Ionut Purica: Technological strategies, risk analysis and paradigm shift
What advantages does Romania have within the European Union, what country risks exist? What major challenges face the business environment? What does the change of paradigm in energy mean? What are the prospects of integration to the eurozone? What stages has Romania gone through on the road map for streamlining the use of resources? These are only some of the questions we tried to find answers to together with energy and environment expert Ionut Purica.
Professor Ionut Purica PhD is researcher with the Romanian Academy, the Institute for Economic Prognosis and Managing Director of the Energy and Environmental Consultancy Centre. He had been adviser to the Minister of Economy and previously to the Minister of Environment and expert with the Romanian Parliament. He participated to the development of Romania’s strategy for the EU accession and of the energy strategy (electricity and heat) for the Ministry of Economy and Trade and conducted risk and structural transactions analysis and managed projects for the World Bank, USEA, JBIC, MARSH, ITOCHU, MVV, etc. He was in charge with the energy and infrastructure projects for the World Bank in Romania and in the Balkans, with specialization in projects’ guarantees, value at risk, acquisitions, in order to complete his expertise in engineering gained as director for international projects with RENEL and as chief engineer in the joint energy group Atomic Energy of Canada – IMG Bucharest, in charge with the quality of manufactured components for CANDU nuclear reactors groups in Romania.
He worked also as international researcher with ENEA Rome – the Italian Commission for New Energy and Environment Technologies – and as associate researcher with ICTP Trieste. He is the author of several books on energy issues published by the Imperial College Press, Academic Press, etc. and published articles in magazines such as Risk Analysis, IEEE Power Engineering Review, Foundations of control engineering, etc. He received his second PhD degree in Economics (the first doctoral degree was in energy engineering) and is Academy of Romanian Scientists (AOSR) member and professor of risk management for masters in science with the Polytechnic University of Bucharest and the Hyperion University. He is a member of the Energy Consultative Group with the EU Commission and member of the study group of energy scenarios for 2050 and 2060 with the World Energy Council.
Frequently, it is not necessary to use too many words about an internationally recognized personality. However, how did you start working in the energy field, Mr. Ionut Purica?
One does not choose through where he enters into this world. But when you become aware that you are in a family of personalities that have contributed to the development of the nuclear field in Romania, a moment of decision is reached in the sense of continuing the scientific activity in the energy field. I had such a moment and found out that I can bring a contribution that seems to be appreciated not only in the country but abroad as well. The research activity is like a virus of which not only one cannot escape but does not want to escape.
As graduate of the Faculty of Energy, which were the most important ‘energy substations’ throughout your career?
As I usually (half) joke: when I graduated nuclear energy engineering I had no nuclear power plant so, I went to build myself one at IMGB-FECNE (Heavy Machine Works of Bucharest – Nuclear equipment factory) that was starting, then, the manufacturing of equipment for the nuclear field. The youngsters looking for a career in energy must understand that in production (especially of nuclear grade components) one is actually making one or two more faculties beside the one for which he has a diploma. Do not avoid production if you want to understand how the economy works. Along with: the first quality assurance manual in the industry, neutron radiography for nuclear equipment weldings, starting the eddy current control activity and coordination of the quality engineering team in the manufacturing of CANDU fuel channel components, I had done a doctorate in energy engineering as well as presented various papers in international conferences. One of these papers has drawn the attention of the head (Nobel Prize) of the International Centre for Theoretical Physics in Trieste. I was proposed a contract of international researcher at ENEA Italy where I had done risk analysis for the Italian gas network and prepared Rio’92 conference with IPCC Italy. I was awarded a prize of the ISPESL institute in Rome for the risk analysis report. After returning to Romania I had coordinated the international projects of RENEL, following which I worked in the World Bank as project officer for energy and infrastructure projects (Rehabilitation of the energy system and rehab of the railroad system). One of the last activities done in the World Bank was the evaluation of the energy system in Kosovo and in Albania, in 1999, (immediately after the war in that area), also, more recently, I had participated in the team that has done the climate change strategy for Romania. Back in the country, I have developed Joint Implementation projects as per the Kyoto Protocol and acted as adviser to the minister of environment, associated expert to the Parliamentary commission for industry and adviser to the minister of economy. In parallel as a researcher in the Institute of Economic Forecasting of the Romanian Academy I have written books published by important international printing houses as well as papers in the energy, environment and nonlinear systems. Out of this activity resulted the second doctorate in economics, with an application to the dynamics of the energy market. The book based on this thesis was awarded the Prize of the Romanian Academy. Teaching courses (mostly to master studies) was a constant activity and I am a Professor. The activity in the energy field resulted in being selected by the EU Commission in its Advisory Group for Energy (AGE). I am also a member and co-author of the energy scenarios study group of the World Energy Council (WEC) in London that elaborates world energy developments scenarios. I am a corresponding member of the Academy of Romanian Scientists (AOSR) and was awarded the Prize of this academy for a book on the dynamics of financial crises where methods of the energy systems have been applied in a synergetic way.
You have a rich experience in terms of risk analysis for power systems. Looking at Romania as energy system and taking into account its status within the European Union, which would be the main advantages and country risks?
Romania is a special case in the EU for having its own energy resources (let’s not forget that we were the first country in the world to have reported in 1857 the production of 275 tons of oil – I have an American friend that is still envious they were not the first). The use of natural gas is also so old (beginning of the 20th century) that some names had become common substantives in the Romanian language (the best example is the word ‘aragaz’ cooking machine that comes from the gas cooking machine launched by the American Romanian Association for gas; the label was ARAgaz). Romania has a future as a potential energy hub and we need to have a clear understanding of what we want and how to get it. A joke that I use says that the end of the world is coming, all countries disappear only Romania remains – why? – because we are ten years behind. If you know what you want you are neither behind not advanced but on your evolution trajectory having the advantage of not repeating the mistakes of others. We have negotiating power and a resilient energy system the can resist gas supply discontinuities (like the one in 2009). We still have enterprises that can maintain and produce energy equipment of high quality and we have schools that can prepare the needed personnel for the system. Our energy companies are performant and the state aid should be well separated from the costs of security in the system according to the new EU strategies. Moreover, like CEZ, E.ON, ENGIE, etc. we have to think a corporate expansion policy in the EU and outside it. Having such a strategy puts us in a better negotiating position for our presence in the EU not only at the level of the energy system but also as a member country.
What major challenges is the business environment facing and what solutions do you see for the future?
In the WEC report for energy strategies are identified two scenarios: The first where the market advances, with new technologies, financing, etc. while the government supports the development by taking various risks; The second where the government gives a direction and the market follows into it. Obvious examples for the first scenario are the USA and for the second is China. Romania stays in a ‘no men’s land’ between these scenarios, we try to give directions for development without having an economic strategy; we let the market evolve without a coherent government support. In connection to resources we concentrate on royalties and neglect monitoring the number of jobs created in the field (a recent report on the shell gas for Romania done for CNR-CME (Romanian member committee of WEC) points at the fact that the most important gains for the budget are not the royalties but the taxes on wages from the newly created jobs). Our governmental policies are seldom mentioning the number of jobs estimated to be created from various actions. Maybe we should develop the modelling capacity for scenarios in the economy in order to analyse multiple options and to have the adaptive flexibility to the economic dynamics at least of the EU (I remember that in 2009 we were talking about converging to the advanced economies in the EU – in that moment they were in full crisis (called submergent by contrast to emergent)). Looking forward to converge to an economic crisis situation means that we do not know what we want – we need to better define our priorities.
At the latest SEE Upstream 2017 conference, you talked about the technological strategy and about the paradigm shift. According to Kurzweil’s Law, the speeding up of technological progress is made on an exponential curve. What is, exactly, the paradigm shift in the energy industry/oil and gas sector?
We are facing a strong penetration of new energy technologies for energy storage, small modular reactors, fuel cells, that use Hydrogen or methane, used also for transportation, Black Sea hydrates, smart grids of electrical energy and gas, distributed and local generation (already there are small boilers that have an electric energy generator included), integration of information and energy systems (not to forget that the energy system is the greatest machine made by men), decision and advanced protection algorithms (cybersecurity), etc. Commercially, the prices will continue to stay low for a while (the price of oil is used also as a deterrent for the countries that base their arms race on oil exports). The new energy technologies are also seen as a potential bridge to a world where hydrocarbons do not any longer represent the key element for development (the owners of Lithium reserves will become the Saudi Arabia of tomorrow). There are today technologies that once implemented on a large scale may lead to a world completely different from the one we live in now. As an example, imagine what would have happened if Edison was inventing the infrared goggles instead of the light bulb. We could see in the dark without the need for light – a great economy of energy and less emissions.
You participated in numerous studies and strategies in the energy field. For oil and gas, this is a weak point, meaning that any delay in drafting the legislation turns into blocking the investment projects and programmes. Recently, the royalties’ law, for example, was moved from the Ministry of Finance to the Ministry of Economy. What is the expert’s opinion on this subject?
We probably have a planning complex reminiscent from the ‘80-ties. Every time a strategy is done nobody follows its implementation afterwards. All big corporations have a well-developed planning function, the same goes for developed economies (obviously, it is not the central planning we were accustomed to). As long as the strategy is done without having the perception of its utility (other than reporting an activity) we will not have well defined priorities and will not be able to negotiate them accordingly. As I have said above the royalties have to be considered integrated with other elements of the exploitation activity such as the number of jobs. The scenarios analysis is precarious and the prioritizing criteria are frequently non-explicit. Generally, there is a lack of a medium and long term vision. The legislation is essential as a condition of stability and of risk control; the continuous change of laws such as the fiscal code, royalties, and others having an impact on the validity of economic projects is proof of a lack of vision correlated with a proper feedback from the economy that cannot manifest itself in months but needs years. At the level of the Parliament there should be a centre of competence for the analysis of the impact of laws provided with well-developed models able to compete with the ones used by the EU Commission for such analysis.
The Romanian Academy organized last month a scientific session about ‘Romania in the European Union’. The prospects are not very optimistic, our country should make strides in several directions, including in terms of increasing energy efficiency, in order to join the eurozone. What prospects are there?
In the last years, the EU Commission has diversified the approach to energy and climate change strategy. If the 2020 horizon was aiming at renewables, emissions and energy efficiency, recently interconnection of energy systems and research and innovation are added for 2030.
There are also a security strategy and a research and innovation one. As may be seen EU responds to the world dynamics related to resources and to new energy technologies and their implementation in the economy. There are several fluxes that sustain the economy among which money and energy are essential. Economic stability requires financial and energy systems’ stability. There is space in Romania for the implementation of energy efficiency increase measures but, there is a need for a support policy and for their effective implementation activity. Without defining coherent and adequate time duration programs it is unlikely to have a hope of success. An example is given by the fact that few banks are doing project finance. The risks are much smaller if buying T-bonds than if investing in complex projects. Moreover, an energy efficiency project say in central heating is paid back after a number of Winters hence several years.
The banking practice allows credits for several months or a year, less credits associated with the business cycles specific to the energy sector. Again, we need to know what we want and dimension the measures in energy in correlation with the whole economy to join the Euro-zone. For the moment, it is probably better to retain control of our currency till we have the assurance of the economy’s financial stability before the European Central Bank will make the monetary policy of Romania once inside the Euro-zone. It is though clear that a united Europe will eventually have only one currency in all its member countries. The present Brexit shows alternative scenarios may unfold but we will not discuss this here.
In the context of the envisaged changes in the European Union, the Romanian Academy has been invited to contribute to a common strategy to promote and support the national interests in the EU. What contribution can this forum bring to the established national targets?
It is refreshing that the Romanian Academy is called to contribute to such an initiative. Using the existing competences in the Academy’s system as well as AOSR and the specific domains academies as well as the various research centres in Romania should be done in a more coherent way to allow involving the researchers from various fields in the socio-economic life, at a deeper level. The research system under the Ministry of Research (newly founded in recognition of this sector’s importance), must be involved in the ‘life of the city’ with the purpose to provide the prospective vision that prepares the economy for the transformations coming in a not so far future.
The European Council’s Strategy Paper – Europe 2020, marks the energy resource efficiency as an important goal. What steps has Romania covered so far?
As previously said the EU finally starts to see the importance of development and penetration of new technologies (that the USA are doing for a long time). Energy efficiency brings significant benefits in the economy (energy suppliers may not fully agree since the consumption of energy decreases with a decrease in price due to higher competition). In the last years, the most visible were the building thermal insulation programs having an impact in the heating bill. There are implementations in the industry of energy efficiency measures but the uneasy finance of such projects is not helping their large-scale deployment. The EU money (ESIF) are not transferred with fluid financing. The idea that one has to spend its own money first and be refinanced after several months creates a repulsion in the economy for such finance. Poland is a good example in the good sense of attracting funds by making financing schemes aimed at spending the money. Unfortunately, the fear of illegal use of the ESIF funds in our country is producing an effect of ‘throwing the child together with the water’ i.e. no projects done because we fear potential fraud. I hope we will come out of this blocking mentality we have now and control the use of the EU funds while they are invested with good results. Potential fraud may be treated as the exception not as the general rule.
Your agenda includes as priorities in the coming period… Which are the concerns regarding Romania and to what extent do you channel your energy towards international projects?
Presently I continue my participation in the EU-AGE and in the WEC energy scenarios study group. In parallel I support the development of the ALFRED (Advanced Lead Fast Breeder European Demonstrator) nuclear reactor, bringing to the existing team some compentence in nuclear and financial structuring. I have a book under publication at AGIR and am preparing papers on risk analysis and nuclear security for national and international conferences to which I will participate this year. As a university professor I am coordinating the dissertation of some master students and improve the support of the courses that I teach.
