16th FORUM The Energy Day in Croatia

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16th FORUM - The Energy Day in Croatia
THE REGION AND CROATIA IN THE CONCEPT OF WEC
SCENARIOS Goran Granic Ph.D. and
co-authors Energy Institute Hrvoje
Poar Zagreb, Nov 23rd 2007
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INTRODUCTION

• Increasing the need for reliable energy supplies
• Priorities energy efficiency improvement,
  promotion of renewable energy sources, reduction
  of energy poverty and the contribution of the
  energy sector to the greenhouse effect, and the
  introduction of consumer choice in electricity
  and gas markets
• Increasing geopolitical tensions
• Strategic interests are clearly articulating at
  national and regional levels
• SEE region is in addition weighted with the
  effect of communist governance, wars in the 90s
  and other problems relating to the post-war and
  transition period

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SCOPE OF THE SCENARIOSMarket efficiency and
energy

• Global trend to opening energy markets and
  promoting free trade in energy and energy
  services
• Market based instruments are the EUs Emission
  Trading Scheme (ETS), the Clean Development
  Mechanism (CDM) and Joint Implementation (JI)
  under the Kyoto Protocol, tradable certificates
  promoting the use of renewable energy sources and
  energy conservation, and incentive based
  mechanisms for energy investments in production,
  distribution and consumption
• Necessary conditions for markets to function
  properly and to deliver the benefits for
  consumers are the economy with reasonable prices
  and stable regulatory regimes with transparent,
  reliable and trustworthy public decision making
  procedures

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SCOPE OF THE SCENARIOSClimate change and
energyEnergy and poverty

• The limitation of Kyoto Protocol unequal
  distribution of commitments between the states
  and inadequate choice of mechanism for GHG
  emission reduction
• The eradication of extreme poverty one of the
  Millennium Development Goals adopted by the UN is
  improving access to electricity for poor people
• For meeting these objectives and necessary energy
  infrastructure developments, the change of
  relation between developed/wealthy and
  undeveloped/poor is important
• The problems in SEE region are bad
  infrastructure conditions, poverty and lack of
  payment discipline, the absence of active social
  politics and governmental prices control

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SCOPE OF THE SCENARIOSGeopolitics and energy

• The expected strong globalization made way for
  weak globalization
• Traditional proponents of the market-based system
  have themselves difficulty in adhering to the
  economic principles that they propagate neither
  directive in the energy sector is implemented in
  EU
• The world is still characterised by two
  orientations to the international system one is
  focused more on economic efficiency as the
  leading principle of governance, and the other is
  focused more on the effectiveness of promotion of
  national interests
• Todays changing international relations will
  lead to an unknown and unpredictable geopolitical
  landscape, and these changing relations will have
  an impact on international energy markets and
  international energy relations

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OBJECTIVE OF THE SCENARIOS

• The objectives to improve the energy position
  globally in terms of sustainability are termed as
  the 3As
• Accessibility to modern and affordable energy for
  all
• Availability in terms of needed energy forms
• Acceptability in terms of social and
  environmental goals.
• Government engagement (engagement, involvement
  and interference)
• Cooperation and integration (government to
  government collaboration in the form of treaties
  or international agreements, private-public
  partnerships to design specific programmes, or
  regulations to achieve specific policy goals and
  company to company agreements)

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OBJECTIVE OF THE SCENARIOS, cont

• Europe rates itself as high with respect to its
  current state regarding all 3 As in electricity
  and considerably less in natural gas
• Accessibility Nearly all of Western Europe has
  100 access to electricity
• Availability The important interdependency
  between Russia and the rest of the European
  region (large part on imports from Russia) will
  determine the quantity and security of the supply
  for Europe
• Acceptability The combination of market-based
  instruments with strong regulation and public
  service obligations has increased the level of
  Acceptability of energy development plans
• Europe has disbalance relating to the energy
  consumption and production the energy
  consumption is in the West and the energy supply
  is in the East (Russia)
• There are wide differences in goals and
  objectives within the European region

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GENERAL REMARKS ABOUT THE POLICY

• Government engagement in the energy market
  relating to the environmental protection and
  energy efficiency
• Weak government engagement in legislation means
  slower legislative arrangement and its
  harmonisation with EU directives
• Weak government engagement in development of the
  market conditions means less involvement in
  regulatory functions
• Weak government engagement in environmental
  protection and energy efficiency means weaker
  results and a slower change of the present
  situation
• The characteristics of the European region
• A distinction between Russia as the large energy
  seller and net energy exporting region and
  central and Western Europe as the large energy
  buyer
• EU member countries, candidate countries,
  countries with and without the ambition for EU
  membership and Russia

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GENERAL REMARKS ABOUT THE POLICY

• The main characteristics of the scenarios are
• Political context
• Security of supply
• Energy market development
• Energy efficiency
• Environment and climate change
• Structure of energy production
• Research and development

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GENERAL REMARKS ABOUT THE POLICY SCENARIOS
Nationalism and Light Government Engagement
(LEurope des Patries)
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GENERAL REMARKS ABOUT THE POLICY SCENARIOS
Nationalism and Heavy Government Engagement
(Fortress Europe)
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GENERAL REMARKS ABOUT THE POLICY SCENARIOS
Globalism and Heavy Government Engagement
(Confident Europe)
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GENERAL REMARKS ABOUT THE POLICY SCENARIOS
Globalism and Light Government Engagement
(Competitive Europe)
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THE REGION AND CROATIA IN THE SCENARIOS

• Region constitutes SEE countries (including
  Greece) and other western countries (Italy,
  Slovenia, Austria and Hungary) because the energy
  needs and flows have impacts on quality and the
  security of supply
• The characteristics of the region are
• The energy needs will grow continually
• Region is a importer of natural gas and crude
  oil, and in particular cases electricity
• In particular cases the potential for electricity
  production is higher than custom needs
• EU is the importer of all energy types and is
  interesting about the import of electricity from
  the region, with reference to Contracting Parties
  of EC
• The more significant resources of natural gas and
  crude oil are outside EU and the region

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THE REGION AND CROATIA IN THE SCENARIOS
Electricity

• The electricity consumption will grow and higher
  increase is expected in the Contractual Parties
  of the Energy Community
• Development of the unique electricity market in
  the region will depend on the transmission
  capabilities
• The transmission networks in Europe are the
  national networks
• In SEE transmission (national) networks have
  become an interconnection capacity
• There is a need for additional investments in
  transmission networks, together with the
  additional financial, institutional and
  organizational treatment

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REGION AND CROATIA IN THE SCENARIOSElectricity,
cont
Electricity consumption in the region (without
Turkey)
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REGION AND CROATIA IN THE SCENARIOSElectricity,
cont
Present interconnection capacities in the region
in 2007
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REGION AND CROATIA IN THE SCENARIOSElectricity,
cont
Planned interconnection capacities in the region
until 2015
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REGION AND CROATIA IN THE SCENARIOSNatural gas

• The needs for natural gas will grow intensively
  up to 2030 and after that will slow down
• Total natural gas needs up to 2030 will be 85 bcm
• Development of new projects for gas supply into
  the region
• Gas pipelines (100 bcm)
• LNG terminals (80 bcm)
• The storage capacity have to double (50 bcm)
• The natural gas networks are considerably less
  developed and with a smaller number of consumers
  than electricity networks

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THE REGION AND CROATIA IN THE SCENARIOSNatural
gas
The total consumption of natural gas (region
without Turkey)
197
135
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THE REGION AND CROATIA IN THE SCENARIOSNatural
gas
New supply directions of natural gas into the
region and PEOP pipeline
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THE REGION AND CROATIA IN THE SCENARIOSMotor
fuels

• The impact on motor fuel consumption is coming
  from
• Growth of the transport activities (growth in
  energy consumption)
• Growth of energy efficiency of vehicles (decrease
  in energy consumption)
• The overall result will be the decrease of motor
  fuels consumption in the region after 2025

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THE REGION AND CROATIA IN THE SCENARIOSMotor
fuels
The forecast of motor fuel consumption in the
region
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THE REGION AND CROATIA IN THE SCENARIOSCrude
oil

• The region is characterized by low production and
  high import (80 of total needs)
• In order to ensure stability of the supply, new
  supply directions are planned together with the
  obligation to ensure stock in volumes equal to
  90-day needs of every EU Member State
  (established by the European Commission)
• Croatia has the Law on Oil and Oil Derivatives
  Market (NN 57/06) with the obligation to ensure
  operational stocks in volumes equal to average
  90-day needs in previous year
• Energy Market Observatory System (EMOS) to
  monitor demand and supply balance and to measure
  the progress in establishing an open and
  competitive market in Europe

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THE REGION AND CROATIA IN THE SCENARIOSCrude
oil
The present and future directions of crude oil
supply in Europe
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REGION AND CROATIA IN THE SCENARIOSCoal

• The region has considerable domestic coal
  reserves (UNMIK Kosovo, Bosnia and Herzegovina,
  Serbia, Bulgaria, Romania, Macedonia and Greece)
  with the possibility for hard coal import
• UNMIK Kosovo has the second largest lignite
  reserves with the lowest cost in Europe, which
  creates an option for electricity production with
  a competitive price
• The use of coal in the future will depend on
  environmental directives and the commitments for
  CO2 emission abatement, political stability in
  the region and the safety of investment (Kosovo)
• Countries with the largest coal reserves have no
  commitment for CO2 emission abatement

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THE REGION AND CROATIA IN THE SCENARIOSRenewable
energy

• Establishment of the system for RES is at an
  early stage of development
• The most important barrier for a wider
  introduction of RES is the lack of stable
  legislative framework
• Only Croatia introduced legislation for RES
  electricity
• None of the Contracting Parties have legislation
  for biofuels (support mechanisms)
• Most important recommendation follow the target
  based approach which has proved its effectiveness
  in the case of EU Member States
• Define legally binding targets for RES
  utilization in the fields of electricity
  production and transport
• Introduce supportive measures needed to achieve
  the set targets

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THE REGION AND CROATIA IN THE SCENARIOSRenewable
energy, cont

• Level of the set targets should be based on the
  realistic assessments of national renewable
  potentials, both technical and economic
• Most of the Contractual Parties have not yet
  performed such an assessment
• Perform a cost benefit analysis and impact
  assessment for RES prior to the definition of the
  targets
• Adoption of the legislative framework for RES can
  be a quite long-lasting and extensive process

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THE REGION AND CROATIA IN THE SCENARIOSEnvironmen
tal change

• The UN Framework Convention on Climate Change
  (UNFCCC) and Kyoto Protocol are announced for the
  efficient achievement of measures of GHG
  reduction
• EU has established CO2 Emission Trading Schemes
  ETS (from Jan 1st 2005) according to the rules
  from Directive 2003/87/EC
• The impacts of Kyoto Protocol and ETS are the
  increase of energy prices produced from fossil
  fuels, prices of primary and final energy,
  technology selection and development for new
  production capacities, safety of supply, and to
  the overall economy

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CONCLUSIONS

• The region is dependent on energy import and the
  countries are not adequately connected especially
  concerning gas pipelines
• Supply security depends on the construction of
  capacities for electricity production, connection
  of transmission networks, and the realization of
  projects for gas and crude oil supply into the
  region
• The energy infrastructure is in bad condition
  with low energy prices as a direct consequence
• In energy politics social aspects, not market,
  are emphasized
• Political problems in some countries slow down
  necessary reforms and adaptation of national
  legislatives with EU legislatives

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CONCLUSIONS

• Neither country can solve these problems alone
  there is a need for cooperation
• Connection of transmission networks (transmission
  of electricity and gas and oil pipelines) between
  the countries in the region
• Accommodation of legislative and institution
  buildings necessary for market development (one
  of the targets of Energy Community)
• Development of regional energy exchange market
• There are problems relating the projects
  realisation
• Transport and transit prices are necessary to
  regulate based on real economical basis

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RECOMMENDATIONS

• Political agreement between Russia and the EU is
  s key prerequisite for further development of the
  energy market in Europe (reciprocity in ability)
• Construction of electricity lines, gas and oil
  pipelines is an assumption for market development
• It is necessary to realistically estimate the
  security concerns in the construction of
  production capacities outside each country, to
  ensure the commitment for building of the minimum
  production capacities in each country, together
  with providing of security
• Market development and security of gas supply
  should be ensured by security standards and
  quality of supply standards which implies the
  obligations in ensuring part of transit for
  unknown users, connecting gas systems with
  neighbor ones, the construction of new supply
  routes and sufficient storage capacities
• The market monopolies should be prevented, as
  well as the ownership concentration which leads
  to market monopolization

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RECOMMENDATIONS, cont

• It is necessary and possible to achieve energy
  efficiency improvements
• In order to implement the Kyoto Protocol and
  enhance the use of renewable sources and
  development of energy market, a single legal and
  market framework should be developed
• Neither supply option should be decline because
  well balanced mix is the basement of the supply
  security
• The supply security should be constituent and
  recognized part of the energy price
• The governments (on national and EU level) and
  private industry must increase the financing
  level for development and research in the energy
  sector and in the climate change sector
• Cooperation in development and research between
  the government and industry should improve

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THANK YOU FOR YOUR ATTENTION!
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