Blog entry

Sustainable district heating gives hope to the Romanian city of Motru, in a coal mining region

It’s not often that a town in a coal dependent region leaps to a fully renewable district heating system. Sometimes it is not even technically possible; other times, decision makers are just too rooted in ‘how we’ve always done things around here’ and keep old polluting heating systems on life-support because it’s the easier political decision. But the city of Motru in Romania benefits both from political will and from diverse sources of sustainable energy and can be a leading example for other municipalities in the country in their efforts to decarbonise the heating sector.

On 17 November, the study Heating from renewable and alternative energy sources for the city of Motru. Solutions and recommendations was launched in Motru, Gorj County, with the support of the mayor and representatives of the local council. The study, which presents five alternative scenarios to the current coal-based district heating system, was carried out by the Institute for Studies and Power Engineering (ISPE) at the request of Bankwatch Romania. Its goal is to assess whether the need for heating and hot water of the 5,000 homes connected to the system can be met in a sustainable way, using renewable energy sources, with minimal negative impact for residents’ health and the environment.

The coal-based district heating plant is managed by the local council and has been providing hot water and heating to Motru’s residents since 1970. Currently, it supplies 86 per cent of Motru’s population, 8 per cent of the public institutions and only 6 per cent of the private ones.

The end of an era?

In recent years, the increasing costs of CO2 allowances – up from EUR 7 per tonne of CO2 at the end of 2017 to over EUR 70 per tonne of CO2 now – and the health-damaging pollution caused by the aging power plant, have made it increasingly difficult to operate it. The wear and tear on both the thermal power plant and the hot water distribution system also results in a lot of lost heat: the system’s registered thermal energy losses in 2021 stood at an eye-watering 46.8 per cent.

At the end of 2021, the company running the plant just barely managed to get out of the insolvency process it had been mired in since 2016. To continue providing heating and hot water for the residents of Motru, the operator received at least EUR 6.5 million in financial aid from the local budget.

Because the financial problems were projected to deepen month after month, the mayor of Motru and Bankwatch Romania decided to look for sustainable, financially viable and non-polluting solutions.

A fully renewable energy scenario is possible, even in a coal dependent town

The study includes the analysis of five scenarios with different technologies for the production of thermal and/or electrical energy. These technologies range from conventional ones, which are expensive to operate and have considerable environmental impacts (such as fossil gas boilers, a municipal waste incinerator), to a biomass cogeneration plant, to photovoltaic (PV) panels on the ash deposit and heat pumps.

Out of all five scenarios, the 100 per cent renewable one stands out as the best choice for modernising the thermal power plant. It involves the use of heat pumps powered by solar PVs mounted on the heating substations and on the ash disposal sites. The electricity required to power the heat pumps when the solar PVs cannot provide it will be taken from the national grid. Along with a deep renovation of the apartment buildings stock, and the rehabilitation of the distribution system, the scenario is possible, viable from a technical-economic point of view and ‘easier to manage and safer from the point of view of continuity and safety of supply’, according to the authors of the study.

The income from the system’s operations fully covers the annual operating expenses. The EUR 23.5 million original investment is estimated to be recovered eight to nine years after the new heating system is put into operation. After the ninth year of operation, the new district heating system would begin making profits. An important part of the cost cuts is because the plant will no longer have to buy CO2 allowances. In 2022 alone, the plant operator had to buy over 45,000 CO2 allowances, with a cost burden of approximately EUR 2.5 million.

The 100 per cent renewables scenario will also significantly improve the local air quality, as current emissions from the district heating plant (sulphur dioxide, nitrous oxides and dust particles) would disappear altogether.

The fully renewable scenario ensures the district heating system will be independent from potentially unreliable, unavailable or expensive fuel sources such as gas, waste or biomass. The fully renewable solution eliminates the risk of having production outages and it gives more predictability to consumer prices.

Funds exist – Motru just has to go for them

The investment needed for a 100 per cent renewable district heating system in Motru is estimated at EUR 23.5 million, which the local administration must fundraise. Fortunately, the palette of available sources of funding is wide, and it ranges from grants to low-interest loans. The Modernisation Fund, the Just Transition Fund, Romania’s COVID-19 recovery plan, and its operational programmes all prioritise investments in renewables, especially in district heating. Motru is a just transition region and has a Territorial Just Transition Plan, so it ticks all the boxes to qualify for this funding. International financial institutions (such as the EBRD) would gladly lend to such projects as well, but when grants are available, they should be the municipality’s preferred option. We can only hope the local council sees all these benefits and opportunities and approves Motru’s way forward on its sustainable path.

The city of Motru is the first town in one of Romania’s coal regions to take such a step towards the use of renewable sources and thus towards decarbonising thermal energy production. The initiative is in line with EU policies and the commitment to increase renewable energy production and improve energy efficiency. Moreover, it will set an example for other towns in similar situations. The well-being of Motru’s citizens will depend on the modernisation of its heating sector.

Ukraine Reconstruction Platform: nothing to write home about

Since May 2022, when the European Council tasked the European Commission with designing the ‘Ukraine reconstruction platform’ to streamline international effort to rebuild Ukraine, no progress has been made. At the Ukraine Reconstruction Conference in Berlin in October 2022, Ursula von der Leyen, President of the European Commission, reiterated the same pledge without elaborating on the issues that have caused frustration among crucial shareholders in the process – civil society organisations in Ukraine and internationally.

Coordination platform: a lot of hot air

The objectives of the latest Berlin conference were formulated around how to involve different sectors and actors, how to map investment needs, how to coordinate action, and, of course, how to channel resources in a reliable and accountable way. Yet these objectives, set by one of the conference’s organisers, the European Commission, were not achieved. The discussions were primarily centred around ‘what?’, not ‘how?’, postponing answers for another occasion – maybe even until the next donor conference, which will take place in summer 2023.

On the other hand, Ukraine’s government should keep abreast of the decisions taken regarding the Reconstruction Fund as well. Ukraine’s prime minister proposed the concept of a ‘financial Ramstein’, which became a new buzzword following the meeting, as one way to do this. This proposal would most likely consist of regular decision-making meetings resembling those of the Ukraine Defense Contact Group (the ‘Ramstein’). Yet there is no clarity if Ukraine’s partners would support such a format.

Sleepwalking into ‘build back as it was before’

It is not just the process of preparing for Ukraine’s reconstruction that is worrisome, but also the fact that the European Commission and other international partners seem to be ignoring civil society’s requests for its implementation. Civil society organisations want to see green and sustainable principles at the core of the planning for Ukraine’s reconstruction. Sporadic, fast repairs and preparations for the winter are already happening as we speak. If there is no common understanding and overarching agreement that Ukraine’s post-war reconstruction must be green, we may find ourselves sleepwalking into a situation where Ukraine’s reconstruction is not in line with its Green Deal commitments.

This year, COP27 has already shown that the leadership of the developed world envisions Russia’s full-scale war on Ukraine as an impetus to accelerate decarbonisation, not an excuse to ease green transition. Ukrainian civil society organisations and their partners in other countries should have a seat at the negotiation table to prevent fossil fuels from being allowed under the RebuildUkraine reconstruction plan.

Delivering on the previous achievements

Since Ukraine has become an EU candidate country as of 23 June 2022, the country’s reconstruction will be closely linked to closing the sectoral chapters of the accession process. The European Commission’s civil servants have been working with the Ukrainian government since 2014 when the parties signed the Association Agreement: this means there is a certain institutional memory to build on in the reconstruction and accession processes.

The European Commission – more precisely, DG NEAR, a dedicated Support Group for Ukraine and the EU Representation in Ukraine – already constitutes the key coordination and institutional mechanism to monitor the EU-Ukraine Association Agreement. To avoid additional coordination burden and further slow-down of the procedures, the future Ukraine reconstruction fund secretariat should be integrated with the already established workstreams. On the Ukrainian side, aligning the reconstruction and EU candidacy workstreams will motivate Ukrainian civil servants and further the professionalisation of Ukraine’s institutions.

The question of who should lead in coordinating the donors has been discussed many times recently, and several parties would have a say in it. Still, the European Union constitutes the most stable counterpart when it comes to long-term commitment, which post-war reconstruction is. The US policy towards Ukraine may change depending on the country’s leadership, adding one more argument to keep the EU at the head of the reconstruction coordination platform.

At the implementation level, a bankable, EU-candidacy-aligned national reconstruction plan should receive the green light from the wider group of Ukrainian stakeholders and recognition from civil society. While Ukraine lays out its own plans, it is necessary to set up an inclusive overall planning process for those plans and aligning it with EU goals and priorities.

Ukrainian state bodies sometimes provide contradicting messaging, which is understandable due to the effort dedicated to defending the country against Russia’s military aggression. However, if we want to be ready to deliver changes swiftly upon Ukraine’s victory in this war, forward-looking thinking and partnership should be at the core. This is where the experience of EU agencies and civil society might be helpful, but civil society should have inclusive communication channels, equal opportunities, and a fast pace if it wants to influence decision-making. The European Code of Conduct on the Partnership Principle may provide insight into how to implement public involvement from all stakeholders’ perspectives. There is little point in waiting until next summer’s donor conference in the UK when we can have all hands on deck now, hammering out solutions that will serve Ukraine’s green, people-centred reconstruction.

Western Balkans: EUR 1 billion in EU funds to tackle the energy crisis – with gas?!

During a tour of the Western Balkans last week and at the Berlin Process Summit on 3 November, President von der Leyen made a series of statements announcing a total of EUR 1 billion in grants for the Western Balkans to help tackle the energy crisis.

The Commission has pledged to provide EUR 500 million budget support by January to support households and small and medium sized enterprises to survive energy price increases and their impact. In addition, the Commission has promised another EUR 500 million for energy diversification, renewable energy generation and gas and electricity interconnections through the Western Balkans Investment Framework.

The first question is whether this is new money at all, or whether it’s just a re-labelling of the EUR 9 billion already promised to the region as part of the Instrument for Pre-Accession. This has yet to be clarified.

It’s also unclear why no funds were announced for Montenegro, and whether funds approved in such a hurry will really be used as effectively and strategically as possible.

But whatever the source of the funds, it’s unbelievable that President von der Leyen is yet again promoting fossil gas in the Western Balkans. Thirty-six civil society organisations working in the Western Balkans have already written to her this year specifically asking the Commission to stop doing this.

The Western Balkans are not as dependent on gas as most of the EU so preventing more gas lock-in in the region is an absolute must. The idea that gas is somehow necessary as a stepping stone to decarbonisation is the product of extensive lobbying by the gas industry, not a technological or economic reality.

Gas is as much a fossil fuel as coal. It will need to be phased out in the next couple of decades, so there is no point in building expensive new gas infrastructure now. The region’s experience with coal shows that once a certain fuel becomes entrenched in the energy mix, it takes decades and decades to move away from it.

Russia’s brutal invasion of Ukraine has once again underlined that increasing reliance on imported fuels — especially from authoritarian regimes like Azerbaijan’s — makes no sense. It’s unfathomable that the EU hasn’t learned this lesson by now.

In addition, much of Azerbaijan’s gas infrastructure is partly owned by Russia’s Lukoil, so this also brings tax income and potentially sensitive information for Russia.

The European Commission often claims that gas infrastructure in the Western Balkans could be used for renewable gases in the future, but so far these are fairy tales with no evidence or studies to back them up. There will never be enough affordable renewable gases to fill large gas networks and hydrogen anyway requires different technical standards than fossil gas.

EUR 1 billion is very little even to tackle the immediate crisis with, if we look at the billions already spent on electricity imports (e.g. Serbia). If it is spent on investments which will really help households such as rooftop solar, housing insulation and heat pumps, or on tackling electricity distribution network losses, it can help. But the EU simply must stop promoting gas in the region if it wants to have any credibility in advancing a sustainable energy transition.

Europe cannot be “REPowered” if citizens are not at the centre of the transition

On 9 November, members of the European Parliament (MEPs) in plenary will vote on the European Commission’s proposal to revise the Recovery and Resilience Facility (RRF) regulation to integrate REPowerEU chapters into the existing recovery plan. The vote will be crucial in determining the direction of the energy transformation in the EU and will have a huge impact on people’s lives; while institutions are negotiating the details of the revision, the energy crisis is already affecting citizens, who are struggling to cope with the very high cost of living all around Europe.

However, it seems that once again citizens will have practically no voice whatsoever in the discussions over which investments and reforms will be enacted under REPowerEU. Concerning transparency and openness, the European Commission’s proposal for the new chapters simply replicates what was already written in the RRF regulation: vague and weak provisions on stakeholder engagement and consultations, which enabled member states to make important decisions behind closed doors, without opening plans up to public scrutiny during the preparation of the recovery plans.

Together with other civil society organisations, CEE Bankwatch Network condemned this growing tendency and called for action in a letter to the European Commission in May 2022 asking the EU to acknowledge its responsibility as a proponent of democratic governance and to open the room up for participatory democracy. Promoting a bottom-up approach and involving citizens, cities and regions is essential for moving forward to a green and just transition of our economies and societies. Despite this, we are not witnessing any positive development at the moment: REPowerEU, as it is proposed now, is another big step back for citizens’ involvement and democratic governance.

Aside from the European Commission’s proposal, the position of the Council of the EU is even more alarming. On 4 October, ministers agreed to remove any reference to consultations with stakeholders. Although we expect it to be amended in the negotiations with the parliament, this position is worrying and dangerous, as it removes democratic accountability.

What we are witnessing today is the compromise of democracy for the sake of rapidity. However, the European Parliament has the chance to reverse this trend and give the public a voice in the discussions in November. MEPs should look back at examples of successful participation during the preparation of the recovery plans, like in Bulgaria, where pressure from civil society organisations led to the removal of a very harmful measure: the coal-to-gas conversion of the Maritsa East 2 power plant.

For now, the text adopted by the committees for budgets and economic and monetary affairs on 25 October sends signals of hope; MEPs on the committees amended the proposal, adding mandatory consultations with partners and a reference to the Code of Conduct on the Partnership, which is one of the cornerstones of the Cohesion Policy. This is the only way forward: mandatory interaction with citizens and the compulsory establishment of monitoring committees.

When the 9 November plenary comes, it will be time for civil society’s voice to be heard and for REPowerEU to be fully opened up to participatory democracy. In the context of the overlapping crises that are affecting European society, institutions cannot continue to ignore people’s concerns. It’s up to the whole European Parliament to make the right move.

Energy crunch underlines the urgency of overhauling Romania’s energy plans

Like people in many other countries across Europe, Romanians are currently faced with surging fossil gas and electricity prices. Fighting to keep energy bills in check, the Romanian government intends to invest big time in new fossil gas infrastructure with the help of EU public funds. The problem is that we cannot afford to deepen our dependence on fossil gas – in Romania or elsewhere – if we want to maintain a decent standard of living in the future and fight the climate crisis.

Volatility in the energy sector, especially the gas and oil market, has broken records this year, and there’s no certainty as to when things will stabilise. Fossil gas prices in European states have increased six fold and, yet, for the foreseeable future countries are continuing to plan new fossil gas-based projects. All this while the European Commission’s latest plans in Fit for 55 and REPowerEU are meant to significantly decrease gas consumption at the European level.

We find ourselves at a crossroad of crises – energy, economic, geopolitical and environmental – and there are solutions that can address all of them. But cementing the dominant role of fossil gas is certainly not the way out of this mess.

The Romanian government has committed to paying EUR 4 billion by March 2023 to reduce citizens’ electricity and gas bills. The very same government is planning further investments to step up fossil gas exploitation, expand the distribution network and increase electricity production from gas.

If all of these planned projects go ahead, they will cost at least EUR 4.5 billion in EU funds and Romanian public money in the coming years. Most of these projects could only materialize after 2026 and would be in operation for 25 to 50 years. They would eventually encourage more gas consumption and risk a fossil gas lock-in, not only harming Romania’s nature but also worsening the climate crisis.

Investment	Financing programme	Budget (EUR million)
6,605 kilometres (km) of distribution network	Governmental programme for local development	1,536
1,870 km of gas and hydrogen mix distribution network	Recovery funds	400
300 megawatts (MW) combined heat and power (CHP) gas plant	Recovery funds	300
850 MW gas power plant	Modernisation Fund	253
475 MW gas power plant	Modernisation Fund	167.5
BRUA pipeline phase II	5th PCI list/Connecting Europe Facility	446
Gas storage	5th PCI list/Connecting Europe Facility	30
Gas storage	5th PCI list/Connecting Europe Facility	123
CHP power plant	Sustainable development operational programme	10
1,437 km of gas and hydrogen mix distribution network	Sustainable development operational programme	323.4
Neptune Deep exploitation share of public company	Participation of public company, possible EUR 16 billion of investment from Romgaz + OMV-Petrom	1,000
		4,588.9

Major planned gas projects in Romania using public funds

Investments encouraged by loopholes

At the EU level, the European Commission is caught between funding new gas projects and convincing countries to turn down their thermostats. The REPowerEU package, which was put forward upon Russia’s invasion of Ukraine, stipulates a 15 per cent voluntary reduction in gas consumption, with provisions to reduce Russian gas consumption by two-thirds by the end of 2022 and phase it out completely by 2027.

The European Commission has been arguing that the REPowerEU strategy would facilitate the diversification of fossil gas sources and should not lead to lock-in or future stranded assets. These plans also include a medium-to long-term focus on expanding wind, solar and hydrogen capacities intened to replace fossil gas consumption. Furthermore, a steep decrease of EU gas consumption is high on the Commission’s agenda.

That said, solutions should have been implemented by now, not least given that this crisis has been lasting nearly a year. More pertinently, granting space for fossil gas in almost every European funding programme has allowed Member States to make the easiest choice. Romania is just one example; Many of the EU funds in central and eastern Europe contain new fossil gas investments, contradicting the EU’s plans to expand renewables and reduce fossil fuel consumption.

Plans for the expansion of the fossil gas network will make us even poorer, given rising prices and the instability of the gas market. New infrastructure could push even more people into energy poverty without solving any of the crises we are facing.

Rather, Romania needs to prioritize investments in renewable energy. Recent plans have added an extra 7 gigawatts (GW) of installed capacity in renewable energy by 2030, but according to experts this needs to be at least 10 GW to reach the new proposed European target of 38 per cent renewables, and even more to achieve the 45 per cent proposed in REPowerEU (from the current 30.7 per cent in the National Energy and Climate Plan). Furthermore, implementation of these plans will require much greater ambition and capacity than Romania has shown for now.

Energy efficiency in building should also be prioritized. A study shows that eight out of 10 buildings in Romania need renovation, while the authorities are planning to insulate 18 per cent of the building stock by 2030. The country already had an ambitious energy efficiency target of 40 per cent, which will need to be ramped up as per new provisions in the REPowerEU strategy.

But the biggest source of energy loss in Romania is actually district heating. One third of the country’s heating plants are more than 50 years old and require major modernisation to reduce heat waste, while some still use polluting heavy oil.

We cannot afford two energy transitions. The Romanian government should focus on reducing energy consumption by insulating buildings, especially for citizens on the brink of energy poverty, improving energy efficiency in industry and directing more funds to heating using renewable energy. This doesn’t mean a decrease in the quality of life. On the contrary, revamping Romania’s energy system will provide cleaner air and better living standards while making sure we do not burn more fossil fuels.

The key fact remains that the sun is setting on oil, coal and fossil gas. Renewables have already become the cheaper option, while fossil fuel prices for gas in particular have proven extremely volatile, and their environmental costs only continue to rise. Romanian policymakers must step up the transition to a sustainable economy by investing in sustainable solutions, new technologies, and energy and resource efficiency. Fossil gas should not be expanded, but rather reduced and replaced with smart, climate-proof solutions to make Romania more resilient and prosperous. Now is the time to make the right choices.

Why we need to invest in electric urban transport while reconstructing Ukraine

For this reason, each attacked or liberated city has immediately started recovering its transport infrastructure. However, to successfully rebuild this infrastructure, municipalities are in dire need of financial support.

As of 1 June 2022, the country’s transport sector needed an estimated USD 74 billion, which is the highest amount needed in any of the major sectors for reconstruction, according to the World Bank’s Rapid Damages and Needs Assessment. These numbers would be even higher in the light of the recent events.

Ukraine’s 2030 National Transport Strategy envisages a full transition to electromobility. Private cars are the biggest polluters in Ukrainian cities, responsible for as much as 84 per cent of air pollution. Despite that, low-carbon transport was not a priority for the Ukrainian national and municipal governments before the war started. This tendency has also been visible during the ongoing reconstruction efforts. In May, the Kharkiv’s city council allowed the partial dismantling of the tram line to extend traffic lanes for cars. So far, only five cities have developed and adopted sustainable urban mobility plans (SUMPs) to raise the attractiveness, safety and security of walking and cycling.

The Draft Ukraine Recovery Plan: Recovery and development of infrastructure presented in Lugano on 4-5 July 2022 also does not sufficiently address electric urban transport, cycling and charging infrastructure for electric vehicles. On the contrary, the plan is centred around automobile traffic, supporting further dependency on fossil fuels and funnelling money into the road sector. According to Ukrainian transport expert Viktor Zagreba, the proposed plan is not in line with the EU Green Deal or the EU Smart and Sustainable Mobility Strategy.

Though on average, 50 per cent of Ukraine’s urban dwellers commute via public transport, the sector has been strongly underbudgeted and neglected, which has led to a significant deterioration of the services. However, safety, accessibility and air pollution in cities will be among the questions that war refugees will consider when deciding whether or not returning home. And all these questions lead back to the sustainability and reliability of municipal transport.

Due to the latest missile strikes, targeting mainly objects of critical energy infrastructure, Ukrainian authorities were forced to implement urgent energy saving measures. These include saving during peak hours, scheduled energy cuts and a limited use of electric public transport. While these urgent measures are well-founded now, such considerations should not compromise the long-term reconstruction of Ukraine’s urban transport system.

When considering support for the reconstruction of Ukraine’s urban infrastructure, foreign investors and donors should meet their climate commitments in terms of carbon neutrality, reflecting the green reconstruction and green principles developed by the Ukrainian civil society. Therefore, they should give the green light to electric public transport projects.

With the help of international investors and donors, Ukraine has a unique chance to build a new and comfortable urban transport system which will also make it independent from fossil fuels imported from Russia.

Bankwatch’s new video explains why electric urban transport should be a priority in Ukraine’s cities reconstruction. The city of Chernihiv is an example of how Ukrainian cities are recovering their public transport following massive destruction. The investment needs for transport reconstruction are high but can afford cities a unique opportunity to rebuild clean, green, comfortable and attractive cities.

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