While addressing the important issue of the security of supply, countries in Central and Eastern Europe still have to deal with the energy transition and scaling-up renewable energy sources (RES) and green technologies seems like the way to go. However, these countries should avoid other types of dependencies and there are several risks to the so-called energy independence.
Speaking at the CEE Sustainable Finance Summit, Balázs Felsmann, Senior Research Associate at the Hungarian Regional Centre for Energy Policy Research was not sure that, from the perspective of the green transition, energy independence is the right word to use.
“If all of our small countries try to build energy systems independently from each other, we will basically end up investing in the same type of technology,” he said. “If, for example, we all invest in solar energy, we will get a lot of surpluses during the day and lack of electricity at night. So the fact that countries’ energy strategies are isolated is a huge obstacle right now. There is no real cooperation to develop different technologies.”
He mentioned the case of Hungary which in the last couple of years saw a boom of solar energy with 3 gigawatts (GW) of capacity installed and an additional 5 GW of permissions licensed. Thus, Mr Felsmann asked what would happen to a country that only has 6 GW of maximum peak consumption and 8 GW of capacity installed? For the first time, Hungary, typically an importer country, had to export solar energy earlier in April.
“Right now it was actually good for Hungary because our neighbours didn’t invest in the same technology,” he underlined. “But if everybody invests in the same type of energy then it will significantly impact the value of produced electricity from solar.”
Therefore, from a financial point of view, it will devalue solar investments in the market. That’s why, for Mr Felsmann, countries must invest lots of money into regional cooperation and increase their trust in each other.
But even when we talk about cooperation, we have to refer to the proper one. Julian Popov, Fellow at the European Climate Foundation and Chairman of the Building Performance Institute Europe pointed out that cooperation is not about signing Memorandum of Understandings, but it is about infrastructure, market integration, cooperation in research, development and innovation and especially regarding innovation, he noted that CEE countries are really lagging behind Western Europe. According to him, this region is looking too much at what other countries are doing to follow them, instead of taking the initiative and creating innovation themselves.
“If we don’t get into the pace of development, there is a risk for CEE the already exiting gap with the West will widen,” he said. “Actually, the Green Deal is bringing very serious risks of widening the gap between East and West, exactly because overall, the East is waiting, trying to see what will happen.”
He cited the automotive sector as an example: while trying to follow the energy transition targets, CEE countries will have cars that are five years old, which is better than having cars of 20 years but at the same time, countries like Germany will have exclusively electric vehicles.
“We lack ambition and this is a serious issue,” he stated.
It is all about education and information for Fady Al-Kheir, Group CEO at Energon holding.
“The transition will happen anyway and it is about strategy, education, culture,” he said at the CEE Sustainable Finance Summit.
For Martin Dratva, Fund Manager at Redside Funds, there are two ways to make changes happen: first, a push from the top which should come from governments, policymakers and banks that have to understand how the new market works, focusing on solutions like PPAs.
“Then, on the other side, there is the demand,” he added. “And we have to booster the demand and make customers more interested in where the energy comes from so that also investors can focus on different areas and different energy sources.”
Still, there are some challenges in funding more renewable energy sources. For Balázs Felsmann, the current environment is too risky and it is very challenging to choose a sector to invest in. And there are some unanswered issues, like the role of nuclear energy or how to concretely and efficiently decarbonise the industry and the transport sector.
“Policymakers should create an environment for new business deals to happen,” suggested Julian Popov. “For example, now there is huge excitement for LNG and all the countries want to build LNG terminals. However, by the time we will finish with the construction we will not need them as what will happen in the upcoming winter is something more pressing.”
Also, he recalled that Russia wants to increase its LNG export, so we might risk moving from a dependency on Russian gas to a dependency on Russian LNG. There are other solutions that we can take right now and they all belong to our cities, our buildings and our houses that are still not energy efficient and that if modernised could help us reduce emissions, decrease dependency and pay less expensive energy bills.