Romania’s coal transition, a new chance for Jiu Valley
‘Jiu Valley Strategy for the transition from coal’ document is being prepared by the consulting firm PricewaterhouseCoopers.
According to a draft of this development strategy that extends until 2030, the analysis of the historical evolution of the mono-industrial area of Jiu Valley and of the current profile of the microregion highlights significant differences of development in relation to the rest of the country. Moreover, the prospect of closing the last four operational mines brings new challenges.
Through this document the officials of the local administration in Jiu Valley undertake the ‘just transition strategy’, which will be approved at central government level, in the perspective of a significant transformation of the area during 2021-2030 in terms of recalibrating the perception of inhabitants on the local identity and their role in the energy transition process, as well as unlocking the potential of the area for the economic development of Jiu Valley on multiple levels, for improving the life of the inhabitants, for promoting innovation and decarbonization.
The prospect for developing the area is carefully calibrated to be sustainable in the long run by preparing specific projects that are the basis for the implementation of the strategy. All these objectives are aligned to the good European practices specific to coal regions in transition and the directions targeted through important European initiatives, such as the Just Transition Mechanism, the European Green Deal, the EU Cohesion Policy, capitalizing on the local competitive advantages of Jiu Valley.
The current structure of Jiu Valley economy reflects the results of both the initiatives of transformation aimed at phasing out the dominant mining activity and the attempts of diversification implemented in the region. The latter have focused mainly on sectors characterized by a low level of technology, low technical skills and limited investment capital. Consequently, the current economic profile of Jiu Valley is dominated by the service sector – especially trade, over 40% of the total number of active companies in the private environment in Jiu Valley operating in this sector.
General objectives of the strategy
According to the draft strategy, the general objectives of transition from coal in Jiu Valley are the following:
-Sustainable development of urban multi-modal mobility, in a unitary manner, facilitating accessibility in all areas of the microregion by consolidating connectivity between the component towns/municipalities and immediately adjacent areas would open the Jiu Valley to new opportunities for all industries.
-Creating a diversified economic environment, focused on consolidating growth and competitiveness of small and medium sized enterprises with activities and products with high added value, supported by initiatives favouring innovation and local entrepreneurship.
-Consistent and sustainable development of tourism and creative industries in Jiu Valley, by stimulating local producers, enhancement of natural and cultural heritage of the area and connecting to the neighbouring regions.
-Creating a dynamic and performing social and professional climate in order to optimize standards of living and ensuring in a responsible manner the transition of Jiu Valley to green economy.
Reshaping the energy sector
Maintaining electricity production in Jiu Valley will continue to remain an objective of the transition. From this perspective, projects in this field will aim at making investments in new capacities to produce energy from renewable sources, using the viable energy assets in Jiu Valley to produce electricity and heat based on a different fuel than coal, as well as supporting the development of a centre of excellence in the energy sector in Jiu Valley. It will focus on research-development-innovation and should contribute to creating opportunities for the whole ecosystem starting from public institutions, large companies, technological SMEs that could contract studies in the field or could implement the results of research.
According to UN Climate Agreement, signed in Paris, Europe and OECD countries must give up coal by 2030 and even earlier, an evolution assumed by the signatory governments of Powering Past Coal Alliance. Romania has postponed the decision of giving up coal, but amid increased economic pressure on the energy sector, in 2018 the Ministry of Energy announced for the first time the prospect of considering the process of coal transition by 2040.
To capitalize on opportunities given by energy transition at global level, Romania has committed to address new directions of development of the energy sector according to the Energy Union Strategy and Clean Energy Package. Reaching the decarbonization targets set under the 2021-2030 Integrated National Energy and Climate Plan (INECP) will require significant investments, in the following main dimensions: Decarbonization – GHG emissions and removals; Decarbonization – energy from renewable sources; Energy efficiency; Energy security; Internal energy market; Research, innovation and competitiveness.
Sources of funding in the support of coal transition
An important component of this strategy is funding projects proposed for development on the dimensions related to the development pillars, funding following to be ensured mainly from European and national funds, the quoted document mentions. It is relevant to mention The Just Transition Mechanism, which also includes the Operational Program for Just Transition, dedicated to coal regions for supporting transition to a climate neutral economy, which will be implemented through three pillars:
-The Just Transition Fund, which is not dedicated to energy transition, but to the social and economic costs of transition (economic diversification, retraining etc.) and provides for the allocation of sources of funding in addition to those for the cohesion policy, to which transfers from European Regional Development Fund and the European Social Fund Plus national allocations will be added, as well as national co-financing.
-Dedicated scheme under InvestEU
-A loan facility granted by the European Investment Bank for the public sector (EUR 10bn) for investment projects in energy and transport infrastructure, heating networks, public transport, energy efficiency measures, social infrastructure and other projects directly benefiting the communities in the affected areas and which will contribute to reducing the social and economic costs of transition. Also, financing mechanisms aimed at supporting the energy intensive industrial sectors and the electricity sector will be capitalized, in order to answer the needs in the field of innovation necessary for transition to a low carbon economy, respectively:
– The Innovation Fund will finance highly innovative technologies and flagship projects with European added value, which can bring significant emission reductions;
– The Modernization Fund will support investments in the generation and use of energy from renewable sources; energy efficiency; energy storage; modernization of energy networks, including heating, pipelines and networks; just transition for carbon-dependent regions: redistribution of labour, retraining of workers, education, job search initiatives and start-ups.
In the context of post-COVID-19 economic recovery efforts of Member States, the European Commission has launched a new initiative of interest – a budget of EUR 166.7 billion for 2021, which will be complemented by EUR 211 billion in grants and approximately EUR 133 billion in loans under Next Generation EU, the temporary recovery tool for mobilizing investment and reviving the European economy.
The budget is fully in line with the commitment to invest in the future for a greener, more digital and more resilient Europe. Once adopted, it will be the first budget in the new multiannual financial framework 2021-2027 and the first annual budget proposed by the European Commission under the von der Leyen mandate.
In addition to the European programs and mechanisms, co-financing through the national operational programs proposed by the Ministry of European Funds for the new financial year will be added:
-Operational Program Just Transition (OPJT)
-Operational Program Sustainable Development (OPSD)
-Operational Program Transport (OPT)
-Operational Program Smart Growth, Digitization and Financial Instruments (OPSGDFI)
-Operational Program Health (OPH)
-Operational Program Education and Employment (OPEE)
-Operational Program Inclusion and Social Dignity (OPISD)
-Regional Operational Programs – implemented at region level (ROP West) the National Recovery and Resilience Plan prepared to use the funds allocated through the Recovery and Resilience Mechanism through three pillars: green transition and climate change, public services, urban development and capitalization on heritage and economic competitiveness and resilience.
Electricity production will not disappear from Jiu Valley
Maintaining electricity production in Jiu Valley will continue to remain a desideratum of transition; therefore, projects in this field will be prioritized, their feasibility following to be analysed from both the perspective of potential (especially of renewable energy sources in order to identify the optimal sites for promoting and attracting private investors for making investments in new production capacities) and from the perspective of technical limitations and possibilities of additional investments.
Depending on renewable energy sources available and exploitable in the Jiu Valley, it will be considered to attract and/or make investments in new capacities to produce energy from renewable sources, both operational (connected to the grid) and for the use of renewable energy at the level of public, economic and/or industrial operators. Depending on the identified potential, including investments in building capacities to produce energy from renewable sources placed on lands belonging to former mines will be considered, therefore developing integrated projects of decontamination – regeneration – reconversion.
To assess the potential of renewable energy sources in Jiu Valley it will be considered to start a study in order to identify the types of renewable energy (solar, wind, hydro, geothermal, bioenergy – biomass, waste etc.) available and exploitable in Jiu Valley and the optimal sites for these types of investments.
The possibility of using the viable energy assets in Jiu Valley to produce electricity and heat based on a different fuel than coal within Paroseni thermal power plant will also be analysed. In order to identify the best solutions, the aim will be to streamline electricity and heat production, diversify the energy mix (for example, using natural gas as transition fuel, unconventional energy sources, hydrogen), contribute to the safety and adequacy of NPS, reduce CO2 emissions and ensure a long-term sustainable economic viability.
Taking into account the social benefits of large-scale use of district heating systems (for example, accessibility of thermal energy for population with low income) and the economic and environmental benefits (for example, the reduction of the number of individual heating systems and implicitly of pollution), while analysing the opportunity to converting Paroseni thermal power plant, including the potential of modernization, rehabilitation, retrofitting and extension of the district heating system in Jiu Valley will be analysed, to ensure heating for the localities in Jiu Valley.
The viability of these initiatives will be assessed following evaluations and technical and economic analyses and will require the favourable opinion of the Ministry of Economy, Energy and Business Environment, of Transelectrica and of ATUs (if it is decided that they take over certain assets).
Modernization, rehabilitation, retrofitting and extension of the district heating system will consider the efficiency of the district heating system by reducing the consumption of energy resources and reducing greenhouse gas emissions. The social benefits of large-scale use of district heating systems will also be considered (accessibility of thermal energy for the population with low income), as well as the economic and environmental benefits (from the point of view of energy efficiency and control of pollution) and the contribution of these systems to strengthening energy security and facilitating flexibility in the use of the various categories of primary resources.
The establishment and development of a centre of excellence in energy in the Jiu Valley, focused on research-development-innovation will be able to contribute positively to creating opportunities for the entire ecosystem starting from public institutions, large companies, technological SMEs that could contract studies in the field or could implement the results of research (including by starting strategic projects in the field of advanced technologies, in order to develop a hydrogen industry).
The focus will be on identifying viable solutions and projects in the field of energy production /distribution /storage and reducing carbon emissions. Pilot projects to exploit the energy potential of the area will be considered (e.g. recovery of methane gas from the degassing of operational coal deposits using cogeneration plants for the production of electricity and heat, extraction and recovery of methane gas from coal deposits which are no longer in operation using surface drilling, underground pumped storage hydropower plant etc.) in order to identify viable solutions and projects in the field of energy production, distribution and storage (e.g. implementation of a pilot energy supply project using as fuel with ‘zero carbon’ green hydrogen, produced by electrolysis using solar energy converted into electricity by photovoltaic panels), followed by the scaling of these pilot projects, depending on the demonstrated technical and economic potential.
Finally, the improvement of the energy performance of the housing stock and public buildings will be considered, by continuing the projects of thermal rehabilitation and modernization of buildings (both public and residential), in parallel with population information and awareness campaigns in the Jiu Valley on responsible energy consumption and energy efficiency measures.
The projects of thermal rehabilitation and modernization of buildings will be carried out on the basis of energy audits (the aim will be to identify the energy situation of each building, as well as the concrete measures to be applied to improve the energy efficiency of buildings, reduce electricity and heat costs and implicitly the reduction of adverse effects on the environment) and technical expertise where appropriate (the identification of the necessary measures on seismic risk/fire protection will be considered). These investments will aim at reducing energy costs, increasing comfort and standard of living and creating new economic opportunities and jobs (within specialized companies).
-Identifying the types of renewable energy (solar, wind, hydro, geothermal, bioenergy – biomass, waste etc.) available and exploitable in Jiu Valley by conducting a study in order to capitalize on potential from renewable energy sources in Jiu Valley.
-Identifying the optimal sites for these types of investments (developing maps).
-Attracting/making investments in new capacities to produce energy from renewable sources depending on the potential identified as a result of studies conducted, both operational (connected to the grid) and for the use of renewable energy at the level of public, economic and/or industrial operators.
-Using the viable energy assets in Jiu Valley to produce electricity and heat based on a different fuel than coal within Paroseni thermal power plant.
-Reducing GHG emissions and increasing energy efficiency by developing the district heating system in Jiu Valley, by launching an advisability study to establish the potential for modernization, rehabilitation, retrofitting and extension of the district heating system from Jiu Valley to ensure the thermal agent in the localities from Jiu Valley in conditions of economic efficiency.
-Starting the investment, depending on the result of the study and the feasibility.
-Establishing a centre of excellence in the field of energy in Jiu Valley, focused on research-development-innovation.
-Carrying out research-development-innovation projects in order to identify and start pilot projects for capitalizing on energy resources in Jiu Valley and integration with smart technologies and low emissions.
-Starting strategic projects in the field of advanced technologies, in order to develop a hydrogen industry.
-Scaling pilot projects, based on studies and research conducted, depending on the demonstrated technical and economic potential.
-Improving energy efficiency in public buildings (including consolidation measures if necessary).
-Improving energy efficiency in residential buildings (including consolidation measures if necessary).
-Carrying out information and awareness campaigns for the population of Jiu Valley on responsible energy consumption and energy efficiency measures.
-Providing support/advice for the preparation and submission of financing files and subsequent settlement for individuals wishing to access financing through national programs (for example, carried out through the Environment Fund Administration – Energy Efficient House).