In the worst-case scenario for Moldova, its 6-month electricity costs would exceed 484 million euros, 260% more than in the previous year.
This is according to a study conducted by the German Economic Team to forecast electricity costs in Moldova between November 2022 and April 2023. The document notes that Moldova is experiencing the worst energy crisis in the country's history, with a high level of uncertainty about the country's electricity import bills and ability to meet demand in the coming winter period. The German Economic Team modeled Moldova's electricity system and evaluated various scenarios to project electricity costs for the period from November 2022 to April 2023. All of these scenarios reflect significantly higher electricity costs compared to the same period last year and various levels of difficulty in obtaining electricity. The scenarios assume no contract with the Moldovan Hydro-Power Plant (MHPP) to supply electricity to right-bank Moldova, the conclusion of such a contract and resumption of electricity supply by the MHPP, albeit with less capacity, an increase in electricity supply from Romania at subsidized prices, and finally, a decline in electricity demand in the left-bank Moldova. The first scenario describes the worst case and forecasts electricity costs for the period from November 22 to April 23 to exceed 484 million euros, 260% more than in the same period last year. It is expected that in case of complete absence of deliveries from the MHPP to right-bank Moldova, most of the electricity demand (53%) will be met by electricity imports from the open market, which will account for almost 74% of the total expenses for that period. Given the high costs associated with these imports, the risk of reduced demand and rolling blackouts increases significantly. The second scenario involves a supply deal with the MHPP, albeit in limited volumes, and the total cost in this case would be 321 million euros. MHPP would meet 32% of right bank Moldova's electricity demand during the period analyzed, helping reduce the share of electricity purchased on the open market. The third scenario assumes additional subsidized capacity from Romania. It is planned that all 180 MW of contracted capacity will be supplied by Romania at more favorable prices. This additional capacity would reduce total electricity costs by more than 22%, compared to the previous scenario, as imports on the spot market would be further reduced. Total 6-month costs under this scenario would be 249.7 million euros, up 85%, compared to the same period last year. The best fourth scenario stipulates that in addition to all previously implemented measures, the industry and population of the left-bank Moldova will follow the savings scheme of the right-bank Moldova (50% reduction of industrial consumption and 10% reduction of domestic consumption). This would allow supplying saved electric power to right-bank Moldova, with electric power produced by MHPP being 53% of electric power consumption on right-bank Moldova, which would allow limiting expensive import on the open market to an insignificant level of almost 1.1%. In this case, the total cost of electricity would be "only" 203 million euros, up 50% over the previous year. The share of the direct cost of electricity production and imports (compared to last year) in GDP ranges from 3% for the worst-case scenario to 0.6% for the best-case scenario. However, additional impacts, such as reductions in industrial production or price increases in other energy-intensive sectors (heating, transportation, etc.), which were considered in this study, will also have a serious impact on GDP and costs. According to experts, while the analysis shows that the cost burden is high in all scenarios, there are options to prevent a worst-case scenario. Below is a list of actions that are strongly recommended. As noted, maintaining the MHPP operation is necessary to survive the next 6 months and may involve sending large volumes of natural gas, fuel oil and/or coal to the left-bank Moldova. MHPP is currently operating, albeit at a very low level, supplying electricity to left-bank Moldova. The power plant is expected to continue operating with the possibility of replacing natural gas with coal or fuel oil. Experts point out that the extended and complete closure of MHPP will lead to an economic and humanitarian disaster and must be prevented at all costs. It is strongly recommended that the right-bank and left-bank Moldova cooperate in terms of fuel procurement and logistics. It is emphasized that the reduction of electricity demand is fundamental and can be achieved through significant savings in industry and moderate savings in the residential sector. Moldova is already making significant electricity savings compared to last year. According to experts, non-critical energy-intensive industries (whose products can be replaced by imports) should be encouraged to temporarily reduce electricity consumption. Analysts also say that sharing the burden of demand reduction between the left and right banks of Moldova is vital: it reduced dependence on excessively expensive electricity imports from the EU. Thus, discussions with representatives from the left bank of Moldova should include the topic of electricity demand reduction on both banks of the Nistru/Dniester. In addition to the results of the model analysis, an increase in the use of combined heat and power plants beyond their needs for heat production could help reduce the import burden and the deficit in electricity demand. Experts point out that if it is possible to secure more than sufficient reserves of fuel oil (or natural gas) for the country's thermal power plants, working in excess of the production strictly necessary to meet the demand for central heating in Chisinau and Balti could provide additional electricity production for the domestic market to reduce the high import burden. // 21.11.2022 – InfoMarket
