Energy storage in the European Union and Romania – an overview

Cosmin Stavaru
Cosmin Stavaru
Vasile Soltan
Vasile Soltan

1. Background

The EU has committed itself under the European Green Deal to decarbonizing the European economy and becoming carbon neutral by 2050. To this end, an accelerated transition from fossil fuels as a primary energy source to renewable energy will be required. The integration of intermittent and variable renewable energy sources (e.g., wind and solar) into the power system requires greater flexibility in supply and demand in order to stabilize the power grid, prevent extreme price fluctuations and maintain security of supply and electricity price affordability. Short-term energy storage and multi-month seasonal storage is one of the ways to achieve the goal of such greater flexibility.

Energy storage can play a key role in narrowing the gap between the extreme values of energy prices and balancing the high and low levels of demand and supply. Thus, a wide range of storage technologies needs to be implemented having all features, in terms of power, capacity and response time, to contribute to grid stability, voltage regulation, operating reserve, dispatch and re-dispatch, etc.

This article seeks to briefly review some key issues related to the regulatory framework and policies for energy storage, storage mechanisms and available financing.

2. Regulatory framework

2.1. General

There is no unified dedicated framework on energy storage at EU level. However, provisions in this respect can be found, for instance, in Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU („Directive 2019/944”) and in Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity („Regulation 2019/943”).

Energy storage is not regulated in an integrated/centralized manner in the national law either, with relevant provisions being laid down in several pieces of legislation regulating activities in the electricity sector. Energy storage is among the main regulated activities in the electricity sector (e.g., generation, transmission, distribution, aggregation, dispatching, supply, operation or management of an electricity market, purchase or sale of electricity).

Key provisions on energy storage were introduced relatively late (2020) in the Electricity and Natural Gas Law No 123/2012 (“Energy Law“), under Law No 155/2020 amending Electricity and Natural Gas Law No 123/2012 and amending other regulatory acts.

The Energy Law defines storage as “the process of converting electricity into a form of energy that can be stored for the purpose of deferring its use for a time subsequent to the time of generation and the subsequent reconversion of that energy into electricity or its use in another energy carrier“. A different definition, in line with the provisions of Directive 2019/944, can be found in the Terms of License (as definition below) according to which storage means „deferring the final use of electricity to a moment later than when it was generated, or the conversion of electrical energy into a form of energy which can be stored, the storing of such energy, and the subsequent reconversion of such energy into electrical energy to be fed into the system.” It follows that energy storage presupposes either (i) the deferral of the final use of energy to a time subsequent to its generation, without subsequent conversion and reconversion, or (ii) the conversion of energy into a storable form, the storage and subsequent reconversion of stored energy into electricity or its use in another energy carrier.

On a particular note, energy storage through pumped storage hydropower plants (“PSHP“) is regulated under Government Ordinance no. 28/2014 on some measures for the development of infrastructure for electricity storage and for balancing the National Electricity System, through the construction and operation of pumped storage hydropower plants with an installed capacity exceeding 15 MW (“GO 28/2014“)[1]. As it will be shown below, today PSHP represent the main electricity storage mechanism.

A number of draft laws on energy storage activities have also been proposed, being in various stages of the legislative process. For example, one of them covers measures to develop the infrastructure for power generation and storage and for balancing the National Electricity System (“NES“) by building and operating wind and photovoltaic power plants equipped with energy storage capacities.[2]. This draft law was rejected by the Senate and is now under legislative procedure in the Chamber of Deputies as the decision-making chamber.

2.2. Authorization and licensing

Energy is stored in storage facilities. Authorization and licensing in the energy storage sector mainly fall under the scope of the Regulation for granting licenses and authorizations in the electricity sector approved under ANRE Order No 12/2015 (“Licensing Regulation“) and the General Terms associated with the license for the commercial exploitation of energy storage facilities approved under ANRE Order No 80/2013 (“License Terms“).

2.2.1. Establishment of storage facilities

The establishment of new storage facilities may only take place under a setting-up permit (autorizatie de infiintare) issued by ANRE if the maximum electrical power delivered to the grid by the energy generation unit in question exceeds 1 MW. However, if the power output is up to 1 MW, it is not necessary to obtain a setting-up permit, but it is compulsory to inform ANRE about the stage of the investment project by sending a notification upon the start of the execution works and a notification after the signing of the protocol attesting the commissioning of the storage facility.

2.2.2. Commercial operation of storage facilities

The commercial operation of storage facilities requires the issuance of a license by ANRE. In general, three situations can be distinguished: (i) the storage facility is added to the electricity generation unit / electricity and heat generation unit of cogeneration plants, (ii) the storage facility is installed within an existing generation unit and (iii) the storage facility is not added to a generation unit, being an independent facility/investment.

In the first situation, the operation of the storage facility will be based on a license granted for the operation of the power generation unit. In the second situation, the owner of the power generation unit and of the storage facility in question shall apply to ANRE for the amendment of the commercial operation license already granted for the power generation unit, in order to include the storage facility and the activities performed by means of such facility. In the third situation, the owner of the storage facility will need to obtain a license strictly for the storage activity.

However, the commercial operation of energy storage facilities with a total electrical output of less than 1 MW may be carried out without the license granted by ANRE, regardless of whether the storage facility is added or not to a power generation unit.

According to public information, it appears that, so far, ANRE has issued only one setting-up permit and no license for the commercial operation of storage facilities.[3]

2.2.3. Qualification for the provision of system services

Owners of storage facilities may become providers of system services (i.e., frequency control reserve, balancing services, voltage regulation services, participation in the defense of the NES and participation in the restoration of the NES. To acquire this status, storage facilities that are set up as reserve supply units (“RSUs“) or reserve supply groups (“RSGs“) must successfully complete the technical qualification process regulated under the Technical Qualification Procedure for the Provision of System Services approved under ANRE Order No. 89/2021. To this end, the applicant, the operator of an RSU, RSG or a designated third party, must submit to the TSO an application to qualify for the provision of one or more system services.

2.3. Connection to the grid

The connection of storage facilities (independent or associated to power generation units) to the public power grid is generally regulated under the Regulation on users’ connection to the public power grid approved under ANRE Order No 59/2013 (“Connection Regulation“). However, the Connection Regulation does not apply to connection facilities owned by grid operators under the exemption granted pursuant to the Energy Law. The integration of such facilities into their own networks is similar to the integration of any other elements of the network in question. In principle, the grid connection of storage facilities follows the same rules as those applicable to power generation units.

At the end of 2021, the Romanian transmission and system operator – Transelectrica submitted for public consultation the Technical Norm on the technical requirements for connection of energy storage facilities to the public power grids and the notification procedure for energy storage facilities (electricity storage battery systems), which has not been adopted so far[4]. The draft norm aims to regulate the minimum technical requirements for the connection of energy storage facilities, such as new electricity storage batteries, when they are connected (i) independently to the public power grids or (ii) to an existing or new generation or consumption place. The draft also seeks to regulate the procedure and stages of the notification process and the content of the conformity tests/checks for assessing compliance with the technical requirements for connection to public power grids.

3. Energy storage policies

3.1. European Union documents

Over the years, the European Commission has published a number of studies and other documents on electricity storage. On 10 July 2020, the European Parliament adopted the Resolution on a comprehensive European approach to energy storage (2019/2189(INI)) (“Storage Resolution”)[5], which analyzes current storage possibilities and makes recommendations to the European Commission and Member States to fully explore the storage potential in the EU. According to the Storage Resolution, a comprehensive approach is required to harmonize various aspects such as efficiency, environmental impact, competences and authorizations, as well as a careful and thorough analysis of each type of storage technology (especially in terms of environmental impact).

3.2. The 2021-2030 Integrated National Energy and Climate Change Plan

Energy storage is also regulated in the energy policy documents adopted at national level. The 2021-2030 integrated national energy and climate change plan adopted under Government Decision no. 1076/2021 (“INECP”) fosters the development of energy storage facilities as a measure to ensure the flexibility of the energy system in the broader context of energy security as a key policy dimension. In this regard, under INECP Romania set itself to implement the following measures: (i) clearly define the energy storage concept in primary legislation, (ii) outline the conditions for the procurement of energy storage licenses, as well as connection to the grid, (iii) define the standards for the installation and use of various storage technologies; (iv) develop a market design that facilitates the integration of storage facilities into the electricity market.

3.3. Draft Romanian Energy Strategy 2020-2030, with an outlook to 2050

The Draft Romanian Energy Strategy 2020-2030, with an outlook to 2050 („Draft ROES”)[6], not yet formally adopted, includes investments in storage facilities among the priority goals, also taking into account the potential of hydrogen and new gas in the sectoral integration process. According to the Draft ROES, in order to use the potential available for the development of photovoltaic sources, the national energy system needs to be modernized to be able to take up the variations in power injection generated by photovoltaic sources, with appropriately sized balancing and storage systems. Also, the volatility of power generation in wind power plants puts a stress on the whole NES, requiring a reassessment of system service needs and appropriate investments in peaking plants with fast regulation and storage systems.

4. Storage technologies

Energy is stored in energy storage facilities. In general, there are several energy storage systems: (i) mechanical (e.g., pumped storage hydroelectric power plants), (ii) thermal (e.g., thermochemical storage), (iii) chemical (e.g., hydrogen – electrolyzer & combustion cells), (iv) electrochemical (e.g., batteries), (v) electrical (e.g., superconducting magnetic coils). However, the main energy storage technologies that are or will be widely implemented are pumped storage hydroelectric power plants, batteries and hydrogen.

4.1. Pumped storage hydroelectric power plants

According to the explanatory statement to the Storage Resolution, pumped storage is one of the oldest and most mature energy storage methods. With an efficiency degree of 75-80%, it accounts for 97% of the current energy storage facilities. The EU would also have a potential of over 28 TWh, focusing on natural reservoirs only. As current research projects show, pumped storage is not limited to natural reservoirs. There are research projects to use former open pit mines for pumped storage.

PTG (Power Transmission Grid) Development Plan (2020 – 2029) developed by Transelectrica[7] provides in one of the scenarios the commissioning, at the level of 2029, of a 1000 MW storage unit (the much-debated Tarnița Lăpuștești pumped storage hydroelectric power plant). The implementation of Tarnița Lăpuștești pumped storage hydroelectric power plant and of other pumped storage hydroelectric plants is also foreseen in INECP.

Along the same line, the medium and long term (2020-2025) NES Adequacy Study prepared for Transelectrica (“NES Adequacy Study”)[8] specifies that the energy stored in storage lakes is the most important flexibility resource, while the data on the minimum / maximum generation, pumping and penstocks can be used as a basis for assessing flexibility.

According to ROES Project, after 2030, pumped storage hydroelectric power plants will be in demand in the mix of power generation units in all the analyzed scenarios. The scenarios estimate pumped storage capacities of approximately 1000 MW in 2050, with variations between 850 MW and 1100 MW. The scenarios in which the estimated need for pumped storage hydroelectric plants is highest, are those with ambitious decarbonization.

4.2. Batteries

According to the explanatory statement to the Storage Resolution, batteries can primarily serve short-term uses to secure the power quality in the grid, such as frequency control, balancing of demand peaks or buffering fluctuations thanks to their relatively fast response times.

However, for the time being, the EU has a very low manufacture capacity for lithium-ion batteries (the European share of world cell production is around 3%) and relies on production outside Europe, with limited transparency. The EU is also heavily dependent on imports of raw materials for battery production, including from sources where extraction involves environmental degradation, breach of labor standards and local conflicts over natural resources. To this end, on 9 April 2019, the European Commission adopted the Report on the Implementation of the Strategic Action Plan on Batteries: Building a Strategic Battery Value Chain in Europe (COM (2019) 0176) (“Report on Batteries”)[9], which proposes certain measures to reduce the dependency mentioned above.

According to the Report on Batteries, by 2050, batteries are expected to play a much more significant role than pumped hydro storage technology, which is currently the main storage technology in the power system. Global market forecasts project that demand for lithium-ion batteries will increase significantly to 660 GWh by 2023, 1,100 GWh by 2028 and could reach 4,000 GWh by 2040, compared to only 78 GWh by the level of the years 2019-2020. The role and importance of energy storage, and in particular battery storage technologies, are expected to increase significantly. In the medium term, stationary batteries are expected to reach about 10% of the battery market, but their role will further grow.

The NES Adequacy Study and INECP envisage the integration of the battery energy storage system (“BESS”) in the PTG. According to INECP, BESS can be a valuable resource for remedying situations of failure to satisfy the load curve, the impact of BESS integration in PTG having an overall positive effect by improving adequacy (by at least 10%). In this regard, BESS integration into the NES at a capacity of 400 MW and more is recommended, in particular in order to flatten the load curve and ensure an additional exploitable reserve in the form of technological system services (TSS) – fast secondary and tertiary regulation.

According to the ROES Project, it is estimated that by 2050 it will be necessary to ensure balancing for 15-20 GW installed in intermittent power generation plants, at the NES level. Thus, in addition to existing power generation units, the development of high-capacity battery systems or geographically dispersed medium or low-capacity battery systems will be an opportune marginal solution on the balancing market. In this respect, technologies that are currently expensive, but which could become economically feasible and timely, depending on technological progress and the evolution of the energy sector, are hydrogen fuel cells based on energy from renewable sources and other low carbon energy generation technologies.

4.3. Hydrogen

The Storage Resolution underlines the high potential of hydrogen, especially green hydrogen for seasonal energy storage in high volumes and as an energy carrier, as fuel and feedstock for energy-intensive industries, and as a sustainable fuel for several modes of transportation. Green hydrogen, produced from water with electricity from renewable sources, can provide significant flexibility to the NES. Modern electrolysers already exist in multiple sizes. Green hydrogen allows for great geographical flexibility: it can be produced directly at the electricity source (e.g., wind parks) and can be used either directly or stored (in extremely high quantities, for example, in natural caverns), or be transported over long distances without significant losses. It can then be used for various purposes, for example to decarbonize industrial processes in energy-intensive industries. However, the use of hydrogen for energy storage seems not to be yet competitive due to high production costs.

The National Center for Hydrogen and Fuel Cells (CNHPC), part of ICSI Energy Rm. Vâlcea, coordinates research studies in the production, storage and application of hydrogen to fuel cells. The directions pursued include energy storage technologies for obtaining the parameters necessary for the execution of power-to-gas stations and hybrid energy storage technologies (Lithium-ion program).

5. Available financing

5.1. National Recovery and Resilience Plan

Energy storage is targeted by the reforms and investments envisaged in the National Recovery and Resilience Plan (“NRRP”). Investment 4 under Component 6 involves, inter alia, the installation of a total energy storage facility of at least 240 MW (or 480 MWh) by 31 December 2025 (sub-investment 3).

On 11 May 2022, the Ministry of Energy published, for transparency of the decision-making process, the draft support scheme documents regarding the installation of energy storage facilities, which, so far, have not been adopted.[10]. The main objective of this support scheme is to put into operation a battery storage facility of at least 480 MWh by 31 December 2025. The following activities are eligible: (i) the purchase of installations/equipment for the construction of new battery storage facilities and (ii) constructions included by the battery storage project. The total budget for the support scheme is the RON equivalent of EUR 104 million, consisting of EUR 80 million of non-reimbursable funds provided under the NRRP and national funds of EUR 24 million by applying the 30% over-contracting rate. The maximum amount of State aid granted may not exceed the amount of: (i) EUR 167,000 per MWh installed, and (ii) EUR 15 million per undertaking, per investment project. The total estimated number of undertakings that could benefit from State aid under the scheme is between 5 and 20.

5.2. Modernization Fund

Key programs of the Modernization Fund include support for the construction of new power plants and heating-cooling systems based on renewable energy sources and for the development of energy storage facilities.[11]. However, for the time being, the funds approved by the European Commission to be allocated to Romania do not include funds for electricity storage facilities [12].

6. Conclusions

Energy storage should play a key role in ensuring a rapid transition from fossil fuels to renewable energy sources and in ensuring that these are well integrated into the power system.

For the time being, energy storage systems in Romania are in an early stage. However, energy storage continues to face some legislative barriers (lack of a comprehensive specific framework) and technological hurdles (lack of diversification or scalable efficiency of storage mechanisms).

On the other hand, some progress has recently been made, at least in terms of energy storage policies and regulations. The availability of significant public funds for the development of storage facilities is also contributing to create a sound development basis for achieving the decarbonization objectives declared at European and national level.

[1] The draft for the approval of GO 28/2014 is available here.
[2] The draft law is available here.
[3] ANRE portal is available here.
[4] Information on the technical norm are available here.
[5] Resolution is available here.
[6] Draft ROES is available here.
[7] PTG Development (2020 – 2029) is available here.
[8] NES Adequacy Study (2020-2025) is available here.
[9] Raportul is available here.
[10] Documents are available here.
[11] Emergency Ordinance no. 60/2022 regarding the establishment of the institutional and financial framework for the implementation and management of the funds allocated to Romania through the Modernization Fund, as well as for the amendment of some regulatory acts
[12] Information of funds allocation is available here.

Cosmin Stavaru, Partner BONDOC & ASOCIAȚII
Vasile Soltan, Associate BONDOC & ASOCIAȚII