Romania pioneers energy market flexibility with new consumption reduction mechanism

Romania has become the first country in the European Union to adopt a mechanism that allows energy market participants to be compensated for reducing their consumption. This innovative approach aims to stabilize energy prices during high demand periods and when production capacities are limited.

George-Sergiu Niculescu, the president of ANRE, has been at the forefront of this initiative, which has been in preparation for some time. The establishment of this mechanism involved extensive discussions with representatives from the European Commission and other regulatory authorities across the EU.

With this new system, participants in the energy market can adjust their positions by lowering their electricity demand during specific time slots. This reduction not only helps balance the grid but also leads to lower electricity prices for all ongoing offers during those hours.

The regulatory framework is designed to accommodate offers for residential customers, although it necessitates the installation of smart meters. In response to this development, two energy providers have publicly launched offers aimed at residential consumers who wish to shift their consumption for better pricing.

To facilitate the broader adoption of this mechanism, ANRE is in discussions with distribution operators to expedite the installation of smart meters. Meanwhile, the Ministry of Energy is allocating resources from the Modernization Fund to finance the necessary consumption monitoring equipment.

The new flexibility mechanism will be particularly useful during periods of high demand and limited production capacity. However, it will not be immediately operational following the adoption of the regulatory framework; Transelectrica will need to establish the procedures for conducting the required auctions.

The compensation rate for those who reduce their consumption will not be directly set by ANRE but will instead emerge from the auctions organized by Transelectrica. They will propose the quantities of energy to be reduced, and market participants must justify the costs associated with these reductions. Selection of participants will occur based on an ascending price model for the reduced energy quantities.