Energy Crisis in Moldova – the Government’s Deliberate Choice

Home / Analytics / Energy Crisis in Moldova – the Government’s Deliberate Choice
Anton SVET The government’s competence in managing the energy sector is still highly questionable. There are too many mistakes, and each of them costs the country too much, both economically and politically Monday morning began with relatively positive news. Earlier, Gazprom PJSC, which had threatened to further reduce its supply from November 28, informed that Moldovagaz SA had eliminated violations of payment for current supplies in November. The Russian gas monopolist said that it had received money for the gas deposited on the territory of Ukraine and that it had no intention to reduce the supply of gas to Suja pipeline, which transited through the Ukrainian gas transport system to Moldova. According to the government, there are already more than 200 million cubic meters of natural gas in the underground gas storages on the territory of Ukraine. In November, according to Vadim Ceban, Head of Moldovagaz SA, Moldova will pay for 102 million cubic meters of the consumption of 171 million cubic meters sent by PJSC Gazprom (that is, the consumption of Transdniestria, as local officials have repeatedly said, will be only 69 million cubic meters in November). Thus, legally, our country daily consumed in November and will now pay for 3.4 million cubic meters of gas. It is obvious that these volumes significantly exceed the right bank’s actual need for the resource. Recall that in October we consumed less than 1 million cubic meters per day – only 29.4 million for the entire month. Such a specific approach of the government allowed the accumulation of inflated reserves and, at the same time, triggered a crisis in industry and utilities in Transdniestria. This was probably a conscious strategy of the current government, prompted by foreign advisers. However, the side effects of such shortsighted steps were serious. First, it provoked the risks of further reduction or complete cessation of deliveries by Gazprom. Second, the already dismal relations with the de facto authorities in Transdniestria suffered. At the same time, Moldova was forced to pay for volumes of gas that significantly exceeded the real need. Under the contract between Gazprom and Moldovagaz SA, the right bank could have received 1.8 million cubic meters of gas per day, i.e., 54 million per month, saving almost half the cost and satisfying the existing demand. These costs would not have put an additional burden on the country’s population and industrial facilities. Moreover, Transdniestrian officials have repeatedly stated that if Chisinau had not withdrawn the gas needed by the region, the Moldovan GRES would have been able to produce electricity and send it to the right bank. It should be reiterated that in November, the weighted average price of 1 MWh of Romanian electricity for Moldova was 231 euros. In Transdniestria, this energy (albeit not in full volume) Energocom could have been purchased at a price not higher than USD 61 per MWh. This would have ensured solid savings and probably would not have hit so hard the wallets of the population, faced with the constant growth of prices in the utility bills. Among other things, the use of the Moldovan GRES to generate electricity for the needs of the right bank would improve the overall stability of the power system and avoid a blackout on November 23, with a high degree of probability. The long-term social and technological consequences of the blackouts have yet to be assessed. Meanwhile, the task before an adequate, people-oriented government is precisely to ensure that these kinds of technological disruptions do not occur. As long as Russia continues striking at the facilities of the Ukrainian energy system, and the Moldovan GRES operates with only one unit (for the internal needs of the Transdniestrian region), a repeat of blackouts, leading to steady degradation and destruction of the energy system, is an extremely likely scenario. As a result, the government outsmarted itself by making a series of mistakes: – it formed inflated gas reserves that far exceeded the real need for the resource, which are stored in a country at war that is regularly attacked by missiles on its energy infrastructure; – it overpaid twice – for Russian natural gas and for Romanian electricity, but the deficit and huge payments to the population are still in place; – it hit the industry and angered the population and political elites on the left bank of the Dniester; – it triggered threats to strategic infrastructure, the deterioration of which will require enormous investments in the future. In this sense, technological accidents at Chisinau CHPP-2, about which Prime Minister Natalia Gavrilita learned from the media, no longer surprise anyone, becoming the natural result of a careless attitude toward the country’s energy system as a whole. As for CHPP-2, it remains to be seen whether the accident is a direct consequence of the politically motivated cancellation of the tender for its repair by the Russian Power Machines OJSC. One way or another, the government will have to take full responsibility for the gas and energy crisis that provoked an economic downturn and enormous inflation. If the authorities do not establish a dialogue with the population and do not try to explain their short-sighted policies, the protests will continue with a high intensity. Where this will lead the country is difficult to predict.