A Policy Paper on Financing an Alternative National Energy Strategy for a Developing Country (2013) (Published)
The Republic of Moldova’s energy sector faces major challenges emanating from a general lack of indigenous alternative energy sources; poor efficiency of energy distribution; limited sources of energy import for oil and electricity and very high costs energy import costs. Currently 96.3% of the energy is imported from Russia and Romania. This paper answers the question of whether heavily investing in interconnection with and integration to the EU energy market is the best option available today to the Government of Moldova to improve efficiency in the country’s energy sector. This assessment is done in light of the major challenges facing the energy sector in Moldova in relation with security and independence of the energy source, efficiency, sustainability and environmental impact, access and price and political feasibility. Policy Option 1: Maintaining the status quo With this politically feasible option, Moldova effectively incurs all the costs related to its extreme dependency on imports of fossil fuel from Russia characterized by one of the high gas prices in Europe and the consequent accumulation of foreign debt, inefficient distribution networks and continuous threats to the security of supply from Russia who have refused to renew its multi-year energy agreement with Moldova. Policy Option 2: Pursuing European Union Integration. By becoming part of the Free Trade zone of European Union Moldova will gain access to a customs free zone and a joint operational program with Romania leading to the development of the Ungheni–Lasi Pipeline which will help to the transition to electricity and give Moldova the capacity to negotiate price reduction. The new pipeline will reduce energy dependence on Russia in the long term, although Moldova would have to weather the storm of discontinued supply from Russia in the short term. However, the conditions for meeting EU standards will be very demanding and costly in the short run for Moldova. Policy Option 3: Pursuing a Pro-Russia Policy A Pro-Russia policy would immediately remove concerns about potential punitive measures from Russian thereby enhancing security and greatly reducing the price of energy in the short term. It is however, difficult to predict long term prospects of Russian energy policies. Inefficiency of the system will remain the same as the burden of improving this still lies with Moldova. The strongest barrier to this policy would be the wide spread democratic aspiration expressed by Moldovan citizens since the regime shift from communists to a pro-EU majority coalition in 2009. Policy Option 4: Shifting to Renewable Energy Sources. Moldova has a high renewable energy potential with a technical capacity to more than meet the total energy requirements according to 2010 estimates. In the long-term renewable energy represents the biggest potential at significantly reducing Moldova’s dependence on foreign energy, enhancing security of supply, reducing the costs of energy and ensuring a sustainable and environmentally friendly option through huge reductions in carbon emissions. This policy will require high levels of investment in the short term before the benefits of it can be realized.
Keywords: Developing Country, Policy paper, national energy, strategy