Balkan Energy Strategies
The guest speakers (in alphabetical order) at this panel discussion were Catalina Dragomir, Managing Director, Vestas CEU Romania; Nikos Katsis, Director of Strategy and Business Planning Division, DEFSA – Hellenic Gas Transmission System Operator S.A.; and Dr. Evanthia Michalena, Sustainable Energy Policy Consultant for the EU and Black Sea Regions. (Mr. George Stassis, CEO of Mamidakis Brothers Group of Companies who was scheduled to speak on behalf of the Balkan oil industry, was called away from the conference and unable to participate as originally scheduled due to an emergency.)
For the benefit of the audience, the moderator presented an introduction to each of the Balkan energy issues scheduled for discussion, and each introduction was followed by questions for the panel members. The introduction to each issue for discussion and the associated questions are set forth below while a video of the session is available here and on YouTube.
SUBJECT NUMBER 1: Oil
Oil is a dominant energy source in the Balkans, including Greece where it accounts for roughly 45% of the country’s total primary energy supply. According to the International Energy Agency, 99.5% of Greece’s oil consumption has been derived from imports from countries that in recent times have included Russia, Saudi Arabia, Iraq, Libya and Kazakhstan.
Questions: for Mr. Stassis
- As the geo-political stage continuously evolves, (a) what countries are the principal oil suppliers to the Balkans, (b) are there likely to be any emerging or re-emerging oil supplying countries to the Balkans, such as Iran for instance, and (c) are there any countries that will be expected to play a smaller role in oil deliveries, such as Libya for example which has experienced oil supply disruptions due to internal conflicts?
- As Balkan economies are slowly recovering from the global financial crisis and transforming into more efficient and globally competitive open markets, how is this affecting Balkan oil imports, oil product consumption in various Balkan countries, and expansion of the oil industry’s distribution network?
- What types of industry infrastructure development are still required or currently in the planning stages to improve industry efficiency, product transportation and storage.
- Crude oil prices have fluctuated widely during the last five years from roughly $38 to $125 per barrel; however, these fluctuations are not expected to impact the long term trajectory of the sector’s growth. The level of oil production output by oil supplying countries, subdued economic recoveries, moderately rising demand and additional suppliers are maintaining downward pressure on oil prices as long as global supplies are not threatened by conflicts.
- In what ways do the risks of such oil price fluctuations impact investment plans for the Balkan oil industry and the oil product distribution network?
- What is the short term industry forecast for oil prices?
SUBJECT NUMBER 2: Regional Natural Gas Network Expansion
Global financial institutions – such as the European Investment Bank, the European Bank for Reconstruction and Development and the Asian Development Bank – as well as national governments and the European Union are jointly developing plans to expand the South East European natural gas network to ensure natural gas supplies to the Balkans and the wider European region from Caspian and Middle Eastern regions including Azerbaijan, Turkey, Georgia, Turkmenistan, Kazakhstan, Iraq, and Middle East countries. The purpose of these plans is to diversify European energy sources, reduce energy costs, and improve energy efficiency, reliability and security.
A major part of this plan is the development of the Southern Gas Corridor in which natural gas from the Shah Deniz II natural gas field in Azerbaijan will be transported and delivered through Georgia, Turkey, Greece, Albania and the Adriatic Sea to Italy and beyond, from a series of pipelines with reverse flow capacities that are to be constructed and connected to the existing South Caucasus Pipeline that originates in Azerbaijan. There will be extensions to these pipelines that will also deliver gas through Montenegro, Bosnia-Herzegovina and Croatia. The first gas deliveries to Turkey are expected to begin in 2018.
Questions for Mr. Katsis
- Please bring us up to date on the plans to expand the regional infrastructure, the roles that Greece and Turkey play as an energy hub in this growing network, and how this natural gas network is expected to affect the use of natural gas as an energy source in Greece and other Balkan countries.
- What effect will these natural gas deliveries have on energy costs, energy efficiency and reliability for the end users, especially in countries such as Kosovo and Bosnia-Herzegovina that currently have unreliable and relatively expensive energy sources?
- What are the wider economic benefits of this gas network plan to Balkan countries – such as (a) the national gas transit fees that will be charged by national governments, (b) the effect of these future gas deliveries on the productivity of business and industry and (c) perhaps whether there will be any expected benefits to the global competitiveness of Balkan goods and services – which affects international trade – in the event that the use of natural gas impacts energy efficiency and cost?
- When might we expect those economic benefits to begin?
- Is an increase in Balkan natural gas consumption expected to supplement and/or displace other energy sources?
SUBJECT NUMBER 3: Sustainable Energy
Dr. Marshall Burke at Stanford University is the lead author of a scientific study* conducted in conjunction with University of California Berkeley researchers and published in the October 2015 scientific journal Nature. This study forecasts socio-economic impacts by the end of this century from unmitigated global warming which would lead to a 23% decline in incomes around the world compared with a world that does not feature climate change. The study includes accompanying forecasts concerning a decline in agricultural productivity (especially including wheat yields), a decline in labour productivity, and an increase in violence and conflicts. This study is based on data analysis from 166 countries during the last century. Robert Stavins, an environmental economist at the Harvard Kennedy School in the U.S., has additionally reported that “many economic impacts of climate change will be outside of markets, such as many ecological impacts, which are nevertheless economic.”
In view of these and other forecasts, we are all encouraged to achieve energy efficiency as the term applies to industrial production; our appliances; the fuel economy of our cars; and the buildings in which we live and work through the use of certain building materials and insulation. The term energy intensity, however, is something altogether different and this greatly impacts the cost of energy to businesses and households; therefore, the levels of both energy efficiency and energy intensity greatly affect the national Gross Domestic Product of every country.
*”Global non-linear effect of temperature on economic production”, 15 October 2015, Nature
Questions for Dr. Michalena
- Please give us an explanation of “energy intensity” and how it differs from “energy efficiency”; and how do high energy intensity and low energy efficiency adversely affect energy costs to industry and households?
- (a) What are the factors that influence renewable energy growth and decline?
(b) What are the factors that could impact the results of renewable energy generation?
(c) What is the renewable energy development forecast at regional, European, and international levels?
- (a) What are the main sources of funding for renewable energy development in the Balkans?
(b) Should national/EU funds be regarded as the first funding sources to turn to or are there alternative options?
- What are the common features as well as the differences in renewable energy development in the different Balkan countries?
- Using examples from other economic regions, such as the Black Sea region and the Pacific region, how can the development of common energy-generating features build a successful regional renewable energy network alliance?
SUBJECT NUMBER 4: Renewable Wind Energy
Renewable energy is a growing resource in Europe. For example, last Thursday on 5 November 2015, Austria’s largest state of Lower Austria in the northeast reported that 100% of its electricity is now generated from renewable sources, and 26% of its electricity is generated from wind. This development has led to the creation of 38,000 “green” jobs and the Austrian state plans to increase this number to 50,000 by 2030. In the entire country of Austria, 75% of its electricity is now generated from renewable sources and 25% from fossil fuels.
Denmark has shown that it can produce as much as 140% of its electricity needs from wind energy. Surplus electricity is transported to Germany, Norway and Sweden as interconnectors allow 80% of the power surplus to be shared equally between Germany and Norway which can store it in hydropower systems for later use, while Sweden takes the remaining 20% of excess power. The website of the Danish transmission systems operator*, which provides a minute by minute account of renewable power in the national grid, showed that Denmark’s windfarms were not even operating at their full 4.8GW capacity at the time of this peak energy production.
The Romanian government has been supporting the development of its own national renewable energy sources in accordance with a National Renewable Energy Action Plan which aims to increase energy consumption from renewable sources to 38% by 2020. To date, renewable energy sources, derived mainly from wind and hydropower, constitute roughly 27% of the country’s total energy production.
Vestas CEU Romania, which was recently established in 2008, is playing a significant role in the generation of electricity from renewable sources. By 2014, under Ms. Dragomir’s tenure as Managing Director, the company had achieved more than a 40% share of the Romanian wind energy market enabling the country to become the 11th largest EU member state in installed capacity in wind energy projects.
Questions for Ms. Dragomir
- As sustainable employment is an important issue in the Balkans, please explain the various types of employment that are created in your country by wind energy development through the delivery of components to the destination site as well as the assembly, maintenance and operation of the wind turbine systems.
- What are the major challenges to wind energy growth?
According to a new study by Bloomberg New Energy Finance published on 16 October 2015, “wind power is now the cheapest source of electricity in both the UK and Germany, even without government subsidies”. This is a first for any G7 economy and is attributed to the technological advances in energy efficiency and power storage.
Questions for Ms. Dragomir
- Has wind energy development affected the cost of energy to consumers in Romania, and, if so, how?
- What is the short to medium term outlook for the trend in wind energy costs in relation to other energy costs?