing Bureau of the Chamber, requesting the rewording of an article of the law. “Titleholders of petroleum agreements regarding offshore petroleum blocks in progress on the date of entry into force of this law shall benefit, during their performance, from the level of royalty, percentage rates of petroleum royalty, thresholds of gross production related to these rates and the specific fiscal regime applicable to exploration, development, exploitation and abandonment activities carried out under the agreements existing on the date of entry into force of this law,” reads the article that the deputies of the committee would want rephrased. “You cannot afford to throw in the trash 15 billion when you need money for research, education etc. Therefore, we will resume the letter, the plenary sitting has decided taking note that it is frozen (the taxation level - Ed.) and it resulted that it is exempted (in the final form sent for promulgation - Ed.). If we take it to the extremes, we take it to the criminal phase,” Iulian Iancu has stated. We will return with information as the situation evolves...

OIL & GAS

EIB supports extension of Romania’s natural gas transmission infrastructure T

he European Invest ment Bank (EIB) is len ding EUR 50 million – the first tranche of an approved loan of EUR 150 million – to Transgaz, Romania’s public gas transmission company, to finance a new pipeline. This transaction is backed by the European Fund for Strategic Investments (EFSI), the financial pillar of the Investment Plan for Europe, or ‘Juncker Plan’. The new pipeline will link Romania’s natural gas resources on the Black Sea shore with both the national gas transmission network and the BRUA gas transmission corridor (linking Bulgaria, Romania, Hungary and Austria), thus connecting the transmission systems of South-East Europe and Central and Western Europe. This connection to the European gas transmission grid will allow gas exports to neighbouring European countries. This project involves the construction of a new 308 km-long transmission pipeline, along with the associated aboveground infrastructure. The new pipeline will be connected to the existing gas transmission system and the new BRUA transmission corridor in Podisor, located at the west of Bucharest. As part of the project, the EIB, via the European Investment Advisory Hub,

which is the advisory pillar of the Juncker Plan, will support Transgaz in drafting a Strategic Environmental Assessment for its 10-year Development Plan. “I welcome this new project supported by the Investment Plan for Europe, as it will help achieve greater energy security and diversification in the region, already characterised by severe vulnerability to its gas supplies. It is yet another brick in the construction of our Energy Union, making energy in the EU more secure, affordable and sustainable. This is also great news for consumers, who will eventually see their gas bills decrease,” European Vice-President in the Commission’s Vice-President in charge of the Energy Union, Maroš Šefčovič, said. “This project, supported by the Juncker Plan, is significant for to multiple reasons: it will facilitate the utilisation of newly identified natural gas resources in the Black Sea, located in the EU. It strengthens links with the Western European gas transmission network and hence, contributes to the diversification of gas supplies. Finally, it will strengthen the competitiveness in the gas sector with positive impacts on EU citizens and economy,” EIB Vice President Andrew McDowell commented. Transgaz’ Director General, Ion Sterian, stated: “The fruitful cooperation between the European Investment Bank and Transgaz aims at ensuring financing for the company’s investment projects, i.e. strategic 45

investments facilitating the achievement of the European Union’s goals for the sustainable and competitive development of gas transmission infrastructure, the diversification of gas supply sources, and the strengthening of energy security and solidarity. Last year, the EIB signed two financing contracts with Transgaz, worth EUR 50 million each, for the implementation of the first phase of the project of common interest (BRUA). It is of strategic importance for Black Sea produced gas to be incorporated into the National Gas Transmission System and transported to the Romanian and EU markets so as to increase the security of gas supply to Romania and the EU and to safeguard the security of gas supply for Romanian consumers. The financial support of the EIB will contribute significantly to the extension of the national gas transmission infrastructure.” This project represents a continuation of the fruitful cooperation between the EU bank and Transgaz. Earlier in 2017, the EIB signed two contracts with Transgaz – for EUR 50 million each – also receiving EFSI guarantees for financing the first phase of the Romanian sections of the BRUA project. In December 2018, the Juncker Plan had already mobilised EUR 371.2 billion of additional investments, including over EUR 2.7 billion in Romania, with 856,000 small and medium businesses set to be nefit from improved access to finance.

OIL & GAS

Over USD 100mn by 2021 Petrotel-Lukoil continues technological investment for modernization The new CEO of Petrotel-Lukoil, Aleksey Kovalenko (who took office on 1 December 2018), has recently made public the most important investment decisions of the company for the following period. Thus, by 2021, the Ploiesti-based refinery will benefit from other approximately USD 100mln, amount allocated to projects aimed at reducing operating costs and optimizing technological processes, with a positive impact on the environment.

Text by Daniel Lazar

OIL & GAS

“Petrotel-Lukoil is one of the most performing refineries of Lukoil Group. Since our arrival in Romania, in 2005, we have invested about USD 600mln, of which USD 120mln only in environmental protection. We will upgrade the coke plant, a project of USD 71.8mln to be completed in 2021, and we will build a new sulphur recovery complex, for which we will allocate USD 29mln, with completion deadline in 2021. We will also consider the optimization of technological processes,” Aleksey Kovalenko said. For the following stage, in addition to the current re-equipment (mounting double sealing of dynamic equipment, continuation of double sealing or internal membrane tanks etc.), the refinery aims to invest in two major projects that will have a positive impact on the ambient air: the modernization of the coking plant, a project that will reduce to zero

process emissions; the construction of a new sulphur recovery complex, which will basically reduce to zero accidental emissions of sulphur oxides in the event of technical incidents or failures. Consistent with the objectives of European refineries, Petrotel-Lukoil will focus on optimizing technological processes by: • Reducing energy consumption (re duction of steam consumption/ losses, by eliminating leaks, replace ment of dynamic equipment with other high efficiency ones, replace ment of steam tracing with electric heat tracing, energy integration of technological processes etc.); • Reducing the consumption of catalysts, chemicals and additives by implementing and using the most efficient FCC catalysts, catalytic

reforming, hydrofining etc.; Regeneration of hydrofining catalysts used in the refinery. A new meeting within the Public Dialogue series of Lukoil company in Romania took place on 11 December 2018 at the Prahova Chamber of Commerce and Industry (CCIPH). This time, the theme was “Transparency in communication, for an effective collaboration, to the benefit of community and business environment”. “At the end of last year, Lukoil recorded the largest turnover at industrial level in Prahova County, of over USD 1bn. Petrotel-Lukoil is the largest exporter in the county and an important member of the Prahova Chamber of Commerce and Industry, having an active presence in the life of the local community,” Aurelian Gogulescu, President CCIPH, said.

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ENVIRONMENT

Are they real? COAL-EXIT PLANS FOR EUROPE AT COP24 After less than five months since the promulgation of Law no. 7/2013 on the establishment of the tax on windfall gains obtained as a result of price deregulation in the gas sector, the Executive plans to amend it. Driven by the desire to bring more money to the budget, the outcome of this approach could prove to be a fatal choice in the long run. The measure will generate a significant increase in gas prices, as it forces onshore gas producers to pay higher taxes and duties to the state budget, and these additional costs will be transferred in gas prices. The first to be affected are precisely household consumers, which could see their bills going up by around 15%, specialists estimate. 48

ENVIRONMENT

y signing the Paris Agree ment, the European Union has joined the international community in officially committing to the goal of limiting global warming to “well below 2°C and to pursue efforts to limit temperature increases to 1.5°C above pre-industrial levels.” For the EU to achieve this goal, it will need to rapidly decarbonise its power sector. A significant portion of the EU’s emissions comes from coal, particularly coal-fired power plants, and phasing out coal in the electricity sector is one of the most costeffective methods to achieve emissions reductions. Reducing coal usage will also provide significant benefits in terms of air quality, health and energy security. The EU has over 300 power plants (as of July 2016) with 738 separate generating units. These are not evenly distributed across the individual member states and those most reliant on coal are Poland, Germany, Bulgaria, the Czech Republic and Romania. Poland and Germany alone are jointly responsible for 51% of the EU’s installed coal capacity

and 54% of emissions from coal. Continued use of coal for power generation is not compatible with sharply reducing emissions and the EU needs to develop a strategy to phase out coal at a faster rate than it is currently doing. According to modelling completed by Climate Analytics, the EU will exceed its Paris Agreementcompatible emissions budget for coalbased electricity generation by 85% in 2050 if all existing coal-fired power plants continue operating to the end of their full life span. If currently announced and planned plants are built in the coming years, this number will rise to almost 100%. For the EU to remain within its carbon budget, member states must first shelve plans for any additional coal-fired generating capacity and secondly, must start actively shutting down currently operating units at an increased rate. Analysis suggests 25% of currently operating coal-fired power units need to be shut down by 2020, rising to 72% by 2025, before a complete shutdown by 2030. 49

EU current policies and coal phase-out Many EU countries have already announced their intention to phase out coal in the electricity sector in the next decades (CAN EUROPE, 2015): The United Kingdom and Austria aim at phasing out coal by 2025, France has announced the shut-down of its last coalfired power plant by no later than 2023, Finland and Portugal in the 2020s, and Sweden has announced fossil fuels phaseout in the next decade. Even though the German Climate Action Plan 2050 does not include any deadline for coal phaseout, it includes a target of close to halving emissions from the power sector between 2014 and 2030. This can only be achieved with the closure or decreased utilisation of a number of coal-fired power plants. In fact, the EU has seen a massive retirement of coal-based power generation units in the last years, with Germany and United Kingdom advancing particularly fast. In the last decade, a total of 272 coal-based power generation units with a combined capacity of around 52 GW were retired in the EU. Most countries with a phase-out plan in place (e.g. France, the UK) require little

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if any effort beyond current measures to implement the least-cost retirement schedule. Countries heavily reliant on coal, however, need additional regional and national measures to achieve the steep decline in coal generation that is required in the next decades.

Developing a coal-exit strategy Climate Analytics developed a methodology to determine a phase-out schedule for coal power plants in the European Union. The critical question is: which criteria should determine when individual units are switched off ? From an Earth’s atmosphere perspective, this choice is irrelevant as long as emissions are being reduced at the pace required. However, from the view of the policy makers, plant owners and other stakeholders, this is a decisive point. Climate Analytics study suggests two possible strategies for how the EU could achieve a complete phase out of coal use in electricity generation, proposing a shutdown date for each coal-fired power generating units. Both methods evaluate units on emissions performance and profit generation potential. The first approach, a so-called Regulators Perspective, prioritises shutting down the most carbon intensive plants first, whereas the second approach, the Market Perspective, prioritises shutting down the least valuable plants in terms of revenue generation potential.

Katowice hosting COP24 The city of Katowice grew out of the discovery of rich coal reserves in the area in the mid-18th century. Since then, Katowice and its surrounding areas have turned into a major coal production centre, home to around half of all the coal workers, and the biggest coal company, in the European Union. The irony of a coal city hosting a summit on climate change isn’t lost on Joanna Flisowska, a coal policy coordinator at Climate Action Network

(CAN) Europe. Instead, she sees it as an opportunity to take a stand. “We can be such a bright example for the transition away from coal if only we could put effort into using these opportunities,” she stated at the climate talks. The burning of coal accounts for almost half of global energy-related carbon dioxide emissions. And Poland generates 80 percent of its energy from coal. It’s the 10th-largest consumer of the fossil fuel in the world, and the second-biggest in the EU, after Germany. So, it was little surprise that the Katowice summit’s host, Polish President Andrzej Sebastian Duda, stated in his opening speech on December 3 that his nation’s dependence on coal doesn’t go against global efforts to combat global warming. “The use of our natural resources, that is coal in case of Poland, and relying our energy security on these resources isn’t contradictory to climate protection and to the progress in the area of climate protection,” he said. Duda added that there were no immediate plans for Poland to stop burning coal. “Experts point out that our supplies run for another 200 years, and it would be hard not to use them,” he explained. Duda also mentioned that Poland was able to reduce its greenhouse gas emissions by 30 percent compared to the baseline year of 1988 by using technology to reduce emissions emitted from coal. “We’ve been able to ensure energy security and the development of the industry based on efficient coal technology. Poland presents a good example of a country following a sustainable development path because over the years, emissions from our economy have been falling and we have been recording constant growth of GDP at the same time.”

Germany’s coal exit commission to extend its work to 2019 Germany’s task force on planning the definite phase-out of coal-fired power production has scrapped plans to present a decision before the end of 2018. Several days after three eastern German federal states had demanded better and more detailed plans to support coal mining 50

regions, the so-called coal commission has decided to “conclude its work on 1 February 2019”. “That’s good and right. The pressure from the eastern German states – which are most affected – was necessary and obviously successful,” State premier of Brandenburg Dietmar Woidke welcomed the decision to extend the work to 2019. The task force set up a working group from its ranks to draw up further concrete proposals for coal regions and to hold talks on these with both the federal and state governments, the commission said in a press release. A new government report detailing Germany’s failure to cut emissions increases pressure on the country’s coal commission to agree on a speedy phaseout plan. Its members enter a critical stage as they focus on tangible proposals.

Romania’s position at COP24 Present at COP24, the Romanian delegation, headed by Deputy Prime Minister and Environment Minister Gratiela Gavrilescu, supported the position of the world states engaged in setting out measures to achieve the objectives of the Paris Agreement. “It is an extremely important meeting to determine how the Paris Agreement will be implemented. While, in 2015, in Paris, the world states decided major objectives for the common fight against climate change, in Katowice, still together, we determine what concrete measures the international community has to take,” Minister Gratiela Gavrilescu said. Within negotiations, our country aligns with the position of the European Union, which supports the adoption of measures to meet the ambitious targets assumed at the time of signing the Paris Agreement. Romania has a strategy to combat climate change for a low-carbon economy and climate change policies and actions are interconnected and designed to ensure sustainable development, the Ministry of Environment informs. “In 2019, during the presidency of the EU Council, our country will be the flagship of the

ENVIRONMENT

significant, rapid decrease in renewable energy costs. Even though wind and solar 20 Gross domestic consumption energy come with their own challenges, ... Share of lignite mainly related to weather dependency, Power plant input a number of options, like storage, grid ... Share of lignite 15 development or dispatchable renewables, exist to cope with these issues. At the same time renewables come with the benefits of being inexhaustible and scalable thus 10 allowing completely new business models and leading to job creation, including in areas which will be affected by coal phaseout. 5 The role of coal has already been decreasing in almost all EU member countries and this trend is set to continue, independently from any attempts at coal 0 1990 1994 1998 2002 2006 2010 2014 phase-out. With the increasing market penetration of renewables and resulting Coal use (hard coal and lignite) in the European Union. Source: Eurostat, Climate Analytics calculations decrease in their price, investors in coalfired power plants are facing difficult WORLD Scenarios to mobilize funding sources for times ahead. Furthermore, they have fight against climateEmissions change at European level. 70 developing countries, technology to deal with the challenge of stricter air It is becoming increasingly clear that we must transfer, and increased capacity of quality standards and rising opposition strive to balance the needs of communities 60 of people affected by the new open pit these states to adapt to climate change. and the need to live on a healthy planet. This NO POLICY mining. The impact of these measures is The United Nations Climate Change means implementing clear measures and 50 AGREEMENTS (COP24) was held during clearly visible in the decreasing number of equal efforts in both directions: both reducing ConferenceCANCUN Hold warming belowin2°CKatowice, planned investments. 2018 greenhouse gas emissions and adapting to 2 - 14 December 40 PARIS AGREEMENT overshoot) To remain compatible with the Paris event was aimed(with at adopting the effects of climate change,” the Romanian Poland. The warming well below 2°C, 1.5°C Limit the Paris Hold Agreement Implementation Agreement’s long-term temperature goal, Environment Minister says. 30 The key elements of the Paris Program. The official opening ceremony the coal phase-out needs to happen much of COP24 took place on 3 December faster. While policy measures already Agreement include: 20 • Operationalization of the long-term 2018, in the presence of Heads of State in place, like the EU ETS or support for 10 objective of limiting average global and Government, followed by supporting renewables, could play an important role warming to less than 2 degrees national statements and the signing of driving the EU’s transformation away 0 Celsius. At the same time, States the ‘Solidarity and Just Transition Silesia from coal if strengthened or scaled up, a coal phase-out needs to be effectively Parties will strive to limit global Declaration’. -10 complemented by additional regulations warming to 1.5 degrees Celsius; 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 that would increase its predictability • A transformation vision that will Further steps to be taken and decrease the economic, social and enable the development of lowcarbon economies in the context of The closure of most coal-fired power environmental costs of this transformation. Several governments have recognised sustainable development and poverty plants in the EU in less than 15 years is a the double climate and air pollution eradication; fundamental transformative challenge. LEAST-COST CO2 EMISSIONS PATHWAYS For coal ﬁred electricity generation • 10,000 A cycle for reviewing commitments But800such a transformation is crucial to benefits of moving beyond coal, and every 5 years that ensures World the meet the commitments made in the Paris EU have already agreed on a phase-out plan ambition and sustainability of the Agreement. Furthermore, an energy for coal (see Coal phase out status by 7,500 600 agreement; transition away from coal will avoid large European countries, November 2018). • A process of global assessment of environmental and health costs, such as air In Germany and Spain, coal phase-outs progress in meeting the targets; pollution or – in the case of hard coal and are currently under discussion. Although 5,000 400 • Other important provisions re some EU member states (e.g. Germany) – other governments do not yet have a plan to get out of coal, many governments now late to clear monitoring and report increasing reliance on energy imports. 2,500 200 ing responsibilities, but also a In recent years, coal power plant shut accept coal needs to be phased out, and are commitment by developed states down has been made cheaper by the developing their strategy on how to do this. Emissions Gt-CO2

GHG Emissions Gt-CO2eq

Energy EJ/year

EUROPEAN UNION Coal Use

2016

2030 2040 2050 2060 2070 2080 2090 2100

CANCUN AGREEMENTS Least Cost Pathway Hold warming below 2°C

2016

2030 2040 2050 2060 2070 2080 2090 2100

PARIS AGREEMENT Least Cost Pathway 51 Hold warming well below 2°C, 1.5°C

ENVIRONMENT

Decarbonisation EBRD’s new strategy for the energy sector The EBRD Board of Directors approved on December 12, 2018 a new energy sector strategy that targets the creation of an energy sector which delivers clean, secure and affordable energy for all.

he strategy for the next five years emphasises the scaling-up of investment in renewables, supporting the integration of energy systems, promoting the switch to cleaner and more resilient energy sources and facilitating electrification as a means to clean the economies where the Bank invests, which include some of the least energy-efficient and most polluting economies and cities in the world. Consistent with this direction the strategy confirms that the Bank will no longer finance thermal coal mining or coal-fired electricity generation. The Bank will also stop funding any upstream oil exploration, and will not finance upstream oil development projects except in rare and exceptional circumstances, where such investments reduce greenhouse gas emissions. The Bank will continue to support the gas sector where it is consistent with a low-carbon transition that is both secure and affordable. “Urgent and decisive steps are needed to address the challenges posed by climate change and poor air quality. This requires a

fundamental shift away from hydrocarbons to cleaner energy sources. That means the electrification of economies, including industry, transport and heating , with that electricity generated overwhelmingly from renewable sources. This is the goal that we have placed at the centre of our new energy sector strategy: to decarbonise the power sector with a decisive shift away from the most polluting fuels. Achieving this goal requires smart, integrated and resilient networks and reliance on competitive, regionally integrated and resilient markets to deliver this change. Our dual role as investors and facilitators of policy reform, coupled with our commitment to promoting environmentally sound and sustainable development, means we are ideally placed to deliver this transition,” Nandita Parshad, EBRD Managing Director, Energy and Natural Resources, stated. The new strategy sets the strategic direction of the EBRD’s investments and policy dialogue in the energy sectors of the 38 economies where it works for the period 2019-202323. It covers the Bank’s activities in two areas: electricity generation, transmission, distribution, storage and supply; and hydrocarbon 52

extraction, processing, transportation, distribution, storage and supply. The strategy focuses on the generation and supply of energy and thus complements the EBRD’s efforts in demand-side energy efficiency. The EBRD has a long history of investments (directly and through local financial institutions) and policy activities that aim to improve energy efficiency in buildings, transport systems, industry and agriculture. Rapid reduction in energy and carbon intensity in these sectors is crucial to accelerate the shift towards low-carbon and resilient development pathways. From January 2019, the EBRD is also adopting a Shadow Carbon Pricing Methodology for use in EBRD projects with significant greenhouse gas emission footprints. When considering such projects, the Bank will undertake an economic analysis that will account for key externalities, including the cost of greenhouse gas emissions. The EBRD’s approach, including the range of shadow prices it intends to use based on the highlevel commission on carbon pricing, will be made available in early 2019.

ENVIRONMENT

Romania limits its GHG emissions Text by Adrian Stoica

reenhouse gas emissions from human activity contribute significantly to global warming, and the latest report of the European Environment Agency shows that at the level of 2017, the European Union (EU) recorded an increase in such emissions compared to 2016. In Romania, greenhouse gas (GHG) emissions increased by 2.4 kilotons CO2 equivalent, which meant an increase by 2.1% compared to 2016. Compared with the data recorded in the other EU countries, plus Iceland, Romania is among the cleanest countries if we relate the quantity of emissions to the number of inhabitants. According to the mentioned report, Romania in 2017 ranked the 10th in terms of GHG emissions, with 114,897 kilotons of CO2 equivalent. Thus, we are far behind states such as Germany, France, Italy, the UK or Poland. The explanation for this performance is one that puts us in a bad light: large industrial platforms have disappeared, and the bulk of emissions now comes from the power system.

Top 5 most polluted EU countries The statistics of the European EnvironÂ ment Agency do not take into account the population of each country. In relation to this, the ranking changes and the most

affected country by greenhouse gas emissions would be Luxembourg. With a population of only 562,000 inhabitants, in this country there are 18.13 tons of CO2 equivalent per person. In the Top 5 most polluted EU countries, plus Iceland, Estonia is also included, with 15.76 tons of CO2, Ireland - with 13.16 tons of CO2, the Czech Republic with 12.42 tons of CO2, and Germany with 11.42 tons of CO2. Among the most unpolluted countries there are Slovenia with 3.42 tons of CO2 per capita, Malta with 5 tons of CO2, Sweden with 5.3 tons of CO2 and Romania, at par with Croatia, with 5.78 tons of CO2. Thus, the report of the Agency shows that Romania has a very good situation in terms of greenhouse gas emissions with 5.78 tons of CO2 equivalent per capita. But if we relate to the strongly industrialized European countries, we notice that even without the industry each Romanian receives a share close to the inhabitants of these countries. If we take Germany as example, country with the strongest economy in the EU, last year it recorded emissions of 904,745 kilotons of CO2, but related to a population of 81.2 million persons there were 11.42 tons of CO2 for each inhabitant. If we talk about France, Italy, the UK or Spain, here pollution per capita was about 7 tons of CO2, and in Austria - 9.54 tons of CO2/ capita. In Romania, most of greenhouse gas 53

emissions came from the power system - 77,877.65 kilotons of CO2 equivalent. The major industry has almost been pulverized, which can also be seen from the fact that emissions from this sector (12,850.84 kilotons of CO2 equivalent) were lower than those from agriculture (18,320.2 kilotons of CO2 equivalent). In terms of waste, Romania continues to have problems, the proof being that emissions from this segment have totalled a large amount - 5,848.21 kilotons of CO2 equivalent. Waste should be burned in a controlled manner and gas used as fuel. But in our case, this does not really happen.

Most polluted sectors EU 28 in 2017 Emissions from the energy sector accounted for about 78% of total emissions. Emissions from combustion of fossil fuels registered an increase of 20.5 billion tons of CO2 equivalent. Agriculture contributed with 10% of GHG emissions in the EU, but in this sector, emissions increased by only 1.7 billion tons of CO2 equivalent. The contribution of the industrial sector was around 9%, emissions geneÂ rated by this sector increasing by about 4.7 billion tons of CO2 equivalent. The waste sector contributes with about 3% of European emissions, but they decreased by 2.5 billion tons of CO2 equivalent compared with 2016.

ENVIRONMENT

Standardized greenhouse gas measurement ICOS to predict and mitigate climate change

COS, Integrated Carbon Observation System in Europe, announces that 15 new greenhouse gas measurement stations have been certified for standardized data production. ICOS data helps to reveal the carbon emissions and sinks on a European level. Data is essential to predict climate change and to mitigate its consequences in line with the United Nations agreements negotiated in Poland. Regional greenhouse gas measure ments are critical to understand the develop ment of climate change, and to predict as well as to mitigate its consequences. The amount of greenhouse gases in the atmosphere increases fast. This, in turn, means more heat is constantly being trapped in the atmosphere, warming it further. ICOS, a European research infrastruc ture, measures greenhouse gases in an extensive network of over 130 stations to produce science-based information for both the scientific community and for the decision makers. After more than five years of work, additional 15 stations now meet the high standards of ICOS, joining the ranks of altogether 32 certified ICOS

stations. ICOS aims to have a majority of its stations certified by the end of 2019. The standards fulfil all international criteria, for example, the ones set by World Meteorological Organization and United Nations.

Greenhouse gas data helps to steer climate change mitigation efforts “With our standardized measurement stations, we gain much more precise knowledge of the carbon emissions and sinks in Europe: of the ones produced by us people, but also of the natural fluxes of the greenhouse gases,” says Dr. Werner Kutsch, Director General at ICOS. Natural carbon fluxes affect the amount of greenhouse gases in the atmosphere as much as human emissions and may themselves be altered by climate change. In the long-term, it is important to be able to distinguish between natural and fossil fuel emissions to be able to direct the efforts in the right way. “The greenhouse gas information gathered from all over Europe is essential for national governments to improve their mitigation activities, and also for inter-governmental organisations to make informed decisions, when they seek ways to fulfil the requirements 54

set by international agreements,” says Dr. Kutsch. The Paris Agreement and the United Nations climate negotiations in Poland are examples of such agreements. The stations receiving the certificate now are located in Belgium, Germany, Finland, France, Italy, Sweden, and on a Norwegian research vessel cruising the North Atlantic Ocean. One of the German stations is Lindenberg, a station which is part of a Meteorological Observatory run by German Weather Service (DWD). Dr. Christian Plass-Duelmer, head of Meteorological Observatory Hohen peissenberg hosting these two stations for DWD says: “We are very proud to have this station approved for fulfilling the state-ofthe-art quality requirements of ICOS. This station combines two aspects: we have an outstanding experience with meteorological transport processes, which enable a better understanding of local fluxes of greenhouse gases. Furthermore, the station is located in a straight line of three ICOS stations from Helgoland via Gartow to Lindenberg. Thus, it will allow us to study the emissions of the big city areas of Hamburg and Berlin. Such information is essential for the monitoring of German and European emissions based on ICOS data.”

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ENVIRONMENT

Pollution and its hidden costs Pollution caused by coal-fired power plants affects the health status of population and on the other hand it generates costs of billions of euros, according to the environmental report named ‘Last Gasp: The coal companies making Europe sick’ published by Climate Action Network Europe with the technical support of Europe Beyond Coal, Sandbag, Greenpeace and European Environmental Bureau, on 20 November 2018.

Text by Adrian Stoica

he study reveals the hidden costs caused by coal-fired energy production companies. “Coal-fired electricity in Europe is in terminal decline. Wind and solar are taking over and making coal plants redundant, but the speed of change remains important. A rapid coal phase-out is essential to clean up our air and minimize climate breakdown. Many companies still have no plans to retire their coal plants, instead they are clinging on to them, polluting our air and making us sick,” the quoted report claims. There are 103 companies that still operate coal power plants in the EU. For the first time, this report models every company’s impact from their coal power plants on the air we breathe, and how that adversely impacts people’s health.

Using the most recent, officially reported coal power plant pollution data from 2016, this report applies stateof-the-art atmospheric modelling and methodologies to estimate the impact of these coal power plants on human health. This report finds that just ten companies were responsible for an estimated two-thirds of the health damage caused by coal power plants in 2016. These companies caused a modelled 7,600 premature deaths, 3,320 new cases of chronic bronchitis and 137,000 asthma symptom days in children. This leads to an estimated 5,820 hospital admissions and over two million lost working days. Four of the ten most toxic companies have their main coal plants in Germany: RWE, EPH, Uniper and Steag. This is no 56

coincidence: Germany burns more coal than any other country in Europe, and has done little to reduce air pollution from its coal plants in the last decade. Three of the ‘toxic ten’ are in Poland: PGE, ENEA and ZE PAK. The final three are: ČEZ in the Czech Republic, Endesa in Spain, and Bulgarian Energy Holding in Bulgaria. Coal-fired electricity in Europe is in terminal decline, the report shows. Wind and solar are taking over and making coal plants redundant, but the speed of change remains important. Many companies still have no plans to retire their coal plants. Those coal companies bear a significant responsibility for the health impact they have caused and are causing; decision makers have a duty to hold them accountable on behalf of their

ENVIRONMENT

citizens. Committing to an ambitious and just transition away from coal by 2030 or earlier is the only way these companies and governments can begin to address the consequences of operating coal power plants.

The 30 most toxic coal companies “The two worst companies are Germany’s RWE and EPH. They burn more coal than anyone else, they burn it in highly populated regions, and they burn lignite – the dirtiest coal. These results underline the urgency with which governments like Germany’s must treat this issue, and phase-out coal as quickly as possible. We have an air pollution crisis, and human health must be prioritized,” Dave Jones, Lead author of the report and European power and coal analyst, Sandbag, warns. Four Romanian companies are included in top ‘dirty 30’ list of EU coalfired power stations. These are: Oltenia Energy Complex (16th), Hunedoara Energy Complex (17th), CET Govora (22nd) and CET Oradea (28th), although in the meantime the latter - CET Oradea - gave up coal-fired production and switched to gas. The significant health costs are similar to the revenues that these companies earn for the sale of coal-fired electricity, or far above them. For example, the health costs caused by Hunedoara Energy Complex amount to about EUR 386/MWh, compared to an average electricity price of EUR 40-60/MWh in Romania.

Recommendations for companies and governments According to the study, companies must: • Stop all investment into hard coal and lignite with immediate effect. This includes not only new plants, but also means ceasing investments into existing plants. It also includes stopping all investments in new and existing mines to put an end to destruction of forests and villages, and forced relocations; • Commit to the closure of all hard coal and lignite plants by 2030 or earlier.

EU ELECTRICITY MIX INmix2017 EU electricity in 2017 (Source: Fig 1.

“The European Power Sector in 2017”¹)

Nuclear 26%

Renewables 30%

Other fossil 4% Gas 19%

Coal 21%

Source: ‘The European Power Sector in 2017’

Companies should not sell their coal plants but rather take responsibility for closing them, and closure dates should be announced to plan for a just transition; • Stop lobbying for coal; especially, to weaken and seek derogation from ‘BREF’ air pollution limits and campaign for capacity mechanisms; • Work proactively with stakeholders to speed a just transition away from coal to minimize the societal and economic impacts of coal closures; • Adopt business plans that ensure the company genuinely contributes towards compliance with the Paris Climate Agreement aim of temperature rises not exceeding 1.5°C. Governments must adopt policies to ensure companies retire their coal plants by 2030. This should include: • Transition to 100% renewables: Commit, including in the 2030 national energy and climate plans, to a rapidbuild program of renewable generation, as well as storage, demand-response, interconnectors and investment in energy efficiency; • Policies to make coal pay its way: tighter air pollution limits, higher carbon pricing, and a cessation of subsidies to coal including capacity mechanisms; • A legally-binding coal phase-out date and a just transition for affected communities and workers. 57

Europe’s slow march away from coal Since the start of 2016, 23 of the EU’s coal-fired power plants have been retired; another 22 have announced retirement dates. The transition beyond coal to a cleaner, greener and fairer energy future is gathering pace, and it is as unstoppable as it is inevitable. The coal phase-out in the EU is being directed by a range of national and EU policies designed to clean the air and reduce climate change. These include tighter air pollution targets on ageing coal plants, carbon pricing, the elimination of coal subsidies, and the rise of renewables. All these adversely impact the economics of coal plants, assuring their eventual closure. Yet despite this accelerated progress away from coal, 250 coal power plants are still operating today in the EU, polluting the air we breathe. While renewable sources supplied 30% of the EU’s electricity needs last year, a fifth of our power still came from coal (see ‘EU electricity mix in 2017’). This coal generation is roughly evenly split between hard coal (11%) and lignite (10%). The vast majority of these plants have as of yet no announced closure dates. Air pollution from coal plants impacts our health in a variety of ways. Coal’s contribution to climate breakdown is also indisputable: the coal power plants in the EU pumped 659 million tons of CO2 into the atmosphere in 2017. This was equal to 66% of the power sector’s CO2 emissions. Retiring coal plants is therefore widely seen as a ‘quick win’ for cutting carbon emissions. Most coal-burning companies, how ever, are failing to grasp the gravity of change that is already upon them, and are not retiring coal plants quickly enough. Rather than engage constructively with governments to help speed up the just transition away from coal, companies are clinging to coal and keeping their plants open, despite them being increasingly uneconomic to operate.

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Solar Decathlon in Dubai Romania’s team ranked number 4 in the world Solar Decathlon is an international competition in which universities from all over the world meet to design, build and operate sustainable solar houses.

he houses use renewable energy as the only energy source and are equipped with innovative technologies that permit maximum energy efficiency. During the final phase of the competition, teams assembled their houses in the Dubai Solar ‘Hai’. The houses were opened to the general public, while undergoing the ten contests of the competition. Solar Decathlon was first established in 2002 in Washington DC, and occurs biennially in the United States. Since then, more international Solar Decathlon competitions have been established. The first Solar Decathlon Middle East took place in Dubai in November 2018, reflecting the rising global position of the UAE, and its key role regionally. The EFdeN team, Romania’s representative in this competition, ranked fourth in the overall ranking worldwide, bringing the country’s best historical performance. In 2012, PRISPA team was the first team in Romania to qualify at Solar Decathlon (Madrid edition), and in 2014 the EFdeN team participated for the first time in Solar Decathlon, Versailles edition, with the home 58

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that is currently Research Centre for Comfort Conditions. “The Solar Decathlon is usually about five years ahead of what you see in terms of commercial building. So, one of the objectives of Solar Decathlon is to bring these new ideas to today’s world,” Richard King, Creator of Solar Decathlon, states.

Promising results Solar Decathlon, the most important international competition of solar houses, took place during 14-29 November 2018 in Dubai. EFdeN, Romania’s team, competed together with other 14 teams in 11 countries, including the US, Australia, France, Italy, the Netherlands and Asian and Middle East countries. The competition involved design and construction of solar houses, smart and environmentally friendly, adapting to climate conditions in the Middle East. The competition was fierce and demanding: out of 21 houses qualified based on the initial project contest, only 18 managed to complete the houses and reach Dubai, and then only 15 of these managed to pass preliminary inspections and actually enter the competition. The house with which EFdeN participated in the competition is named EFdeN Signature and had a total budget almost four times lower than that of the project that won the competition, FutureHaus from the US. EFdeN ranked 1st in terms of Communication - test that assesses the communication ability and social awareness of the teams, taking into account the creativity, effectiveness and efficiency of sharing the relevant topics of the competition (sustainability, energy efficiency and use of renewable energies) and team objectives. Also, the Romanian young team ranked 2nd in the Engineering and Construction test. The test aimed at assessing the construction and the systems included, innovation, integration and implementation of solutions. The team has proven a high level of operation of the structure, electrical and mechanical installations and equipment. The team also ranked 2nd in terms of Comfort conditions, test monitored by sensors placed in the EFdeN Signature house throughout the 10 days of competition. 59

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The goal was to ensure indoor comfort by controlling the temperature, humidity, light, indoor air quality and acoustic performance. At the Sustainability test, Romaniaâ&#x20AC;&#x2122;s team was again on the podium, ranking 3rd. The jury assessed how each team managed to reduce the environmental impact of each house during the life cycle, while keeping the comfort and health conditions. The assessment also included interdisciplinary design and water and vegetation conservation initiatives.

EFdeN Signature in data and figures Designed and built by the EFdeN team, an interdisciplinary team consisting mostly of students, the house has the following features: intelligence, sustainability, comfort, energy efficiency, automation, modularity, reconfiguration and modern design. The funding sources for the EFdeN Signature house are entirely private, obtained from partnerships with more than 100 companies, and the project is a 100% educational and research project run by Romanian students. The EFdeN Signature house was built entirely by students from the EFdeN team, initially in Bucharest, in the parking of a shopping centre in northern Bucharest, where it could be tested and visited by the Bucharest citizens. It was then transported to Dubai and rebuilt on the competition site, in just 14 days. The performances obtained are due to the sustained efforts - over a two-year period of study, research, conception, design, voluntary practice - of a multidisciplinary team of students from four universities in Bucharest: Technical University of Civil Engineering, â&#x20AC;&#x2DC;Ion Mincuâ&#x20AC;&#x2122; Architecture and Urban Planning University, Polytechnic University and University of Bucharest. So far, EFdeN has won over 35 national and international awards, at Solar Decathlon and other competitions. EFdeN is the leading NGO in Romania that develops solar homes for educational and research purposes, along with sustainable products and educational modules for both students, specialists and the general public. The volunteer project works on the basis of strategic partnerships and sponsorships. 60

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EUR 1.9mn agreement for energy efficiency solutions E.ON to build a photovoltaic power station in TeraPlast Industrial Park E.ON Energie Romania and TeraPlast have entered into a strategic partnership, worth EUR 1.9 million, to accomplish one of the largest solar energy generating systems in Romania.

uilding a photovoltaic power station is mainly intended to produce electricity from renewable sources, using solar energy and delivering the produced energy to the consumers connected to the power station. Based upon this partnership, E.ON will install solar energy systems on the roofs of 13 production halls and buildings owned by TeraPlast, which will enable the company to generate its own power from renewable sources. Thus, in the long run, the company will reduce the CO2 emissions up to 600.000 tonnes per year. The agreement provides for the possibility to extend the project next year with up to 4 million Euros. The photovoltaic power stations will produce a total of up to 2.196 Gigawatt hours (GWh) per year, which corresponds to approximately 11.45% of TeraPlast’s total power requirements.

“TeraPlast is following ambitious objectives for the sustainability of its business and we are proud of this partnership. E.ON is implementing photovoltaic solutions to the customers interested in the power efficiency and in reducing their carbon footprint, the international know-how guaranteeing the best possible result for our customers and the climate,” says Dan Morari, CEO of E.ON Energie Romania. “Our concern in the environment is real, which translates into actions and investments of millions of Euros. After last year’s investment of TeraPlast in the PVC recycling station, this year we are starting a strategic partnership with E.ON. For TeraPlast, beside the raw material, electricity is the main resource we use in the manufacturing of our products. From this point of view, our concern to produce at least a part of this energy in a sustainable manner is natural and coincides with our wish to grow healthy and responsible,” TeraPlast’s CEO Alexandru Stanean underlines. 61

The installation corresponding to the photovoltaic power station includes a surveillance system that allows supervising and assessing the operational results, both locally and remotely. The roof systems on the market have a nominal power output of maximum 1,936 Kilowatt (kWp).

About TeraPlast Group With over 120 years of tradition, TeraPlast Group is the largest building materials manufacturer for the construction market with Romanian capital. The Group’s product portfolio is organised on six business lines: Installations & Decoration, Joinery profiles, Granules, Thermal insulation panels, Windows & Doors and Metallic Roof Tiles. TeraPlast Group has opened in October 2017 TeraSteel Serbia, the first factory fully owned by a Romanian company, inaugurated after 1990.

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Energy Ministry putting NECP under discussion Priority objectives The Ministry of Energy of Romania has posted on its own website, for consultation, the draft Integrated National Energy and Climate Plan 2021-2030. According to the Energy Union Governance Regulation, which is part of the legislative package Clean energy for all Europeans, all EU Member States must submit to the European Commission by 31 December 2018 the NECP national plan, its final form following be finalized following discussions with the European Commission and transmitted by 31 December 2019. Through these plans, Member States set their own targets/contributions to the achievement of the European global targets, set by the legislative package, in the field of renewable energy sources, energy efficiency and greenhouse gas emissions and the measures they propose for reaching those targets, for the period 2021-2030.

Text by Adrian Stoica

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ollowing the EU’s accession to the Paris Agreement and the publication of the Energy Union’s Strategy, the Union has taken on an important role in combating climate change through its 5 main dimensions: energy security, decarbonization, energy efficiency, the internal energy market and research, innovation and competitiveness. The Report on the State of the Energy Union, published by the European Commission (COM) on 18 November 2015, indicates the need for an integrated energy and climate change strategic planning at the level of each Member State, on all the 5 dimensions. Thus, the Member States (MS) must develop an Integrated National Energy and Climate Plan (NECP) for the period 2021-2030, based on the governance system. The plan reflects the set of national preferences, features and priorities, taking into account Romania’s right to set its energy mix. By respecting this approach in determining national targets, the plan was designed to facilitate the selection of the most effective (including in terms of costs) policies, measures and commitments that will help achieve the national targets outlined in this plan. Rapid changes at European and global level in terms of technological developments and cost savings with RES technologies as well as new regulations in the context of climate change mitigation efforts can turn Romania into an important player in meeting EU ambitions and targets on energy prospects in 2030 and even in 2050. Romania has a balanced and diversified energy mix. Our country benefits from important domestic energy resources, such as crude oil, natural gas and coal. Romania has a significant hydropower potential and sufficient uranium reserves to supply the Cernavoda NPP. The current energy mix can provide, in critical situations, caused by either extreme weather or operational reasons, a reasonable degree of energy security, both at national and regional level.

In the elaboration of the Plan, the data and information gathered from the draft Romanian Energy Strategy 2019 - 2030, with the perspective of 2050, from the central and local public authorities, the own expertise of the consultant at national and regional level as well as other sources (e.g. relevant studies published on the DG Energy website) have been used. 2019 is the year when the European Commission assesses whether the national efforts proposed by the Member States through the NECP lead to the achievement of the European targets set, make recommendations to the Member States and negotiate with them the setting of the final targets. By 31 December 2019, Member States shall transmit to the Commission the final form of NECP. The document posted and submitted for public consultation by the Ministry of Energy is the result of joint efforts with the Ministry of Environment and in collaboration with the other ministries and authorities involved. Observations, comments and constructive criticism are expected, the ultimate goal being to develop a national plan to strengthen the Romanian energy system, based on a balanced energy mix and low carbon technologies to ensure the country’s energy security and a realistic transition to innovative technology generating progress.

The government wants another 7,400 MW to be installed in renewable sources The mentioned document provides for a target of 27.9% renewable energy in gross final consumption by 2030, in conditions in which the target assumed at EU level is 32%. The major areas covered by this plan where increases in renewable energy consumption are foreseen are electricity, heating and cooling, and transport. While considering the introduction of new renewable energy generation capacities, the legislation continues to change, becoming increasingly unfavourable to producers. “Considering that the overall share of renewable energy in gross final energy consumption of 24% for 2020 was exceeded 63

(25% in 2016, according to Eurostat) and its evolution (estimated at 26.2% in 2020), projections made on the basis of the assumptions used to implement this plan indicate reaching a global share of 27.9% RES by 2030,” the document submitted to Brussels shows. The plan shows that the percentage of renewables will increase steadily by 2025 (28.1% for Romania that year, 25.7% intermediate target for all European countries), and it will drop slightly to 27.9% of total national energy consumption in 2030. The total share of energy from renewable sources in gross final consumption of energy encompasses the contribution of the renewable energy of each sector to final energy consumption. Regarding the share of electricity consumption from renewable sources in relation to total electricity consumption, the target assumed by Romania in 2030 is 39.6%, starting from 41.8% in 2020, with an intermediate target of 43.6% in 2025.

Building consumption: target of 31.3% With regard to heating and cooling, Romania’s target is 31.3% of renewable energy consumption in this sector in 2030, starting from 26.5% in 2020 with an intermediate target of 29% in 2025. “According to the calculation assumptions used, the gross final consumption of energy from renewable sources used in the H&C (heating and cooling) sector is projected to increase by 33% between 2021 and 2030, given the availability of biomass sources (mainly firewood and agricultural waste), respecting the sustainability criteria. Another alternative valid for 2030 could be the introduction of heat pumps to meet heating needs (in the context of lowering the cost of heat pumps by at least 25% in 2030 compared to today’s values, without taking into account the support measures at national and European level, which could lead to a decrease in these costs),” the mentioned document specifies.

Transport: target of 17.6% Regarding transport, the total renewable energy consumed will increase

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from 10% in 2020 to 12.5% in 2025 and 17.6% in 2030. At European level, the fixed target for transport is 14% of final energy consumption in the year 2030. The electrification of the sector (large scale introduction of electric vehicles) is another priority objective of the NECP.

Indicative trajectory of installed capacity, by sources, [MW] The 2030 projections foresee an increase in wind power capacity up to 4,300 MW and photovoltaic up to approximately 3,100 MW. 23,337

New 7,400 MW from wind and solar energy The plan underlines that the proposed targets will be achieved by installing wind and photovoltaic capacities. â&#x20AC;&#x153;At the level of 2030 there is an increase in wind power capacity of 4,300 MW and photovoltaic power up to about 3,100 MW,â&#x20AC;? the plan shows; thus, a total of 7,400 MW, compared to the 5,100 MW installed at the end of the previous year. Under the current EU energy policy, Member States have no longer set national renewable energy targets in the next decade, with only a European-wide target being assumed, to be achieved by the combined contribution of all Member States. This target is set at 32% for 2030, according to the final decision of the European Commission. The evolution of installed capacities for the period 2021 - 2030 indicates an increase compared to the total installed capacity in 2018, according to the calculation forecasts related to future policies and measures, based on the assumptions foreseen in the Romanian Energy Strategy 2019 - 2030, with the perspective of 2050.

Final gross energy consumption increasing by 18% In terms of gross final energy consumption, according to the WPM scenario (weighted projection measure), an increase of approximately 18% is expected between 2021 and 2030. This consumption is broken down into three sectors of interest: heating and cooling, electricity and transport. According to the calculation projections, at the level of 2030, the heating and cooling sector is responsible for about 50% of gross final energy consumption.

20,705

19,534

7,593 7,593

6,843

4,300 3,002

3,002 84

1,487

126

100

2,935

2,237 2,935

3,085 126

100

137 2,935

3,752

3,407

3,212

1,305

1,975

2020

2025

2030

Hydropower Natural gas

Wind power Solid fuels

Photovoltaic Nuclear power

Biomass

Crude oil and petroleum products

Source: Deloitte calculations based on the Energy Strategy of Romania, 2019 - 2030, with the perspective of 2050

The indicative trajectory of gross final energy consumption, by sectors, [ktoe] At the level of 2030, the heating and cooling sector is responsible for about 50% of gross final energy consumption. 29,311.0 25,943.3 24,046.2 50.9% 54.9% 54.6%

25.4%

22.0%

21.2%

23.4%

23.9%

23.7%

2020

2025

2030

Heating and cooling

Electricity

Transport

Source: Deloitte calculations based on the Energy Strategy of Romania, 2019 - 2030, with the perspective of 2050 64

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Towers of wind power plants taxed The President of Romania has promulgated the draft law amending the Fiscal Code to include buildings and towers supporting wind power plants. With this change, local authorities will be able to impose taxes and duties on such constructions. The Chamber of Deputies had approved at the end of October the amendment of the Fiscal Code to this effect, the draft law being supported by the Ministry of Finance and the Government. The amendment was supported by the Ministry of Finance, which argued that such a tax was justified following the elimination of the tax on special constructions, known as the ‘pole tax’, which has affected energy companies

in particular. Currently, the Fiscal Code establishes, in the local taxes and duties chapter, that building is defined as “any construction situated above and/or below the ground, whatever its name or use, and which has one or more rooms which may serve to accommodate people, animals, objects, products, materials, installations, equipment and other such and its basic structural elements are the walls and the roof, regardless of the materials they are built from.”

Exemptions from the payment of green certificates A draft law exempting Oltenia Energy Complex, Hunedoara Energy Complex and CET Govora from the payment

of green certificates worth EUR 5mln per year has recently been voted by the Chamber of Deputies, after being passed by the Senate. The legislative initiative exempts the company from the payment of green certificates for energy used in the coal mining and preparation process. The draft was passes in conditions in which it received a negative opinion from the Economic and Social Council, after finding the lack of an impact study on the electricity and green certificates markets. However, the draft will be submitted for promulgation. But the entry into force of these provisions will take time. The Government will have to notify the European Commission about whether or not this incentive is state aid.

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Office Ploies‚ ti Romania ILF Consulting Engineers Romania 16 Negru Voda Str. RO-100149 Ploiesti ‚ Tel.: + 40 (344) 401-333 Fax: + 40 (344) 401-334 romania@ilf.com www.ilf.com

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Hyundai Motor Group’s ‘FCEV Vision 2030’ H

yundai Motor Group (HMG), which includes automotive brands Hyundai Motor Company and Kia Motors Corporation, announced on December 11 its long-term roadmap ‘FCEV Vision 2030’ plan, as the group reaffirms its commitment to accelerate the development of a hydrogen society by leveraging the group’s global leadership in fuel-cell technologies. Aligned with the roadmap, Hyundai Motor Group will drastically boost its annual fuel-cell systems production capacity to 700,000 units by 2030 and explore new business opportunities to supply its world-class fuel-cell systems to other transportation manufacturers of automobiles, drones, vessels, rolling stocks and forklifts. The demand for fuel-cell systems from sectors beyond transportation such as power generation and storage systems is also expected to emerge quickly. “Hyundai Motor Group, the global pioneer of the commercial production of FCEV, is taking a bold step forward to expedite the realization of a hydrogen society,” said Euisun Chung, Executive Vice Chairman of Hyundai Motor Group. “We will expand our role beyond the automotive transportation sector and play a pivotal role in global society’s transition to clean energy by helping make hydrogen an economically viable energy source. We are confident that hydrogen power will transcend the transportation sector and

become a leading global economic success.” The ‘FCEV Vision 2030’ roadmap will help Hyundai Motor Group and its suppliers invest approximately KRW 7.6 trillion in R&D and facility expansion, which is expected to create approximately 51,000 jobs by 2030. The Group plans to secure a 500,000-units-a year FCEV production capacity by 2030, including passenger vehicles and commercial vehicles, in anticipation of high demand for global FCEVs expanding to around 2million units a year within that timeframe. As the first step to fulfill the ‘FCEV Vision 2030’, HMG’s fuel-cell system manufacturing affiliate Hyundai Mobis Co. today held a groundbreaking ceremony for its second fuel-cell system plant in Chungju, South Korea. The second factory will help Mobis increase annual fuel-cell system output to 40,000 units by 2022, up from the current 3,000 units. The Group’s flagship auto-making affiliate Hyundai Motor earlier this year launched NEXO, its second-generation commercialized FCEV, improving upon the acclaimed Tucson FCEV introduced in 2013. NEXO was built on Hyundai’s first dedicated fuel-cell vehicle architecture, which provides many structural benefits including lighter weight, increased cabin space and improved fuel-cell system layout. The Group plans to further advance the fuel-cell system used in NEXO 66

models to upgrade and diversify its fuelcell system lineup, so it can respond to demands from various industry sectors. In December, Hyundai Motor Group established a dedicated division to develop and support fuel-cell system businesses. The Group’s proprietary fuel cell system combines hydrogen fuel with oxygen taken from the air to produce electricity. Without combustion, the system only emits water as a by-product whilst also purifying polluted air, making it the ultimate source of clean energy. With high energy density and ease of stack refueling, hydrogen would help reduce the comprehensive ownership costs by about 10 percent for all possible transportation means including rolling stocks, vessels and forklifts, according to a study by McKinsey & Company. The study also estimates that approximately 5.5 million~6.5 million fuel cell system units will be required by 2030 globally. HMG is the only company to establish a dedicated plant for commercial production of fuel cell systems. With the construction of an additional fuel cell plant, Hyundai can quickly target market success on a global scale. The Hydrogen Council, a global initiative of leading energy, transport and industry companies including Hyundai Motor, predicts the annual demand for hydrogen would increase tenfold by 2050, thereby creating diverse opportunities for sustainable economic growth.

i.Comp Tower reciprocating compressor Premium quality for trades and workshop applications

nyone looking for a superquiet, efficient and costeffective supply of quality compressed air for their workshop requires a useroriented solution. With the space-saving i.Comp 8 and 9, Kaeser Kompressoren is proud to introduce a completely new compressed air supply concept that has been specifically developed with this field of use in mind. These units are tough, powerful, compact, easy to maintain, efficient and much more. At the heart of the new i.Comp family is a new drive concept, which provides a multitude of advantages. It delivers the necessary power to cover the required compressed air demand with infinitely variable control. Needless to say, the reciprocating compressor itself is made in Germany and is manufactured to the highest industrial standards for which Kaeser is world renowned. Moreover, i.Comp family reciprocating compressors are able to operate with 100 percent duty cycles. Intelligent solutions - such as drawing the air for compression in through the piston head - ensure exceptional filling performance and, as a result, outstanding efficiency. The i.Comp Towers can be used for a wide range of workshop and trades

“Compressed air for the workshop”: The stationary ‘Tower’ version of the durable, variable speed and powerful i.Comp workshop compressor provides a dependable supply of quality compressed air for workshop business environments. applications and assure a constant pressure of up to 11 bar with absolute operational reliability. Made from roto-moulded polyethy lene to enable optimum corrosion- and impact-resistance, the attractive sound enclosure not only hides an advanced allin-one compressed air station comprising 67

a compressor and a refrigeration dryer, but also keeps sound levels to a minimum and helps retain system value. Kaeser’s field-proven Sigma Control 2 controller allows pressure preselection and infinitely variable speed operation, as well as connection to a master controller such as the Sigma Air Manager 4.0. Since i.Comp Tower systems deliver oil-free compressed air, no oil enters the compressed air supply itself. This in turn eliminates the potential for accumulation of oil-contaminated condensate that would otherwise have to be carefully disposed of. In addition, there is no need for oil changes or oil inspection, which of course further reduces overall service costs. i.Comp Tower systems are the perfect choice for workshop and trades environments, such as in car repair shops, where a dependable supply of quality compressed air is required. KAESER KOMPRESSOREN S.R.L. Address: 179 Ion Mihalache Blvd., 011181 - Bucharest Tel.: +40 21 224 56 81 Fax: +40 21 224 56 02 Web: www.kaeser.com Email: info.romania@kaeser.com

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Transelectrica sounds the alarm Power transmission grid in very poor condition

Text by Adrian Stoica

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The power transmission and distribution grid is very old. A large part of it is 40-50 years old, above the normal life span, and in absence of investments it has reached an advanced state of decay. The warning appears in a document of the power transmission company Transelectrica. The warning signal comes following an analysis conducted at the level of the grid operator resulting, inter alia, in the fact that two thirds of the overhead lines are in an unacceptable state.

he study, conducted at the request of Transelectrica, has analysed 54 high voltage power lines, 52 of which have been declared unacceptable. Also, out of 80 transformers analysed, one third are in poor condition. Transelectrica contracted in 2017 the study ‘Analysis of the technical state of the electrical equipment and installations in the PTG’, the company informs, and for testing a database has been created, including 80 power transformers out of a total of 136, 81 switches and 54 overhead lines of 110kv-400kv out of a total of 154. They were included in one of the following categories of Good/Acceptable/Poor/ Unacceptable condition. Out of 80 transformers analysed, only two are in good condition, 52 in acceptable condition and 26 in poor condition. Out of 81 switches, 46 are in acceptable condition and 35 are in poor condition. In the database of the Asset Management Information System data was also introduced for 54 high voltage overhead lines, out of a total of 154. It resulted that only two were in acceptable condition. For the rest, the system has indicated an unacceptable condition, without mentioning a score. Of total overhead power lines, 83.6% were commissioned during 1960-1979, 14.1% between 1980 and 1999 and only 2.3% after 2000. We can notice a low rate of commissioning after 2000. Of the total installed power in transformers, 21% was commissioned between 1960 and 1979, 22% between 1980 and 1999, and 57% after 2000. “The hardware equipment of the current EMS-SCADA system, the related

communication equipment, as well as the level of conceptual development of software applications are physically and morally outdated, being at the limit of their capacity to ensure the functional support for the transmission and system operator in the operative management of the National Power System (NPS). Keeping them in an appropriate operational condition is achieved with increasing costs, as manufacturers no longer produce the respective equipment, and software upgrades are becoming more and more difficult to achieve, because as time passes, there have been many versions that emphasize the degree of incompatibility with the existing one,” data from Transelectrica show.

High risk for grids in Transylvania and Moldavia The analysis conducted shows that sections S4 (N-W Transylvania) and S5 (Moldavia) present a high risk of operation close to the maximum permissible power in the section, both in the medium and long term, demonstrating the need to strengthen each of these sections, according to Transelectrica. For this purpose, consolidating the power transmission grid by completing the 400kv ring between the North-East and NorthWest of the National Power System is beneficial in terms of increasing the static stability reserves for both sections S4 and S5 and for section S3. Several areas with local power supply safety problems were have also been identified, where additional injection capacity from the 400kv grid to the lower voltage grid (Iernut, Cluj, Brazi, Sibiu) 69

must be installed. The grid also needs to be consolidated, in order to increase the cross-border exchange capacity at the western border of the country, for the transmission of output surplus from the Iron Gates - Resita area to the consumption centres. In order to ensure the higher exchange capacity with Serbia and Western Europe and discharge power from the photovoltaic power plants and hydropower arrangements in the Iron Gates - Resita area, it is necessary to strengthen the transmission grid on the western axis (Iron Gates - Resita Timisoara - Arad).

Strengthening the distribution grid in the Capital area For Bucharest area, the study recommends new power injections from the transmission grid to the distribution grid of the city and strengthen the distribution grid so as to allow takeover of consumption from one area to the other. The analysis pointed as opportune the following projects: two substations of 400/110kv, one in the central area of Bucharest (Grozavesti) in the medium term, and the second in the Filaret area, in the long term. “A special situation exists in the network supplying the city of Bucharest. The forecasted evolution of consumption leads to the need for a 400/110kv substation in the consumption centre of the city of Bucharest, in order to increase power supply safety. In order to include these projects in the development plan, it is necessary to agree with the distribution operator in the area on the distribution stations in which injections from the PTG will be made and a joint action plan,” Transelectrica also shows.

RENEWABLES

New EU rules O

n December 4 the re vised Energy Efficiency Directive, the revised Re newable Energy Directive and the new Governance Regulation were formally adopted at the Transport, Telecommunications & Energy Council, following on from the strong support that all three dossiers got from MEPs at last month’s European Parliament Plenary session. The EU has adopted four of the eight legislative acts which make up the Clean Energy for All Europeans package, published by the European Commission on 30 November 2016. This package is a key element in one of the Juncker Commission’s priorities - “a resilient Energy Union and a forward-looking climate change policy”, aimed at giving Europeans access to secure, affordable and climate-friendly energy and making the European Union world leader in renewable energy. The new regulatory framework, in particular via the introduction of the first national energy and climate plans, brings regulatory certainty and enabling conditions for essential investments to take place in this important sector. It empowers European consumers to become fully active players in the energy transition and fixes two new targets for the EU in 2030: a binding renewable energy target of at least 32% and an energy efficiency target of at least 32.5%, which will stimulate Europe’s industrial competitiveness, boost growth and jobs, reduce energy bills, help tackle energy poverty and improve air quality. When these policies are fully implemented, they will lead to steeper emission reductions for the whole EU

than anticipated – some 45% by 2030 compared to 1990, instead of 40%. To strive towards a long-term greenhouse gas reduction objective, the framework sets up a robust governance system of the Energy Union.

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Renewable energy •

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Sets a new, binding, renewable energy target for the EU for 2030 of at least 32%, including a review clause by 2023 for an upward revision of the EU level target. Improves the design and stability of support schemes for renewables. Delivers real streamlining and reduc tion of administrative procedures. Establishes a clear and stable re gulatory framework on self-consum ption. Increases the level of ambition for the transport and heating/cooling sectors. Improves the sustainability of the use of bioenergy.

Energy efficiency •

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Sets a new energy efficiency target for the EU for 2030 of at least 32.5%, with an upwards revision clause by 2023; Will extend the annual energy saving obligation beyond 2020, which will attract private investments and support the emergence of new market actors; Will strengthen rules on individual metering and billing of thermal energy by giving consumers especially those in multi-apartment building with collective heating 70

systems – clearer rights to receive more frequent and more useful information on their energy consumption, enabling them to better understand and control their heating bills. Will require Member States to have in place transparent, publicly available national rules on the allocation of the cost of heating, cooling and hot water consumption in multi-apartment and multipurpose buildings with collective systems for such services.

Governance of the Energy Union and climate action •

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Puts in place a simplified, robust and transparent governance for the Energy Union which promotes longterm certainty and predictability for investors and ensures that EU and Member States can work together towards achieving the 2030 targets and the EU’s international commitments under the Paris Agreement. Calls for each Member State to prepare a national energy and climate plan for the period 2021 to 2030, covering all the five dimension of the Energy Union and taking into account the longer-term perspective. Aligns the frequency and timing of reporting obligations across the five dimensions of the Energy Union and with the Paris Climate Agreement, significantly enhancing transparency and reducing the administrative burden for the Member States, the Commission and other EU Institutions.

RENEWABLES

EY Report Gas and renewable energy transactions boost mergers and acquisitions

he wave of gas and renew able Energy transactions in the third quarter of 2018 generated a record rise in the cumulative value of global energy and utility transactions, reaching USD 241.8bn, according to EY Power transactions and trends: Q3 2018 (PTT). Despite ongoing regulatory uncertainty and geopolitical tension, the latest EY Global Capital Confidence Barometer (CCB) also indicates that 57% of global sector executives expect to pursue a deal in the next year. Following a record start to the year for mergers and acquisitions, deal activity across the sector remained buoyant, despite a 25% quarter-on-quarter decline to USD 61.9bn from USD 83bn. Gas utilities transactions reached an all-time quarter high in the third quarter of 2018, representing 59% of global deal value (USD 36.5bn), with more than half (51%) of those deals conducted in the Americas (USD 18.3bn). All regions continued to pursue investment in renewables, with 58 deals accounting for 41% of global deal volume. In Europe, renewables represented 78% of deal value (USD 8.1bn) and underpinned a weaker-than-expected quarter. Globally, financial investors are targeting electricity generation capa bilities using renewable sources. This leads to an increase in the specific value of transactions with such assets, as

compared to investments in network assets, subject to regulators’ pressure. In many cases, various support schemes applied by the authorities intensify this trend. In Europe, we are witnessing vertical and horizontal consolidation (conventional generators buy renewable capacities to diversify their portfolio and increase their own production flexibility), combined with energy storage capacities. Corporate Power Purchase Agreements are becoming increasingly frequent; thus, corporations acquire electricity from renewable sources, guaranteeing their development as part of their effort to participate in climate change mitigation and as an assertion of the sustainability commitment. “We also foresee in Romania a rapid spread of decentralized solutions that use renewable energy sources, combined with storage solutions, in parallel with the intensification of transactional activity in the field of renewable production capacities,” says Valeriu Binig, Senior Advisor, EY Romania. Deal value in the Americas saw a 7% increase quarter-on-quarter to USD 28.8bn, representing nearly half (46%) of total global deal value. The third quarter demonstrated continued investment appetite for renewable energy assets amounting to USD 4.5bn, including Edison’s announced USD 2.1bn acquisition of assets from Sempra 71

Energy – further highlighting the impact of ongoing shareholder activism in the Americas. The US remained the top investment destination in the region. Despite a 78% decline in deal value in Europe to USD 10.1bn, offshore wind offered financial investors scale and strong returns, with US-based Global Infrastructure Partners agreeing to acquire a 50% stake in a 1.2 GW offshore wind farm from Danish company Ørsted A/S. The conclusion of negotiations among the 28 EU Member States around the future framework of the electricity market is expected to strengthen investment certainty into Q4. Asia-Pacific saw a 118% increase in deal value quarter-on-quarter to USD 22.5bn, with much of the value attributable to announced plans to acquire Australia’s APA Group for USD 16.3bn by CK Infrastructure, CK Asset and Power Assets Holdings. This deal was set to be the largest gas utility transaction to date. However, the federal government has issued a preliminary view that the deal may be blocked, with a formal determination to be issued shortly. Looking ahead, the CCB indicates that sector leaders remain confident in economy development. With another year of strong GDP growth forecast, 86% of global power and utilities executives expect to see improving growth con ditions over the next 12 months.

RENEWABLES

10 years of Enel Green Power 100 TWh of output per year • In 2021 the energy generated from renewable resources will represent more than 50% of the Group’s total output • The company is ready to make its contribution to the revival of renewable generation in Italy, focusing on innovation and digitalisation

ustainability, innovation and digitalisation: these are the key words of Enel Green Power’s strategy. The Enel business line focused on the development of renewable energy is celebrating an important anniversary - ten years - with numbers that make it a world leader: 100 TWh of power generation, a growth rate of 3,000 MW of capacity per year, over 1,200 plants in operation in 30 countries, with a constantly expanding geographical presence and a close-knit team of about 7,000 people. Enel Green Power is an Italian company that, as it has grown, has created major knock-on effects for other companies in the industry that want to expand abroad. It stands ready to contribute to growing renewable generation in Italy, experimenting with new technologies and innovations in both photovoltaics and wind power. “The energy sector is undergoing a profound transformation, and the world is

moving towards a 100% renewable future,” said Enel CEO Francesco Starace. “We are in the midst of an epochal change that is proceeding through decarbonisation and is opening the world of energy to completely new scenarios, not only from the business standpoint but also relating to the way each of us lives, consumes and produces. Enel has had the foresight to grasp, before many others, the key role of renewables in the energy transition. It is a natural process, guided by financial convenience and greater sustainability. In 2021, the energy generated from renewables will represent over 50% of total Group output, compared with the current 38%. This percentage is destined to grow, in line with the objective of achieving carbon neutrality by 2050.” “Enel Green Power is a market leader: in 2020 will achieve 4.4 GW of growth per year, record numbers that no other competitor in the world can boast,” said Antonio Cammisecra, Head of Enel Green Power. “We are ready to do our part to revive renewable generation in Italy, which is working to define RES targets for 2020, 72

both with the repowering of existing plants and with new innovative and technologically advanced solutions. Italy has good solar and wind resources, which will ensure that renewables can be competitive in the Italian energy mix, accounting for an absolute majority of generation by 2030. One of the key factors in the development of renewables in the short to medium term in the country will be streamlining and accelerating authorisation procedures. The sector does not need incentives, but rather a stable regulatory framework. In the meantime, we are celebrating our tenth anniversary by exceeding for the first time 100 TWh of renewable energy output in a year”. In Italy, Enel Green Power has about 14 GW of installed renewable capacity, including hydro, geothermal, photovoltaic and wind power: maintaining the efficiency of these plants, including through repowering, remains one of the main activities on which the company is focusing. On the technological innovation front, in Sicily Enel Green Power has

RENEWABLES

The energy sector is undergoing a profound transformation, and the world is moving towards a 100% renewable future. We are in the midst of an epochal change that is proceeding through decarbonisation and is opening the world of energy to completely new scenarios, not only from the business standpoint but also relating to the way each of us lives, consumes and produces. Enel has had the foresight to grasp, before many others, the key role of renewables in the energy transition. It is a natural process, guided by financial convenience and greater sustainability. In 2021, the energy generated from renewables will represent over 50% of total Group output, compared with the current 38%. This percentage is destined to grow, in line with the objective of achieving carbon neutrality by 2050.

Francesco Starace, CEO, Enel ÂŠ Enel

started the conversion of the 3SUN factory to make the Catania factory the first in the world to exclusively produce bifacial HJT photovoltaic panels, based on heterojunction technology (the junction of two different types of silicon, amorphous and crystalline) with particularly high performance. The new panels will go into production in March 2019, and will have a cell efficiency that is 22% greater than current levels. With the new investment, the Innovation Lab, which together with the 3SUN factory forms Enelâ&#x20AC;&#x2122;s Sicilian technology hub, will also become a campus dedicated to innovation and an accelerator of youth entrepreneurship aimed at stimulating research in the energy sector. It will host local and national start-ups as well as major national and international research centres, and will have links with the world of innovation to create a meeting place

for excellence in the field of innovative technologies. For the Italian wind power sector, the challenge is digitalisation, big data and artificial intelligence. In addition to being an inexhaustible source of energy, a wind generator is also a huge source of data that, through new technologies, can now be collected to track the health status and performance curve of a wind turbine more precisely. For this reason, in Italy Enel Green Power has a series of innovative projects under way involving the wind farms located from north to south along the peninsula with the aim of improving efficiency and the predictive maintenance process. Again, in Italy, EGP is experimenting with new storage technologies, with the aim of boosting competitiveness. A crucial challenge will be storage coupled with renewables: flow batteries, now close 73

to commercialisation, may be a viable future alternative to lithium batteries, especially for seasonal storage. Another crucial frontier for innovation is big data processing. EGP is involved in initiatives to extract value from large volumes and varieties of information, exploiting technologies such as cloud computing and the Internet of Things (IoT). The projects also include secondgeneration infrastructure for data collection and the implementation of digital data governance processes to leverage information assets. The company is also working on a programme focusing on digital automation solutions for engineering and construction processes that includes, for example, robots for the installation and cleaning of photovoltaic modules and drones for thermographic inspections and analyses, performance monitoring and reporting activities.

Photo by Karsten WĂźrth, Unsplash

RENEWABLES

Renewables boom 1.23 trillion dollars investments by 2022 Globally, the capacity of one TW installed in wind and solar energy sources was exceeded in mid-2018, according to international statistics. Investments in this area will continue at a sustained pace over the next few years, so that by mid-2023 the second TW of wind and solar energy will be achieved. With the increase in installed capacity, the costs will continue to decrease, so that at the second TW they will be 46% lower than at the first TW. In total, installed capacity in wind farms accounts for 54% and solar energy - 46%.

Text by Adrian Stoica 74

RENEWABLES

he renewable energy sector has developed extremely rapidly since 2000, with statistics showing that installed capacity in the wind and solar parks has increased 65 times compared to this benchmark. As investment, it is estimated that the first TW of wind and solar energy required approximately 2.3 trillion dollars. Given the forecast according to which to install the second TW costs will drop by around 46%, calculations show that investments will amount to a total of 1.23 trillion dollars between 2018 and 2022. The wind energy boom has resulted in the creation of new jobs. This quick growth meant over 300,000 jobs and the generation of an annual turnover of EUR 72 billion in 2017, according to windeurope. org. The European industry holds a share of 40% of all wind turbines sold globally, and wind energy is a reliable and affordable energy source, with benefits for the European electricity consumers, bringing an important contribution to energy security. According to the same sources, wind energy already meets 11% of EU’s energy demand.

Renewable energy to ensure 30% of the demand The percentage of renewable energy used globally would increase by one fifth in the next five years, to 12.4% in 2023, according to a report by the International Energy Agency (IEA). In the electricity sector, renewable energy (hydro, photovoltaic, wind, bioenergy and tides) will deliver the fastest growth rate, supplying almost 30% of the energy demand in 2023, from 24% in 2017. During this period, renewables are forecast to meet more than 70% of global electricity generation growth, led by solar PV and followed by wind, hydropower, and bioenergy, IEA report shows. Hydropower remains the largest

renewable source, meeting 16% of global electricity demand by 2023. It is followed by wind (6%), solar PV (4%), and bioenergy (3%), the International Energy Agency estimates. According to the IEA, 2017 was a record year for renewable energy, the capacity of photovoltaic power plants recording the highest increase, to 97 Gigawatts. More than half of this capacity was installed in China, country which invested USD 44 billion in clean energy projects in 2017. Over the next six years, the increase in renewable energy production will be dominated by photovoltaic technology, with new capacities of 600 Gigawatts becoming operational, according to the IEA report.

China continues to invest heavily China continues to be a force in the field of renewable energy. According to a report published by the Institute for Energy Economics and Financial Analysis (IEEFA), China’s increased renewable energy capacities are part of the country’s effort to become a world leader in the sector. The report states that China’s total investment in clean energy projects in 2017 amounted to USD 44 billion, a significant increase compared to 2016, when the investment was USD 32 billion.

2,179 GW installed at the end of 2017 Global renewable energy production capacities increased by 167 GW, reaching 2,179 GW by the end of 2017. This represents an annual average increase of 8.3% for the seventh consecutive year, according to a study published in the spring of 2018 by the International Renewable Energy Agency (IRENA). In 2017, capacities installed in solar PV climbed 32% and in wind power by 10%, says the report on renewable energy, covering over 200 countries and territories. The increase in the renewable energy production capacity comes amid 75

substantial cost reductions. During 2010-2017, the cost of electricity form solar PV fell by 73% and from wind energy by almost 25%. In 2017, 64% of the new installed capacities were in Asia, while Europe and North America added 24 GW and 16GW respectively in new installed capacities. The latest data confirm that global energy transition continues at a rapid pace, due to substantial cost reductions, improved technology and favourable environmental policies, IRENA claims.

Millions of new jobs According to figures published by IRENA, over 10 million persons work in the renewable energy industry. In 2017 alone, the sector added over 500,000 jobs at global level, increasing by 5.3% compared with 2016, the largest employer being solar photovoltaic. The photovoltaic energy industry has remained the largest employer among all renewable technologies, providing 3.4 million jobs, increasing by almost 9% since 2016, after a record of 94 GW installed in 2017. Geographically, 65% of all photovoltaic solar jobs are located in China, equivalent to 2.2 million people, representing an increase by 13% over the previous year. Despite a slight decline, Japan and the US ranked second and third among the largest photovoltaic solar energy markets, followed by India and Bangladesh. At present, the top five represent about 90% of global solar photovoltaic jobs. In general, China, Brazil, the US, India, Germany and Japan remain the largest employers in the world in the renewable energy sector, accounting for over 70% of total jobs in the industry at global level. While the number of countries benefiting from the socio-economic benefits of renewable energy is increasing, there are few countries where production activities take place. Thus, 60% of all renewable energy jobs are in Asia, according to the study. The data

RENEWABLES

also underscores an increasingly regionalized picture. “In countries where attractive policies exist, the economic, social and environmental benefits of renewable energy are most evident,” said Adnan Z. Amin, Director-General of IRENA. “Fundamentally, this data supports our analysis that decarbonization of the global energy system can grow the global economy and create up to 28 million jobs in the sector by 2050.”

Europe added 11.5 GW Expenditure on new wind power generation capacities in Europe fell by one-fifth in 2017, to the lowest level in the last three years, according to the WindEurope association, a sign that the sector cuts costs and becomes more efficient as governments cut subsidies. According to the annual report of the organization’s experts, investment in new onshore and offshore wind projects in the EU declined in 2017 by 19%, to EUR 22.3 billion, from the record of EUR 27.5 billion in 2016. However, lower investments made in 2017 have funded the construction of new record capacities of 11.5 Gigawatts (GW), up from 10.3 GW in 2016, which means that in 2017 the cost went down to EUR 1.9 billion for each GW of new capacities, from EUR 2.7 billion per GW in 2016. “Cutting costs along the value chain of industry and increasing competition inside the industry have made it possible for investors to finance more capacity for less money,” WindEurope highlights. Among European countries, Germany was the largest investor in wind power in 2017, accounting for 30% of total investment, followed by the UK with 22%. Also, investments in new onshore wind projects have reached a historic record of EUR 14.8 billion. Currently, the EU has a total installed capacity in wind power of 169 GW, which is outpaced only by natural gas capacities. Wind power is responsible for 18% of the total installed capacity in the EU.

The capacity of offshore wind turbines is increasing The capacity of wind turbines installed offshore in Europe has increased by 25% in 2017, the WindEurope report mentions. 13 new offshore wind parks with a total capacity of 3.1 GW were completed in 2017, taking total capacity of offshore wind parks in Europe to 15.8 GW. Giles Dickson, WindEurope CEO, qualifies the increase by 25% as ‘spec tacular’, adding that offshore wind is now a mainstream part of the power system. Giles Dickson explained the reasons underlying this growth. “The costs have fallen rapidly. Investing in offshore wind today costs no more than in conventional power generation.” According to WindEurope, currently there are 4,419 offshore wind turbines in 11 countries in Europe, with a capacity of 15.78 GW. In 2017, the most offshore wind energy capacities were completed in the UK (1.7 GW) and Germany (1.3 GW). WindEurope shows that, in Europe, the offshore wind energy is heavily concentrated in the UK, Germany, Denmark, the Netherlands and Belgium, which hold 98% of total offshore turbines. WindEurope mentions that at the end of 2017 11 offshore wind parks were under construction, and once completed they will increase the installed capacity by 2.9 GW. Thus, in 2020 the total capacity of offshore wind parks in Europe will reach approximately 25 GW.

Romania is swimming against the tide In Romania, the development of the sector is blocked after the change of legislation regarding subsidies for renewable energy a few years back. The new energy strategy does not seem to help either, according to representatives of the sector. The Romanian Wind Energy Association (RWEA) claims that the Energy strategy proposed by the Ministry of Energy ignores the current technical, economic 76

and climate trends and proposes measures in contradiction with the declared objectives, to the detriment of consumers. RWEA believes the strategy is “a collection of morally outdated development plans of state-owned companies, old plans with questionable potential to be implemented, overlooking wind energy.” The association has warned that wind energy has complied with the targets of the last strategy adopted in Romania, installing the capacity provided and bringing technological progress. Moreover, this technology has improved its technical performance despite a regulatory framework created for conventional technologies and has reduced costs despite losses incurred due to repeated changes to the support scheme, losses which exceeded 25% of the invested capital. RWEA believes that wind energy has become the cheapest form of power generation, with an average installation cost in Romania of approximately EUR 1,080/ kW and a Levelized Cost of Energy (LCOE) of approximately EUR 52/ MWh for the analysis period of the strategy. A RWEA study prepared with the support of Deloitte, whose data was sent to the Ministry of Energy in the position paper regarding the Energy strategy, shows the technical and economic opportunity for additional capacities from wind sources of at least 3,000 MW in the horizon of the strategy, which will create an added value of over EUR 5 billion between 2021 and 2030, while the impact of investments related to the development of renewable energy sources will reach EUR 350 billion over the period under review. The Association points out that the technologies provided by the ministry for investments (nuclear energy, coalfired energy and pumped storage power plants) are the most expensive forms of energy generation, with the longest durations of implementation and will require consumer support throughout their lives.

E.C.P.M.C. – CONSULT & LEARNING

E.C.P.M.C. Consult & Learning Fire protection service Explosion hazard WE DON’T KNOW WHO COULD BE NEXT

E.C.P.M.C. provides safety and security to its partners by offering the following services: In accordance with NEx 01-06 require ments for installations and equipment operating in potentially explosive atmos pheres - related documentation for sub mission to INSEMEX Petroşani and onsite examination of technical installations, aiming at the prevention of explosions by following the next steps: • On site visit; • Preparation of technical docu mentation for obtaining the Ex. certificate; • Explosion protection and com pliance documentation for technical equipment to certify their operation in potentially explosive environments; • Preparation of site plans for objectives that operate in potentially explosive atmospheres, other than mines susceptible to fire damp; • Obtaining the Ex. certificate from INSEMEX Petroşani; • Obtaining from INSEMEX Petro şani the report on explosion protection and compliance of the technical equipment in order to certify their operation in potentially explosive environments. E.C.P.M.C. CONSULT & LEARNING S.R.L. together with its experts is certified by INSEMEX with the Certificate no. GANEx.Q.2016.(01).12.0026 and NVIV 01-06/2007, according to the Amendment no. 1/8947/22.09.2017.

Offer for additional services •

Design of signaling, alarm and fire alarm systems and installations; • Design of systems and installations for limiting and extinguishing fires; • Design of ventilation systems and installations for the disposal of smoke and hot gases, except those of natural-organized type, according to the authorizations: Series A No.: 7261, 7262, 7263 of 31.07.2017, for an unlimited period, issued by IGSU - the National Center for Fire Safety and Civil Protection, according to the legislation in force. In addition to the aforementioned, E.C.P.M.C. executes projects relating to the protection of objects, goods and valuables against any unlawful actions infringing upon the right to property, their material existence, and the protection of individuals against any hostile acts. E.C.P.M.C. holds the economic operator code (NCAGE: 1GYEL) in accordance with the procedures of the NATO Coding System No. 2124 based on Government Decision no. 4445/2003 for the approval of “Rules on the organization and conduct of coding activity for defense equipment items”. The company’s activity is reflected in several national and international publications, including the Energy Industry Review. E.C.P.M.C. – CONSULT & LEARNING is recommended by INSEMEX Petroşani - the national authority in the field. 77

Keep your bussiness safe from fire with ECPMC Consult & Learning

We deliver value through professional technical solutions so that our partners’ economic activities become a safer place, following the procedure professionally, always in step with new technologies. We provide the following services: consultancy, design and execution, obtaining the approval/ permit in the field of fire safety. Preparation of technical documentation and on-site inspection of installations to obtain the AntiEx certificate and report. Counselling in the fields of: procurement, technical and any other economic activity carried out by our partners. Our values are also the values of our partners: • Competence • Passion • Collaboration

E.C.P.M.C. - Consult & Learning S.R.L. A: 46 Fabricii St. | 6th District - Bucharest A: 1 22 Decembrie St. | Petrosani - Hunedoara T: 0728010140 E: ecpmc.petrosani@gmail.com W: www.ecpmc.ro

Hidroelectricaâ&#x20AC;&#x2122;s year of records Investments worth RON 5.56bn After 2017, a year of records for Hidroelectrica, the largest electricity producer in Romania, ends 2018 with historical performance. While the previous year was considered the best in the companyâ&#x20AC;&#x2122;s history, obtaining a gross profit of RON 1.6bn, at the end of the first nine months of 2018 Hidroelectrica had already reported a gross profit of RON 1.98bn.

Text by Adrian Stoica 78

RENEWABLES

idroelectrica has implemented an extensive investment program for the following five years, according to Bogdan Badea, President of the Management Board. In this period, investment will amount to a total of RON 5.56bn. The plan includes both new investments in production capacities and funds for retrofitting, upgrade, maintenance, acquisitions of shareholdings and extension of Hidroelectrica’s portfolio. For 2018, the investment budget of Hidroelectrica was RON 577.87mln and at the end of the first three quarters the energy producer has physically completed about 60% of this program. A good result, given that Hidroelectrica is still facing difficulties generated by blocking several projects. The company had in summer of 2018 investment projects worth EUR 200mln blocked. It’s about investments in Dumitra (98% completed) and Bumbesti (90% completed) hydropower plants, on Jiu River. The construction of the two large hydropower plants, with an installed power of 66MW, started in 2004, but due to several obstacles in the recent years (some obstacles related to environmental issues) they have not been completed to become operational. We recall that the project ‘Hydropower development of Jiu River on Bumbesti-Livezeni sector’, in which Hidroelectrica has invested EUR 155.5mln, is blocked by environmental organizations - Bankwatch and Neuer Weg, which have definitively won in court the lawsuit in which they applied for the annulment of construction permits.

Projects completed in December 2018

Upgrades to HA1, amounting to RON 23,983,918, aimed at increasing the reliability and the lifetime of the installations by at least a new life cycle. “The completion of the upgrade at Calimanesti is the second refurbishment work that we inaugurate this month, after that at CHE Beresti, in Bacau. We are now ripping the benefits of an intense teamwork during the year. But in terms of investments we plan much more than that. It’s important to build, because the energy system needs massive investments, and time is not waiting for the undecided. We have the necessary resources, we are ending a very profitable year - the best in Hidroelectrica’s history, if we think that after 9 months, we had already exceeded the results of the entire 2017,” Bogdan Badea mentioned. Storage and CHE Calimanesti are part of the hydropower development scheme of Olt River, on Turnu - Calimanesti sector. CHE Calimanesti is located on DN 7 Rm. Valcea Sibiu, near the locality of Calimanesti. CHE Calimanesti exploits the hydropower potential between 276 mdM 261.5 mdM. The main energy parameters of the power plant are: installed power: 2 x 19.8 = 39.6 MW; average annual energy production according to the design: 106 GWh/ year; turbines are Kaplan type and hydro generators - HVS 787/84-64.

The last investments completed by Hidroelectrica in 2018 were the commissioning of the Hydropower Unit 2 (HA2) of Beresti Hydropower Plant and of the Hydropower Unit 1 (HA1) of Calimanesti Hydropower Plant, after carrying out extensive modernization works. The investments, which provides a new life cycle for HA2, amounted to RON 18.23mln. “We are today (13 December Ed.) at an important moment, the first day of a new technological cycle for the Hydropower Unit 2 of Beresti Hydropower Plant. In general, investments are mentioned as an element of the future, but things are happening for us right now. We plan to continue investments, so as to secure the current portfolio. We cannot think about development and expansion without making sure we keep what we have. As far as investments are concerned, I can certainly say that each step matters. It’s important to mobilize, overcome the barriers we are facing ,” Bogdan Badea said. Beresti Hydropower Plant is a dam-type power plant, located on Siret River about 4km downstream of Beresti, equipped with two hydropower units (2 x 21.75MW), with vertical Kaplan hydraulic turbines KVB 26-17.7, with Qi = 165m3/s and Hmax = 18.3 m. Beresti power plant has an average annual energy production of 110GWh. 79

TECH

Mobile training simulator Getting oil and gas industry seal of approval for well control

rilling Systems’ revolu tionary mobile On-TheRig (OTR) simulator has been accredited by the International Well Control Forum (IWCF) for well control accreditation at Robert Gordon University. The unique mobile OTR simulator, which enables rig crew training to take place onsite at the rig itself, received industry approval for Level 3 and 4 well control from the IWCF following months of development by Drilling Systems and leading oil and gas university, Robert Gordon.

IWCF is one of the global independent bodies which sets international training standards for well control accreditation. Having IWCF accreditation means delegates using the OTR receive one of the highest-quality, industry-approved training qualifications in internationallyrecognised well control standards. Drilling Systems worked with Robert Gordon University (RGU) over several months to develop the market-leading product, adding features such as a separate choke control panel and ensuring the software complies with the IWCF’s requirements. The OTR can now be used to train 80

well control crews all over the world onsite - providing a cost effective and immediate method of training and assuring competency. “Achieving IWCF accreditation for our OTR mobile simulator is a glowing endorsement of the quality of the product and the training it provides. Well control students at RGU will now be able to benefit from industry-approved training and assessment using the OTR simulator,” Clive Battisby, Chief Operating Officer at Drilling Systems, said. “We are very grateful to RGU for all their help in the development of the OTR unit for well control training,” he added.

Rexroth Produkt-Range Rexroth offers a complete portfolio of filters and filter elements engineered with the latest technology in hydraulic filtration in order to deliver the highest performance. For any application, Rexroth offers the right solution for the filtration of hydraulic fluids, lubricants and industrial liquids. Our product range includes measuring devices for oil cleanliness, water concentration and condition monitoring systems for hydraulic fluids. Rexroth‘s wide portfolio of filters ensures optimum operating conditions over the operational life, reducing the total cost of ownership. All Rexroth filtration products and solutions comply with international standards. As a result, Rexroth filter technology can be used in any application regardless of the original equipment manufacturer. Rexroth’s worldwide sales and service network ensures easy access to products, services and technical advice.

Cyclone Filter Head Design means Improved Filtration: With Cyclone-Effect, fluid flow enters filter housing on tangent to the element, rather than directly against it. Thus oil envelops the element surface and is distributed over the filter media surface in a downward spiral flowing pattern. This patent pending feature ensures heavy contamination particles are carried outward and away from the filter element preventing the pores from blocking prematurely. These heavier particles will accumulate on the inside and bottom of the filter bowl, depending on the actual fluid flow conditions, increasing the dirt holding capacity and extending the time between element replacements by 7-10%.

Filter elements with PURE POWER: Filter elements with PURE POWER capture up to 50 percent more particles at a comparable retention rate and low differential pressure. All filter elements are equipped with an additional conductive layer as a standard. It allows for charge exchange between oil and filter material thereby reducing the risk of electrostatic charge and discharge in the filter.

Bosch Rexroth Romania 2 Aurel Vlaicu Street, 515400 Blaj Tel. +4 0258 807 872 sales@boschrexroth.ro

PURE POWER

TECH

High-performance coating for extreme offshore environments P

PG recently announced the introduction of PPG SIGMASHIELD® 880 high-performance coating to the U.S. and Canadian offshore market. The ultra-durable coating for vessels and rigs provides onecoat, direct-to-metal protection with quick curing at very high moisture levels, including underwater. PPG SIGMASHIELD 880 offers superior abrasion, impact, seawater and corrosion resistance with improved cathodic disbondment protection and excellent resistance to chemical splashes and spills. Its shorter dry-to-touch means assets can be returned to service more quickly, with the coating continuing to cure upon immersion in water. “Today’s offshore marine and energy assets, whether they are oil and gas rigs, windfarms or the vessels that serve them, demand the very highest levels of corrosion protection in extreme operating environments,” says Al Kaminsky, PPG marine manager, protective and marine coatings, U.S. and Canada. “PPG SIGMASHIELD 880 multipurpose, surface-tolerant epoxy delivers on PPG’s commitment to help owners manage application and maintenance costs.” PPG also announced the creation of a new marine sales team for the U.S. and Canada that will provide expertise and advice across the complete range of PPG marine coatings. “This focused commercial marine group will provide not only excellent in-person support at shipyards throughout the U.S. and

An ultra-durable coating for vessels and rigs PPG SIGMASHIELD® 880 provides one-coat, direct-to-metal protection with quick curing at very high moisture levels, including underwater. | Photo: PPG Canada but also owner support,” says Scott Doering, PPG director of sales, protective and marine coatings, U.S. “We also continue to develop industry-leading solutions that provide application efficiencies and extended product performance, reducing downtime and owner costs while providing protection across all kinds of fixed and floating marine assets.” To further expand its range of 82

high-performance coatings, PPG recently announced the release of PPG NOVAGUARD® 810 ER coating, which is the company’s first product targeted at the tug and barge tank lining markets in the U.S. and Canada. NOVAGUARD and SIGMASHIELD are registered trademarks of PPG Coatings Nederland B.V.

TECH

New method from RIKEN Measuring the salt content of concrete structures Researchers from the RIKEN Center for Advanced Photonics (RAP) have used a method, using the RANS compact neutron source, to non-destructively measure the salt content of structures such as bridges, tunnels, and elevated roadways, which can suffer from degradation due to exposure to salt from seawater and other sources.

he collapse of a bridge in August in Genoa, Italy, leading to the deaths of 37 people, has highlighted the danger posed by aging infrastructure. Japan, like many countries, faces major problems, as many of its bridges and tunnels were constructed during the high economic growth in the 1960s and 1970s and are now suffering degradation. However, inspections are time-consuming. For example, gauging the salt content of cement structures is typically done by boring out a core - an action which is time consuming and can slightly damage the structure. The research group decided to search for a better way to perform inspections, using a neutron beam - a device that emits high-energy neutrons in a beam - emitted by a compact neutron source that they had developed. Neutrons are an exciting new way to image structures, as they can penetrate quite

far into metallic materials thanks to the fact that they do not interact via the electromagnetic force, and thus are not affected by electric charge. They do occasionally interact with nuclei in the materials they penetrate, leading to the release of gamma rays that can be detected. For this experiment, the group used their compact neutron source, which generates neutrons by bombarding a beryllium target with protons. They used the beam to irradiate a series of concrete blocks with salt squeezed between them, with ‘prompt’ gamma rays - gamma rays that are emitted immediately upon irradiation by neutrons - being measured by high resolution germanium detectors. The prompt gamma rays are emitted from the atoms in the concrete blocks, and different elements can be detected by looking at the energy of the gamma rays. For example, the energies peaks from the prompt gamma rays emitted from chlorine - a component of salt - are 83

517 kiloelectron volts, 786 kiloelectron volts, 788 kiloelectron volts, 1165 kiloelectron volts, and so on. By doing this the researchers were able to demonstrate the presence of salt even when it was surrounded by between 12 and 18 centimeters of concrete. Each measurement took about 10 minutes. “This is very exciting , because Japan is suffering from serious infrastructure degradation, and it is impossible to predict when a major accident will happen. Our feasibility study has shown that neutron beams can indeed be used to measure whether the salt content of a concrete structure is within the legal limits set by the government. Our next challenge is to build a compact neutron source that is small enough to be readily transported to various infrastructures to conduct measurements,” says Yoshie Otake, who led the study. The results were presented at the 18th JSMS Symposium on Concrete Structure Scenarios (October, 2018), held by the Society of Materials Science, Japan.

TECH

New Propane Dehydrogenation technology KBR announces that it has developed a new Propane Dehydrogenation (PDH) technology (K-PROTM) that offers high propylene selectivity and conversion. This technology is based on KBR’s catalytic olefins technology (K-COTTM) which is a commercially proven fluidized-bed technology for converting low-value olefinic, paraffinic or mixed streams into high-value propylene and ethylene.

-PROTM delivers signifi cant capital cost and operating cost advantages when compared with conventional designs. This arises from its fluidized-bed design which delivers reliable operation and high onstream factors when compared with fixed or moving bed reactors. K-PROTM technology combines the know-how and experience of K-COTTM with a novel high selectivity, low-cost, dehydrogenation catalyst that does not require precious metals. Plants based on this new technology will be designed as stand-alone propylene production units independent of a steam cracker or FCC unit. Additionally, existing PDH operating units can be easily modified to benefit from the superior process performance and lower operating cost. “K-PROTM is a further evolution and extension of KBR’s pioneering work in catalytic cracking process technology,” said John Derbyshire, KBR President, Technology. “The CAPEX savings for K-PROTM over other commercially available technologies is in the range 20-30% based on our internal studies. In addition, the FCC-based design

will deliver higher on-stream factors and much better energy efficiency when compared with existing designs. Our clients have every reason to be excited about this newest addition to our olefins technology portfolio.” KBR has over 70 years of experience in olefins plant design and construction. KBR’s K-COTTM technology is extremely flexible in terms of feed and products and its versatility can enhance economic performance of steam crackers in a number of ways KBR’s SCORETM is a versatile, high yield and low CAPEX steam cracking technology which can be designed for feedstock ranging from ethane to heavy gas oils. With the addition of new PDH technology to its offerings, KBR is positioned better than ever to address all its clients’ needs for olefin technology solutions.

About KBR KBR is a global provider of differen tiated professional services and technolo gies across the asset and program lifecycle within the Government Services and Hydrocarbons sectors. KBR employs approximately 34,000 people worldwide 84

(including the joint ventures), with customers in more than 75 countries, and operations in 40 countries, across three synergistic global businesses: • Government Services, serving government customers globally, including capabilities that cover the full lifecycle of defence, space, aviation and other government programs and missions from research and development, through systems engineering, test and evaluation, program management, to operations, maintenance, and field logistics; • Technology, including proprietary technology focused on the monetization of hydrocarbons (especially natural gas and natural gas liquids) in ethylene and petrochemicals; ammonia, nitric acid and fertilizers; oil refining and gasification; • Hydrocarbons Services, including onshore oil and gas; LNG (liquefaction and regasification)/GTL; oil refining; petrochemicals; chemicals; fertilizers; differentiated EPC; maintenance services (Brown & Root Industrial Services); offshore oil and gas (shallow-water, deep-water, subsea); floating solutions (FPU, FPSO, FLNG & FSRU); program management and consulting services.

TECH

The SR1000 device Providing an ultra-low power and latency wireless technology for the IoT

PARK Microsystems, which is developing a lowpower wireless transceiver for the industrial Internet of Things revolution, has been named the winner of the Nokia Open Innovation Challenge 2018 (NOIC). To help bring its innovative solution to the marketplace, Nokia will provide SPARK Microsystems with USD100,000 as well as access to resources across Nokia and Nokia Bell Labs to further explore and develop their solution. AOMS Technologies and Razor Secure were tied for second place and will split a USD75,000 prize, with each start-up also given the opportunity to work with Nokia and Nokia Bell Labs to investigate how their solutions can integrate with, and enable, the Future X network. “This year’s NOIC brought together many innovative start-ups with impressive products, technologies and solutions that will shape the world of industrial automation. While competition was tight, SPARK Microsystems was selected as the winner for its low power wireless transceiver chipset that has the potential to help ‘spark’ the next industrial revolution,” Marcus Weldon, President of Nokia Bell Labs and CTO of Nokia, said. “SPARK is honoured to be selected as the winner of this year’s prestigious award. Nokia and Nokia Bell Labs are networking, communications and wireless technologies leaders, and we look forward to collaborating on delivering innovative solutions for edge

devices, sensors and wearable applications. These applications are a great fit for our ultralow power and ultra-short latency groundbreaking wireless technology and are aligned with Nokia’s vision of the future,” Fares Mubarak, CEO of SPARK Microsystems, mentioned. SPARK Microsystems, based in Montreal, came out on top of more than 300 start-up companies from the around the world that submitted entries to NOIC. This year’s competition was launched in July and focused on products and solutions for the industrial automation and industrial Internet of Things. The entrants went through two assessment rounds, with 6 finalists invited to pitch and demonstrate their ideas to an international selection jury at an event held on December 6 at the iconic headquarters of Nokia Bell Labs in Murray Hill, N.J. The selection jury was led by Weldon and was comprised of leaders from across Nokia, Nokia Bell Labs and NGP Capital. The three other competition finalists that participated in this event included INVOLI, NKN, and XXII, with novel approaches to drone air traffic information systems, a novel internet overlay network, and xR and video analytics solutions for industrials, respectively.

The winning solution – The SR1000 device The new SR1000 device from SPARK Microsystems can communicate 85

with such low energy that it can be powered by a simple low-cost solar cell or other energy harvesting device and use a capacitive cell for energy storage. This eliminates wires and batteries, and vastly simplifies the installation process and extends the life of wireless devices. The ultra-low latency and energy efficiency of the SPARK radio enables robust and high-performance mesh network capabilities when compared to other protocols. However, unlike RFID, the SR1000 device can accept other machine input, such as engine hours, temperature, humidity, or other sensor input, thus promoting a wide range of device analytics to help improve overall corporate operational costs. The communication latency of the SR1000 is so short that it can be used in the feedback loop of control systems such as in robotics to remove the need for wiring or complex timing management. The SR1000 can be deployed in a mesh network to enable long range and agile short-latency communications within dense low-power networks. SPARK can support device-to-device, star, and mesh network configurations. These features allow for increased connectivity and reliability, as well as better coverage of large areas, factories, and warehouses. A gateway device can then send the SPARK Network data to the cloud.

ÂŠ NOV

TECH

NOV - Equinor new agreement IntelliServTM Wired Drillpipe to outfit offshore drilling rigs fleet National Oilwell Varco, Inc. (NOV) announced the signing of a frame agreement with Equinor ASA for the provision of IntelliServTM Wired Drillpipe to outfit their global fleet of offshore drilling rigs. This agreement is based on the success of recent field deployments of version two of Wired Drillpipe that have demonstrated the value of high-speed telemetry in multiple applications across their fleet of working rigs. The initial agreement is for three and a half years with five, two-year extensions.

TECH

e are delighted to see accelerated adoption of NOV’s proprietary Wired Drillpipe in the global drilling market,” commen ted Clay Williams, Chairman, President, and CEO. “As the industry places further emphasis on drilling automation and opti mization, high-speed telemetry, which allows data to be transferred instant aneously from downhole to surface ope rations, is becoming an increasingly critical enabling technology. Partnering with a major national oil company interested in standardizing their operations with Wired Drillpipe is a testament to the value it brings versus conventional drillpipe.” Version two of IntelliServTM Wired Drillpipe has evolved to deliver even higher uptime performance and was designed to be easier to handle in demanding drilling operations. The agreement, which also includes eVolveTM Optimization & Automation Services, highlights NOV’s continued investment in the design, development, and provision of a broad portfolio of products and services that enable downhole and surface drilling auto mation. Equinor is stepping up its use of wired drill pipe to acquire subsurface real-time data during drilling operations, in line with the corporate digitalisation strategy and to prepare for automated drilling. NOV and Schlumberger have been awarded corporate frame agreements for global deliveries of wired drill pipes to the Norwegian multinational energy company. Both suppliers use solutions from IntelliServ, which is owned by NOV and Schlumberger. In addition to the corporate frame agreements with the two suppliers, commitments have been made on the use of wired drill pipe delivered by NOV for specific operations, such as Mariner in the UK, the West Herkules exploration campaign on the Norwegian continental shelf and Transocean Enabler’s drilling campaign on Trestakk. Estimated value of this

work scope is around NOK 300 million. The contracts allow the technology to be used on all Equinor installations globally. The total contract value may exceed NOK one billion during the first three years of the contract period. “This technology gives us a deeper understanding of what is happening inside and around the well during drilling , and makes it easier to make the right choices, based on real-time data, during the drilling operation. We will eliminate expensive mistakes, such as obstructions in the open hole during and after drilling and having to drill sidetracks. It also gives us a better understanding of the reservoirs and enables us to optimise the well placement. We become more efficient because we can control the speed and power of the drilling against the limit values that are most suitable underground,” says Geir Tungesvik, head of TPD Drilling & Well. He says that Equinor has already good experience from using this technology during the Barents Sea exploration campaign last year. “That is why we are expanding the use of this technology, while we are upgrading all rigs and some platforms in 2018 and 2019 to prepare for more automated drilling. This technology is an important element of our digitalisation strategy. I look forward to expanding the use of high-speed data transfer, which I believe will help ensure safer and more efficient drilling operations,” he adds. The wire inside the drill pipe allows high-speed data transfer. The signals transmitted through the drill pipe are estimated to be 10,000 times faster than the pressure waves of the drilling mud in conventional drill pipes. “We are pleased about awarding these global contracts and we are looking forward to the cooperation with NOV and Schlumberger. At the same time, we want the industry to keep developing this kind of technologies. Technology development in this segment is progressing fast and we are eager to see the development of other solutions in the market that may be relevant for us to test in the short or longer term,” says Peggy Krantz-Underland, Equinor’s head of Procurements. 87

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ANALYSIS

10 for the win The Climate and Energy Agenda Does your winter seem a little bit cooler than average? Or maybe you’re expecting an overly hot summer. You don’t feel the water actually rising, or the species which can’t adapt quickly enough slowly disappearing, not yet anyway. Not until your own kind is in danger. Let’s be honest here, the majority of the population does not live in a constant fear of climate change. We take it as a possibility, not a probability. When sadly enough it’s starting to look like a dead certainty.

Text by Vlad-Adrian Iancu | Graphs and maps: The European Political Strategy Centre 88

change are already a reality – also in Europe ANALYSIS

• Initially seen as amost distant, next-generation nyhow, people just think theyproblem will be dead full of uncertainties, change ischanges now anwill occur by the timeclimate actual dramatic observablesophenomenon. that’s done and dusted. Not quite so, though. Wildfires, floods, droughts are very real and are • Global warming has already reached 1°C happening now with dire consequences andat actual above preindustrial levels and is increasing 1 you? Think again… lossapproximately of human life. Still think it can’t happen to 0.2°C per decade. And now you’re going to ask, what!? We just stop? We forsake • Weather-related disasters – from hurricanes and modern life and go back to caves? No, nothing so dramatic is wildfires wiping out forests and towns, to typhoons required. We just start considering things, thinking and acting with and heavy floods, or severe droughts and extreme perspective. Putting things in balance, this should be the strategy heatwaves – are already proliferating around the for the coming years. Energy and climate don’t have to exclude globe forcing countries to develop expensive climate each other. adaptation strategies, next to climate mitigation Luckily enough, the powers that be, namely in this instance ones. Worldwide weather-climate disasters caused the European Commission, are not just sitting pretty waiting for a record-breaking loss of 290 billion euro in 2017, a solution to fall from the sky. By way of the European Political and are set to increase significantly with higher Strategy Centre, they have devised a set of 10 trends that may temperatures.2 hopefully alter our view on the flimsy balancing act between • Theand damage energy climate.is not limited to other continents: During the summer of 2018, climate-related catastrophes struck across Europe, including in Sweden, Greece, Hereand and Now Portugal, taking hundreds of lives. 2018 also sawFirst large-scale losses of realizing up to 50% several The trend is crop actually about thatinwhat we are 3 parts discussing of Europeisdue droughts or latetofrost. currently not to a matter of coming terms with what • Climate-related begun causing will happen, becausedisasters it already have did. Climate change isalarming the present; displaced it is peaks days ofin ournumbers lives stuff.ofThe rhetoric people of “we’ll inseerecent whenyears. we get Asshould future be climate impacts feltrealistic disproportionally there” abandoned forwill thebe more Here and Now. populations in theterm developing this isabout Well,strongly ‘here’ isby a decisively relative but yes, world, I am talking likelyLet to drive unprecedented migration flows (see theto the Europe. me throw some numbers at you: according EPSC’sPolitical 10 Trends Shaping Migration). European Strategy Centre report, the cities of Europe are already on average 1°C warmer in the century. It • Environmental degradationthan linked to20th traditional mayenergy seem likeproduction a silly number now, but take into account theisfact and consumption patterns thatalso this iscreating 1°C abovenew preindustrial levels and it’ s increasing health risks. Air pollution –at an alarming rate: 0.2°C per decade. And we’re already paying for which already causes more than 400,000 Europeans 4 it bytoway of mitigating wildfires, hurricanes, floods and so on. die prematurely each year – is set to get worse Andaswouldn’t you have guessed it; it’ s only going to get climate change further magnifies the effects ofworse. Thepollutants. record breaking 290change billion euro spent in 2017toon climate Climate is also expected redraw 5 adaptation strategies and climate mitigation might seem the map of mosquito-borne diseases globally. like

European cities are already on average 1°C warmer than in the 20th century +1.5°+1.2°-1.5° +0.9°-1.2° +0.6°-0.9° +0.3°-0.6° +0.0°-0.3°

Source: European Data Journalism Network

• Fact Unaddressed, of the matterglobal is thatwarming althoughcould we’re cause bound severe to see some ocean over-acidification 2100, we’re that could not benefits from reducing climatebychange, still dangerously onlylimiting kill off the warming entiretybelow of coral reefs,2°C butmark. also 16 far from global the agreed cause fatal damage all ecosystems out of 197 participants at the to December 2015 Parisrelying Agreement underwater plants for food sources.6 to climate have on actual definitive plans to meet their commitment change. The Intergovernmental Panel on Climate Change warns us that we have 12 years left to get our act together or face the worst effects of climate change come 2060 with a 2°C and rising global average temperature increase. Optimists argue that the cost of climate-related damages will average around 120 billion euro per year if we hit 2°C and 190 billion euro for 3°C. Bureaucracy seems to stunt the movement even more, so organizations like the C40 Global Leadership on Climate Change (a network of world cities) is trying to take the initiative at ground level. Even with court cases centred on human rights to hold greenhouse gas emitters and governments accountable it still sounds like too little too late.

pocket change compared with what it may cost us if we don’t pump the breaks now. The loss of human life already is in the hundreds, just this past summer. Not to mention the impact on agriculture, with a reported 50% loss in Europe due to late frost or drought. If you thought migration was a problem before, let’s see what happens when millions of people suddenly realize their living areas can’t sustain proper existence anymore. And this is all due to short term and fast active consequences. But traditional energy production will hurt the environment and also slowly kill you. While disasters like fires and floods quickly wipe out a smaller number of people, air pollution causes about 400,000 Europeans’ premature deaths year in, year out. If this wasn’t enough, climate change is also set to play around with the map of mosquito borne diseases and may cause the over-acidification of oceans by 2100 which will neutralize the entirety of ecosystems based on underwater plants as food sources.

A Diverse Energy Mix But we should at least try to focus on the bright side. The socalled new hope might come from a Diverse Energy Mix (2nd trend). The EU looks ahead and continues to promote renewable energy which now represents 17% of the final energy consumption 89

ies for industry and investors, even if capital re slower to align with the climate economy

Renewables

Networks

Billion dollars

750 500

2017

2016

2015

2014

2013

2012

2011

2010

250 2009

nesses close n battery ion d to ng omies mate.24 which is ailable eople still ense.

1000

Coal, oil, gas Nuclear Battery storage

2008

plying with good e owd in

global markets have already grown to almost one trillion euro annually. Only the European battery market will be worth approximately 250 billion euro by 2025. Also, there are huge untapped resources and market in Africa. Another major trade commodity will most certainly be low-carbon technology, based on the fact that between 2012 and 2015 Europe exported clean energy amounting to 71 billion euro, thus exceeding imports by 11 billion euro. While the financial sector is still getting its feet wet, there seem to be some movements being made. One of the fast growers is the green bond market which reached 151 billion euro in 2017, supporting a large slice of financing for further clean energy investment. But and there is a big but, these bonds represent a meagre fraction: less than 1% of the whole bond market. The EU is indeed trying to clarify standards and definitions in what pertains to green loans and green securitisation but it will take time. While most large institutional actors like insurance companies, pension funds and sovereign wealth funds are yet to commit, France’s AXA was the first to divest from the coal sector in 2015 and most of the leading EU insurance companies followed them. Another notable endeavour is the Climate Action 100+ group which saw many other global investors advocating for improved climate change governance, emissions reduction and transparency on climate risks.

Clean energy investments have largely overtaken fossil fuels

2007

than ity ments ancing, ment as

ANALYSIS

Source: International Energy Agency

• Low-carbon technologies are also becoming a

in Europe, right on trackwith if we to achieve 20% major which tradeiscommodity, thewant EU benefiting by 2020. With a reduction in the overall share of fossil fuels by from significant positive trade balances. During almost 10% since 1995, renewables might actually 32% of the period 2012-2015, EU exports of clean hold energy the energy market in Europe by 2030. Globally though we technologies reached 71 billion euro, exceeding have 25 a different story withbillion the total energy demand being split 10.4% imports by 11 euro. - 81% in favour of fossil fuels. Hopefully the power sector will spearhead the global change towards 12.4% by 2023, with China envisioned to overtake the EU and US in terms or renewable power over the next two decades. But there is still a lot more to be accomplished. Surplus energy currently goes to waste, but one major factor is set to be battery storage, even if it is in its early days. The best approach for renewables is indeed a centred one; most companies are small and slowly growing without massive capital investments. A major change in approach will be required if they are to even think about competing with fossil, not to mention the adoption rates which are certainly affected by the agricultural and urban sectors. The balance seems to be brought about by solar and wind energy, which are becoming more and more competitive seeing a cost reduction by 70% since 2010. While the power sector is advancing quickly as we already mentioned, some sectors are dragging their feet: renewables in transport are still down at 3.4% and not going anywhere due to the sector’s reliance on fossil fuel. And is this a surprise seeing as approximately 112 billion euro have been allocated to the production and consumption of fossil fuels between 2014 and 2016 in Europe?

We are not all moving at the same speed The 4th trend was always going to be a certainty: We’re not all moving at the same speed. As President Macron argued before quite soundly, even to the discontent or Romanian overzealous patriots, Europe has indeed different speeds. Just compare our economy or roads to German ones. It’s a given then that different countries will adopt a clean economy at varied speeds. Good news though for the Planet as a whole: the number of people employed in the renewable energy industry worldwide surpassed 10 million for the first time in 2017. There had to be a drawback though, the fossil fuel industry is expected to lose about 8.6 billion jobs come 2050. The shift to electrical cars will of course also affect carmakers and garages alike with some jobs becoming unnecessary, thus retraining and lifelong learning will become a must in nearly all sectors. While some jobs will be relevant moving forward, Europe’s job market is already facing a shortage of trained professionals in the wind and solar energy industry. Ironically enough, the public will be one of the drivers against climate change. People who do not realize what’s at stake will protest against rising fuel taxes and retiring old vehicles. Policymakers will have to juggle with sustainable transition measures, all the while taking into account solutions that are manageable for low income groups as well, so as to avoid situations like the ‘yellow vests’. Stricter regulations could also drive business away and further throw an already crooked playing field out of balance. Apparently, it’s high time that we found a global carbon pricing initiative that works… 53 sounds like quite a lot.

Markets following business Is it all a money business though? As we rightly know, Markets follow business (3rd trend). New and exciting technologies also mean new opportunities for investors and industry alike, and the capital markets will eventually follow suit, keyword here being sustainability. Public finance continues to be a major factor, but companies start discovering that the bottom line might benefit from climate friendly business models and technologies, as 90

ANALYSIS

TS Consumers transforming the Energy Demand DING UNEVENLY

180 170 160 150 140 130 120 110 100

Environmental economy: employment Environmental economy: gross value added Overall economy: employment Overall economy: gross domestic product

TREND 6

1000-3000 3000-6000 • The6000-15000 energy sector started integrating digital >15000 technologies as early as the 1970s to make grid (up to 41000)

ICT

Other energy

2017

Transport

2016

Utilities

2015

Oil and gas Other 7 USD (2017) billion 6 5 4 3 2 1 0

2014

Corporate investments in new energy technology companies, by sector of investing company

2013

management and operation more efficient. Today, the pace of digitalisation in the energy system is accelerating.47 • In 2016, global investment in digital electricity infrastructure such as smart grids – which use digital technologies to enable two-way communication between utility providers and customers – amounted to 40 billion euro. This was almost 40% higher than investment in gas-fired power generation worldwide (30 billion euro).48 • Energy tech start-ups are popping up the world over, attracting some 5 billion euro in 2017 in corporate venture capital and growth equity.49 Importantly, since 2015 this increase has been driven Source: Joint Research Centre by IT companies, rather than energy, transport or utility companies. The growing involvement of digital platforms is driving the development of new services and apps that serve to optimise society’s energy consumption, cut costs and reduce carbon

IT companies ramping up energy investments

2012

ready where e ng g. Of vant, in d the ture.35

DIGITAL DRIVING AN ENERGY REVOLUTION

2011

conomy ose ive favour ng and

The next commandment is pretty clear in what pertains to connectivity: Go Digital or go home (6th trend). Sounds good yes, but it will only work if done carefully. While many were surprised that robots were used in industry as far back as the 80’s, Source: Eurostat, European Commission digital technologies were used in the energy sector since the 70’s and are currently picking up speed at an amazing pace. Only in Carbon-intensive regions are most at risk 2016 digital grids amounted to 40 billion euro. That’s almost 40% higher thandigitalisation investment in gas fired power generation around the In 2015, there were 237,000 direct jobs in coal and lignite mining and But like in other sectors, the of critical power-plants – the majority of them in just a few regions. By 2030, it globe. Energy tech start-ups are springing up like mushrooms after is estimated that around 160,000 of these may beinfrastructure lost.36 energy does come without risks the rain not as well, attracting a whopping 5 billion euro in corporate capital and growth equity in 2017. Logically enough, since 2015 Potential job losses Until 2030 (cumulative) this increase was mostly driven by IT companies, not energy, <1000 transport or utility ones. And since digital platforms are also in

2010

NING

Go Digital or go home

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

uelossil globally 0.33 to e ‘garage cars aintain

2009

luding the first wable is o 1.5

Environmental economy growing faster than overall economy

2008

my over s of

2007

onomy

intensity. Translation – economic growth is no longer intertwined with greenhouse gas emissions at least in Europe (total emissions decreased by 22% between 1990 and 2017, as EU’s combined GDP grew by 57.5%). This was also reflected by a shift in policy making as a third of the world’s energy consumption is neatly covered by mandatory standards and regulations. Things were indeed far more hectic in 2000 when only 11% was regulated. And these actually help the average Joe, especially if he has been living in precarious conditions or is a victim of energy poverty. A key factor in all this going forward will be reusability and recycling, with producers already aligning to this trend with costs noticeably declining. One example of how waste and biomass can help the industry shift comes from the cement industry: the share of fossil wastes and biomass has gone to 28% presently and 14.8% in 2015 from absolutely nothing in 1990. But this does not mean that new solutions alleviate responsibility of consciously making sustainable choices. We should remember that consumers and their appetites continue to rule the market.

Another important trend will be Consumers transforming the Energy Demand (5th trend). As the world economy grows, so shall our need for energy, but apparently consumption is expected to grow at a slower pace than in the past: 1.3% per year over 2015-2035 as opposed to 2.2% per year in 1995-2015. The growing butannot for everyone math doesfast really–have explanation this time: energy intensity is picking up speed which of course leads to improved carbon

Source: International Energy Agency, World Energy Investment 2018

• Digitally-enabled technologies are also transforming the very nature of modern energy demand, as seen with the sharp growth in ‘mobility as a service’, as

ANALYSIS

secure a transparent transaction environment for independent energy trading platforms. Start-ups concerned with blockchain energy have multiplied and raised more than 265 million euro for technology applications in 2017.

on the action, society’s energy consumption will be optimized as well as cutting costs and reducing the carbon footprint by way of ingenious apps and services at our fingertips. This increased accessibility will not only grant us the capacity to cut our costs, but also use predictive capabilities to address asset malfunction. Mobility is indeed a service nowadays as car sharing and ridehailing apps take on the urban dweller and not only. We’ve already discussed the various goodies the Internet of Things will provide us with, combined with big data and Artificial Intelligence but the ‘digital twin’ deserves a special mention – power plants and several other installations will benefit from virtual copies that can run predictive maintenance and training simulations. The not so nice part comes now. Being connected means being easier to hack and some companies have had their fair share of grief due to unrelenting hackers. There’s no telling what amount of panic and chaos a cyber-attack may inflict on a fully connected city. Since hackers only need physical access to one entry point in the network in order to paralyze an entire mainframe (one hacked turbine means an entire wind farm being shut down) the cascading principle might affect several countries in a rather horrifying domino effect. In these conditions data privacy and information protection seems to be the frosting on the cake really. And the ever-present conundrum – new technologies, especially digital ones also increase the energy demand.

Look to the East If you’ve been paying attention so far, the next trend which is Look to the East (8th trend), won’t surprise you at all. And you are not the only one; the world has high hopes and has set high expectations for Asia as these fast-growing economies mean fast growing consumption rates. Having already surpassed the US as the largest crude oil importer in the world, China is primed to become the biggest oil consumer in the world by early 2030s. Also, it is expected to account for one fourth of the global growth of gas consumption between 2015 and 2040. Conversely, China is also the biggest greenhouse gas emitter surpassing both the US and the EU. The whole Asia Pacific region could be held accountable for almost 50% of the global carbon dioxide emissions. But fast growth also means furious investment in renewables and energy efficiency as China and neighbours have to contend with surplus energy bills and citizens demanding cleaner air. Between 2015 and 2021, China and India are envisioned to amount to 46% of the projected growth in renewable energy markets. Thus, it’s no surprise that China is the current go-to for companies interested in manufacturing clean tech such as: photovoltaic, electric vehicles and battery cells soon enough. But they don’t just keep their business at home, China being a massive investor in energy infrastructure and resources abroad through its Belt and Road initiative as well as in Africa. Another target they fancy is indeed Europe which accounted for 77% of the total Chinese stock between 2010 and 2017.

Electrification breeding Democratization and Fragmentation All these changes will of course have consequences of their own as Electrification breeds Democratization and Fragmentation (7th trend). This new trend means that the consumer can be a handson participant in the energy trend - see solar panels. Unlike coal, gas and nuclear plants, you can now own your energy. This is a holy grail for investors and will obviously create a more competitive energy market. Thus, we are now faced with a new entity, the prosumer – a consumer that produces his own energy and can sell any surplus back to the grid. It is estimated that by 2030, 17% of installed wind capacity and 21% of solar could be owned by energy communities. By 2050 it’s plausible that almost half of the whole EU households, which amount to approximately 113 million, could be an active part of producing renewable energy. We’re far from that idyllic future though. Nowadays, Europe has only some 3,000 energy communities which are limited to just a few countries with the majority located in Denmark, Germany and Austria. According to the German Agency of Renewable Energy, German citizens own approximately one third of the country’s full renewable energy capacity. But all these little prosumers may overthrow and short-circuit a system that was not installed with them in mind. It’s hard to regulate off the grid assets and harder still to integrate them. Seeing as power and electricity don’t come from only one valve anymore this raises some security risks again. Some say it’s worth the risk, companies on the old continent starting to expand to the US. This trend seems to also breathe new life into Blockchain in order to facilitate and

New Supplies means new risks This is what the players in the energy industry need to remember (9th trend). Traditionally, the supply of oil and gas was a concern, mainly because of security issues and pipeline diplomacy but now it seems it won’t be the only one. Sure, gas markets going global and the rise of shares of liquefied natural gas mean diverse sources of import, but the increase of renewable energy means that production is going to be decidedly local, so no more imports required. This change however will not happen overnight and might even create additional dependencies that Europe will have to manage in its external and trade relations. For the production of clean tech solutions to run smoothly, rare earths and cobalt and other such special materials will have to be supplied continuously, and you can’t find most of them at the European corner market. Some will have to be imported from other countries, countries that might not benefit from the most stable political regimes. Seeing as this obstacle can’t be overcome in-house, the key here will be strong trade partnerships and recycling and reuse of materials at every turn. Sadly, EU’s import dependency increased 92

ANALYSIS

Import dependency for raw materials, as well as for selected materials used in wind, PV and battery technologies

Battery

Wind

Solar

Share of global production of different processed and finished materials used in wind turbines, solar photovoltaic panels and batteries, in % of total

Wind Solar PV Battery

Aluminium Boron (borates) Cadmium Chromium Cobalt Copper Dysprosium Gallium Graphite (natural) Indium Iron ore Lead Lithium Manganese Molybdenum Neodymium Nickel Niobium Praseodymium Selenium Silicon (metal) Silver Tellurium Tin Zinc

EU competitiveness at stake as China leads on supply of most materials and components needed for renewables

China

Japan

Steel (crude)

Solar-grade silicon

18 51

14 8

13 7 57

Electrolyte 0%

15 1

Carbon ﬁbre composites 10

Anode material

South Korea

6 10 5 4

Sintered NdFeB magnets

Cathode material

USA

60 20%

40%

5 18 7 7

60%

80% 100%

Source: Joint Research Centre

100

Source: Joint Research Centre

and innovation. Despite this, the EU still ranks last among major economies in terms of investment per GDP. It seems that money is short and bureaucracy dramatically slows down the process of actually bringing research to the market. Even though the EU was an early bird in what pertains to this whole innovation game, it still might lag behind on account of being one upped by Asia on the number of low carbon inventions. And this poses a new question: Can carbon be effectively used as a resource? The answer seems to be ‘yes’ in the case of chemical feedstock, fuels and building materials with a goal of reaching net-zero GHG emission if and only if they are powered by renewable energy. If you can’t use it, at least stock it right. This seems to be the motto of Carbon Capture and Storage technologies, but until now they haven’t penetrated Europe on account of negative perception by the public, regulatory constraints and no successful demonstration project. Aspects such as the price for the two mentioned technologies still remain blurred at best. These trends are in no way definitive and, as you’ve certainly seen, speculate a lot on what might be. Best case scenario, everyone pulls together and humanity collectively overcomes this hurdle which to be honest we brought on ourselves. But with some people deciding that climate change is just a hoax or a tool of manipulation, it might prove to be difficult. These are not the Ten Commandments and should not be regarded as such. But a little moderation and common sense might come in handy, especially for the coming years.

from 46.7% to 53.6% from 2000 to 2016 but Member States have pledged to enhance their cooperation on lowering the exploitation of gas and oil fields in Europe and phasing out coal. Friendly neighbour Russia remains the EU’s main supplier of oil, gas, coal and nuclear fuel, albeit EU imposed sanctions have affected its energy sector. The fact that the US has shifted from an energy importer to an exporter bodes well for Europe’s security supply, but it could also leave it in an exposed geopolitical position vis-àvis global oil markets should the US turn their back on the Middle East. Foresight will be the name of the game in order to navigate this intricate web of connections between sectors and actors and finally facilitate political steering and be prepared for alternative unexpected scenarios.

Net-zero emissions are possible Last but not least we need to make clear that Net-zero emissions are possible (10th trend) thanks to innovation. Counting on existing technologies like solar, wind and hydropower, the EU is primed to reduce its carbon footprint by up to a staggering 90% by 2050. But it’s not so simple. In order to actually realize the netzero scenario, other technologies will have to be implemented as well such as carbon capture and storage, precision farming, advanced biofuels and more. Credit should be given where credit is due, in this case to the private sector which accounts roughly for more than 75% of EU investment in clean energy research 93

EVENT

Romania taking stock 29th Session of the Energy Charter Conference in Bucharest Romania hosted during 27-28 November 2018 the 29th edition of the Energy Charter Conference, as President of this international forum. Our country is the first state of the European Union to take over the Presidency of the Energy Charter since the establishment of this international platform for debate and decisions in the energy sector. The Conference has gathered ministers and officials in the energy sector from over 30 countries.

EVENT

nergy Minister Anton Anton has stated in the opening of the reunion that: “Romania, as active member of the Energy Charter, has completed its National Energy Strategy 2018-2030, towards 2050. Romania’s strategy is far from being a strategic document, it is a dynamic projection based on innovation and analysis. This document prepares the transition of the Romanian energy sector to European trends. However, I believe that, irrespective of the path, each EU state must establish as priority both innovation in the energy sector and security and safety for the citizen. Romania is a promoter of innovative technologies aiming at the electricity and gas sector, while supporting by all means the prosumers.” The Energy Charter process began in 1990 as a policy initiative launched in Europe, in the form of an energy cooperation platform, accepted by both the Eurasian states and the developed countries. In 1991, the European Energy Charter was signed in The Hague, and in 1994, in Lisbon, the Energy Charter Treaty and Energy Charter Protocol for energy efficiency and environmental aspects were signed. The two documents were ratified by Romania in 1997. The provisions of the Treaty cover areas such as transit of energy and energy resources, investment protection, energy trade, crisis mechanisms, energy efficiency. Romania, as the first EU Member State to undertake the Presidency of the Energy Charter Conference, has continued to promote during its term a global vision on the role that the Charter can play in progress towards a secure, accessible and sustainable energy future. The theme of this year’s Charter Conference, chaired by State Secretary within the Ministry of Energy IulianRobert Tudorache, President of the Energy Charter Conference, was ‘Driving innovation for ensuring energy security, sustainability and prosperity.’ The Ministerial session was attended by more than 150 participants from Energy Charter Members, Observers,

International Organizations and members of the Industrial Advisory Panel. During the interventions, ministers, government officials of Member States and Energy Charter observers have highlighted the significant role that innovation can play in energy transition and the ways in which innovative technologies can contribute to reaching sustainable development. At the end of the work, the Bucharest Declaration was adopted, a strategic document reiterating the commitment to modernizing the Energy Charter Treaty, reducing investment risks, combating energy poverty, increasing energy security, improving cross-border energy flows and, last but not least, extending the membership of the Energy Charter Treaty. In his speech, State Secretary IulianRobert Tudorache expressed his gratitude for the trust granted and thanked the Energy Charter Secretariat for the fruitful cooperation during the exercise of the mandate. “It was undoubtedly an honour, and also a great responsibility. I am convinced that Romania has managed to successfully exercise this mandate and capitalize on this extraordinary opportunity offered by the rotating Chairmanship of the Energy Charter Conference. I firmly believe that we will hand over to the forthcoming Presidency of Albania unanimously appreciated results at the level of the Energy Charter and that Romania’s consistent efforts will be continued towards 95

achieving the major goals of the Energy Charter.” Apart from official addresses to the Conference, the delegates had a dynamic discussion about the role that innovation plays in the energy transition and how innovative technologies help countries to achieve sustainable growth. Ministers and other high-level government officials from Energy Charter member countries and Observers also talked about their longterm energy targets, energy transition perspectives and how to phase out fossil fuels taking into account legitimate interests of all involved parties. “The key question is how to make the transition which can be difficult for countries depending on energy production from coal,” highlighted the Minister of Energy of Romania Anton Anton. In his concluding remarks, IulianRobert Tudorache presented the main achievements of the Energy Charter Process under the Romanian Chairmanship in 2018, including the accession to the ECT by Jordan and Yemen, invitation for Eswatini (former Swaziland) to accede to the Energy Charter Treaty, publishing of the EIRA2018 - Energy investment risk assessment publication that includes 30 countries and the successful implementation of the Bucharest Forum on energy efficiency, energy poverty and providing access to affordable energy services in June 2018.

EVENT

UN climate conference in Katowice EU aims for adoption of rules for implementing Paris Agreement

his year’s UN climate con ference was a key moment for implemen tation of the Paris Agreement, with Parties aiming to finalise detailed rules that will enable the landmark accord to be put into practice across the world. The 24th Conference of the Parties to the UN Framework Convention on Climate Change– ‘COP24’ – was held from 3-14 December in Katowice, Poland, presided over by the Polish government. It brought together ministers and government officials, as well as a wide range of stakeholder representatives. The Vice-President for Energy Union Maroš Šefčovič represented the European Commission on December 3 at the high-level opening ceremony. The Commission presented a strategic vision on how the EU could achieve climate neutrality by 2050. The EU was represented at the negotiations by the chief climate negotiator Miguel Arias Cañete and Elisabeth Köstinger, Minister for Sustainability and Tourism of Austria.

2050 Long-term strategy On 28 November 2018, the Commission presented its strategic long-

term vision for a prosperous, modern, competitive and climate-neutral economy by 2050 – A Clean Planet for All. The strategy shows how Europe can lead the way to climate neutrality by investing into realistic technological solutions, empowering citizens, and aligning action in key areas such as industrial policy, finance, or research – while ensuring social fairness for a just transition. It will build on the new energy policy framework established under the Clean Energy for All Europeans package. Following the invitations by the European Parliament and the European Council, the Commission’s vision for a climate-neutral future covers nearly all EU policies and is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The purpose of this long-term strategy is not to set targets, but to create a vision and sense of direction, plan for it, and inspire as well as enable stakeholders, researchers, entrepreneurs and citizens alike to develop new and innovative industries, businesses and associated jobs. It looks into the portfolio of options available for Member States, business and citizens, and how these can contribute to the modernisation of our economy and improve the quality of life of Europeans. 96

The long-term strategy also seeks to ensure that this transition is socially fair and enhances the competitiveness of EU economy and industry on global markets, securing high quality jobs and sustainable growth in Europe, while also helping address other environmental challenges, such as air quality or biodiversity loss. The road to a climate neutral economy would require joint action in seven strategic areas: energy efficiency; deployment of renewables; clean, safe and connected mobility; competitive industry and cir cular economy; infrastructure and inter connections; bio-economy and natural carbon sinks; carbon capture and storage to address remaining emissions. The Commission’s strategic vision is an invitation to all EU institutions, the national parliaments, business sector, non-governmental organisations, cities and communities, as well as citizens and especially the youth, to participate in ensuring the EU can continue to show leadership and encourage other international partners to do the same. This EU-wide informed debate should allow the EU to adopt and submit an ambitious strategy by early 2020 to the United Nations Framework Convention on Climate Change (UNFCCC) as requested under the Paris Agreement.

EVENT

The Petroleum Club annual prizes and awards T

he Petroleum Club Christmas Party took place at Amvrosia Restaurant in Bucharest on 12 December 2018. The event included the Petroleum Club annual awards and the traditional raffle. HABAU PPS Pipeline Systems, Expert Petroleum, Air France KLM, and LifeStyle Travel & Gourmet Club were proud sponsors of the party. In his introductory speech, Andrew Costin, the Petroleum Club President, mentioned the most significant achievements of the Petroleum Club in 2018, and thanked the members and partners for their active support. He also nominated the 11 companies that joined the Club in 2018: Santbau Con, Cambriel Services, Innovative Tex Solutions, BGP

Photo 6

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Photo 5

Photo 1

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Inc., ROHRER Servicii Industriale, Electroalfa, Mazars, Up Romania, J. Christof E&P Services, LifeStyle Travel & Gourmet Club, Syntek Global. The programme continued with the annual awards that acknowledge continued effort, exceptional deeds and success in the energy sector. Spencer Coca (Photo 1), the Country Manager of Mazarine Energy Romania won the ‘Oilman of the Year 2018’ Award, while Mihai Mitroi (Photo 2) collected the 97

‘Company of the Year 2018’ Award for Prospectiuni. Kees Cramer and Laurentiu Ursu (Photo 3) received the ‘Support for the Oil & Gas Industry Special Award 2018’ on behalf of Steder Group Logistics, while Constantin Capraru (Photo 4) was honoured with ‘The Outstanding Achievement in the Oil & Gas Industry Award’. The ensuing raffle generated more winners: Viorel State (Photo 5), Sales Manager at J. Christof E&P Services won a VIP Black card offered by LifeStyle Travel & Gourmet Club. Then Air France KLM, long-time partners of the Petroleum Club, offered two Flying Blue Gold cards, and the winners were Andreea Hliban (Brenntag) and Mihaela Hampu (Mazars). The big AF-KLM prize consisting of two round trip tickets (all taxes included), from Bucharest to one of the following destinations at winner’s choice, Aruba (Antilles, Carribean), Houston (USA), Cartagena (Columbia) went to Florian Grosu (Photo 6), the Assets Director Romania of Expert Petroleum. Photos of the event are available at the Petroleum Club Facebook and LinkedIn pages.

JANUARY’S READING

DNV GL research paper: Hydrogen as an energy carrier Some 55 million tonnes per annum (Mtpa) of hydrogen (H2) is currently made every year for industrial feedstock, mostly for oil refining and making chemicals. In contrast, only 0.002% of hydrogen production, about 1,000 tonnes annually, is produced for use as an energy source. Most, if not all, of this currently powers hydrogen fuel-cell electric vehicles.

ydrogen as an energy carrier - a new research paper from DNV GL - predicts significant long-term rises in these numbers, with low-carbon H2 becoming an effective decarbonization agent to mitigate climate change. For example, the company’s experts estimate that demand in 2050 for H2 solely for energy could range from 39– 161 Mtpa under various uptake scenarios. The paper builds on the DNV GL’s 2018 Energy Transition Outlook, which projects moderate uptake of H2 in the period 2030–2050. “Hydrogen as an energy carrier provides more granular analysis to evaluate emerging hydrogen value chains,” says the paper’s lead author Dr Jørg Aarnes, senior principal engineer, DNV GL - Group Technology & Research. “Our studies make a persuasive case for hydrogen being a potentially significant clean option in the global energy mix.” The research paper highlights decarbonization as the main driver for using hydrogen for energy, whether the value chain involves transporting

it as compressed gaseous H2, liquid (cryogenic) hydrogen, ammonia, or as hydrogenated liquid organic hydrogen carrier. Additional uses for hydrogen, among others, include providing heat to industry; fuelling transport; and, as a medium to store and transport surplus power from variable renewable energy sources (VRES). To help decarbonize these applications, hydrogen needs itself to have a low carbon footprint. Consequently, the paper stresses how large-scale production of ‘blue hydrogen’ — made by either steam methane reforming or coal gasification — requires parallel development of largescale carbon capture and storage (CCS) infrastructure. “This requirement needs considering when designing policy measures to incentivize low-carbon hydrogen production,” Aarnes mentions. ‘Green hydrogen’ is produced by electrolysis of water powered by an electricity mix with a low greenhouse gas emissions footprint. The power can come 98

from VRES. In analysing applications for hydrogen, DNV GL’s paper stresses that several countries may see hydrogen-heated buildings as a good decarbonization option. It sees Australia, Canada, the Netherlands, South Korea, UK and US as the most likely to adopt H2 at significant scale for heating residential and commercial premises. Aarnes explains: “Natural gas already has a high share of energy input to space heating in these countries, and their existing gas infrastructure can be adapted to hydrogen distribution and storage. Importantly, these countries also have large-scale CCS operations or are beyond the early stage of developing them.” However, he added that the application of hydrogen to space heating requires substantial policy push and public cofunding to materialize. “Hydrogen as an energy carrier is one of a number of studies and papers that we are publishing to inform this debate and provide evidence-based analysis of what it will take for a global hydrogen economy to develop,” Aarnes concludes.