The energy policy agenda of the Republic of Moldova (Moldova) is driven by several interrelated factors. The first key driver is high dependence on imports from limited sources and subsequent energy security considerations. Moldova’s energy self-sufficiency is among the lowest in the world: only around 25% of its energy demand is covered by domestic production, consisting almost entirely of solid biomass and variable renewable energy sources. Moldova imports 100% of its gas and coal consumption, nearly all of its oil consumption and around 80% of its electricity (including electricity procured from the Moldavskaya GRES [power station] situated in Transnistria).1

Second, Moldova has obligations stemming from its aspirations for European integration. In 2010, the country became a member of the Energy Community and in 2014, it signed an Association Agreement with the European Union, which implies a commitment to transpose the core EU acquis communautaire2 into national legislation. One of Moldova’s long-term objectives is to gain access to the network of the European association for the cooperation of transmission system operators for electricity (ENTSO-E) by interconnecting its national electricity network with that of Romania.

Third, the country’s energy policy integrates Moldova’s international and internal commitments in the areas of climate change mitigation and environmental protection.

Since the last IEA review of Moldova’s energy policies (IEA, 2015), the country has made significant progress towards meeting the three key objectives of the Energy Strategy of the Republic of Moldova to 2030: 1) ensuring the security of energy supply; 2) developing competitive markets and their regional and European integration; and 3) ensuring sustainability of the energy sector and climate change mitigation.

Commendable efforts have been made towards the diversification of supply sources and increasing the security of both electricity and gas supply. Notable actions were taken, in particular, to avoid the potential gas crisis resulting from the interruption of Russian gas supply through the Ukrainian gas network at the end of 2019. By interconnecting with Romania through the Ungheni-Chisinau pipeline, Moldova has created the possibility of alternative gas supply from Romania. The modification of the gas network to allow the reverse flows from the Trans-Balkan system, actual testing of deliveries to Ukraine and the use of its gas storage capacities have created additional possibilities of supply diversification and access to the EU markets, including potential access to liquefied natural gas (LNG) supplies through Greece. Moldova has adopted the full set of security of supply rules, even beyond the current Energy Community acquis.

The Moldovan government is also to be praised for the efforts focused on market reforms and aligning the national legal framework for energy with that of the EU. Moldova has successfully adopted several legislative acts, which transpose the EU’s Third Energy Package3 at the level of primary legislation; related secondary legislation is also being developed and partially adopted. Moldova is also on the right path to developing a sound institutional structure in the energy sector, informed by better statistical data. The National Bureau of Statistics (NBS) is commended for its efforts to improve energy data collection and reporting. Efforts have also been made to adjust national legislation in the field of renewable energy and energy efficiency and to enhance regional cooperation.

Over several years, Moldova has successfully removed cross subsidisation of electricity and gas tariffs for households, though this has been politically difficult. It has also introduced targeted support schemes for the most vulnerable consumers. The National Agency for Energy Regulation (ANRE) and the government should be praised for this major achievement. It is also encouraging that ANRE has approved market rules for the procurement of electricity on forward, day-ahead, intra-day, balancing and ancillary service markets, as well as gas market rules and network codes. Considerable progress in attracting investment to modernise the country’s district heating systems is also to be noted.

After signing the Paris Agreement on climate change in 2016, Moldova was among the first countries in the EU4Energy region to develop and approve its Low Emissions Development Strategy (LEDS) in December 2016 and the National System of Monitoring and Reporting of Greenhouse Gas Emissions in 2018. The country is to be commended for its decision to set more ambitious targets in its updated nationally determined contribution (NDC2), which was submitted in February 2020. The new economy-wide unconditional target is to reduce GHG emissions by 70% below the 1990 level by 2030, instead of 64-67% as committed in the NDC1. The updated NDC raises the conditional target to 88% (compared to 78% committed in the NDC1). The government plans to update the current LEDS in order to implement the targets stated in the new NDC. Moldova is also one of the first countries in the EU4Energy region4 that has pledged (by a Government decree adopted in December 2019) to develop, by 2022, a new mid-century Low Emissions Development Strategy, outlining the policies for accelerating GHG reductions by 2050.

Despite all of these notable achievements, the Moldovan energy sector still faces major challenges which need to be addressed in a timely manner in order to improve energy security, accelerate the transition towards a more sustainable, clean and efficient energy system and support the development of free and competitive energy markets.

Moldova will derive numerous benefits from the development of free, liberalised, competitive markets for electricity, gas and oil products: these markets would stimulate investments in generation facilities and infrastructure, provide comfort to investors, suppliers, traders and consumers, contribute to overall increased energy security and decrease upward pressure on energy prices in the long run. To create such markets, the government and the ANRE should accelerate the pace of implementing the legal and regulatory provisions in line with the Third Energy Package.

It is necessary to finalise the unbundling and development of independent market operators in the electricity and gas sectors, implement transparent and fair market rules, and minimise state interference in trading. As regards electricity, providing access to neighbouring and regional markets, regional traders and suppliers will stimulate liquidity on the Moldovan market. It will be necessary to develop spot markets in order to allow market coupling with the Romanian and Ukrainian Day-Ahead/Intra-day Markets. Development of balancing markets will create a favourable environment for the optimal technical and economical operation of the energy system.

Regarding the gas sector reforms, Moldova has adopted several regulations, including the network code and market rules, as a step towards the establishment of a competitive gas market. Unbundling of network and trading activities has been implemented at the distribution level, where 12 regional Distribution System Operators (DSOs) were separated from supply activities. Unbundling at the transmission level is underway. Moldovagaz – currently a vertically integrated company controlling almost the entire chain of gas business (import, transit, transmission, wholesale supply, distribution and retail supply) – is expected to be unbundled through the Independent Transmission Operator  (ITO) model.

The retail market was declared open as of the adoption of the Gas Law in 2016. Most customers had been supplied by Moldovagaz under the Public Service Obligation (PSO), but trading at non-regulated prices started in 2020 and the number of independent suppliers grew from 17 to 24.

Moldovagaz has accumulated a large debt to Russia’s state-owned energy corporation, Gazprom, for the gas provided to Transnistria5 (reportedly USD 7 billion as of the end of 2019). Although the debt does not accrue to the Moldovan government or the right bank consumers, the unsustainable business model harms Moldovagaz’ credibility as a trusted, financially healthy player, especially in view of its role as a major importer, Public Service Supplier and Supplier of Last Resort. To ensure the sustainable operation of Moldovagaz and to secure uninterrupted gas supplies in the future, a solution should be found to resolve the issue of debt accumulation and to establish the gas trade according to commercial principles.

The removal of cross subsidisation of electricity and gas tariffs for households and the introduction of targeted support schemes for the most vulnerable consumers are very positive steps. There is room for further improvements and potential for innovative approaches to the distribution of benefits within the energy taxation system and for phasing out tax distortions. Also, the Public Service Obligation regime applicable to all residential gas consumers is hardly compatible with the establishment of a competitive market and needs to be gradually reduced and refocused on vulnerable customers only.

As the energy sector is the key emitter of GHGs and of air pollutants, energy policies should be closely coordinated with both climate change and environmental policies. A working group has been established by the MIRD and the Ministry of Environment (ME) to prepare jointly the National Energy and Climate Change Action Plan. Coordination and information exchange between these two ministries should be further enhanced: for example, the energy demand and supply modelling prepared by the MIRD is helpful for the ME’s work on climate change projections, while the forecasts related to impacts of climate change on the Moldovan economy should inform the energy sector development strategies.

The government has created a multi-stakeholder Climate Change Coordination Mechanism to foster dialogue, coordination, collaboration and coherence among sectors. The National Climate Change Commission (NCCC) has been established to ensure cross-sectoral coordination of all climate-related components: adaptation, GHG emissions and mitigation. This is a very positive initiative. Since this Commission – as a formal body with a permanent secretariat and Technical Committees on specific thematic areas – has been established at a high decision-making level, it is ensured to get sufficient policy attention. The Commission was built upon the lessons learned from the operations of the previously established inter-ministerial bodies, such as the Committee on Sustainable Development and the Committee on Green Economy.

Following the adoption of the EU’s “Clean Energy for all Europeans” package and the amendments in the relevant directives, Moldova needs to further adjust its legislation to the more ambitious EU framework. This includes preparing an integrated 10-year National Energy and Climate Plan (NECP) outlining how the country intends to meet the energy efficiency, renewable energy and other targets for 2030.

As regards energy efficiency (EE) and renewable energy (RE), Moldova has made commendable progress in adopting a legal and regulatory framework aligned with the relevant EU directives, in compliance with the country’s commitments as an Energy Community Party. One praiseworthy example is the nearly complete transposing into national legislation of the EU acquis on eco-design and labelling of energy-related products. Moldova still needs to adopt several necessary by-laws to fully transpose the EU acquis related to energy efficiency and renewable energy. Most of the missing regulations have already been developed (with the support of the Energy Community Secretariat and other development partners), and the key challenge for the Government of Moldova will be their full implementation and enforcement. It is also important to establish national legally binding energy efficiency and renewable energy targets beyond 2020, which are absent in national legislation as of early 2021. Establishing legally binding targets for a relatively long period of time would give clear signals to market players.

Despite numerous strategies, action plans, programmes and an extensive body of legislation, progress in improving energy efficiency has been limited. Moldova needs to make additional efforts to ensure the effective implementation of energy efficiency strategies, policies and programmes. This can be done through better enforcement of legal and regulatory requirements, enhanced public awareness of energy efficiency benefits and related possible improvements, facilitated access to financing, support for developing an energy service companies (ESCO) market, and further legal and regulatory improvements particularly to facilitate decision-making and enable energy efficiency improvements in condominiums. The government should also consider how it can amend residential energy price subsidies and create additional incentives to provide proper price signals for energy efficiency improvement while avoiding exacerbating inequality and energy poverty.

According to the official methodology (Directive 2009/28/EC), renewable energy accounted for 25.1% of final energy consumption in 2020 compared to the binding 2020 target of a 17% share. However, this is mainly due to the traditional use of biomass for heating, which used to be underestimated until the revision of the data for the period 2010-2016. Moldova has successfully promoted the use of biomass in the heating sector over the last decade with the support of development partners. However, the available biomass – especially wood – is limited and the use of the different sources should be coordinated to be deployed in an efficient and sustainable manner. Adopting a comprehensive approach which would develop a clear strategy on biomass deployment based on a thorough study is therefore recommended. This study would investigate (among other things) best use of agricultural and municipal waste, wood and the option of an increased use of energy crops. The soil degradation resulting from the lack of soil regeneration and from potential depletion should be considered when implementing the strategy on the use of biomass residues. It is important to strive for a sustainable and balanced biomass deployment, thinking about all possible side effects.

According to the Law on the Promotion of the Use of Energy from Renewable Sources, which entered into force in 2018, RE-electricity can be supported by three legal instruments: net metering and feed-in tariffs (FITs) for smaller-scale installations, and auctions for larger plants. The net metering and FiT schemes have already been implemented resulting in growing electricity generation from renewable energy sources (RES). The government is now encouraged to finalise auction implementation details, and conduct initial RES auctions in accordance with best international practices.

The 10% mandatory target for RE in the transport sector is far from being met, as almost no action has taken place in this area. The government is encouraged to develop as soon as possible a clear strategy for the transport sector, supported by legal and regulatory instruments.

Implementation of Moldova’s energy policy objectives will require deployment of new energy technologies. Moldova’s research, development and demonstration (RD&D) system – with the presence of a strong scientific tradition, a network of industrial research institutes including the Academy of Sciences – provides an opportunity for the country to secure a certain share of the technology value chain, rather than import all of the necessary equipment and technological components. It is encouraging that energy efficiency and renewable energy were identified as one of Moldova’s priorities in the EU Smart Specialisation Platform. However, the reduced state funding of research and development over the last several years is of concern. To enhance the relevance of energy technology R&D to the energy policy priorities, it is important to maintain adequate funding and to improve the cooperation of research institutions and scientists with public authorities. This can be done, for example, by establishing a joint scientific and technical council for setting up specific tasks on energy RD&D with subsequent project financing of the necessary developments.

The vulnerabilities of the energy sector to climate change, as well as related challenges and opportunities are recognised in the Moldovan official documents submitted to the UNFCCC. It is encouraging that the government is planning to update the Climate Change Adaptation Strategy that was approved in 2014. Further efforts could be made to ensure that the energy policy integrates the possible impacts of climate change on the development of energy supply and demand trends, such as increased summer demand due to air conditioning, possible decrease of biomass use and increase in solar and wind energy.

The government has also made substantial reforms in the area of environmental protection, which can influence energy sector operations. Following the adoption in 2014 of the Environmental Strategy for the years 2014-2023, institutional reforms have been implemented and several new laws and regulations have been enacted related to Environmental Impact Assessments and air quality, among other areas. More efforts could be given to the integration of environmental policies into sectoral policies, such as energy and transport.

The Government of Moldova should:

Enhance the institutional capacity and the staffing of the state bodies responsible for energy policy development and implementation and improve coordination and cooperation between them.

Further improve energy security through regional cooperation, regional market integration, diversification of routes/sources of supply in gas and electricity sectors and continue providing suitable conditions for developing local energy infrastructure and increasing energy efficiency.

In updating energy strategy and setting up specific targets, enhance institutional capacity in energy data collection, modelling and forecasting, resource assessment, and system integration of renewable energy to allow informed decision-making.

Continue the efforts – in cooperation with the energy regulator – to develop free, liberalised, competitive energy markets:

• Accelerate the implementation of the legislation and regulations to transpose the provisions of the Third Energy Package.
• Ensure transparent and fair market rules and minimise state interference in the market operations.

Strengthen the independence, transparency and accountability of the Regulator (ANRE) to make sure it can adopt regulatory practices and methodologies that enable the much-needed private sector investments in the energy sector infrastructure without putting additional pressure on the state budget.

Make sure that vulnerable energy customers are protected by efficient targeted social protection measures.

Enhance the relationship between the energy policies and climate change, environmental and RD&D policies, and strengthen cooperation between the public and private stakeholders, civil society and academia, including through effective permanent working groups and policy dialogue.

Reinforce the public-private dialogue on energy policy matters and develop a communication strategy for sector stakeholders and population on energy strategy and challenges for/ benefits of the ongoing reforms.

Further develop national energy statistics to improve the data quality and to inform policy decisions:

• Ensure that the development of the unified electronic data reporting portal objectively reduces the burden on respondents, respects the confidentiality of the data and allows for amending the forms based on current needs. Transferring the responsibility of the active portal to the National Bureau of Statistics (NBS) would allow for independent amendments and compliance with the principle of confidentiality.
• Liaise with the EEA and NBS to ensure that appropriate data are available for energy planning and for the development of energy efficiency indicators (e.g. gross value added by manufacturing subsector, building stock and transport activity data).

Eurostat (2020), Shares (Renewables), https://ec.europa.eu/eurostat/web/energy/data/shares (accessed 30 May 2022)

IEA (2015), Energy Policies Beyond IEA Countries: Caspian and Black Sea Regions, International Energy Agency, Paris, https://www.iea.org/reports/energy-policies-beyond-iea-countries-eastern-europe-caucasus-and-central-asia-2015

RoM (Republic of Moldova) (2021), Official website of the Republic of Moldova, https://moldova.md/en (accessed14 May 2021).