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5 energy issues to watch in CEE in 2021

While the most used words in 2020 were pandemic and coronavirus, the main driver of 2021 will be recovery: recovery of the economy, of our health and of our planet’s. After summarising the most important events of last year in Central and Eastern Europe, let’s have a look at what to expect from the year that has just started.

1. The future of LNG

2021 began with long-awaited news for the Liquified Natural Gas (LNG) industry. Already at the end of 2019, LNG was for the first time the second source of gas to the European Union, covering 28 per cent of the total imports. This year its importance for the continent’s energy diversification is growing.

Gas started to flow from Azerbaijan through the Trans Adriatic Pipeline (TAP), reaching Greece, Bulgaria and Italy. This summer a second phase will begin, which will double the pipeline’s capacity to 20 billion cubic metres per annum.

natural gas krk
LNG carrier at the Krk terminal in Croatia.

Also, the first LNG carrier – Tristar Rub – has arrived at the Krk terminal in Croatia. The terminal will increase the security of supply for the countries of Central and Southeastern Europe. In parallel, the company operating the terminal is developing a bunkering station in the Port of Rijeka in order to enable usage of LNG as an alternative fuel in the trafficking.

Moreover, Serbia received its first shipment of gas from the TurkStream pipeline project which was built to carry Russian gas flows to Turkey and Central Europe. Serbia plans to carry out large-scale gasification in the following years that is expected to bring significant savings and reduction of pollution. In accordance, President Aleksandar Vučić announced that the government will soon propose a significant reduction in the price of gas connections for households in Serbia.

With the supply secured, all eyes are on new financing structures and how to make LNG greener.

2. From blue hydrogen to green hydrogen

Hydrogen was one of the major topics of 2020 and it will continue to be so in 2021. More and more companies are forming or joining Hydrogen Alliances to push green gases in different countries. However, the main question is: how quickly can the industry move from blue to green hydrogen? Producing hydrogen is not a secret. Producing it via electrolysis and based on 100 per cent renewable electricity it is going to be the main issue. Together with carrying it.

Lithuania’s gas transmission system operator Amber Grid is already analysing the possibilities of adapting the Lithuanian gas transmission system to the transportation of green gas, including hydrogen. In particular, the GIPL gas connection currently being installed between Lithuania and Poland has been planned to ensure the security of gas supply and diversify the gas markets of the Baltic States and Finland. It is clear that the GIPL could also become a channel for green energy exports to Northwest Europe.

3. Innovative solutions

Hydrogen could also solve the problem of green energy storage. If we imagine a world whose energy production is 100 per cent based on renewables we would need storage for when the sun doesn’t shine and the wind doesn’t blow. Can hydrogen be the answer?

It might be but not for everything. Last year, the European Alliance to Save Energy (EU-ASE) highlighted that meeting the EU’s goal to achieve a climate-neutral economy by 2050 will require an enormous reduction in gas demand, but with a focus on immediately available and cost-effective solutions. The keywords are energy efficiency and renewables, especially for buildings.

Tirana, Albania. Source: Tirana Municipality.

With many cities adopting new, smart and sustainable concepts (as in Estonia, Albania and Slovenia, with the help of financial institutions like the European Bank for Reconstruction and Development), an interesting matter to wait for this year will be how our towns will be renovated and modernised, also thanks to the new financial push coming from the European Union under the Next Generation EU initiative.

4. Fit for 55 package

To achieve a climate-neutral Europe by 2050, the European Commission will table a Fit for 55 package to reduce emissions by at least 55 per cent by 2030, as announced by President Ursula von der Leyen in her State of the Union address. The package will cover wide-ranging policy areas – from renewables to energy efficiency first, energy performance of buildings, as well as land use, energy taxation, effort sharing and emissions trading.

Among the many initiatives, a Carbon Border Adjustment Mechanism will help reduce the risk of carbon leakage and ensure a level-playing field by encouraging EU partners to raise their climate ambition. In addition, the Commission will propose measures to implement Europe’s circular economy action plan, the EU biodiversity strategy and the farm to fork strategy.

5. International dynamics

As European Commissioner for Environment, Oceans and Fisheries Virginijus Sinkevičius once said, “the environmental and economic ambition of the Green Deal will not be achieved by Europe acting alone.”

This is why the COP26, UN climate summit in Glasgow will be the most awaited event of the year.

Different international agreements and geopolitical dynamics will shape the climate and energy agenda in Europe. US President-elect Joe Biden has shown support for climate initiatives and promised to rejoin the Paris Agreement during his first days of office. However, only if he will secure support both in the House and the Senate, he will be able to keep its promises and commit hundreds of billions of dollars for the energy transition. If Republicans will keep the majority within the Senate, the new President will need to find other tools. Still, in 2017, former Vice-President of the European Commission Federica Mogherini warned the US administration to not meddle in European politics. Will it still be the case?

On the other hand, China has pledged to be carbon neutral by 2060, an important commitment considering that China is the world’s biggest source of carbon dioxide, responsible for around 28 per cent of global emissions. If we think that Chinese involvement in the Central and Eastern European region, in particular in the Western Balkans has mostly concerned coal-fired power plants, it is yet to see if these commitments will become a reality.

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