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Energy: the main protagonist of 2022

Energy was surely the protagonist of the year 2022. Taken for granted over the past years, it has a very important role to play, in our daily lives, within the global geopolitical game and for future generations.

This year started with a lot of hopes of bouncing back from the COVID-19 pandemic. On the contrary, in less than two months, Europe faced another serious challenge: Russia invaded Ukraine and, together with great human suffering, it had serious impacts on the energy system worldwide. As with the pandemic, the response was almost immediate and even if not all the countries were aligned, EU Member States showed solidarity by agreeing on different common measures and showing a unified front.

After having said for decades that energy diversification is important and that we cannot rely on a single supply source (like Russian gas or Russian oil), Central and Eastern Europe became a leading character in this year’s geopolitical map. Lagging behind in many aspects, it found a renowned interest from parties all over the world, due to its geographical position, the potential of its infrastructure and its ties with Russia.

Expanding the gas infrastructure to enhance supply diversification

Indeed, the diversification of gas supplies was a major concern in every country in the region. New pipelines were inaugurated, others were accelerated and tested at maximum capacity and many others are expected to be opened next year. In January, the construction of the Gas Interconnector Poland-Lithuania (GIPL) was completed and in May it started operating, expanding the European gas market and integrating the Baltic States and Finland.

Also Azeri gas played a crucial role, with the volume transported through the Trans-Anatolian gas pipeline (TANAP) to Turkey and Europe in the first quarter of 2022 amounting to more than 4 billion cubic metres (bcm). Furthermore, in December, Romania’s natural gas producer ROMGAZ and SOCAR TRADING, a subsidiary of Azerbaijan’s State Oil Company, signed the first individual contract for gas deliveries.

The construction works to connect the Polish and Slovak transmission systems were also completed in May and the pipeline was ready to start operations in November: a cornerstone of the North-South gas infrastructure corridor which will enable gas transmission of 5,7 bcm per year towards Poland and 4,7 bcm towards Slovakia.

Another important milestone was represented by the completion of the Gas Interconnector Greece-Bulgaria (ICGB) which transported a record amount of gas in the first days of its operations. Transportation of the first quantities of gas to Moldova via the ICGB also began successfully earlier in December.

Finally, the Baltic Pipe was officially inaugurated: it will transport natural gas from the Norwegian shelf via Denmark and through the Baltic Sea to Poland, opening a crucial period supporting the EU’s efforts to diversify away from Russian gas.

LNG imports from all over the world

Liquified Natural Gas (LNG) was also an important aspect of supply diversification, especially due to its varied sources. In December, a political agreement was reached, between Hungary and Qatar on the purchase of gas and LNG. Also, Slovakia discussed LNG production and energy security with Qatar already in March.

2022

In the meantime, according to data from the US Energy Information Administration (EIA), during the first four months of 2022, the United States exported 74 per cent of its LNG to Europe, compared with an annual average of 34 per cent last year.

However, the infrastructure in CEE cannot keep up with the pace of imports. That’s why, new terminals are expected to be built, like the Estonian-Finnish one and Greece’s one in Alexandroupolis. Whilst, other terminals are evaluating and working towards a possible expansion, like the Krk one in Croatia and the one in Klaipeda, Lithuania.

Energy: the main issue on world leaders’ tables

The war also completely redrew the energy map. In February, Germany and the US started imposing sanctions on the operator of the Nord Stream 2 pipeline, while Russia halted gas supplies to Poland, Bulgaria and Latvia and completely shut down gas transmission on the Nord Stream 1 pipeline towards Western Europe.

Western companies began exiting Russian projects (like bp, Shell, ExxonMobil and OMV) and the EU started unveiling several measures to show a unified response. First, in May, EU leaders agreed to block more than two-thirds of Russian oil imports. Then, Member States agreed to reach a minimum 80 per cent gas storage level by 1 November to protect against potential interruptions to supply.

2022

A little bit more complicated were the decisions regarding price caps. At the beginning of December, the price cap on Russian seaborne crude oil came into force, set at a maximum price of 57 euros per barrel, while Hungary was granted an exemption. Later, the EU also reached an agreement on a gas price cap, set at 180 euros per megawatt-hour (MWh), but also in this case, many are the sceptical voices, raising concerns that price caps are not the solution.

However, the most important package unveiled by the European Commission was the REPowerEU, which will increase the resilience of the EU-wide energy system based on different pillars: diversifying gas supplies, via higher LNG and pipeline imports from non-Russian suppliers; larger volumes of biomethane and renewable hydrogen production and imports; faster reduction of the use of fossil fuels in our homes, buildings, industry and power system; by boosting energy efficiency, increasing renewables and electrification and addressing infrastructure bottlenecks.

The renewables’ leader: offshore wind

In particular, renewables have been recognised as the only real sustainable solution to the current energy crisis. Indeed, the International Renewable Energy Agency (IRENA) reported that almost two-thirds of renewable power has lower costs than the cheapest coal-fired options in G20 countries, which make them the obvious choice to face the current crisis.

In this regard, one of Hungary’s largest solar power plants, the Tázlár Solar Park has been completed, with an integrated capacity of 63 megawatt-peaks (MWp) which will provide electricity to more than 36,000 households.

However, a special role goes to offshore wind and its enormous untapped potential. In February, the European Parliament set out recommendations on how to deploy offshore wind more quickly. In the report adopted by MEPs, it was stressed that meeting the 2030 and 2050 targets requires the faster deployment of offshore renewable energy, but maritime space and coasts must be managed more sustainably.

Overall, Baltic Sea countries pledged to boost offshore wind capacity sevenfold by 2030 while wind energy associations from Turkey, Ukraine, Bulgaria and Georgia initiated the creation of the Black Sea Offshore Wind Energy Federation (BASOFWED).

Of course, greater penetration of renewables means also a more flexible electricity system and, while the market reform will be an important aspect of next year, in the previous months, companies all over the CEE region are starting to upgrade and modernise the electricity infrastructure.

Batteries, storage and hydrogen reconfirmed as major energy trends

Another important aspect included in the REPowerEU is the deployment of innovative technologies like battery storage and hydrogen. The European Battery Alliance is trying to strengthen the supply chain sustainability of batteries: the latest agreement reached by the European Parliament and the Council aims at making all batteries placed on the EU market more sustainable, circular and safe from 2024 onwards.

In Lithuania, the testing of a new battery park system with a combined capacity of 200 MW and 200 MWh has already begun which will increase the stability and reliability of the Lithuanian electric power system.

Regarding hydrogen, earlier in March, the Hungarian Gas Storage (MFGT) launched the construction of its 2.5-MW electrolyser and hydrogen gasifier technology within the framework of the Aquamarine Project.

Overall, to deliver the accelerated 2030 hydrogen demand and supply targets set by the REPowerEU plan, five large-scale pipeline corridors have been envisaged by the European Hydrogen Backbone initiative and all of them cross Central and Eastern European countries, giving an important role to play for regional Gas Transmission System Operators (TSOs) like Slovakia’s Eustream, Czechia’s Net4Gas, Hungary’s FGSZ, Lithuania’s Amber Grid, Poland’s Gaz-System and so on.

In total, 504 hydrogen production sites have been identified by Hydrogen Europe with a total production capacity of 11.5 Million tonnes (Mt) and the CEE region must work on transport and storage infrastructure, something that Bulgaria and Greece have already started to do.

Energy and climate change: interlinked more than ever

Finally, despite being a year almost entirely focused on the security of supply, climate change was not entirely forgotten. At the beginning of the year, a major agreement was reached that put an end to the dispute over the Turów mine. However, the war in Ukraine meant also a comeback for coal. In the words of the Commission’s Executive Vice-President Frans Timmermans, there are “no taboos”, in this situation, which also means we might have to “stick a bit longer with coal.” Indeed, Hungary responded by relaunching the Mátra Power Plant and increasing lignite production to strengthen energy security.

2022

The year ended, almost, with COP27, which took place in Egypt, the first COP in Africa, which we covered extensively thanks to the daily insights of Barbara Botos, Hungary’s Ambassador-at-large for Climate. COP27 fell short in some crucial areas, but it still led to some important shifts in accountability and pledges towards the energy transition.

Regardless, locally, some milestones were reached as well: like the agreement, at the EU level, for all new cars and vans registered in Europe to be zero-emission by 2035. Or, the breakthrough deal reached on EU deforestation-free supply chain regulations.

Many were the concerns raised over the year about the fact that Europe is not focusing enough on all the aspects of the energy trilemma. It is indeed a challenge that is yet to be solved and next year will be another crucial one.

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