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The main takeaways of the NECPs of the Danube Region

Under the Clean Energy for All Europeans package, EU Member States are obliged to draft 10-year integrated national energy and climate plans (NECPs) for the period from 2021 to 2030 outlining a set of measures and activities proposed by each member state, to reach the EU 2030 energy and climate goals.

A recent study prepared by REKK evaluates the targets, measures and expected outcomes laid down in the NECPs of EU member states belonging to the Danube Region (Austria, Bulgaria, Czech Republic, Croatia, Germany, Hungary, Romania, Slovakia and Slovenia) and energy strategies of the non-EU Danube Region countries where NECPs are in progress (Bosnia and Herzegovina, Moldova, Montenegro, Serbia and Ukraine).

The analysis focuses on the planned development in the most important areas of energy consumption: electricity and gas markets, heating and cooling, transport, buildings and the industry sector which could serve as a useful input for the preparation of the upcoming NECPs of the non-EU Danube Region countries, as well as for the following updates and revisions of NECPs of EU member states.

Experts from the region discussed the ambitions and policy tools aimed at transforming the electricity and gas markets in the region highlighting the main takeaways from the NECPs at a workshop organised by REKK.

The future of gas: many plans to serve a stagnating demand

The share of gas in the total primary energy supply of the Danube Region is 23 per cent, very similar to the average of the EU28, while the contribution of solid fossil fuels is much higher (26 per cent compared to 14 per cent in the EU28). The Danube Region is altogether a 170 billion cubic metres/year gas market, but it’s very diverse: the share of gas in the energy mix, import dependency and sectoral distribution vary among countries.

An important finding of the study is that based on the country-level documents, the total gas consumption of the Danube Region is expected to drop by 3 per cent until 2030, however, the total Danube Region investment in gas infrastructure is estimated to be 15 billion euros despite the marginal change in demand forecasts. As Borbala Toth, Senior Research Associate at REKK presented 75 per cent of capacity extension is planned in countries with decreasing consumption.

REKK analysis. Source: NECPs and, national strategy documents. The changes refer to the difference
between 2020 WEM and 2030 WAM projections.

The study warns to avoid investments in future stranded assets and underlined that introducing natural gas to new markets should not be supported. Gas can be a bridging fuel where the infrastructure already exists but not yet gasified markets renewable solutions should be the way forward.

This serves as a lesson to the Energy Community (EnC) countries as well. Bosnia and Herzegovina, North Macedonia, Kosovo, Albania, Montenegro and Serbia from the Western Balkans plus Ukraine, Moldova and Georgia are EnC contracting parties all of them preparing their NECPs.

Karolina Cegir, Gas Expert, Energy Community Secretariat highlighted that for the contracting parties: especially Bosnia and Herzegovina, Serbia and Montenegro having gas infrastructure is a big issue and development plans are on the table.

“They are all planning to have more gas infrastructure but unfortunately, this is not connected to other sectors,” she said.

In the Danube Region, there is also no clear vision of how to decarbonise any of the sectors with significant shares of natural gas. In industry, there are few concrete measures and gas in general will remain in a substantial role in the long term in heating in households.

Measures related gas infrastructure. Source: REKK.

Moving from coal to gas?

As coal phase-out is accelerating under the pressure of stringent emission reduction targets natural gas is commonly referred to as a bridging fuel that can step in to replace dirty coal-fired power generation.

As the study highlights several NECPs in the Danube Region are referring to gas as a transitional fuel, but there is no evidence of the coal to gas switch. According to the power mix visioned for 2030, coal-based power generation is replaced mainly by renewable and nuclear power with a large group of CEE countries (Czech Republic, Slovak Republic, Hungary, Romania and Bulgaria) supporting nuclear power extensions and expansions.

As Davor Bajs, Infrastructure Expert of the Energy Community Secretariat pointed out the EnC region relies largely on coal especially in the Western Balkans, replacing these capabilities with more environmentally-friendly options presents a huge challenge.

“At the moment we don’t have a significant amount of renewables, we are talking about 1 gigawatts (GW) in the Balkans and slightly more (5GW of solar and 1.2 GW of wind), in Ukraine,” he said.

Mr Bajs underlined that all counties expressed more or less their commitment to change their generation mix. However, this process will have a certain gap as it’s difficult to replace coal with pure renewables which points in the direction of gas as a transition fuel.

Speaking about the future of Bosnia, Ognjen Markovic, Project Expert at Regional Cooperation Council in Bosnia highlighted that it’s important to look at the fuel switch on a case by case basis considering the existing transmission and distribution infrastructure.

“If we want to rely on gas we should invest large sums in gas infrastructure, in any case, Bosnia will have to replace coal-based power plants which are now 30-40 years old,” he explained. “The question is whether to go in two steps (first from coal to gas which requires huge infrastructure investment) or to decarbonise in one step (directly switching to renewables).”

On this note, Pál Ságvári, Vice President for International Affairs of the Hungarian Energy and Public Utility Regulatory Authority pointed out that we have to strike a right balance between sustainability and affordability. Directly jumping from coal to RES won’t go without incentives. Also, the integration of more renewables in the energy system must be balanced somehow and the prices go up. In this case, gas is the number 1 option to jump in.

In conclusion, he added that before it was clear that the core strategic goals are route and source diversification, however in the new world we should find the place of gas in the sustainability axis, whether it’s the coal to gas switch or the gas as the best friend of renewables approach and policies should reflect this as well.

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