Reporting results of participation of Cepconsult s.r.o. in the Central European Energy Conference 2019 in Bratislava, Slovakia on November 18-19, 2019.
Over the next 3-5 years, the key efforts of the regulators of the European energy market will be directed to the development and modernization of infrastructure of the electricity market, which is prioritized among other types of energy (mechanical, chemical, thermal, nuclear).
The representatives of European governmental and commercial entities believe that the EU has taken into account the negative experience of the gas crises of 2009 and 2014 and, in case the supply of Russian gas through the Ukrainian gas transportation system ceases after January 1, 2020, the EU is prepared for a “painless” passage of the winter season with further reorientation of gas transit projects by means of bypassing the territory of Ukraine.
Thus, the representative of the Polish side, Slawomir Sieradzki, director of the gas market development unit of the state-owned company GAS-SYSTEM S.A. believes that, to date, “the date of January 1, 2020 is no longer important for Poland, and Poland is looking forward to 2022, when the contract with Gazprom expires and will not be renewed.”
Polish state-owned company GAS-SYSTEM S.A., founded in 2004 as a subsidiary of PGNiG (Polish Petroleum and Gas Mining Co.), is the operator of all Polish gas transmission networks, except the Yamal-Europe gas pipeline, owned by EuRoPol Gaz S.A. (48% of which is owned by Gazprom). The company is also responsible for the construction of the LNG terminal in Świnoujście and the Baltic Pipe gas pipeline between Poland and Denmark.
Tomas Jungwirth, an associate at the Association for International Affairs in Prague, believes that “there is no need to sign a new contract between Gazprom and Naftogaz”.
Rastislav Nukovic, CEO of the national gas transport company Eustream a.s. (51% of which is owned by the Slovak Ministry of Energy) believes that “Russia, Ukraine and the EU can agree, but with the approaching launch of Nord Stream 2” the “window of opportunity “disappears”.
To date, Russian gas in the EU is considered to be an important natural gas resource that, in line with European approaches, will remain one of the main energy sources for electricity generation and a means of balancing volatile renewable energy sources (RES) in the medium term, the share of which according to the Energy Union documents should reach 32% by 2030.
The Energy Union Strategy Paper, published in February 2015, is a European Commission’s priority program for reforming the European energy sector, aimed at creating an efficient, integrated, innovative and decarbonized EU energy market.
The objectives of the program are, first and foremost, to reduce CO2 emissions by 43% within the ETS sector and by 30% outside the ETS sector as compared to 2005 (ETS – Emissions Trading System, an emissions trading system introduced in the EU in 2005, which includes energy and heating, energy-intensive sectors of the economy and provides for significant fines for excess emission allowances purchased), achieving 32% of RES and 32.5% of EU energy efficiency by 2030 (currently estimated at 20%) and the carbon neutrality of the European economy by 2050. M. Shevchovich considers such a reform “the most profound modernization since the Second Industrial Revolution”.
The main directions to achieve the goals of the Energy Union are:
1) Implementing the 10-year National Energy and Climate Plan (NECP), first of all concerning the modernization of the economy and industry, the final versions of which EU Member States have to agree on with the European Commission by the end of 2019 (for the period of 2021-2030);
2) Ensuring reliable and secure supply of all types of energy through the development of energy infrastructure, especially gas interconnectors, underground natural gas storage facilities, LNG terminals, and power grids;
3) Decarbonisation of transport.
According to Miroslav Jarabek, the Director of the Energy and Natural Resources Department of the Ministry of Economy of the Slovak Republic, the National Energy and Climate Action Plan (NECP) envisages a 50% reduction in CO2 emissions by 2030 within the ETS sector and by 20% outside the ETS sector (as compared to 2005), achieving 19.2% of RES and 30.3% of energy efficiency in the energy sector.
At the same time, the following indicators are expected by 2020: the share of RES in the country’s energy balance at 14%, energy efficiency in the energy sector – up to 20%, CO2 emissions outside the ETS sector may increase by 13% (as compared to 2005).
At present, the energy balance of Slovakia includes: 24.4% of natural gas, 22.8% of oil, 22.2% of nuclear energy, 19.9% of coal, 10.7% of RES. The share of NPP generation in the production of electricity is 55%, the share of RES is 23%, the share of fossil fuels is 22%.
By 2030, the Slovak government forecasts the largest investments in RES, being up to 47.4% (thermal energy amounting to 14.3% and nuclear energy amounting to 38.3%), which can increase RES productivity by up to 35.2% (thermal energy up to 26.2% and nuclear energy up to 38.6%).
The problematic issue of achieving the goals set by the government is the transformation of the country’s coal mining region – Nitra. Regardless of the government decision and action plan adopted in June 2019 and in December 2018 respectively, the subsidy system for local coal producers can only start operating in 2022.
According to Waldemar Lagoda, Deputy Director, Electricity and Heat Department, Ministry of Energy of Poland, it became known that the Polish NECP, in line with Poland’s energy strategy until 2040, anticipates a 7% reduction in CO2 emissions by 2030 outside the ETS sector (as compared to 2005), achieving 21% of the share of RES in the energy balance of the country and 23% of the share of energy efficiency in the energy sector, saving up to 60% of electricity using coal in the total electricity production.
At the same time, as of November 2019, the Polish government estimates the minimum investment needs for the period from 2016 to 2040 needed to achieve the abovementioned goals, amounting to EUR 451.682 billion (of which EUR 91.101 billion are for the needs of electricity) calculated based on:
EUR100.251 billion during 2021-2025 (EUR 11.706 billion in electricity);
EUR 95.528 billion during 2026-2030 (EUR 12.229 billion in electricity);
EUR 86.561 billion during 2031-2035 (EUR 23.879 billion in electricity);
EUR 74.369 billion during 2036-2040 (EUR 22.880 billion in electricity).
According to Otto Toldi, Energy and Climate Policy Analyst of the Ministry of Innovation and Technology of Hungary, the Hungarian NECP, in line with the Hungarian national energy strategy, anticipates a 7% reduction in CO2 emissions by 2030 outside the ETS sector by 2005), achieving 21% of the share of RES in the energy balance of the country and 27% of the share of energy efficiency in the energy sector.
The strategy proposes to reduce natural gas consumption from the current 10 billion cubic meters to 8.7 billion cubic meters in 2030 and 6.3 billion cubic meters in 2040, with a corresponding reduction in natural gas imports to 70% in 2030, and decrease in dependence on Russian gas supplies (which is currently estimated at 60%).
As of November 2019, the Hungarian government estimates the minimum investment needs required to achieve the above goals for the period up to 2030 at EUR 103 billion (of which EUR 56 billion is allocated for the energy sector needs). With up to 3% of Hungary’s annual GDP targeting the modernization of the economy and industry, the country can reach climate neutrality by 2050.
At the same time, a problematic issue in the relationship between the European Commission and the Hungarian government, in the context of the EU common energy policy, is the definition of the role of nuclear energy, which the Hungarian side considers as a “clean” (CO2-free) form of electrical generation and equates to RES.
Sławomir Sieradzki, the representative of the Polish company GAS-SYSTEM, considers natural gas as a major component of low carbon energy balance. He considers that a promising way to reduce CO2 emissions, first and foremost, is to expand the use of natural gas for electricity and heat production by abandoning the coal industry and reducing the role of RES.
According to Sławomir Sieradzki, 57% of electricity in the Central-East Europe is generated by solid fuels, as compared to North-Western Europe, where the coal industry is marginal (provides 5-7% of electricity production), and carbon-free nuclear generation and RES are supplemented with low carbon generation using natural gas.
According to the manager of GAS-SYSTEM, over the next 10 years, Poland’s domestic demand for natural gas may increase by 50%. The expansion of the use of natural gas for electricity and heat production is seen as a major impetus for reforming the Polish energy sector, meeting the needs of the regional energy market and the goals of the Energy Union.
Jan Klepac, a representative of the Slovak Gas and Oil Association, is convinced that natural gas and gas infrastructure play a key role in the energy transformation process; gas is a “partner” of RES. Jan Klepac believes that the European Commission should provide financial support for the development of technologies for decarbonisation of natural gas supply, provide for the joint development of electricity and gas networks and give preference to gasification as opposed to waste disposal.