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The ‘new normal’ of the energy sector: looking back at 2021

For a great part of 2021, we were all looking at COP26 as the biggest event of the year.

And big it was indeed. Nearly 200 countries have agreed on the Glasgow Climate Pact, in November, to keep the 1.5C alive and finalise the outstanding elements of the Paris Agreement. CEE countries made their part by committing to the reversal of forest loss and land degradation by 2030, by scaling up clean power and ensuring a just transition away from coal and by signing the declaration on accelerating the transition to 100 per cent zero-emission cars and vans. The 1.5C remains in sight, but COP26 President Alok Sharma reminded us that “its pulse is weak and it will only survive if we keep our promises and translate commitments into rapid action.”

2021: the year of the diversity of gas supply

Although the momentum of the energy transition has accelerated again, 2021 was also an important year for the gas infrastructure, with new pipelines completed, new supply unlocked and new contracts signed.

2021

In January, the first Liquified Natural Gas (LNG) carrier, Tristar Ruby arrived at the Krk terminal in Croatia. At the Croatian terminal, also the first small scale LNG reloading operation in the Mediterranean was carried out. At the same time, gas started to flow from Azerbaijan through the Trans Adriatic Pipeline (TAP), which in September reached 5 billion cubic metres (bcm) while Serbia received its first shipment of gas from the TurkStream pipeline project.

During the summer, Lithuanian Klaipėdos Nafta launched a public procurement regarding the purchase of floating storage and regasification unit (FSRU). Also, following the construction of the Gas Interconnection Poland-Lithuania (GIPL) on both sides, a symbolic Gold Weld was welded, marking the physical connection of the gas transmission systems of the two European Union countries. 

Finally, in July, the Hungarian and Serbian sections of a pipeline connecting the countries’ gas networks were welded together near Horgos (Horgoš).

The Nord Stream 2 saga continues

The controversial pipeline that will transport natural gas over some 1,230 kilometres from the world’s largest gas reserves in Russia through the Baltic Sea was again making the headlines. In September, specialists on the laybarge Fortuna welded the last pipe of the two strings of the Nord Stream 2 and in October, the gas-in procedure for the first string started.

However, after Poland’s PGNiG, its German subsidiary PGNiG Supply & Trading and the Gas Transmission System Operator of Ukraine (GTSOU) submitted a request for granting participation in the certification procedure, Germany’s Federal Network Agency (BNetzA) announced its suspension. The reason is that, at the current stage of the procedure, Nord Stream 2 does not meet the criteria for an independent transmission system operator, specifically the condition that the operator must be organised in a legal form under German law.

Ukraine in particular found itself at the centre of attention because of the gas infrastructure passing (or not passing) through the country. The GTSOU underlined the importance of the country’s unique place within the EU Green Deal and the enormous potential of using natural gas as a transitional fuel. As pointed out by Sergiy Makogon, CEO of the GTSOU in an interview with CEENERGYNEWS, “we still need Ukraine to be a transit country.”

Resilience, flexibility and decarbonisation

Electricity system flexibility, grid flexibility, energy storage are all key components of the energy transition. The year started with a near power grid outbreak which cut Europe’s power grid into a South-Eastern and a North-Western part for about an hour due to outages of several transmission network elements in a very short time. It was described as one of the most critical near-blackout situations since the region’s last major blackout in 2006. A final report published in July revealed that swift TSO coordination mitigated the incident and no major impact on consumers’ energy supply occurred. The in-depth analysis showed that the large pan-European electric power flows and the low stability margins in the system played a crucial role in the incident, which reveals an illuminating view on future power system conditions in Europe.

That is why, as the Polish Electricity Association (PKEE) suggested in January, we should make the 2020s the decade of distribution grids, the backbone of the digital and energy transition, as they ensure a continuous and reliable electricity flow, integrate the majority of renewable energy sources and enable the creation of new services for consumers.

Coal phase-out commitments and first national climate laws

Despite recent commitments, under governments’ current recovery spending plans, global CO2 emissions are set to climb to record levels in 2023 and continue rising in the following years, warned the International Energy Agency (IEA).

2021

CEE States are trying to phase out coal to help reach the EU targets. In March, Hungary joined the Powering Past Coal Alliance (PPCA), followed by Croatia and Poland’s region of Eastern Wielkopolska in July. However, there is not a clear date established by the Czech Republic yet, despite the IEA urging the country to prepare for an earlier phase-out of coal than previously envisaged. Also, Slovenia fears that the premature closure of the coal mine could make the country more import-dependent.

On a positive note, Greece and Serbia joined Hungary in the list of countries that unveiled climate laws. For Greece, it is a historic legislative initiative, given that for the first time tackling climate change is enshrined in a binding legislative requirement. Also, Serbia’s National Assembly has adopted the country’s first Law on Climate Change. According to the Minister of Environmental Protection Irena Vujović, the legislation is the first step in the decisive fight against climate change. 

Renewable energy sources: the new normal

It was also a good year in terms of renewable energy auctions and installed capacity. Renewable sources of electricity such as wind and solar grew at their fastest rate and are set to expand in coming years. According to the IEA, the amount of renewable electricity capacity added in 2020 rose by 45 per cent to 280 gigawatts (GW) and is set to become the new normal, with almost 280 GW in 2022.

And the CEE region is also standing out. In January, the construction of the largest photovoltaic power plant in the region was announced in Pomerania by Sebastian Jabłoński, CEO of Respect Energy: the plant is expected to generate 230 gigawatts-hour (GWh) of green energy annually. Over the next 30 years, the plant could contribute to reducing CO2 emissions by 5 million tonnes. Poland is also set to become the leading regional player on offshore wind after the Senate passed the Offshore Wind Act unanimously and the three largest Polish energy companies, PGE, Enea and TAURON decided to cooperate on future offshore wind farm projects.

But, it is not only Poland: in February, Croatia’s Minister of Economy and Sustainable Development Tomislav Ćorić announced an auction for 400 megawatts (MW) of renewable energy sources, primarily large solar panels and wind farms, while the country’s power company HEP Group intends to increase the share of RES from 35 to 50 per cent by 2030.

Power engineers completed construction of the Czech Republic’s largest photovoltaic power plant that serves as a car park roof, on the exterior premises of the Dukovany Nuclear Power Plant: with a capacity of 831 kilowatts-peak (kWp), this new zero-emission source will generate approximately 850 megawatts-hour (MWh) of electricity per year, which covers the annual consumption of nearly 300 households. And, most recently, Swiss-based European energy company MET Group completed the acquisition of a 100 per cent stake in a 60 MW wind park in Bulgaria from the Spanish Grupo Enhol.

Getting ready for the hydrogen infrastructure

Since the launch of the hydrogen strategy in July 2020, the lightest element has come a long way. New companies have joined the European Clean Hydrogen Alliance, including Bulgaria’s Bulgartransgaz and Ukraine’s Naftogaz.

In February, European Commissioner for Energy Kadri Simson highlighted that hydrogen is not just a new energy carrier, but the beginning of a revolution in the energy system, where Europe is the leader. And the CEE region is an area with a lot of potential.

2021

The Baltics seem to lead the way: Lithuania’s Ignitis Innovation Fund invested additional 430,000 euros into the Israel-based company H2Pro developing green hydrogen production technology. Estonian energy company Alexela and cleantech start-up PowerUP Energy Technologies unveiled the first-ever Smart Hydrogen cabinet, targeted towards small application users of hydrogen including sailing boats, yachts and campervans. Again in Lithuania, the gas transmission system operator Amber Grid, energy distribution operator ESO and company SG dujos Auto signed a cooperation agreement on the development of hydrogen production via power-to-gas (P2G) technology.

Other countries are also getting ready to build the hydrogen infrastructure: Slovakia’s Gas TSO EUSTREAM, the GTSOU, Czech TSO NET4GAS and leading German TSO OGE joined forces to develop a hydrogen highway through Central Europe. Finally, as part of the Aquamarine project, the Hungarian Gas Storage (MFGT) is intending to implement an electrolysis system with approximately 2.5 MW of total performance and the corresponding hydrogen gas preparatory technology at the Kardoskút Underground Gas Storage site.

We will see how the recently-unveiled Commission’s proposals will contribute to creating the conditions for a shift from fossil natural gas to renewable and low-carbon gases, in particular, biomethane and hydrogen and strengthening the resilience of the gas system.

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