LocationsMoldova is the first country in the Central and Eastern Europe to adopt an Energy Sandbox, in search for its energy market niche
Moldova's Energy Sandbox: a safe environment for innovation and new solutions
March 5, 2025
Moldova, like many other countries in the Central and Eastern Europe region, has inherited a legacy energy market characterized by fossil fuel dependence and high energy intensity, misaligned financial incentives and centralized approach that limits flexibility and innovation. Additionally, outdated infrastructure, poor energy management, and limited investments in energy efficiency have positioned the energy sector as the leading contributor to greenhouse gas (GHG) emissions, accounting for about 70% of the country’s total.
Recently, Moldova has embraced a challenge and embarked on a journey to proactively explore a unique value proposition to define a niche — positioning itself as a hub for innovation — thus attracting companies and investors with an interest to develop high value-added products and services through investments in research and development (R&D).
With this in mind, in July 2024, Moldova has adopted the Law on regulatory sandboxes, with UNDP and Denmark support. An energy regulatory sandbox is a purposefully created ‘safe space’ where the private and public sector can learn and test new energy solutions – products and services – before they are developed and rolled out to scale through regulatory adjustments, launching a new product offer to customers or a combination of both. This triggers a virtuous cycle of wins for customers, companies and the public sector as it opens new markets and growth areas, while advancing energy sector transformation while ensuring that vulnerable groups are not left behind.
“The creation of the sandbox is a strong argument for the Investment Agency to engage with potential investors or companies that, in other countries or regions of the world, would not enjoy such a high level of openness. Moldova is not a very large country, so we need to build our competitiveness through something that makes us special,” underlines Natalia Bejan, Director of Investment Agency.
The Sandbox mechanism directly addresses systemic inefficiencies by fostering an environment where innovation and regulatory flexibility go hand in hand. By providing innovators the opportunity to test and refine solutions, the sandbox plays a crucial role in:
- Reducing pollution and energy waste through the development of cleaner, more efficient energy technologies.
- Aligning and creating financial incentives with sustainability goals by promoting cost-effective, market-driven investments in renewables.
- Enhancing energy governance by shifting from a rigid, centralized system to a more adaptive and decentralized energy model.
UNDP and Denmark via UNDP Funding Windows* that provide thematic flexible and pooled funds from Funding Windows partners for strategic initiatives, have supported the Ministry of Energy to draft this law, to develop the secondary legislation, adopted only recently, to bring this new mechanism to life. The sandbox is now open to researchers, as well as public and private institutions, to test new energy products, services, and business models in a real-world environment. Innovators and companies—both from Moldova and abroad—can benefit from regulatory exemptions for a fixed period of up to seven years, with the possibility of a justified extension for an additional five years.
”For the research sector I represent, this is a very important tool because when we develop an innovation, a technology, we can easily identify a potential company to help us further develop and test the idea in practice, specifically within this sandbox framework,” is confident Mihai Târșu, Director of the Institute of Energy, Technical University of Moldova.
The areas for experimentation include, but are not limited to:
- energy communities – collaborative models that enable households, businesses and authorities to produce, store, distribute and jointly use renewable energy.
- electromobility – infrastructure development for electric vehicles, smart charging solutions, and vehicle-to-grid integration to optimize energy consumption and support the transition to clean transportation.
- flexibility and balancing services – innovations that improve grid stability through demand response mechanism, battery storage solutions, real-time energy trading.
- integration of renewable energy sources, and biogas & biomethane production – converting agricultural waste into biogas, expansion of renewable energy capacities in solar, wind.
The Sandbox mechanism operates under strict ethical guidelines, ensuring that innovations align with environmental sustainability and consumer rights. All projects tested within the sandbox integrate a consumer-centric approach, prioritizing transparency, safety and reliability. Companies participating in the sandbox must demonstrate clear benefits for consumers, such as improved energy efficiency, cost reductions, or enhanced service reliability.
Sandboxes drive innovation in the EU and in Moldova
As Moldova continues to carry out the reforms, accelerate investments and enable fully functioning energy markets as part of its EU accession journey, it does so with keeping the global commitments under the Paris Climate agreement in mind. The Republic of Moldova aims to achieve a 30% share of renewable energy consumption in its electricity mix by 2030.
While energy regulatory sandboxes might be still a novelty introduced recently by the European Union, with around 50% of EU members states currently operating similar test zones, Denmark houses one of the most successful examples of use of energy sandboxes - Skive GreenLab.
Denmark’s experience in developing an innovation ecosystem offers valuable insights for Moldova’s sandbox mechanism. One of the most successful examples is Skive GreenLab, a green and circular industrial park located in Skive, Denmark, that advanced renewable energy integration, circular economy principles, and business-to-business (B2B) collaboration. This initiative demonstrates how public-private partnerships can accelerate the adoption of clean energy solutions, while at the same time generating economic value.
At Skive GreenLab, companies collaborate by sharing surplus energy and resources, optimizing efficiency and sustainability. Moldova’s sandbox mechanism can adopt a similar approach by fostering collaboration between local and international businesses, ensuring the transfer of knowledge, technology, and best practices to drive innovation in the energy sector.
Denmark’s success lies in creating an enabling environment through proactive collaboration between government institutions, industry leaders, and international partners. In Moldova, the sandbox benefits from a strong public-private partnership involving the Government of Moldova, Denmark, UNDP, and other stakeholders. This framework ensures that businesses receive support to innovate, while aligning with Moldova’s national climate and energy goals. At the same time, sustaining public-private collaboration and access to flexible financing will be essential to unlocking the full potential of an energy sandbox.
Energy Sandbox - a piece in the country’s toolbox for addressing persisting challenges
The adoption of the energy sandbox mechanism is a part of a broader intervention to modernize the country’s energy landscape and improving its energy security, and social and economic vulnerabilities. Energy affordability remains a major concern for Moldova households and businesses. While the implementation of short-term measures such as the Energy Vulnerability Reduction Fund (EVRF) provides immediate relief to households affected by rising energy costs, the sandbox enables to explore new ways to lower energy costs while improving efficiency. These might need some time to mature. Yet, with the right partnerships of private and public sector, Moldova continues to keep its eye on the long-term shift from dependence on subsidies toward a more resilient and market-driven energy sector.
UNDP and Denmark are committed to accompany Moldova in making the full use of the sandbox mechanism, including learning from the implementation of demonstrative projects within this innovative environment.
*The project has been supported by Luxembourg, the Republic of Korea and Sweden through the Funding Window on Governance, Peacebuilding, Crisis and Resilience.
