The South East Europe region is proving to be increasingly attractive for investment in the energy sector, despite the difficulties that are still slowing it down. This is clear from the published edition of the Greek Institute of Energy for Southeast Europe IENE - SEE ENERGY OUTLOOK 2021/2022. The presentation in Sofia was hosted by the Institute of Energy Management and the Bulgarian Independent Energy Exchange.
According to experts, currently the total estimated investments related to energy projects in the region are much higher and now amount to 483.7 billion euros. This is a significant improvement over 5 years ago and clearly shows the significantly increased interest and appetite for energy investment in Southeast Europe, explained Costis Stambolis, Chairman and CEO of IENE, during his presentation.
From it, several key messages of the last report of the specialists became clear. According to them, there is currently a significant difference between the stated goals and the actual progress on the topics of decarbonisation, the introduction of RES projects and regional cooperation. There is a clear failure at EU policy level to achieve national targets, especially in the field of RES, as there is conflict over budgetary rules and permitted levels of government budget deficits. The coronavirus pandemic has prompted governments to impose unprecedented measures to curb transport and economic activity in general.
Combined with the fall in world oil prices, especially in March-May 2020, this crisis is creating imbalances in the energy sector, affecting both investment and the transition to decarbonisation, according to the IENE report. According to them, the energy mix of the countries in the region is still relatively slow in terms of the use of dominant fuels and the introduction of new ones. It is the continuing importance of solid fuels that is explained by the large amounts of local coal and lignite deposits. And these mines are still seen as partly hindering the decisive move towards decarbonisation, the report said. They recall that the region of Southeast Europe is also characterized by high dependence on oil and gas imports. It is no coincidence that Bulgaria has announced that it is against imposing sanctions on Russia over fuel imports from there. The main oil supplies and reserves of our country are directly related to Russian oil.
At the same time, however, the outlook for Southeast Europe's oil and gas industry rarely seemed so uncertain. Natural gas is becoming increasingly important for the energy mix of SEE countries, both for electricity generation and for commercial and domestic use.
The liberalization of the electricity sector has made enormous progress over the last five years with the separation of market participants and the achieved competition in retail trade. This has been achieved mainly by EU member states in the region, as well as Serbia and Turkey, which are also taking bold steps in this direction.
Less impressive is the progress in the natural gas sector, where competition is largely limited to the industrial sector. In this market, retail is also lagging behind, IENE explains.
The expert report shows that nuclear energy remains a viable option, as it meets important baseline requirements in some key countries such as Romania, Bulgaria, Croatia, Slovenia and Hungary. Its nuclear power plant is fully compatible and supported after the revision by Brussels. However, nuclear energy currently contributes only 4.1% to total gross domestic consumption in SEE, including Turkey, according to an IENE report.
Until recently, energy efficiency in South East Europe was not given enough priority or attention, although its role was recognized in all EU Member States. Additional efforts are needed to introduce energy efficiency as an integral part of national energy planning, the authors say. SEE countries have particularly high levels of energy poverty due to low incomes, high energy needs stemming from energy inefficient housing, and limited access to a variety of energy sources.
Poor energy security, but growth of RES and electric cars
In terms of security of energy supply, the SEE region as a whole seems more vulnerable than the rest of Europe. Along with strengthening the energy network, a diverse combination of flexible technologies for renewable energy production in Southeast Europe. The integration of the variable green energy in the electricity systems of the countries, should also be facilitated.
In Southeast Europe, the introduction of electric vehicles is still at a very early stage, although it shows significant annual growth. Looking at the forecast for gross domestic energy consumption in the EU member states of the SEE region, the general trend shows a stabilization and even a slight reduction of the time horizon until 2040.
In contrast, the forecast for gross domestic energy consumption in the six countries of the Western Balkans presents a very different story from that of EU member states in the region. After the expected GDP growth, gross domestic energy consumption is expected to increase by almost 40% between 2015 and 2040, with the amount of coal maintained almost constant, close to 15 Mtoe.
Against this background, Turkey's gross domestic energy consumption is expected to grow sharply, by more than 50% between 2020 and 2040.
Against this background, investment prospects for major energy-related infrastructure and energy projects look generally positive over the next decade, the report said.