05 October 2018

Energy security, major challenge for Western Balkans’ future

Stelian Teodorescu

“Energy security” generates intense debates in analysis milieus, but also concerns on the politic scene nationally, regionally and internationally. As a consequence of these debates and concerns, many times at the highest level, the regulation process of energy sources’ market became an important topic when it comes to “energy security strategies” dedicated to reduce the dependency against the energy resources of some states, the main natural gas or oil providers and, implicitly, of the threats and risks that are connected with security. In such a context, considering that Western Balkans’ region does not have significant natural gases resources on the internal market, the option above mentioned could be accepting a compromise regarding dependency’s increase to large natural gases imports, which would lead to increase the risks against area’s energy security.

Image source: Mediafax

Introduction

Increasing the interdependency and interaction level between states, economically, technologically, culturally and politically, determined a similar evolution in security field, with important implications over the international relations dynamic.

Defining the actual security environment and the process of identifying and quantifying the major challenges at regional and global level, must be related also with how states’ energetic security level afflicts their security, sovereignty, stability and prosperity. Hence, amplifying countries’ interdependency level regarding energy resources’ capitalization and exploitation leads to new and complex problems apparition regarding the necessity to ensure all states’ access to these resources.

In these circumstances, “energy security” is the syntagma that, at the moment, generates intense debates in analysis milieus, but also concerns on the politic scene, nationally, but also regionally and internationally. As a consequence of these debates and concerns, many times at the highest level, the regulation process of energy sources market became an important topic of the discussions when it comes to “energy security strategies”, dedicated to reduce the dependency on other states’ energy resources, the main providers of natural gas and oil and, implicitly, the risks and threats that are related with security.

Risks and threats to Western Balkans’ energetic security 

Nowadays, when we talk about two important projects like North Stream 2 and Turkish Stream, projects which, mainly, will aim to increase some states’ and even areas’ energetic dependency on Russia, it is necessary to highlight that Center and East Europe states receive gases through two important routes: Yamal gas pipeline, which crosses Belarus and Poland and the gas pipelines which start from Russian and passes through Ukraine and Slovakia. So, it is important to remark that theses states are transit routes of the gases that come from Russia to Western Europe states and, implicitly, are the beneficiaries of the Russian gas.

As consequence, we can appreciate that West Balkans’ energetic security can be significantly threatened by both internal vulnerabilities and increased energy dependence on Russia, an important actor that has an extremely important contribution at region’s energetic map configuration, especially when a new energetic dynamic is defined in Central and East Europe.

Hence, it is essential to remark that in 2014, as consequence of some analysis made by the European Commission after the event in Crimea, resulted that states from South-East Europe have major vulnerabilities regarding energetic security because these are dependent only on one natural gases provider, Russia. In such circumstances, EU proposed a list with almost 200 common interest projects, the main objectives being the diversification of energy sources, the increase of competition on profile market, acquisition of energy at a fair price and, implicitly, energetic security’s increase.

Energetic security involves ensuring the access to energy sources, to predictable distribution routes and other alternatives, access to a market of energy sources that are generating a fair price as a competition result and, implicitly, the decrease of energetic dependency against other states, like Russia.

As part of national security, the energetic security is permanently connected with different types of risks and threats, the main risk being generated by the high level of unpredictability of region’s actors’ geopolitical interests and, implicitly, regarding the distribution routes, resources providing and, not least, easing the access to alternative sources in extreme situations.

As for the types of threats, the first one is about the access to energy resources, ensuring some stable sources of energy on the longest term possible because of production’s decrease in this field.

A second type of threat is connected with managing the consequences of energetic resources prices increase over the economies and social consumption, this type of threat being able to influence the actual specific methods and consumption need for each state. Because of such evolutions, the social instability is more and more probable, generating the necessity of dialogues mechanisms between politic, economic and social internal actors, to identify new possible vulnerabilities and fight against the potential risks against their societies.

Another type of threat comes from the need of radical change of the energetic base, oil and other energy types.

Analyzing these types of threats, we can see that these have a significant potential to generate some conflicts that, in their return, can produce huge economic and social changes, the Western Balkans’ region being among the most sensitive regions to such possible changes, as it is placed at the intersection of some of the most important energetic resources transport routes to big consumers.

Consequently, considering that energy resources are vital for all world’s economies, we can appreciate that those forces whose aim is to destabilize and to control a region or a nation, the easiest way to do it is perturbing the access to resources, whether by brutal intervention, destructive, on the extraction, processing, transport, distribution, or by manipulating the prices’ market of those resources.

Western Balkans’ region energetic security dynamic between the European perspective of the region and some important international actors’ geopolitical interests

Obviously, all West Balkans’ entities elaborated, adopted and prepared the development of some energetic policies and energetic security strategies, considering that the national energetic portfolios from Western Balkans are founded exclusively on lignite and hydroelectric stations to produce electricity.

South-East Europe and, particularly, Western Balkans, have a huge potential in the field of renewable energy, but in order to take advantage of its whole potential, including geothermal, solar and wind energy, it is essential to be created an efficient cross-border infrastructure, through high-tech networks investments and by developing storage capacities.

Fossil fuels are dominating the range of energy sources in the Western Balkans region. Coal is the biggest source, 41% from the primary energy request, while oil is only 34%, and gas 13%. Renewable sources- predominantly hydroelectric power and firewood for heating - are 10% from the total energy consumption. Electricity production in the region comes mainly from lignite (61%)- a large part of it from old installations, inefficient and very polluting.

However, it can be noticed that national energy strategies do not envisage a significant decrease in lignite utilization, planning to continue the investments in lignite-based electricity production, although considering Western Balkans’ European pathway, the candidate countries to EU’s integration must harmonize its legislation, meaning the limitation of carbon dioxide emissions in the atmosphere and other polluting elements coming from burning installations of some different types of fuels.

Furthermore, we must not forget that there is the clear perspective to increase in the future the actual quite reduced prices of energy produced by these lignite-fired power stations. We also must not forget either that this process will include also the application of a higher charges system for the installations that are producing large amounts of carbon dioxide quantities over EU’s environmental protection standards.

Consequently, the investments in electricity production based on lignite-fired can be seen as incompatible with EU’s policy to reduce the coal consumption on the long-term and are, also, the subject of some controversial discussions regarding Western Balkans’ energy security future. In this context, it is important to underscore that China’s financial and technical involvement in building, until 2020, of a third unity, of 350 MW, at the coal-fired power plant in Kostolac (Serbia), which will produce electricity in an amount of 2.5 billion kWh annually. China also supports the development of similar projects in Bosnia and Herzegovina (BIH), among these being the 300 MW power plant in Stanari and the seventh block of Tuzla’s heating plant.

Not least, another example that could be an essential element in the analysis regarding Western Balkans’ energy security future is also the agreement signed between the Kosovar government and the American company ContourGlobal, both parts agreeing to build a coal-fired power plant of 500 MW, the first major energy project in this Balkan entity, which will be based on an investment of 1 billion euro, high-tech technology in the field and aimed at replacing old capacities to reduce the level of pollution in the area. The project is about to be finished 2023. Probably, through this investment they want to maintain Kosovo’s certain independency level by exploiting the 14 billion tons lignite resource, as more than 90% from its energetic power is produced in two energetic centrals that are working with coal.

Knowing all these, we can highlight that there is a significant difference between major international actors’ approaches, which are funding Western Balkans’ projects. An eloquent example for this is that EU is funding mainly infrastructure projects in hydro energetic field, of some renewable energy sources, as well as in natural gases field, meanwhile China is mainly funding lignite production and electricity produced by using this type of fuel. All these Western Balkans’ evolutions are taking place because of increasing of Russia, China and other Gulf states direct investments, even if EU remain the clear leader of region’s investments.

In these circumstances, it is important to mention that, although in a modest quantity, natural gases imports in Western Balkans are almost totally coming from Russia. Across the profile milieus it is analyzed Western Balkans’ dependency on Russian gases, but the relative rate of gas in the global consumption is quite reduced in the region, Serbia being on the first place, with 11% or 2.5 billion cubic meters per year, meanwhile Croatia consumed 3 billion cubic meters per year, wherefrom two thirds are extracted from their own deposits from Adriatic Sea. All of this aside, we can appreciate that Western Balkans’ common problem is market’s regulation regarding the acquisition prices of important energetic resources.

As consequence of this situation, in Serbia, BIH and Macedonia, Russia tries to transform gases provision dependency in politic dependency and to limit these states’ integration in European and Euro-Atlantic structures. Hence, Macedonia and BIH are based on Russian gas 100% and are paying some of the biggest prices for its acquisition. Still, for the moment, Russia’s influence in Western Balkans’ energy sector is not absolute and, in the future, it might be limited by the development of some new projects which will ensure the access to alternative energetic resources for all entities in the region.

In the mentioned context and despite the less significant development of natural gases transport infrastructure in Western Balkans, several gas supply projects in the region, whose objective is gases sources procurement diversification and are supported by EU, are in different phases of planning and realization. These projects are those about the construction of natural gases transport pipelines Trans-Adriatic/TAP, Adriatic-Ionian/IAP, Trans-Anatolian (TANAP), Tesla and White Stream (all these projects being planned to be made until 2020, except for White Stream, in 2022). Still, considering the actual dynamic of the evolutions in Western Balkans, even if there is a significant increase of gases request in region’s entities and a diversification of energy sources and development of an interconnected market based on competition, it is unlikely that current dependence on Russia is significantly reduced.

Hence, an important strategic project for the entire Europe, but especially for Central and East Europe’s energy security and, in the future, for the Western Balkans through the development of interconnections, could be the BRUA project, part of the “Southern Gases Corridor”. The BRUA transport pipeline provides a new export route for natural gases that will be exploited in Black Sea, aiming at enhancing Europe's energy security by diversifying regional gas sources. This project will support economic development objectives nationally, but also regionally, at the same time easing the replacement of the existent energy sources (large carbon dioxide generators) with natural gas.

One of BRUA’s pipeline development supporters is also the European Commissioner for energy, Arias Canete, who remarked that in this part of Europe there is not enough interconnectivity and that states in this area significantly depend on Russia. The European official underlined that an interconnected market is a competitive one, including BRUA gas pipeline, in its first phase, being able to contribute at increasing the energy security of some countries from South-East Europe, through a 1.75 billion cubic meters gases capacity, but the realization of an interconnection is influenced by many divergent interests.

It may prove to be hugely important the second phase of BRUA when, after the complete satisfaction of Romania’s own energetic needs, part of Black Sea’s exploited gases could be exported on different interconnected alternative routes to satisfy South-East Europe’s energetic interdependency increase and needs, including Western Balkans’ region.

Consequently, one of the eloquent examples that will also generate consequences for Western Balkans is the Belgrade’s leaders’ intention to take advantage on Black Sea’s natural gases procurement and signing, accordingly, an agreement between Serbia and Bulgaria, to implement the gasses interconnector project, which will connect transport systems from both countries, having a capacity to transfer up to 1.8 billion cubic meters gases per year, on Bulgaria-Serbia relation, and only 0.15 billion cubic meters on the reversed relation, Serbia-Bulgaria. The project is about to be completed in 2022, it is financially supported by EU and it will be a new procurement route not only for Serbia, but also for other entities from South-East Europe, because it will ensure the access to gases resources from Greece, Azerbaijan gases through Southern Corridor and Black Sea’s gas, but will also ensure these sources integration to EU’s energy market.

Possible evolution scenarios

Geopolitical interests and, especially, concurrent interests in energetic resources market from Western Balkans only continuously contribute to region’s geostrategic importance increase.

As we already know, Western Balkans region is an area with a population of around 25 million people, entities here confronting with energy consumption increase requests (annual increase rate up to 3-3.5%), but also with big needs and investments for ensuring the production capacities and provision, as well as for ensuring equipment storages.

So, EU elaborated energetic models for Western Balkans entities, being an instrument conceived to reduce the carbon emissions, the main purpose being to show possible solutions for the energetic system in this area, a system which at the end must respect and better implement EU’s standards and objectives.

Additionally, between 2014-2016, was created “2015-2016 South-East Europe’s energetic perspective” which was based, all in all, on a continuous monitoring and had the objective to understand the geopolitical environment, define and evaluate, objectively, the main politic challenges for region’s energetic sector and, parallelly, identify the important investments area and business opportunities in the region.

According to the conclusions of this study, the future major challenges of the energetic system from South-East Europe can be resumed as follows:

  • Consolidating procurement’s security with energy through:

- Continuous diversification of gases and oil procurement;

- Energy routes’ diversification;

- Expanding the range of energy sources used;

- Electricity and gases system’s interconnectivity;

- Extending gases’ storage capacity;

- Increasing the indigene energy sources production.

  • Progressive decrease of the carbon dioxide emission on the entire energetic system.
  • Completing the liberalization process of electric energy and gases market and increase the competition.

Hence, one of the easiest and advantageous solutions, ecologically speaking, could be connecting Western Balkans to natural gases sources from the region, but this solution would create, implicitly, a bigger dependency on Russia because, analyzing the necessary investments for the development concept through durable energy, the most accessible, at the moment, are the Russian resources.

There the problem of using wind energy could also be analyzed, but despite the existence of various powerful areas to use such type of energy, South-East Europe is way behind the rest of Europe. Meanwhile more and more countries from the region are building their first wind energy systems, the electric energy quantity, generated by the wind in the region is too small, the medium capacity factors measured in different places in the region being around 25% in Albania up to 32% in Montenegro.  

As in the next period it is expected for Western Balkans countries to have the highest annual energy consumption rate in Europe, a possible evolution scenario could be linked to the more than twice increase of electricity consumption, until 2040.  

Consequently, Western Balkans entities may confront with significant challenges and with a scenario that could demand adopting some major decisions in their energetic policy, which will be about choosing between the development of the coal-fired and gas-based energy production capacity and to increase the hydro energetic potential and the use of renewable energy sources. Such a context, could lead to adopting new ambiguous and unclear decisions, which would also lead to unpredictability’s increase regarding region’s integration process in EU.

All of this aside, is it probable for Western Balkans’ entities strategies to prevail over the national interests which are related to the integration in European and Euro-Atlantic structures and their leaders to adopt those decisions that will contribute to a scenario which will involve extending the energy portfolio, as well as increasing the interconnectivity of the electric energy and gases procurement systems for the region, but also with other EU states, further diversifying of oil and gases procurement, but also of the possible alternative energy solutions, extending the terminals and gases’ storage capacities and, not least, increasing the indigene energy sources production.  

The probability of such a scenario could be increased, if we think at the urgent need to create some significant progresses regarding the decrease of carbon dioxide emissions across the energy system as a condition imposed by EU for the integration process. Adopting such measures to implement the standards demanded by EU would lead to reducing the carbon quantities exploited and allocated for electricity production sectors, especially if we think that, according to environment’s policy, natural gas is seen as more desirable than coal.

In such context, as Western Balkans’ region does not have significant natural gases resources on the internal market, the option mentioned above could be the foundation of adopting an approval decision of the compromise regarding the dependency for large natural gases imports, which would lead to increasing the risks against area’s energy security.

Consequently, we can say that we are dealing with a high unpredictability level regarding Western Balkans’ energetic security future, especially considering that there is a quite similar uncertainty about the role that natural gases may have in producing and ensuring energy consumption’s need in the region.

Concluding, we can assume that securing greater gas consumption for the Western Balkans would involve ensuring some alternative resources to the Russian ones and developing terminals and distribution pipelines, but also accessing a competitive market which could generate a fair acquisition price. And all of these desiderata seem to be made along with European states, especially if we think that among the initiatives announced by the European Commission that will be EU’s specific actions in 2018-2020, to support Western Balkans’ transformation efforts in the fields with mutual interest, is also the extension of the European Energy Union initiative and West Balkans’ integration in it.

 

References:

- De ce este important ca securitatea energetică a Europei de Est să fie tema României pentru preşedinţia Consiliului Uniunii Europene, https://adevarul.ro/economie/stiri-economice/de-important-securitatea-energetica-europei-est-fietema-romaniei-presedintia-consiliului-uniunii-europene-1_5a9901eadf52022f7520e438/index.html;

- The Energy Path of the Western Balkans,https://www.aboutenergy.com/en_IT/topics/energy-path-of-western-balkans.shtml#;

- The Key Role of the Western Balkans in the Energy Union, http://www.newslettereuropean.eu/key-role-western-balkans-energy-union/;

- West & Russia battle for control over Balkans gas corridors, https://www.thepeninsulaqatar.com/article/16/07/2017/West-Russia-battle-for-control-over-Balkans-gas-corridors

- Balkan energy strategies, http://www.balkaneconomicforum.org/wp/balkan-energy-strategies/;

- A sustainable energy model in the Western Balkans, https://www.ebrd.com/news/2018/a-sustainable-energy-model-in-the-western-balkans.html;

- Energy efficiency in the Western Balkans – success or failure?, https://www.eceee.org/...energy-efficiency.../energy-efficien;

- Energy Sector Development Strategy of the Republic of Serbia for the period by 2025 with projections by 2030, http://www.mre.gov.rs/doc/efikasnost-izvori/23.06.02016%20ENERGY%20SECTOR%20DEVELOPMENT%20STRATEGY%20OF%20THE%20REPUBLIC%20OF%20SERBIA.pdf;

- Energy development strategy of Montenegro by 2030, http://www.oie-res.m/uploads/Dokumenta%202016/Action_Plan_2016_-_2020_ENG.pdf;

- Western Balkans: more resilience for the energy sector, Zoran Nechev and Aleksandrs Svilans, https://www.iss.europa.eu/content/western-balkans-more-resilience-energy-sector;

- Energy Strategy of the Republic of Kosovo 2017-2026, https://mzhe-ks.net/repository/docs/Kosovo_Energy_Strategy_2017_-_26.pdf;

- Strategy for energy development in the republic of Macedonia until 2030, http://www.ea.gov.mk/projects/unece/docs/legislation/Macedonian_Energy_Strategy_until_2030_adopted.pdf;

- Western Balkans are massively expanding coal power – but the new plants may have to be closed again soon, https://bankwatch.org/blog/western-balkans-are-massively-expanding-coal-power-but-the-nw-plants-may-have-to-be-closed-again-soon;

- China’s Belt and Road in Balkan coal dead end & why the EU should care, https://balkangreenenergynews.com/chinas-belt-and-road-in-balkan-coal-dead-end-why-should-eu-care/;

- China starts on Serbia’s new coal-fired power plant, http://www.globalconstructionreview.com/news/china-starts-serbias-new-coal-fired-power-plant/

- China's CMEC to build 3rd unit at Serbia's Kostolac B power plant, https://seenews.com/news/chinas-cmec-to-build-3rd-unit-at-serbias-kostolac-b-power-plant-591835#sthash.CJ3U0mT8.dpuf https:/seenews.com/news/chinas-cmec-to-build-3rd-unit-at-serbias-kostolac-b-power-plant-591835

- China expands coal power interests in Bosnia and Herzegovina, https://theecologist.org/2018/jul/24/china-expands-coal-power-interests-bosnia-and-herzegovina

- Kosovo, ContourGlobal agree to build 500 MW coal-fired power plant, https://serbia-energy.eu/single-esiasee/?postid=9377

- Western Balkans countries to build four coal-fired power plants, https://www.energyworldmag.com/western-balkans-countries-build-four-coal-fired-power-plants/;

- Energy Poverty in the Western Balkans, The balancing factor between Affordability and Environmental Sustainability, Mihailo Mihailović, Nikola Tomasović, Serbia, http://www.iene.eu/microsites/10thSEEED/articlefiles/Session-VII/Tomasovic.pdf.

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