“The End of Light”: Gloomy Prospects for Moldova’s Energy Security

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Images of Chisinau at night have vividly illustrated the grave energy crisis that has hit Moldova. Reduced supplies of cheap electricity from the Dniester power plant and obstinate inaction of the authorities have put the country’s medium-term energy security at risk
Energy consumption throughout the country is rapidly decreasing.  Members of the ruling party urge daily to save electricity for a secure and independent future. The Supreme Security Council convened to discuss specific energy saving recommendations. Next, the government’s emergency commission approved cost-saving measures, including changes in the operating schedules of energy-intensive industries, reduced illumination of cities, shutdown of fountains and storefronts, refusal to use external illumination of buildings, control of the use of elevators, heating rationing and a number of outreach activities. Wood is being actively procured, and there are plans to use fuel oil and biofuel. However, even the pro-government analysts admit that austerity measures alone may not be enough, which means that rolling blackouts cannot be ruled out. It will be extremely difficult to survive this winter given the current electricity and gas supply levels, even if weather conditions are favorable. Previously, it was the issue of unaffordable gas and electricity tariffs for the population, but now it is not clear at all where to get the missing amount of heat and light. The left bank of the Nistru River is also in a dire situation – the work of major budgetary enterprises is halted, the beginning of the heating season was postponed (although household consumers were provided with heat in their apartments on Monday), and the mining of cryptocurrencies was stopped. In the long term, the ongoing changes in energy consumption will have an extremely negative impact on the economic situation, which is particularly alarming given that there are virtually no sources to replenish the financial deficit in Transdniestria and no international donors willing to provide short-term assistance to the region. It is clear that the problems on the right bank came after a series of attacks by Russian military forces on the Ukrainian energy infrastructure. Various estimates suggest that the missile strikes, along with disconnecting the Zaporizhzhya nuclear power plant from the Ukrainian grid, reduced the neighboring country’s power generation by 30-40 percent. Alternative views, in turn, suggest that the actual damage from the attacks is not so significant. Anyway, Kyiv imposed a ban on electricity exports, and cancelled the contracted deliveries to Moldova of 30 percent of the existing demand. As of today, only flows to the north of Moldova and minor amounts to the north of the Transdniestrian region come from the Ukrainian territory. However, these flows do not even compensate for the volume of Moldova GRES supplies to Odessa Region. Next, PJSC Gazprom reduced Russian natural gas deliveries to Moldova and Transdniestria. In general, there is no clarity about next month’s supplies. Ukraine’s Gas Transmission Network Operator has already provided a clarification that it is technically possible to maximize transit if the Russian side pumps the necessary volumes of gas into the pipe. However, this does not happen, which suggests a political intent on the part of Moscow to reduce supplies as a response to the numerous anti-Russian actions of the ruling party and to boost protest sentiments in Moldovan society. It can also be interpreted as an offer to our leadership to come to Moscow. But so far, the authorities have ignored it, stating, among other things, that there are certain political conditions from the Kremlin which cannot be fulfilled. One way or another, cuts in gas supplies have approximately halved the generation at MGRES. At present, the plant, considering the savings, covers the needs of the left bank of the Dniester River, as well as about 20% of electricity consumed in the rest of Moldova. In turn, the government managed to negotiate electricity supplies from Romania through a high-voltage line in the south, in transit through Moldova and Ukraine to a node in the MGRES and thence to Chisinau. But the cost of Romanian electricity, as deputy prime minister Andrei Spinu says, is in the range of 190-360 euros per megawatt, which is at least four times more expensive than MGRES electricity. The power distribution hub in Romania’s Isacce (linked to the Chernivodska NPP in southeastern Romania) supplies volumes of electricity comparable to, or even exceeding (depending on the time of day), the production of the MGRES. However, a certain part of electricity is exported to the Odessa Region of Ukraine, again in transit through MGRES. In this situation, Moldova’s energy security is seriously threatened. Even with Romanian imports and good weather, the power deficit is 7%, which the authorities seek to tackle through increased savings. The situation is relatively stable only in the capital, because Chisinau CHP-2 can use a variety of raw materials, including fuel oil and coal, which are quite affordable for import to the country at adequate prices. However, all other generating facilities are located on the left bank of the Nistru River, or abroad. Hence, rolling blackouts, or even a total blackout, especially in the south and possibly in the west of Moldova, are a quite realistic prospect. Apparently, this is the scenario Moscow hopes for, as they expect the collapse of the Moldovan budget (due to the high cost of Russian gas, Romanian electricity and alternative energy sources) and an increase in protest activity. Some cautious suggestions about the possibility of joining the strikes, with Sor party as the main headliner, are coming from the so-called “Common Agenda”. This is what Vlad Batrincea of the Socialist Party stated after his visit to Moscow, specifying that it should be a consolidated decision of the newly created platform. It is obvious that the Western curators of the project at this stage effectively monitor their brainchild and will not allow the Common Agenda to create real problems for the ruling regime, but no one can guarantee today that the entire left flank will remain “in Europe’s pocket”. No agreements between the left and right banks of the Nistru can fundamentally improve the situation. On the contrary, they may annoy Moscow and further reduce the volume of supplies. Nevertheless, the government chooses to raise the stakes and continues to ignore opportunities to engage in direct dialogue with the Kremlin. The brief audit of the right bank’s historic gas debt was done by experts for whom PJSC Gazprom may have very tentative credibility. The results of the audit will be known only in late spring, when the Moldovan gas market might witness a completely different situation. The results of the inspection may turn out to be dubious and politicized and will directly depend on our GTS configuration and relations with Moscow. Furthermore, last week, Energocom allocated Moldovagaz JSC a credit line pledged against the Moldovan gas transportation system to pay for the current month and the next month's advance. Even if the ongoing supply volumes are maintained or reduced, this loan will not be repayable. As a result, the property of Moldovagaz JSC, the main shareholder of which is Gazprom, on the main and distribution pipelines in the country can pass to the government, which has the right to sell it at its own discretion, for example, by selling it to foreign investors. By and large, this is a copy of the European Union’s mechanism for seizing Russian gas assets provided for in the so-called Third Energy Package. For many years we could not find a solution to implement these EU directives and the national gas market legislation adopted in 2016 to comply with these directives. However, desperate times stimulated desperate measures. No doubt, Moscow will consider this dubious scheme as a raider attempt, so the response is bound to be painful. One of the predictions is that Russian gas supplies to Moldova will be completely halted (possibly, with volumes sufficient solely for household consumption in Transdniestria). Such a decision may come in winter. Both Russia and Chisinau have chosen to play big, without regard for the ensuing losses. In Moldova alone, the political short-sightedness of the leadership will directly hit the budget and the people, who may simply not survive this winter. Yet, even this price for the European choice and the fictitious energy independence will not seem excessive to Maia Sandu and her team.