Moldova’s energy system experiences a double shock
Moldova has experienced its second energy crisis in three years, driven by a significant double shock. Firstly, Russia cut off gas flows to the Transnistrian region of Moldova, resulting in a decrease in electricity production at the MGRES power plant, which led to a cessation of electricity sales to Moldova. Secondly, higher international market gas prices and a delayed procurement by Moldova resulted in energy tariffs for consumers.
While the government has made significant strides in energy resilience in the last years, the crisis again exposed deep vulnerabilities and reliance on international assistance. Nonetheless, the crisis provides a pathway for Moldova to further bolster its energy resilience for long-term stability and prosperity.
Russia cuts of gas flows to the Transnistrian region
The Transnistrian region (TN region) has annually received ca. 2 bcm of free natural gas from Russia, which has been key to fuelling its energy-intensive economy. Much of this gas is used by the MGRES power plant to generate cheap electricity for domestic use, and to sell electricity to Right Bank Moldova (RB MDA), bringing in revenue.
On 1 January 2025 Russia completely cut off gas flows to the TN region, plunging the region into darkness. All industrial objects were shuttered, with the remaining gas used for heating to prevent a full-blown humanitarian catastrophe. MGRES switched to operating on dwindling reserves of coal, leading to decreased production and a cessation of all electricity sales to RB MDA.
While RB MDA has impressively weaned itself off direct gas imports from Russia between 2022 and 2024, electricity bought from MGRES (which is generated from Russian gas) still accounted for 69% of RB MDA’s elec-tricity consumption in 2024. The cessation in flows therefore resulted in a rapid switch to more expensive imports significantly increasing electricity tariffs.
Higher energy prices and procurement delays
Despite the successful diversification of gas supply and independence gained from Russian gas, RB MDA’s gas sector did not optimally prepare for this heating season’s looming energy shortage.
Ideally, Energocom purchases gas for the upcoming heating season and sells it to Moldovagaz over the course of the year as gas reserves. These reserves exist for direct use, heat and electricity production. Through this temporal spread price volatilities can be hedged for.
However, in 2024, large purchase quantities started only in Aug-24, where prices were already 29% higher than in Apr-24. Only in Dec-24 Moldovagaz reached the necessary reserve quantities for the entire heating season by purchasing approx. 268 mcm of natural gas in one month at nearly 70% higher prices.
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The effects of the double shock
The cessation of electricity flows from MGRES, compounded with the higher procurement cost of gas reflected significantly on energy tariffs in RB MDA.
As the direct costs of gas increased, tariffs increased between 16%-23% based on consumers’ gas connection type, despite prior government statements that this would not happen. The two combined heat and power plants (CHPs) in Chisinau and Balti then in turn increased heat prices to account for the higher gas cost, resulting in increases of 38% and 17%, respectively. The higher CHP production costs also led to an increase in electricity prices and tariffs for final consumers.
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In the electricity sector, the supply shortfall due to the cessation of MGRES electricity was partially compensated by imports from a mix of Romanian electricity producers, including Nuclearelectrica, Hydroelectrica and D.Trading. Nonetheless, all domestic generation capacity and the allocated ENTSO-E commercial transfer limit of 315 MW (which includes the imports from Romania) still wasn’t enough to meet RB MDA’s peak demand. This resulted also in much more expensive emergency imports. The weighted average wholesale price of electricity increased from 90 EUR/MWh in 2024 to over 130 EUR/MWh in January 2025, with even higher tariff in-creases for final consumers.
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Preparedness for crisis demonstrates mixed results
RB MDA has made significant strides in improving its energy system resilience, although gaps remain. Moving away fully from importing Russian gas has led to less exposure and increased energy security. Sufficient volumes of gas were procured even in the run up to the current winter period. When MGRES stopped sending electricity to RB MDA, supply contracts were already in place substituting some electricity at favourable rates. Additionally, the increased ENTSO-E net transfer capac-ity (NTC) of 315 MW (and ability to have more capacity from Ukraine when available) ensured that the crisis was managed without any blackouts or disruptions.
Concurrently continued dependence on MGRES persists, with insufficient progress made on expanding domestic generation and transmission capacities since 2022. While the upcoming RES auctions are a very positive step, more flexible capacity and storage would help cushion the current disruption. The higher gas procurement costs could also potentially have been better hedged for, and the current Ukraine Moldova NTC capacity re-allocation does not provide full security.
MGRES and Ukrainian coal, an opportunity?
During a meeting in Kyiv in late January, President Zelenskyy of Ukraine and President Sandu of Moldova discussed sending Ukrainian coal to MGRES. This would enable increased power generation for the TN region, resumption of electricity supplies to RB Moldova and exports to Ukraine. Given Russia’s occupation of much of Ukraine’s coal-producing territories, Ukraine is currently only able to supply bituminous coal, while MGRES is built for anthracite coal. However, Ukraine has experi-ence with converting units to work on bituminous coal, including the same type as MGRES, and President Zelenskyy pledge support and technical assistance for the conversion.
Even when considering the conversion costs and timelines, as well as logistical costs, it is likely that generating electricity from bituminous coal would be significantly more economical than importing anthracite from international markets or using natural gas (neither of which require unit conversion). While this could there-fore decrease system costs in the short-to-mid-term, environmental and energy strategy factors must be con-sidered, due to much higher coal-based emissions.
Outlook
In early February, the EU announced an EUR 250 m package for Moldova, which also includes EUR 60 m to help the TN region with energy costs. Gas has also been sent through Moldova to the TN region to alleviate the energy crisis, leading to an overall stabilisation. The situation has however laid bare Moldova’s continued dependence on cheap electricity imports from MGRES. Another key dependency is reliance on international aid, further highlighted by the suspension of USAID funding.
The crisis however enables Moldova to continue improving its energy security, a process started in 2022. This involves finishing existing interconnection projects, building out domestic RES generation and constructing more flexible capacity. While this will require time and significant funding, it presents the right pathway for Moldova’s long-term energy security and prosperity.
This Newsletter is based on the Policy Briefing ”A double shock to right–bank Moldova’s energy system”
