Romanian Economic Monitor: High energy prices expose Romania's and the EU's vulnerability

  Romania's recent energy price surge has exposed one of the country's and Europe's main economic vulnerabilities: dependence on fossil-fuel imports, researches from the Romanian Economic Monitor (RoEM) - a project of the Faculty of Economic Sciences and Business Administration (FSEGA) of the Babes-Bolyai University (UBB) in Cluj-Napoca say.They note that Romania's average electricity price has tripled compared with the pre-pandemic period, driven by energy shocks and geopolitical instability. At the same time, falling renewable-technology costs make green-energy investments more attractive, turning the energy transition into an opportunity to strengthen security and competitiveness.Balazs Marko of RoEM-UBB FSEGA explains that the sharp rise in energy prices, which reduced consumption, was caused by several factors: the strong post-pandemic demand rebound, Russia's reduced gas exports after the war in Ukraine, and instability in the Middle East - which intensified after 2023. These developments affected both households and companies. Price-cap schemes also pressured the state budget through supplier compensations, contributing to the widening fiscal deficit. If geopolitical fragmentation deepens, energy-market volatility may remain high in the coming years, Balazs Marko warns.The expert points out that electricity-price volatility increased significantly in Romania and other European markets: Romania's average electricity price tripled, rising from 45 euro/MWh (2019 - 2020) to 136 euro/MWh (2021 - 2025). Over the same period, Brent crude oil rose from 53 dollars to 80 dollars per barrel.In 2025, Romania imported about five billion euro more energy than it exported, while the EU's total energy imports exceeded exports by around 300 billion euro, roughly 1 - 2% of GDP in both cases.Marko warns that dependence on external sources is a deeper vulnerability than these values suggest: if external supply disappears or drops, replacing it domestically in the short term is extremely difficult. Romania remains exposed to shocks beyond its control - such as a potential conflict between the USA and Iran - and to the risk that energy dependence becomes a geopolitical pressure tool, as happened when Russia halted gas exports to EU states after the invasion of Ukraine.RoEM experts believe the likelihood of continued or repeated international crises is high, but obviously the major powers are less vulnerable to energy shocks than EU states. Russia is a major global energy exporter, while the USA has become a net energy exporter due to the shale revolution.China remains a major energy importer but has large coal reserves and rapidly expanding renewable capacity, reducing long-term import dependence. Its relations with Russia and Iran also secure access to needed resources.Thus, major powers are less exposed to direct economic effects of conflicts than import-dependent economies. Kiel Institute researchers estimate that a conflict in Iran would have limited effects on the US economy, while import-dependent economies - including European ones - would feel stronger increases in energy and agricultural prices. A potential resumption of Russian oil and gas imports would again place Europe in a position of strong dependence.Just as after 2022, reducing Russian energy imports cuts Russia's export revenues but has negative effects on high-consumption European economies. A 2022 study estimated that halting Russian energy imports would reduce Germany's GDP by 0.5 - 3%. Germany avoided recession and grew in 2022, but its industrial competitiveness was hit by high and volatile energy prices. These developments also affect Romania, given its strong ties to euro-area industries, especially Germany's.RoEM-UBB FSEGA experts argue that energy autonomy can help reduce dependence and price volatility. Maintaining competitiveness and supporting growth in Romania and the EU requires lowering energy costs. Accelerating the shift to renewables can address both challenges.According to the report, photovoltaic module costs fell by about 90%, from 2.44 dollars/Watt (2010) to 0.26 dollars/Watt (2024). Onshore and offshore wind costs dropped by about 50% between 2010 and 2023, a situation reflected in the levelized cost of electricity (LCOE): solar and wind have become more competitive than gas or coal.Romania's 2025 contract-for-difference auction prices are as follows: solar - 35.77 - 45.2 euro/MWh; wind - 65.12-79.5 euro/MWh. These values match the lower end of European LCOE estimates. By comparison, Germany's estimated levelized cost of electricity (LCOE) ranges for 2024 were 109 - 181 euro/MWh for gas-fired generation, and 151 - 293 euro/MWh for coal-fired generation.Eurostat data show that in 2024, about 20% of Romania's primary energy (including oil) came from renewables, up from 4% in 1990.Marko notes that Romania produces gas and oil, but domestic output does not cover consumption. The country is nearly self-sufficient in natural gas but remains a significant net importer of oil. Nuclear energy also supports autonomy: Cernavoda's first unit (completed in 1996) was providing 9% of primary energy in 2024. New nuclear capacity requires high investment and generally has higher LCOE than solar or wind, but offers stable, low-emission production independent of weather.As far as infrastructure and storage are concerned, Romania has advanced through programmes like Casa Verde Fotovoltaice, but accelerating the transition requires simpler permitting for new solar and wind capacity. Expanding energy networks is essential and demands major infrastructure investment. Stronger electricity networks can reduce energy prices and stimulate private renewable investment. Studies show that integrating solar networks in high-activity regions can lower electricity costs and encourage private investment.Lithium-battery prices fell by about 85% between 2010 and 2024, enabling energy-storage solutions and reducing challenges linked to intermittent renewables. Falling battery costs also lowered prices of Chinese-made electric vehicles, making them more competitive with internal-combustion cars. Expanding charging infrastructure can support EV adoption in Romania and reduce oil-import dependence. Storage helps manage short-term intermittency but cannot replace investment in networks and interconnectors.Referring to geopolitical dependencies in renewables, the experts note that solar-panel production is concentrated in China, and many raw materials - including rare earths - are extracted and processed there. A conflict limiting imports would expose Europe's vulnerabilities. Europe could reduce them by developing its own industry and finding alternative suppliers, but this requires time due to limited current production capacity, especially in refining and processing.Thus, the RoEM-UBB FSEGA experts say, renewable transition also involves geopolitical dependencies. Solar and wind components still require fossil fuels for manufacturing, but renewables do not need continuous fuel input and are less vulnerable to external shocks. Developing recycling capacity for batteries and solar components can reduce raw-material needs and strengthen the domestic economy.In conclusion, RoEM-UBB FSEGA specialists argue that the energy transition can reduce Romania's and Europe's energy dependence. Supported by investment in networks, storage, efficiency, demand flexibility, regional interconnectors and diversified supply chains, it can lower exposure to external shocks and reduce production costs and price volatility on wholesale markets.However, as coordinator of the RoEM-UBB FSEGA team Levente Szasz notes, the transition does not eliminate all external dependencies nor does it guarantee lower final prices for all consumers. Its impact depends on market structure, infrastructure investment and how costs are distributed among households, energy companies and the state.