The REPowerEU Plan and the Transition to Green Energy in Romania

Dinca, Violeta Mihaela; Moagar-Poladian, Simona; Stamule, Tanase; Nistoreanu, Puiu Article The REPowerEU Plan and the Transition to Green Energy in Romania Amfiteatru Economic Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: Dinca, Violeta Mihaela; Moagar-Poladian, Simona; Stamule, Tanase; Nistoreanu, Puiu (2023) : The REPowerEU Plan and the Transition to Green Energy in Romania, Amfiteatru Economic, ISSN 2247-9104, The Bucharest University of Economic Studies, Bucharest, Vol. 25, Iss. 64, pp. 676-690, https://doi.org/10.24818/EA/2023/64/676 This Version is available at: https://hdl.handle.net/10419/281726 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ AE The REPowerEU Plan and the Transition to Green Energy in Romania 676 Amfiteatru Economic THE REPOWEREU PLAN AND THE MAIN CHALLENGES FOR THE TRANSITION TO RENEWABLE ENERGY IN ROMANIA Violeta Mihaela Dincă1 * , Simona Moagăr-Poladian2, Tănase Stamule3 and Puiu Nistoreanu4 1)3)4) Bucharest University of Economic Studies, Romania 2)Institute for World Economy, Romanian Academy, Bucharest, Romania Please cite this article as: Dincă, V.M., Moagăr-Poladian, S., Stamule and T., Nistoreanu, P., 2023. The REPowerEU Plan and the Transition to Green Energy in Romania. Amfiteatru Economic, 25(64), pp. 676-690. DOI: https://doi.org/10.24818/EA/2023/64/676 Article History Received: 30 March 2023 Revised: 8 May 2023 Accepted: 5 June 2023 Abstract The energy system of the European Union has suffered major changes in the recent years. High energy prices, increased energy security concerns and heavy reliance on gas, oil, and main combustibles coming from Russia have the three most important features of the EU energy sector in 2022. The European Commission has presented in the first part of 2022 the REPowerEU Plan which aims to implement measures to economise energy, generate clean energy, and diversify the origin of energy provisions and stocks. This program is supported by economic and legislative actions to shape the additional energy infrastructure and framework that Europe requires. This article focuses on the part related to the green energy transition of the REPowerEU, by investigating the perception of Romanian companies about favourably substituting fossil fuel to decrease emissions and reliance. This research examined the obstacles/challenges that have an impact on the adoption of renewable energy from the point of view of Romanian companies. An econometric model was conceived and it encompassed five variables that were analysed to see how they could impact the decision to accept and implement green energy in Romania. The article applied a quantitative study, with the primary data collected with a survey on managers in companies from five of the most energy intensive industries in Romania. The data was processed with the structural equation modelling (SEM) and the results revealed that market (economic), technological and administrative obstacles affect with a major impact the implementation of renewable energy technologies in Romania. Community (social) and organisational obstacles have been determined to influence with a medium effect on the deployment of renewable energy technologies in Romania. The outcomes of the article * Autor de contact, Violeta Mihaela Dinca – e-mail: [email protected] Acesta este un articol cu acces deschis distribuit în conformitate cu termenii Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0), care permite utilizarea, distribuirea și reproducerea fără restricții în orice mediu, cu condiția ca lucrarea originală să fie citată corect. © 2023 Toate drepturile aparțin autorilor. Clean, Diversified, and Affordable Energy for the European Union in the Context of the REPowerEU Plan AE Vol. 25 • No. 64 • August 2023 677 contribute to increasing awareness of the imperativeness of substituting fossil fuels by accelerating Romania’s clean energy transition and considering the great potential the country has for making this switch. Keywords: REPowerEU Plan; renewable energy transition; substitution of fossil fuels; Romanian companies JEL Classification: Q40; R15; M14 Introduction At the beginning of 2022 the world’s energy system was disrupted mainly because of Russia’s invasion in Ukraine. It provoked a constant rise in energy prices, it deepened energy security issues, and it drew attention to the European Union’s over-reliance on Russian natural resources. This new geopolitical and energy market framework puts a pressure on the EU to speed up the process of clean energy transition and enhance Europe's energy independence from questionable suppliers, on the one hand, and from fossil fuels, on the other hand. In March 2022, the European Commission put forward the REPowerEU plan that seeks to lower the reliance on Russian fossil fuels by making Europe independent from this point of view before 2030. REPowerEU includes various actions in order to: conserve energy, vary supplies, rapidly replace fossil fuels by hastening Europe’s clean energy transition, and actively mix financing and upgrades. As of December 2022 the European Parliament and the Council have reached a political consensus on investments of REPowerEU and helping the EU Member States to implement REPowerEU sections in their recovery and resilience plans. Within the plan, the measure regarding increasing the supply of renewable energy offers a solution to the challenges of: continuous growth of Europe’s population, contributing to the issue of global warming and, at the same time, reducing the dependence on Russian fossil fuel imports. This paper underlines the scale of demand, and the essential role that the corporate environment has in increasing renewable electricity capacity and opening access to renewable electricity in new markets. The article also takes into consideration that the renewable transformation of Europe’s and implicitly Romania’s energy system will consolidate economic progress, build up its industrial administration and direction, and help to reach climate neutrality by 2050. With regard to the current state of events, the objectives of this research were to identify the main challenges/obstacles in Romania along with their impact in order to accept and implement renewable energy technologies. The article continues with a review of several relevant references on the subject, on the basis of which the hypotheses of the study are strengthened, followed by the methodology of the paper, in which the proposed econometric model is described in more detail, continuing with the results of our own research and the formulation of recommendations and suggestions integrated in the conclusions section. 1. Literature review A significant acceleration and advancement of renewable energy in power generation, manufacturing, trading, construction, and distribution (shipment) will intensify the process AE The REPowerEU Plan and the Transition to Green Energy in Romania 678 Amfiteatru Economic of switching from of Russian gas. Altogether, over time, it will decrease electricity expenses and diminish gas imports backing up the REPowerEU Plan (Figure no.1). Figure no. 1. The set of actions put forward by the REPower Plan Source: European Commission, 2022. REPower EU plan The REPowerEU plan has taken shape ever since the EU countries committed themselves to achieving climate neutrality by 2050 (under the Paris Agreement) by the European Green Deal, which was formulated from the beginning as the EU’s strategy to smooth the road to a green transition, ultimately achieving the 2050 objective. Among the initiatives in the Green Deal, the Fit for 55 package can be mentioned, which represents a series of initiatives enclosed within the EU Green Deal, to re-examine climate-, energy- and transport-related legislation and settle for new amendments that align with the EU’s climate objectives. The European Council has fixed the objectives for the EU to reduce its greenhouse gas emissions with minimum 55% until 2030, in comparison with 1990, and established a new binding renewable energy target of at least 32% evolving in this way into climate neutral by 2050 (Figure 2 below). REPowerEU strengthens the potential for complete accomplishment of the Fit for 55 measures and reaches a minimum of -55 % net GHG emissions until 2030 and climate neutrality until 2050 in accordance with the European Green Deal (European Commission, 2022). Regardless of the impressive publicity and engagement within different countries, just a minor proportion of energy comes from green sources, particularly in developing countries (Dincă et al., 2022; Nițoi et al., 2021). This is caused by multiple obstacles that handle and deal with the distribution and expansion of renewable energy. These complications prevent green energy from keeping up strongly with energy coming from traditional sources and impede the fulfilment of the needed development (Dinu et al., 2022). The factors which were retrieved from the literature on the difficulties of development and enforcement of renewable energy are: economic, social, organisational, technological, and administrative (governing) and therefore they will be tackled in this literature review as well. Clean, Diversified, and Affordable Energy for the European Union in the Context of the REPowerEU Plan AE Vol. 25 • No. 64 • August 2023 679 Figure no. 2. The share of energy from renewable sources Source: Eurostat, 2021 1.1 Market/economic challenges One of the most important criterion that have kept renewable energy from developing into a wide-ranging one is the challenging rivalry with energy coming from fossil fuels. The renewable energy quota in the world’s power generation peaked at approximately 13% in 2021, stronger than the share of nuclear energy (9.8%). The share of coal in the power sector recorded the level of 36% in 2021 while the one of gas in 2021 stayed around its value from over ten years, which was 23% (BP, 2022). Therefore, it is settled that the energy deriving from fossil fuels remains a powerful alternative to renewable energy. Thus, the first item of this variable is stiff competition from more established energy sources. Another contributing factor to the under-development of green energy is represented by the insufficiency of subventions from public authorities or private financing schemes granted to renewable energy compared to classical sources of energy (there is only a small number of financing institutions for renewable energy projects in contrast with fossil fuel energy projects) (Seetharaman et al., 2019; Safwat Kabel & Bassim, 2020). One of the main causes for that is that investments in green energy projects are regarded as uncertain, thus discouraging investors (Ohunakin et al., 2014). Renewable energy projects suppose an expensive preliminary capital due to the risky success green technology and the extended period of reimbursement (of the initial investment), and these disadvantages can persuade investors against making a funding (Lu et al., 2020). The third item of the variable is, therefore, the cost – specifically, capital AE The REPowerEU Plan and the Transition to Green Energy in Romania 680 Amfiteatru Economic costs, or the upfront cost of building and installing renewable technologies. All the elements enumerated above lead to the formulation of the first hypothesis: H1: Market/economic challenges have a significant and negative impact on the implementation of renewable energy technologies in Romania. 1.2 Community/information/social challenges The transition from traditional sources of energy to green energy faced disapproval from society at the time. The first cause would be public understanding and information translating into: the low level of information and awareness about the processes of implementing and maintaining green energy technologies and also about their potential ecological and financial benefits (Mirza et al., 2009). Public dissatisfaction with renewable energy (from civilians, governmental representatives, communities NGOs) happens because of alteration of landscapes and its impact, interposing with stable lifestyles, ecological concerns and shortcoming in the dialogue with local communities (Streimikiene et al., 2021; Rosso-Ceron & Kafarov, 2015). Another impediment is the requirement of a skilled labour force with expertise in renewable energy and the lack of specialists in design, building, training, maintenance, and operations for a renewable energy plant (Juszczyk et al., 2022). The scarcity of trained workforce capable to generate and develop renewable energy projects is therefore seen as another serious holdback to the implementation of renewable energy (Ansari et al., 2016; Dincă et al., 2021). All these ideas lead to the formulation of the second hypothesis: H2: Social (community) challenges hold a major impact on the implementation of renewable energy technologies in Romania. 1.3 Organisational challenges Although companies have begun to realise (and feel) the magnitude of the energy transition, many are still underestimating the pace required to deliver the change demanded. Corporations which excelled at incorporating renewable energy have done so by linking the benefits of green energy technologies with wider business purposes and values (Mercer, 2021). The energy culture of a company could be described as the degree to which considerations of energy are embedded in the organisation’s practices and processes, particularly those relating to decision-making (Rohdin & Thollander, 2006). Several studies have indicated that the absence of a positive energy culture (having efficiency targets, already having obtained an Energy Efficiency Certificate, or a member of staff is in charge with responsibility for energy concerns within the company) is a key determinant of failing to transition to clean energy (Brown & Sherriff, 2014). Apart from that, the leadership is another important organisational component, and if it does not take energy concerns into account (energy auditing, but also courses and training for the staff and management teams), it could cause problems for the process of a successful clean energy transition. There is evidence that training on energy topics is growing the skills of employees in large firms relating to energy management (Jalo et al., Clean, Diversified, and Affordable Energy for the European Union in the Context of the REPowerEU Plan AE Vol. 25 • No. 64 • August 2023 681 2021). Not setting the bar high enough for corporate leadership on renewable electricity, not imposing certain exigences of energy for which board members are responsible, and celebrating their achievements to encourage others to follow could definitely slow down the transition to clean energy (weforum, 2020). Therefore, the above ideas lead to the formulation of the third hypothesis: H3: Organisational challenges have a significant impact on the implementation of renewable energy technologies in Romania. 1.4 Technological challenges One of the most relevant technological issues we can name is the none or limited availability of physical infrastructure and of transmission and distribution networks in promising locations of renewable energy supply, which leads to a scarce exploitation of their capacity. Another item that prevents growth for green energy is grid integration. Numerous energy power plants are located in remote places, and they need supplementary transmission to link the head grid, and multiple current grids are not devised to incorporate green energy; therefore, they should be replaced or improved (Hosseinalizadeh et al., 2021; Mirza et al., 2009). The insufficient amount of research and development (R&D) activities and skills represents another point that may restrict renewable energy development (Khezri et al., 2021). Funding in R&D is not substantial enough to ensure competitiveness for the one in fossil fuel (Moagăr-Poladian et al., 2015). Public authorities and energy corporations limit financing in R&D for renewable energy projects because of the big uncertainty connected to this technology (Mohsin et al., 2022). Apart from that, the finite number of standards, methodologies, and working norms in green energy technologies in reference to sustainability, accuracy or achievement do not permit renewable energy to accomplish an extensive range of marketability, another item which is putting a pressure for the development of green energy (Weitemeyer et al., 2015). According to the studies specified above, the fourth hypothesis can be stated: H4: Technological challenges have a relevant impact on the implementation of renewable energy technologies in Romania. 1.5 Administrative challenges Independent energy consultancy Eclareon has published in the 2022 report the barriers that block wind and solar energy projects in all 27 EU countries and the UK (Eclareon, 2022). The main problem identified in the report for Romania is the recurring amendments to the main renewable energy law and the low consistency of the regulatory framework, which inevitably stalls renewable projects. In Romania, the implementation of renewables is hampered by a lack of confidence in the underlying schemes, caused either by frequent changes in regulations or a lack of transparency of actual methods (Cristea et al., 2020). Simultaneously, the complexity and inconsistency of the bureaucracy also lengthen the administrative procedures in general and increase the capital expenditure of renewable projects (Seetharaman et al., 2019; Aceleanu et al., 2017). AE The REPowerEU Plan and the Transition to Green Energy in Romania 682 Amfiteatru Economic Also, we can mention that Romania’s potential for sustainable renewable energy development is far greater than the country's future plans regarding the renewable energy development and carbon emission reduction for the next decades. The fixed targets can be achieved without any support schemes due to Romania's natural wind and solar potential; therefore, Romania should push more and surpass the recommendations made by the European Union (34%) because it has the prospects (Eclareon, 2022). The mentions made at this point lead us to formulate the fifth hypothesis: H5: Administrative challenges have a meaningful impact on the implementation of renewable energy technologies in Romania. An overview of the five hypotheses of the model is encompassed in the Figure no.3 below. 2. Research methodology Several studies have been conducted over the years about the barriers of implementing renewable energy from the point of view of experts within the energy domain. The aims of this research revolve around the particular approach from the REPowerEU Plan about how to achieve the replacement of fossil fuels with green energy sources from the point of view of representatives of companies from Romania within industries which are mostly affecting the environment. These objectives of the study materialised in the form of five hypotheses through which the authors aimed to identify the main challenges/obstacles in Romania and their impact on the acceptance and implementation of renewable energy technologies. An overview of the five hypotheses of the model is included in figure 3 below. Figure no. 3. Overview of the econometric model regarding the challenges affecting a good implementation of renewable energy technologies in Romania The basic rule for selecting respondents for the study was that they have a management position and that they are also in charge of energy issues within their work. The data was collected from study participants through a structured and closed-ended questionnaire with Clean, Diversified, and Affordable Energy for the European Union in the Context of the REPowerEU Plan AE Vol. 25 • No. 64 • August 2023 683 data collected between December 2022 - January 2023 and the convenient random sampling technique was used to determine the final number of respondents for this survey. The authors received 233 completed questionnaires, but subsequently the data was refined and a total of 217 responses were adopted as material for this article. The identification questions required details about the respondent’s age, gender, degree of education, position within the company and the industry. Thereafter, the participants in this survey gave information in relation to the model’s variables. More notably, five variables related to the obstacles that prevent renewable energies to expand in Romania were assessed: market (economic); community (social); organisational (corporate); technological and administrative. The model’s variables have been assessed with four-point Likert scaling method running from (1) ‘Strongly disagree’ to (4) ‘Strongly agree’. The dependent variable is the “favorable implementation of green energy projects”, we used a four-point Likert scale spanning from (1) “Very low” to (4) “Very high”. First, the demographics of the respondents were analysed using descriptive statistics. The reliability and validity of the data were assessed though statistical analysis tools like Cronbach’s alpha, average variance extracted (AVE), and convergent reliability (CR). With the confirmatory factor analysis (CFA), the model fitness was evaluated. Finally, to test the study’s hypotheses, the technique of structural equation modeling (SEM) has been applied to examine the links existing between the variables of the model. This analysis was performed with the softwares AMOS vs. 26 and SPSS vs. 29. 3. Findings and discussions Table no.1 shows respondents’ demographic details. From the final sample of 217 people (all Romanians), 119 males (55%) and 98 females (45%) between the ages 28 and 71. Table no.1. Identification information of the participants and their companies Gender Frequency Percent Education Frequency Percent Male 119 55 Bachelor 92 42 Female 98 45 Master 114 53 Age Frequency Percent PhD 11 5 18-30 34 16 Manager’s industry work experience Frequency Percent 31-42 66 30 Less than 10 years 30 14 43-54 78 36 10-19 years 109 50 55-66 39 18 Over 20 years 78 36 Industry of the company Frequency Percent Number of employees of the company Frequency Percent Textile 38 18 Transport 52 24 10-50 employees 32 15 Construction materials 49 22 51-150 employees 108 50 Agro-alimentary 41 19 151-250 employees 46 21 Chemical 37 17 Over 250 employees 31 14 Source: Authors’ own computation AE The REPowerEU Plan and the Transition to Green Energy in Romania 690 Amfiteatru Economic Lu, J., Ren, L., Yao, S., Rong, D., Skare, M., and Streimikis, J. 2020. Renewable energy barriers and coping strategies: Evidence from the Baltic States. 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