Moldova signs €264mn funding package to connect to Romania’s power grid

Moldova signs €264mn funding package to connect to Romania’s power grid
By Iulian Ernst in Bucharest September 27, 2019

Moldova’s government and state power grid operator Moldelectrica have signed financing agreements, sketched since 2017, for the streamlining of the national power grid and its connection to Romania’s power grid.

The interconnection is of critical importance for the diversification of Moldova’s electricity supply. 

The financing package for Moldova includes a €160mn loan from the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB), a €40mn grant from the European Union and a $70mn loan from the World Bank, amounting to around €264mn in total. 

The EU grant will co-finance the construction of a 600 MW back-to-back converter substation in Vulcanesti on the border with Romania. The World Bank loan will finance the construction of a new 400 kV high-voltage overhead line between Vulcanesti and Moldova’s capital Chisinau, as well as the expansion and upgrade of associated high voltage substations.

The project is scheduled for completion in 2024, two years later than initially planned.

Currently, Moldova operates a single, small power plant fuelled by natural gas, oil and coal. It depends on electricity imports from the separatist region Transnistria and to a lesser extent from Ukraine for more than 80% per cent of its electricity demand. The main electricity supplier to Moldova is a Transnistrian power plant, Kuchurgan, operated by Russian owners and which burns natural gas from Gazprom but never pays for it. This resulted in huge debts of over $6bn that formally are owed by Moldova’s Moldovatransgaz (controlled by Gazprom). 

Notably, the connection to Romania’s power grid, by the back-to-back station at Vulcanesti, will be asynchronous — meaning that only “band” (constant power) imports will be possible, as opposed to the synchronised power grids that allow for the merger of the spot (day-ahead, intra-day) markets.

Another important note regards Romania's power market that needs more generation capacities. The outage of one nuclear unit at the Cernavoda nuclear power plant has pushed up the spot electricity prices two to three times above those in Hungary in recent days for peak consumption hours, partly because of the limited import capacity. 

The project to build two new reactors at Cernavoda, developed with Chinese investors, is now uncertain after Romania signed a memorandum of understanding on civil nuclear energy with the US. Meanwhile, Romania’s coal fired power units need time and money to convert to burning gas, which is supposed to start flowing from the Black Sea offshore no sooner than early 2022. In this regard, recently announced plans to sweeten the Offshore Law bode well.