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Decarbonisation pathways of the CSEE region – interview with Erik Kolstø, Commercial Director, NET4GAS

Energy plays a very important role in the economies of many of the European Union Member States in the Central and South Eastern European region. At the same time, there is limited information about the energy transition in this region. That’s why, Gas Infrastructure Europe (GIE), together with Deloitte, published an in-depth report on the status of the decarbonisation pathway of the CSEE region.

CEENERGYNEWS spoke with Erik Kolstø, Commercial Director of the Czech Transmission System Operator (TSO) NET4GAS and GIE Board Member, about the main findings of the study, how he is afraid that coal will remain a part of the energy mix longer than expected and what is needed to scale up the hydrogen production in the CSEE region.

“There is a geographical disbalance and a lack of information,” he begins. “Usually, these countries are so small they are not included in other reports, so it was a wish of the companies, members of GIE, to present the decarbonisation pathways of this region.”

He highlights that it is a fact-based report that presents the current status of decarbonisation to help stakeholders and decision-makers to make the right decisions on how to take it to the next level.

One striking thing is how all countries in the region, except for Austria, have a higher energy intensity than the EU-27 average.

“What does this tell us about the region?” asks Mr Kolstø. “To create one euro of GDP, you need more energy than in other regions, which is why the current high energy prices are having a larger negative effect on these countries at the moment.”

The other thing that surprises Mr Kolstø is the differences between the countries within the region: for example, Estonia and Latvia in the Baltic region are very advanced when it comes to the use of renewable energy while other countries are still predominantly using coal and oil.

“It is a very diverse mix of countries due to historical and geographical reasons which call for non-standard solutions but overall, the region is still very carbon-heavy,” says Mr Kolstø. “However, if we compare today’s situation with the situation in 1989 or 1990, we can see that the region has come a long way and each country has taken massive steps forward.”

Due to the energy crisis, there has unfortunately been a temporary return to a larger use of coal, according to Mr Kolstø.

“It is currently only a short-term trend to ensure the security of supply. All stakeholders understand that the era of coal must end and the most coal-heavy countries have for a long time been preparing for a switch from coal to gas,” he underlines. “In these countries, you cannot just magically cover the gap created by coal by only wind and solar overnight, you need something in between and that is gas.”

Poland (96 per cent) and Czechia (4 per cent) are the EU’s last hard coal producers. Brown coal, which is consumed almost exclusively domestically, is present in the energy mix of most of the countries in the region except for Estonia, Latvia, Lithuania and Cyprus. All the countries that are currently using brown coal, except for Poland, have declared their phase-out in the short to the mid-term horizon. Although the phase-out dates are relatively late, mostly around 2030 or beyond.

Mr Kolstø also mentions that in order to reduce the use of coal, a clear incentive is needed for a switch from coal to natural gas and in the future from natural gas to hydrogen. However, the future of natural gas is uncertain and there is a lack of regulations on hydrogen. This uncertainty hinders new investments.

“It is important that the alternatives are clear and investments are secure,” he continues. “Or, I am afraid that coal will stay with us for much longer even when policymakers and stakeholders know that we cannot afford it.”

Surely, the targeted share of renewables in power generation became more ambitious in some countries in reaction to Russia’s aggression in Ukraine. Austria, Croatia, Greece, Romania, Slovenia, Czechia and Bulgaria all increased their 2030 targets from the goals previously declared in their NECPs in 2019. However, the targeted share of RES is still below the EU average in the case of some CSEE countries, most visibly Hungary, Slovakia, Cyprus, Poland, Bulgaria and Czechia.

“Increasing the share of renewables is more difficult in the CSEE region than in other regions, says Mr Kolstø, as investments in renewable energy in the past were often connected with high costs and sometimes even corruption, so it was not widely supported by the public. What is needed is a change of mindset and proper communication because wind and solar are not so expensive anymore.”

As in the rest of the EU, the energy industries and transport are the most emissions-heavy sectors also in the CEE region. Estonia, Czechia, Poland, Bulgaria, Greece and Cyprus pollute more in the former, while Slovenia, Slovakia, Lithuania, Austria, Latvia, Croatia and Hungary need to lean heavily on the latter in their decarbonisation efforts.

“Gaseous fuels dominate the alternative fuel mix for most countries in the region and I am optimistic on the outlook of the long-haul transportation based on LNG and on hydrogen,” underlines the Commercial Director of NET4GAS. “But you need to create an affordable market for alternative fuels and the right infrastructure. For example, electric cars are not widely used as they are still too expensive for the people in the region and the infrastructure is lacking.”

The report reminds us that ramping up the hydrogen economy is difficult as it means building up an entirely new value chain from production via transportation to the consumer on an industrial scale.

“Gas infrastructure in the region is well developed and it is relatively cheap to repurpose it to transport hydrogen,” believes Erik Kolstø. “The amount of parallel gas pipelines also provides the option to keep a dual system with gas. And EU needs a lot of hydrogen and hydrogen imports from countries outside of the EU, such as Ukraine. That’s why hydrogen corridors in the CSEE region will become very important.”

Indeed, after one year of research, NET4GAS together with 3 other leading Central European gas infrastructure companies (EUSTREAM, from Slovakia; GTSOU, the Gas TSO of Ukraine; and Germany’s OGE) finalised the pre-feasibility study to develop a hydrogen highway through Central Europe.

The study clearly indicates that it is technically feasible to transport 120 gigawatt-hours (GWh) of hydrogen per day through Central Europe by 2030.

“The other side of the consumption is the production and it is important to identify those places where it makes more sense to install hydrogen electrolysers”, Mr Kolstø continues. “Hydrogen will most likely be produced in clusters. When the main production and consumption areas will be clear, it will not be technically difficult to provide the transportation part. However, as the gas transportation sector is regulated, we need proper legislation and regulation, which is hopefully coming with the new gas decarbonisation package.”

Mr Kolstø insists on the importance of regulations which is the prerequisite for a future hydrogen economy to work.

“We will continue working on a national and EU level on what exactly needs to be changed,” he concludes. “This will take time, but I remain optimistic that hydrogen will play an important role before 2030, also in the CSEE region.”

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