Romania’s fossil fuel-driven district heating plans are holding back a sustainable energy transition

The measure is expected to reduce air pollution and enhance environmental sustainability. However, these district heating systems will be powered by fossil gas, neglecting the potential of the country’s renewable energy sources.  

Four projects in the municipalities of Râmnicu Vâlcea, Arad, Constanța and Craiova have been approved to receive funding from a pool of EUR 300 million allocated for this measure. In June, the Ministry of Energy announced that contracts had been signed, marking completion of the first milestone in the investment. 

The most acute issue with the scheme is its exclusion of financing for renewable energy sources in these district heating systems. The call for projects has been designed in such a way as to support only fossil gas projects, thus limiting the possibility of a transition to renewable heating systems, an approach that that needs to be urgently adopted in the coming years. 

The irony is that projects benefitting from EU public money under the recovery plan are supposed to meet higher environmental standards. For one, they should comply with the principle of ‘do no significant harm’. Even the funding guidelines drawn up by the Ministry of Energy state that such projects must meet the following three criteria for environmental protection:  

• Keep within the emissions limit of 250 g carbon dioxide per kilowatt hour (CO2/kwh) over the lifetime of the project;  
• Have the capacity to use a mix of so-called ‘renewable gases’ and be compatible with 100 per cent renewable hydrogen by 2030; 
• Replace polluting solid fuel or oil-based power plants.   

Unfortunately, transparency is absent from the Ministry’s criteria. Neither the project promoters nor the relevant ministry departments have published any assessments of the project’s alignment with the ‘do no significant harm’ principle. In response to a request for information filed by Bankwatch, the Ministry of Energy confirmed that the projects would meet the greenhouse gas emissions limit and be hydrogen-ready, but did not provide access to any supporting documents.  

To analyse the compatibility of the projects with climate objectives, we have reviewed the documentation submitted for the environmental impact assessment, a mandatory process that any project with potential environmental impacts must go through. But the devil is in the details. None of the approved projects was found to fully comply with the environmental criteria outlined in the funding guidelines.   

For example, the Ministry’s guidelines mandate that only energy projects intended to replace coal or oil can be included in Romania’s recovery plan. However, the gas-fired power plants planned for Constanta and Arad, which the delevelopers claim could be switched to hydrogen in the future, are intended to replace existing units already running on fossil gas. And although these obsolete units undoubtedly need to be modernised, the new plants would necessarily undermine Romania’s emissions reduction targets.  

Production data from the operator’s environmental report as well as data from the European Union Emissions Trading System reveal that in 2022 the district heating power plant in Constanta produced 209 g CO2/kwh. However, the new plant will generate CO2 emissions of around 226 g for a similar amount of energy produced. This means that instead of slashing emissions, they will be increased.  

Furthermore, it’s unclear how any of the approved projects will use hydrogen. Although some documents mention the possibility of a 20 per cent hydrogen input, they provide no details on the operation or source of the hydrogen supply. Nor do any of the promoters demonstrate how exactly these projects will stop using fossil gas after 2030.  

In any event, the criteria for switching to green hydrogen are biased from the outset, considering that the use of hydrogen in electricity and heating is notoriously inefficient. A huge amount of renewable energy is needed to produce green hydrogen, which is then used to power thermal power plants, a process that loses around 60 per cent of the energy initially invested.  

Ultimately, continuing the use and even increasing the demand for fossil gas will undoubtedly worsen the escalating climate crisis. New projects of this kind deepen dependence on fossil gas, hamper the energy transition and do little to tackle exorbitant energy prices. Renewable energy is already cheaper than conventional sources and has zero emissions during operation.  

That’s why EU Member States need to create a pathway for its development in the heating sector. Thankfully, significant EU funding for the green transition via the Modernisation, Cohesion and Just Transition Funds will be made available in the coming period. The crucial thing is that these funds are allocated for the right purpose, not wasted on inefficient projects that perpetuate the fossil fuel saga.  

The European Commission should closely monitor how these projects are implemented to make sure they achieve the EU’s climate targets. But more importantly, it should exclude financing for fossil fuels and create more space for innovative sustainable projects.