Electricity demand in Romania is expected to grow byless than 1% per year until 2025, unless the government takes aproactive approach to encourageconsumption, a study byglobal consultancy A.T. Kearney has indicated.

Under these conditions, small-scale energy solutions with locally integrated supply and demand, likesolar panels and biomass for self-consumption,are better fit than largeunitsto meet investor criteria and energy system needs due to higher flexibility and lower network costs andlosses, according to theRomania Strategic Energy Market Outlook 2014-2025 studyprepared byA.T. Kearney at the request ofRomanian investment fundFondul Proprietatea.

"To increase demand, successful economies are building the energy landscape on a competitive industry development master plan, but this is missing in Romania," the two companies said in a joint press release on Thursday.

Romania has sufficient capacity to meet expected demand by 2025, but operates at inefficient costs andthe electricity price is distorted by subsidies and inefficiencies of the electricity production sector.

The recent integration of Romania’s electricity market with that of Hungary, Czech Republic and Slovakia poses both challenges and opportunities.

"On the one hand, Romania will be challenged to phase out its inefficient units, generating sunk costs. On the other hand it can take the opportunity to reshape its generation park and evolve as a competitive net exporter,” Michael Weiss, Partner at A.T. Kearney, was quoted as saying in the statement.

Renewables are expected to be the most attractive sources from an investor perspective by 2025 if the current level of subsidies is maintained.

To meet 2025 investment needs, Romania'senergy regulator and the government should ensure a market framework focused on transparency, predictability, consistency and competitiveness, the statement added.

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