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Share of renewables in CEE increased thanks to higher hydro generation and a solar boom

The share of electricity generated from renewables in the European Union energy mix (39 per cent) exceeded the share of fossil fuels (36 per cent) in 2020 for the first time ever and EU consumption of both electricity (-4 per cent) and gas (-3 per cent) fell from 2019 levels, but most of the drivers for this change (notably the COVID-19 pandemic) were exceptional, according to the latest Commission quarterly reports on gas and electricity markets.

The electricity market report confirms that the combination of the pandemic demand shock and favourable weather conditions for renewables substantially changed the structure of the mix over the course of 2020. Coal and lignite generation fell by 22 per cent and nuclear output dropped by 11 per cent. Gas was less affected due to its favourable price, thereby supporting coal-to-gas and lignite-to-gas switching. As consumption fell, the share of renewables in the mix rose to 39 per cent, beating fossil fuels (36 per cent) for the first time. Based on preliminary estimates, the carbon footprint of the power sector in the EU dropped by 14 per cent in 2020.

In Central and Eastern Europe, the missing lignite volumes were only partly replaced by higher gas generation in Czechia, Slovakia and Hungary. The share of renewables increased from 22 per cent to 24 per cent thanks to higher hydro generation in Czechia and Slovenia and thanks to a solar boom in Hungary and Poland. Nuclear remained the dominant generation technology with a 37 per cent share in the mix and a considerable presence in all five markets.

Changes in the electricity mix in the CEE region (excluding Poland) between 2019 and 2020. Source: electricity report.

Notably, Hungary brought forward its coal phase-out plan by five years, aiming to shut the last lignite-fired unit at the Matra power plant in 2025. The government plans to achieve 90 per cent carbon neutral electricity generation by 2030 by maintaining its nuclear capacity and adding 5 gigawatts (GW) of new solar PV capacity.

In Poland, the combined share of coal and lignite in its mix decreased to 69 per cent in 2020 (compared to 73 per cent in 2019), while renewables increased their share from 16 per cent to 19 per cent year-on-year thanks to rising solar, wind and biomass generation. The country’s solar PV capacities have been growing rapidly thanks to the introduction of an auction support system and grants for rooftop installations. Around 3.5 GW were registered by the local Transmission System Operator (TSO) by the end of 2020 (up from 1.3 GW at the end of 2019). Going forward, the share of coal in Poland’s mix should decrease to 56 per cent by 2030 thanks mainly to significant wind capacity additions (especially in the offshore segment), according to a strategy document approved in February 2021 by the Polish government.

However, the report notes that the key factors (the pandemic, favourable weather, high hydro generation) were exceptional or seasonal. In fact, figures for the 4th quarter saw electricity consumption close to pre-pandemic levels, despite continuing restrictions on economic and social activity.

On the other hand, the gas market report confirms that EU natural gas consumption amounted to 394 billion cubic metres (bcm) in 2020, down from 406 bcm in 2019. This came despite a 1.3 per cent increase (1.5 bcm) in the 4th quarter.

Indigenous gas production in the EU was down by 15 per cent as at the end of 2020, the Netherlands produced 6.2 bcm of gas, down by 17 per cent year-on-year. The Dutch government announced that the production cap for the Groningen field is going to be halved compared to the current gas year as of October 2021. Romania produced 2.4 bcm of gas, followed by Poland (1.5 bcm) and Germany (1.1 bcm).

Also, EU net gas imports fell by 9 per cent year-on-year. Russian pipeline supplies covered 49 per cent of extra-EU net gas imports. Norwegian pipeline gas was the second most important source (22 per cent), LNG imports together covered 18 per cent of the total EU imports. Nord Stream remained the most important supply route of Russian pipeline gas to the EU having a share of 37 per cent in the Russian pipeline imports, the Ukrainian transit route re-emerged to the second place (34 per cent), and the Belarus transit came to the third place, with 25 per cent, ahead of Turk Stream (4 per cent).

In spite of renewed lockdown measures in some countries, energy markets were generally stable in the 4th quarter, following an upward price trajectory over the quarter. Optimism about the recovery of the global economy supported the rise in demand for energy products.

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