Moldova’s Foreign Policy Statewatch
Institute for
Development and
Social Initiatives
„Viitorul”
Issue 80, July 2014
Corina Gaibu
Comparative analysis of
electricity prices in the RM and
in the region (Romania, Ukraine)
E
nergy sector is a strategic field for Republic of Moldova
Geopolitical situation in the region, the tension between
Ukraine and Russia, impose the acceleration of establishing interconnections with Romania, thus ensuring
energy security of Republic of Moldova The contract
on electrical energy supply to the RM was negotiated
and signed in March. The negotiated price has a major impact on country’s economy and directly affects the whole
society. Setting the electricity prices excessively high causes
extra pressure on the population’s welfare and the monthly bills
people pay; while, high dependency on electricity imports from
Ukraine and a single generating facility in Transnistria (Steam
Electric Power Station ”Moldoveneasca” owned by RAO UES
of the Russian Federation) create an energy security vulnerability. Diversifying electrical energy sources through building a
connection with Romania allow attaining an acceptable energy
security level.
Situation in the RM
Over 80% of electrical energy consumed in the RM is imported.
Currently, Republic of Moldova’s electrical energy is distributed by ICS
„Union Fenosa Gas” (64%), which provides electricity to Chisinau and
Central and Southern areas of the country, and state-owned electrical
distribution networks „RED-Nord” (22%) and „RED-Nord-Vest” (14%).
The electrical energy market in the Republic of Moldova is considered
to be liberalized and electrical energy may be purchased and imported
through direct negotiation by licensed companies from any market the
Board:
Cornel Ciurea,
Cristian Ghinea,
Witold Rodkiewicz,
Martin Sieg,
Dan Dungaciu
Editor:
Elenbaum John Ryan
Moldova’s Foreign Policy Statewatch
represents a series of brief analyses,
written by local and foreign experts, dedicated to the most topical
subjects related to the foreign policy of Moldova, major developments
in the Black Sea Region, cooperation with international organizations
and peace building activities in the
region. It aims to create a common
platform for discussion and to bring
together experts, commentators,
officials and diplomats who are
concerned with the perspectives of
European Integration of Moldova.
It is also pertaining to offer to
Moldova’s diplomats and analysts
a valuable tribune for debating the
most interesting and controversial
points of view that could help Moldova to find its path to EU.
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Moldova’s Foreign Policy Statewatch
Republic of Moldova has a physical connection and cooperation agreement with. In reality, energy
imports from Ukraine are conducted only through SE „Energocom” in the name of RED „Nord” and
RED „Nord-Vest” while ICS RED „Gas Natural Fenosa” purchases electricity from Steam Electric Power
Station “Moldoveneasca” (located in Transnistria).
Import prices from Ukraine and purchase prices from Steam Electric Power Station “Moldoveneasca”
have always been the same. The latest contracts were 6.1 US cents / kWh in April 2011 and 6.91 US
cents / kWh in 2012.
In the RM, electrical import energy price dynamics varied from 2.4 US cents / kWh in 2005 to 6.8
US cents / kWh in 2014. Most of the electricity tariff is the cost of the electricity purchase and only 22%
of the tariff is for administrative, commercial, investment, distribution, profit, etc. Reducing the price of
imported electricity would reflect in final tariff paid by consumers much more than a decrease in internal
costs (investment, operational and administrative etc.)
Electrical energy market in Romania
We have analyzed the Romania’s market based on publicly available sources. Electrical energy
prices have varied over time. In 2012 the average purchase price2, including transportation to the
border, maintenance, transit fee for neighboring countries and cogeneration fee was 7.9 USD cents /
kWh. The average price at the border with the Republic of Moldova (including the same additional costs
as in 2012) in 2013 was 7.9 C USD / kWh, too, but in 2013 it decreased continuously to reach 7.5 USD
cents / kWh in December.
Since January 2014, only cogeneration and transit fees are added to electrical energy export3 the
price dropped to 5.9 US cents / kWh and has steadily declined since. The cogeneration fee will be
discontinued in July 2014 according to a Government Decision draft currently pending approval. The
price for the second half of 2014 is 5.3 US cents / kWh and will drop to 5.2 US cents / kWh by March
2015.. Thus, Romania’s electricity has become very attractive for the Moldovan market.
The electrical connection between RM and Romania can occur between the high voltage
lines near Străşeni, Moldova and Iasi, Romania -- the closest two points between the networks -and offer line capacity sufficient to supply Chisinau, the main consumption center. While a reliable
interconnection has been discussed for many years, unfortunately there have been no concrete steps
toward realizing it. The absence holds Moldova hostage to suppliers from the East (Ukraine and
the Transnistrian region) through greatly diminishing Moldova’s negotiation power and leading to the
Republic of Moldova’s consumers paying undue prices.
Electrical energy market in Ukraine
The price4, including transportation and access to transport capacity, of electricity exported from
Ukraine was 5.9 US cents / kWh in 2012. This price increased to 6.3 US cents / kWh 5 in 2013 but
decreased to 5.5 US cents / kWh in the first three months of 2014.
During 2013 Moldova imported 3229.6 million kWh6 from Ukraine. Thus, consumers in the RM paid
a 19.3 million USD premium over the actual wholesale prices. In 2014 Moldovan consumers may be
expected to pay an additional 42 million USD premium.
According to the Ministry of Economy statements
http://www.opcom.ro/rapoarte/raportStatisticiPCCB.php?lang=ro
3
ANRE Order No. 89 of December 2013 on approving the transportation framework contract
4
The Ukrainian electricity market was analyzed on the basis of publicly available sources.
5
http://www.er.gov.ua/doc.php?c=5
6
http://www.anre.md/upl/file/monitoring/electricity/Piata%20EE%2012%20luni%202013web.pdf
1
2
Str. Iacob Hîncu 10/1, Chişinău
MD-2005 Republic of Moldova
373 / 22 221844 phone
373 / 22 245714 fax
office@viitorul.org
www.viitorul.org
3
Moldova’s Foreign Policy Statewatch
Existing connections with Ukraine are sufficient to cover Moldova’s entire electrical demand. This
was proven when the Steam Electric Power Station “Moldoveneasca” refused to supply electricity to the
RM in 2005-2007 and Ukraine successfully supplied the electrical energy to the Republic of Moldova.7
For comparison, in 2013 Belarus managed to negotiate the price of 6.18 US cents / kWh for
electricity imported from Ukraine.
For a better understanding of electricity prices in Moldova, Romania and Ukraine, the figure below
shows the price fluctuations.
Evolution of electricity prices9 on the markets of Ukraine, Romania and Moldova
Conclusions
1. The imported electricity price is unjustifiably high. Compared to regional wholesale
electricity prices, we believe the negotiated price for 2014 to be unjustified. The contracted
price is in 2014 is at least 15% higher than the Romanian wholesale market prices and 23%
higher compared to Ukraine.
The final consumer price would decrease by 18 bani/kWh if the RM had negotiated the
contract for the next year (through March 2015) based on the wholesale market prices and
would have led to 42 million USD savings.
All Moldovan governments, including the present one, negotiated and concluded costly
contracts for electrical energy imports despite the fact that the Ukrainian market is open for
http://from-ua.com/eco/1e6ba39b8b2c2.html
According to the statements of Vice Minister of Energy of Belarus - Leonid Senet http://atom.belta.by/ru/news_ru/view/
belarus-umenshit-import-elektroenergii-v-2014-godu-na-37-2444/
9
Price at the border with the Republic of Moldova
7
8
Str. Iacob Hîncu 10/1, Chişinău
MD-2005 Republic of Moldova
373 / 22 221844 phone
373 / 22 245714 fax
office@viitorul.org
www.viitorul.org
4
Moldova’s Foreign Policy Statewatch
everyone willing to participate in the wholesale purchase and sale of electrical energy. We
doubt the dedication and capacity of the Ministry of Economy experts to analyze the actual
situation in neighboring markets where open public sources are available for consultation,
including the real electrical energy purchase prices and mechanisms to establish them. We
question the role of this ministry if negotiations result in 42 million USD losses annually for
national consumers?
2. Energy security is at risk. Intensifying efforts to implement, as soon as possible, projects
that would ensure electrical energy import from Romania is required. Authorities need
to develop an action plan ensuring energy security through diversifying electrical energy
sources. Finally, this plan must be implemented. For the time being, everything is stuck at
the stage of concepts, strategies and discussions. Thus, we can mitigate the risk of electricity
supply interruptions, increase capacity to meet the expected economic growth, and improve
Moldova’s negotiating position for supply contracts.
Over the last 23 years, only insignificant steps the ensure energy security have been
made. The statements of intent in the last five years on the need to interconnect the electrical
power systems of the RM with those of Romania are welcomed, but there have been no
real actions yet. Only through ensuring the interconnection of Moldova’s energy network
with the Romanian one will we have a real alternative to electricity purchase and better
positions for negotiation.
3. The Republic of Moldova must participate in the Ukrainian electrical energy market. The
Moldovan state should, through its agents (organizations in the field), obtain the authorization
to take part and trade (make orders) directly on the Ukrainian electrical energy market
ensuring transparency in trading and delivering electricity to Moldova.
4. Ensuring transparency of wholesale purchases of electricity in the region. State institutions
responsible for conducting and monitoring wholesale purchase of electrical energy (mainly
Ministry of Economy, Energocom) must consistently monitor the regional markets; publish
regular reports on their evolution and fluctuations; and based on these set the import prices
for the Republic of Moldova.
These specialized structures must ensure the development and publication of action plans for civil
society in order to capitalize on new opportunities identified in the region or avoid potential hazards
likely to impact negatively electricity consumers in the Republic of Moldova.
This publication was produced by IDIS “Viitorul” with the financial support of
Soros Foundation Moldova. The opinions expressed in this publication reflect the
author’s/authors’ position and don’t necessary represent the views of the donors.
Str. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax office@viitorul.org www.viitorul.org
Str.
Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax
office@viitorul.org
www.viitorul.org