Security of supply at the fore of SEE energy policies
The latest Russian-Ukrainian crisis and its serious repercussions for energy trade between Russia and the European Union (EU) amply demonstrates the importance of energy security. Although part of a bloc, EU member states are far from being aligned to a common energy policy which only recently has begun to take shape, mainly through the imposition of internal market policies and directives and common goals for CO2 emission reductions and maximization of the use of renewable energy sources (RES).
What is apparently lacking from present EU energy policies is a “security of supply” dimension at both national and bloc-wide level. Until now most countries in the EU had a well developed local supply basis - on the strength of their extensive coal reserves - which covered the vast majority of their needs for power generation and relied on oil imports - to varying degrees, to mainly cover transportation needs and in some cases power generation. Diversification of energy supply, although necessary and accepted by many countries as a top national priority, was for the most not an easily attainable objective.
Over the last ten to fifteen years everything has changed on the energy supply front as a result of EU internal market energy rules, the growing imports of natural gas - mainly used for power generation, the emphasis on RES use and the introduction of disincentives for coal and lignite use for power generation. At the same time, neither the EU nor indi- vidual states - with the exception of North Sea countries, have pursued strong and consistent policies for the development of indigenous hydrocarbon resources. As a result, oil and gas import dependency has risen to unacceptably high levels as is the case in Southeast Europe (SEE).
For some countries such as Bulgaria, Slovakia, Hungary and the Baltic states, the dependence on Russian gas imports is total. Greece is also highly dependent on Russian gas imports. Turkey, too, relies for almost 50% of its imports on Russian gas. For ex-Soviet bloc countries that dependence is legacy of history. For others, like Greece and Turkey, it is the result of failed policies and wrong decisions which have prevented them from developing a well-balanced and diversified energy resource base. On this backdrop, the need to introduce and match energy security across the whole of the EU to the current political realities emerges as a top priority in the current EU policy agenda.
Several key pan European projects will need to be implemented over the coming years in order to facilitate the flow of electricity and gas across national borders. These range from the expansion of the current electricity grid through the establishment of regional hubs and interconnections, the construction of major inter-regional gas pipelines and several country-to-country interconnectors and the introduction of new LNG terminals, both land-based and floating.
In the latest EU policy paper entitled “Commission Staff Working Document: In-depth study of European Energy Security”, there is no mention of the costs involved in improving energy security and the unavoidable impact on European competitiveness. Shale gas and tight oil is giving the U.S. a dramatic
competitive advantage, while Europe is losing market share and jobs in all the energy intensive industries. But as with the bloc's common agricultural policy, the fact that supplies could be imported more cheaply is not a key factor and therefore it is not even discussed. Of course, Europe could meet all its own electricity needs from renewables but the cost – as the Germans, the Greeks, the Bulgarians and the Italians are finding – is punishingly high. The message of the document which reflects current EU thinking and in fact was adopted by EU's June Summit Meeting, is that imports are bad, and should be reduced. Where they cannot be reduced, the sources of supply should be diversified. It seems that eurocrats assume that energy is solely a matter of public policy and consequently economics and the specific characteristics of certain countries are missing elements from that discussion (i.e. Greece's and Portugal's island environment). Also, there is nothing on science or the potential for technical change, which is regrettable, given Europe's strong, scientific base. The technology of energy supply and consumption is moving rapidly and it would be useful to see Europe doing more to match the efforts being made by the U.S. and China.
On the key issue of energy security on the one hand we have EU's almost academic approach to energy security and on the other we have the harsh daily reality that countries in SEE face, as they count oil and gas storage levels and try to match energy flows and needs through a delicate balancing act. To them, projects such as TAP-TANAP, planned liquefied natuural gas (LNG) terminals such as the Krk LNG Terminal in Croatia and Greece's FSRU units in northern Aegean, and local vital gas links like the Greece-Bulgarian interconnector (IGB), the Bulgaria-Serbia interconnector (IBS) and the Bulgaria–Romania interconnectors (IBR) acquire a special significance.
Indicative of the anxiety which currently prevails in SEE over energy supplies is the Greek government's request to the EU of August 21 to set up a backup plan to ensure LNG is available for Balkan countries in the event of potential disruptions to Russian gas supplies stemming from the crisis in Ukraine. In a letter sent to European energy commissioner Guenther Oettinger, Greek energy minister Yannis Maniatis proposed an EU emergency mechanism to ensure that surplus amounts of lower-priced LNG are reserved for EU member states with gas shortages instead of being sent to other destinations.
RES which is in abundance in SEE is another issue of contention. The wider use of RES in only one of the responses to energy security alarms, which, in fact, presupposes a solid commitment to a long-term strategy for their development and penetration into the energy mix. The most effective policy response aims at a diversification of energy inputs, with RES only one of them and albeit a small one at present.
Energy efficiency improvements through demand side management and technological innovation can cost-effectively mitigate the large-scale impact of energy supply disruption in the electricity and heat sectors, and to a limited degree in the transport sector too. A combination of demand side management and energy efficiency measures can reduce the dependence on fuels for the production of electricity, heat and transport fuel.
Expanding grids, establishing regional hubs and building inter-connectors and LNG terminals will enhance energy security.
As a general observation one could say that the increased participation of RES in the energy mix can play an important role in strengthening energy security at both country and regional level. However, a high RES percentage participation in the energy mix can be misleading because of the intermittent nature of RES. In that sense there is still considerable ground to be covered for increasing RES actual contribution in the energy mix of SEE countries. Large scale application of energy efficiency measures can also contribute greatly toward energy security by curtailing energy demand. However, their contribution is not easily quantifiable.
As far as the energy security implications of renewable energy technologies are con-
cerned one can point out that although RES are typically indigenous resources and can help reduce dependence on energy imports, they have certain constraints: RES are intermittent in nature and therefore cannot be relied upon to provide alternative power generation supply in case of emergencies; RES are widely, but unevenly, distributed and their use for electricity generation can minimize both transmission losses and costs only when they are located close to the demand load of end-users: so called “distributed” generation; relatively high capital costs per unit of capacity installed remain for many RES's – in spite of significant cost reductions as a result of advancements in technology and of the learning experience (this is offset to some extent by a zero fuel cost over the life of the system).
The extent to which RES can contribute in bolstering energy security depends on several facts such as the installed electricity capacity of RES and its relation to the overall power generation capacity of the country concerned. Secondly the grid development and its operational level which allows for maximum utilization of the electricity produced. Thirdly the availability of energy storage mechanisms (both dispersed and pumped storage).
Today we witness various levels and speeds of RES and energy efficiency development in the different countries of SEE both in terms of installations and participation in the energy balance. In fact there is considerable divergence between the various countries as it is shown in the data presented. The same applies for the state of the electricity grids of the various countries. Consequently, the role of RES in the integration of regional energy markets (i.e. electricity and gas) is marginal at this stage since the focus is, and will remain at least until 2020, on grid upgrading and their further expansion.
However, the anticipated addition of sizeable energy storage capacity in conjunction with further RES development is likely to propel RES in the front line of power generation and participation in the national energy mix of the SEE countries. The addition of energy storage is thus expected to correct and improve the intermittent nature of RES power generation, thus improving predictability of RES availability in the context of daily electricity market operation.
In addressing the present impasse on energy supplies in SEE it seems that the implementation of a wide variety of interconnectors and gas storage projects is the only sure way at present to increase effectively and relatively quickly the security of supply in the region.
The region's experience to date shows that the only reliable way to meet the challenges stemming from major geopolitical rifts not of the making of the countries in the region - such as the present Russian – Ukraine crisis, is for each country to pursue its own highly prioritised energy agenda in close coordination with its immediate neighbours with whom it shares energy interconnections. A common energy pool and a fully integrated and easily accessible electricity and gas flow system, which could serve the needs of various countries, whether this is electricity or gas, is still far from becoming a reality. We may have to face few more energy supply changes in order for such noble plans to become reality.