The past two years of energy disruptions in Europe amid the crisis caused by the war in Ukraine have created tensions among consumers, electricity suppliers and investors over prices, affordability and sustainability of energy supply. Under enormous pressure to offset rising prices, governments have implemented massive fiscal interventions in European energy markets worth €758 billion between September 2021 and January 2023.

In turn, the energy transition required to meet emission reduction targets, as well as to have sources alternative to imports from Russia, reveals several flaws in the way prices are set in wholesale markets, where they are regulated networks and costs to end consumers. are calculated

“The energy crisis has highlighted just some of the challenges facing energy providers around the world in times of uncertainty and transition, challenges that will increase as they strive to achieve climate neutrality (net zero) goals. In many countries of the world, the regulatory and legal framework is not yet well structured to ensure the investments urgently needed for the energy transition. This is why new regulations are needed to address the biggest challenges: increasing demand for transport capacity, financing and feasibility of future investments, the authorization process, sustainability of supply chains and labor availability,” explains Dinu Bumbecea, Country Managing Partner of PwC Romania.

A reform that requires huge investments

In mid-March 2023, the European Commission proposed to reform the EU electricity market to increase production from renewable sources, protect consumers from future price increases and potential market manipulation, and improve industrial competitiveness.

Most countries in Europe have set themselves ambitious targets to reduce their carbon emissions to zero, but most governments are only now beginning to understand the scale of the infrastructure investment projects required to create sufficient renewable energy capacity, and what financial support for these projects will mean.

In addition, electricity providers are now realizing that they need to increase investment in infrastructure and generation, as well as rethink how they deliver energy and how and when it is best consumed by businesses and people.

“The latest analysis by PwC, based on data from the International Energy Agency (IEA), shows that energy production from renewable sources must increase eightfold compared to 2021 levels, and annual investment in distribution systems must increase threefold to achieve global climate neutrality by 2050 year. Governments play a key role in setting policy and permitting regimes, reducing the time needed to approve and develop projects, and creating incentives for investment. Romania can benefit from significant investments in the energy transition, co-financing from the PNRR and amounts from the Modernization Fund exceeding €16 billion for areas such as renewable energy, coal substitution, production and use of green hydrogen, nuclear energy, high-efficiency cogeneration, biofuels , modernization of the energy infrastructure,” added Dinu Bumbechea.

What can regulators and industry do to best prepare for the energy transition? To better understand all the challenges shaping the current and future energy landscape, PwC recently held a roundtable in Amsterdam to share ideas and discuss ways to help accelerate the energy transition while maintaining security of supply and demand. Based on the results of the discussions, the document “Regulating the energy sector – designing a sustainable and sustainable energy system of the future” was published (available here).

Article supported by PwC Romania