ENERGY
FORUM
XIX ECONOMIC
FORUM
KRYNICA-ZDRÓJ, 9-12 SEPTEMBER, 2009
IV ENERGY FORUM
BUDAPEST, 15-17 NOVEMBER, 2009
Pa r t n e r o f t h e I V E n e rg y Fo r u m
O rg a n i ze r
INSTYTUT WSCHODNI
MISSION OF THE ECONOMIC FORUM
To build favourable climate for the development of political and economic cooperation
among the states of the European Union and their neigbours.
In carrying out its mission, the Forum is independent and impartial.
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Archives of the Eastern Institute
Publisher | Forum Organizer
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Warsawa 2009
© Foundation Institute for Eastern Studies
ISBN 83-60172-91-9
Preface
Zyg munt Ber dychow ski
Chairman of the Programme
Council of the Economic Forum
The gas crisis which took place in January 2009
made us even more aware of the necessity to
cooperate in the energy sector in Central and
Eastern Europe. Today power sector business
makers, politicians and experts keep asking
themselves: is the region better prepared for
dealing with such situations after that crisis? Many
of them think that, for many years now, the
European Union has underrated energy problems
troubling Central and Eastern Europe. The situation
of the region is also made more complicated by the
ever greater energy expansion of Russia and the
negative consequences of the economic crisis,
which has caused a significant drop in foreign
Zygmunt Berdychowski, Chairman of
the Economic Forum Program Council, Poland
investment in the countries of Central and Eastern
Europe, which, in turn, has reduced financing
available for energy projects. Therefore it is
necessary to develop new solutions ensuring
energy sovereignty by looking for new sources of
raw materials, expanding industry capabilities, and
developing investment in the area of renewable
and nuclear energy. The Eastern Institute has
participated in the debate devoted to such
problems for many years, both during the Economic
Energy Forum which has already been organised for
over 4 years. We care about gathering key
politicians, businessmen and experts involved in
broadly understood energy issues so as to create
a platform for discussion about possibilities for
cooperation in a new political-economic reality and
ensuring energy security on our continent.
Forum in Krynica, where debates devoted to energy
issues have their separate agenda and during the
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Energy Forum
Address by László Sólyom
President of the Republic of Hungary
Not so long ago we might have considered any
illusion to an energy supply crisis as an
exaggeration that environmentalists often use.
Nowadays we experience increasing prices,
decreasing stocks, and supply disruptions as part of
our common everyday routine. The economic crisis
László Sólyom, President of the Republic
has also caught the attention of the public, and
of Hungar y
conferences and raising awareness events that
follow one another are crucial.
At this year's 4th Energy Forum, one of the main
At this December’s UN Climate Change Conference
highlights are regional concerns and alternative
in Copenhagen, opposing parties will again strive to
energy. I am happy to hear that the Polish Eastern
reach an agreement. The determination to act
Institute proved to be an outstanding partner on
appears to be universal, and the goal is to have
course of shaping cooperation in Central and
agreement valid starting in 2010.
Eastern Europe. We welcome them in Budapest, and
Pressing issues of energy policy did not change in
we also welcome participants from Europe and
the past years, while numbers and indicators have
from overseas.
been deteriorating. Due to the advances of science,
When talking about the quality of our lives and the
the picture became even more complex: we now
future, it is a crucial concern to have energy supplies
know more about the advantages and
secured from sustainable sources. A society aspiring
disadvantages of bioenergy. This is why, we are
to exist for many years to come can not afford to
much looking forward to the results of the Danish
turn its back on the issue of energy security.
research on green energy to be presented at this
Changing the way of thinking is not like fighting
Forum. I hope that regional cooperation in energy
windmills: the already existing system of values
affairs will find its place and mission and thus the
inherent in human nature has to be supported and
Energy Forum will prove to be a useful and creative
encouraged. Raising awareness of our
tool in serving this mission.
responsibilities and building on the interactions in
Short-term concerns generated the global
the global world, academic and political elites need
economic crisis. Now it is time to think long-term.
to analyze the problem at the household level to
With this, I wish you a fruitful exchange of ideas,
reach permanent change.
new insights and well-grounded arguments.
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Energy for Central
and Eastern
Europe
Mariusz Swora
President of the Energy Regulatory
Office (URE)
„This is a gift from God, a passport to the future”
– these are the words spoken at the beginning of
September 2009 by the president of Brazil
commenting the discovery of gigantic deposits of
petroleum, which probably every European
politician would like to repeat. For the time being,
we do not have such deposits of petroleum or
natural gas in Europe, including its central and
Eastern part, and we have to rely on importing
Mariusz Swora, President of the Energy
Regulator y Office (URE)
them. The lack of one’s own energy resources has to
be countered by their importation, mostly from the
East. The geographical position of Central and
Eastern European countries, together with their
respective political and economic luggage,
determines their special position within the
European Union. This special place lends
a particular legitimacy to the postulate of European
solidarity in the area of ensuring energy security,
which is raised by these countries. This solidarity is
Being able to choose from a few solutions
that would guarantee separating grid
activities from the vertically integrated
energy concerns, we were in favor of the
most far-fetched solution – complete
ownership unbundling, while the common
European market will be shaped by
different forms of administrative
unbundling forecast in the third package,
which will not facilitate implementation of
uniform solution.
a form of defense against the marginalisation of
Central European countries in the European Union
and an expression of domination of Eastern
suppliers of energy resources. However, Western
burden of communism in the social-economic
European countries, which, as a matter of fact, have
sphere, approach this issue in a rather reserved
different historical experiences without the negative
manner. In some sense, the existence of these two
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Energy Forum
different approaches is confirmed by the two gas
European energy 'diaspora' today. Despite
pipeline projects, omitting Central European
progresses in the area of integration in different
countries: the Nord Stream and the South Stream.
areas. Decentralisation of interest in the power
At the same time, the European project Nabucco,
sector is a fundamental obstacle to this process.
which is competitive with South Stream, has not
Various are visible in different aspects of European
started to be realised yet. The Forum in Krynica
energy policy and legislation. Hence, the ambitious
provides a perfect opportunity to emphasise the
(yet dubious from a scientific point of view) projects
unique character of the region of Central and
in the area of environmental protection are prepared
Eastern Europe and to make an attempt to look for
from the perspective of the rich countries, which
common experience and economic interest. In this
have great enough economic potential to achieve
discussion we must also let regulatory offices take
them. Such a situation is dangerous for Central
a stance as their role in the European and national
European countries, which, when obliged to make
political and economic scenes keeps growing year
incommensurate efforts aimed at environmental
after year, and because of their active participation
protection, could suffer irrevocable damages to their
in the Forum in Krynica for the two last years.
economies (carbon leakage). This discord has to be
The European Union, which started off as the
taken into consideration while deciding on which
European Coal and Steel Community is the
measures to undertake in order to achieve common
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goals. In the case of climate protection, emotional
arguments have taken the upper hand over
European ideas of solidarity and subsidiarity, and
over simple common sense.
Liberalisation of the energy sector has its pains – the
same „Old Europe” countries which coin slogans
relating to with climate protection do not want to
undermine their energy champions by thorough
implementation of competition (for instance
ownership unbundling in the so called third
liberalisation package). However, at the same time,
there is some an air of optimism as the European
Union is striving for diversification of its „energy mix”
and has adopted the following priorities: making plans
concerning creation of cross-border interconnections,
petroleum and gas pipelines, and energy bridges.
A source of hope may lie primarily in the regional
However, it is most important that the „between”
electricity and natural gas markets which are being
spot belongs to a uniting Europe, which brings
created with great effort. National regulators and
together countries of different cultures and
operators of industrial systems are involved in these
economies. Andrzej Stasiuk, who writes not far
ventures. Creating regional markets is not an easy
away from Krynica, in his literary elation over the
task but, in a longer time frame, their creation will
Central European countries, treats this place as one
lead to the creation of a common energy market
which is sometimes simply magical. We avoid
within the European Union, which will significantly
including this magic ingredient in our economic
increase the energy security of its member states.
discussion, even though the political and economic
When creating regional markets, we have to
transformation which took place in the countries of
account for the role of the closest EU neighbours
the former Eastern Bloc is by all means a unique
who share democratic European values and have
phenomenon. This specific character which is
similar historical experience. Countries such as
a natural ingredient of the variety of all the
Ukraine (if only they wanted to) should have an
countries of our continent should not be forgotten
open road to cooperation within the framework of
and should be protected within the framework of
regional EU energy initiatives.
the European Union – in the economic and cultural
Being „between the East and the West” is a difficult
dimension as it constitutes a passport to the future
place from a political and economic point of view.
of the countries from Central and Eastern Europe.
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Energy Forum
European solidarity versus energy
security
In times of economic crisis – low prices of energy
sector in Central and Eastern Europe. The
sources accompanied by low economic growth
Foundation Institute for Eastern Studies – the
– new opportunities for cooperation in the energy
organiser of the Economic Forum in Krynica
sector have appeared. The gas crisis which took
– cannot leave out such important subjects in the
place in January 2009 made us realise even more
field of international relations in our region as the
clearly that we have to act together in the energy
issues regarding energy resources, their types and
methods of transfer, and energy output and its
influence upon the natural environment. That is
why discussions devoted to energy problems in
Europe constituted one of the key points in this
year’s Economic Forum agenda.
Participants in debates on energy issues during the
Forum in Krynica were unanimous that energy
security, which is a global issue with immense range
and implications, should be perceived not only from
the perspective of companies but also from the
point of view of entire countries or regions, while
the changeable and ever more unpredictable
market of petroleum and other energy resources
calls for more effective solutions which we need to
start searching for without delay. Energy security in
Europe, which is a key importer of petroleum,
requires stabilisation and predictability of
Paweł Olechnowicz, President of the Board,
LOTOS Group, Poland
petroleum prices. The last twelve months have
proven that sudden fluctuations of petroleum
prices increase economic tension and risk. The
It is necessary to build a European system of
energy security. This will be possible when it
is based upon a system of partner-like
balance.
economic slow-down has made fuel and gas
companies undertake restructuring efforts and has
forced them to look for savings. Governments have
to watch out for attempts at hostile takeovers.
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one country decides for the entire region is
unacceptable. Many participants in the Forum share
the opinion that the rules of the energy market of
the old continent are dictated not by the condition
of Gazprom but by the Kremlin’s political strategy.
The president of the Lotos Group Paweł
Olechnowicz emphasised that it is necessary to
build a European system of energy security. In his
Zsolt Hernadi, Chairman and CEO, MOL Group,
Hungar y
Today it is worth talking about market
integration because there are no companies
for sale. Now countries talk about „energy
security” and do not want to give up control
over companies.
Heads of petroleum companies admitted that they
had been forced to limit investment, even though
they had not discarded crucial projects, and have
also had to introduce stricter budgetary discipline.
Zsolt Hernadi, CEO of MOL, pointed out that there is
a need for closer and more effective political
cooperation in the area of ensuring gas supplies
Filip Thon, CEO of RWE Polska
It is precisely coal that may make Poland a
very competitive energy producer. The only
problem is that this energy is now produced
using inefficient methods.
because, in his opinion, such a situation in which
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Energy Forum
opinion it will be possible when it is based upon
a system of partner-like balance.
The euro deputy Janusz Lewandowski assured that
new regulations, the aim of which is to mobilise EU
member states to undertake joint action in case of
a gas crisis, are being worked on. However, as he
Michał Szubski, President of the Board,
Polish Oil and Gas Company (PGNiG), Poland
The greatest challenge for us is to help
our customers solve their problems –
even big companies are not able to pay
their gas bills now.
noted, it is the beginning of the road towards
„solidarity”. He admitted that in many cases business
habits will work to the detriment of energy solidarity.
Jacek Krawiec, President of the Board, PKN
ORLEN S.A., Poland
And indeed „energy solidarity”, which is so hard to
include in EU directives and regulations, often stands
in clear opposition to companies” interests. They
What we understand as the Germans and
the Russians’ 'plotting' is understood by
the Germans as a simple diversification of
supplies. Therefore, the sooner we get
connected to the Western European grid
of gas and petroleum pipelines, the better
for us.
prefer to sign a profitable contract with Gazprom
rather than worring about the provisions included in
a resolution of the European Parliament, the best
proof of which is the North Stream, which Gazprom
is building in cooperation with German companies.
The CEO of PKN Orlen Jacek Krawiec said: „What we
understand as the Germans and the Russians”
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„plotting” is understood by the Germans as a simple
diversification of supplies. Therefore, the sooner we
get connected to the Western European grid of gas
and petroleum pipelines, the better for us.”
The course of the discussion proved that today we
need to include energy security in the notion of
European solidarity, which poses a great political
and economic challenge. Poland may play
a particular role here as it is standing at the
crossroads of strategic interests, has a well
developed petrochemical sector and can offer vast
petroleum storage space. We have a coherent
energy policy and the energy sector in Poland
cooperates with the business world. We can
together a model of permanent energy security for
Mirosław Bieliński, President of the
Management Board, ENERGA, Poland
Europe.
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Energy Forum
Between the East and the West:
investment predispositions and
regulations in the electro-energy sector in
Central and Eastern European countries
Few seem to remember that European integration
began with the European Coal and Steel Community,
i. e. that it started in the energy sector. This sector of
the economy where the first European communities
were set up is now at the very end of the integration
process. Insufficient integration limits free exchange
and consequently impedes development of
competition in Europe. Marek Woszczyk, Vice
President of the Energy Regulatory Office (URE) and
moderator of the energy panel started discussion by
presenting predispositions for development of the
European electro-energy sector. After accession to
the European Union, Central and Eastern European
countries became an element of the European
system by joining the Regional Markets. And even
though each of these markets is still different in
character due to the region’s particularities, their
objective is to eventually lead to the creation of
a common internal European market. Today, the
energy sector is lagging a bit behind when it comes
Marek Woszczyk, Vice President of URE
We cannot talk about the energy sector
without making reference to regulations.
Particular regional markets are striving for
a common market at a different pace and in
different ways.
to creating a common market.
Until now the main problem of the European power
sector obstructing full integration has been an
inadequate level of investment. The power sector is
interconnections or national transfer systems used
an infrastructural market and therefore investment
for transit, coupled with no technical possibilities for
plays a key role here. Too little investment in
wireless energy transfer are the main reasons for
developing the capacity of cross-border
inadequate progress in the area of integration, and
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president of the Italian Regulatory Authority for
Electricity and Gas pointed out not only the
dimension of energy policy between the East and
the West but also the necessity of taking the NorthSouth line into consideration. He addressed the
need for social education in the process of
increasing energy efficiency in Europe and the
importance of cooperation between regulatory
Giacomo Goldkorn, Editor-in-chief of
Equilibri, Italy
Italy is not involved in any common
energy policy because it conducts direct
negotiations with Russia, Kazakhstan,
Turkey, Libya and Algeria, and our
energy policy is based on bilateral
relations.
also the key problem from the energy consumers
point of view.
In the first part of the panel discussion moderated
by Marek Woszczyk, Vice President of the Energy
Regulatory Office (URE), problems connected with
the integration of local markets in the European
Oleksandr Chaly, Ambassador Extraordinar y
and Plenipotentiar y, Ukraine
Today, Ukraine has enough gas in its storage
to ensure a continuity of supplies for its
internal market and for transit purposes. The
declaration of the Russian part that gas
transit to Europe depends on the political
situation in Ukraine in unacceptable. It is
also unacceptable for a key Russian
politician to say that we have to take into
account gas transit problems as Ukraine
cannot pay for its gas.
aspect were touched upon. Alessandro Ortis,
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Energy Forum
authorities in this respect. According to the Italian
this one, so the above mentioned „regulatory risk”
regulator the strategic challenges are the „energy
cannot justify lack of investment.
hunger”, sustained development and shaping such
Janusz Moroz representing RWE Polska confirmed
a power market which will not be troubled by the
that investment in infrastructure and increasing
present flaws, such as, for instance: information
security are the biggest issues in the power sector.
asymmetry and lack of transparency.
„These issues are even more important because we
Minister Maciej Woźniak, chief advisor to the Prime
are lagging behind other countries due to the old
Minister of the Republic of Poland concerning
infrastructure,” explained the RWE representative.
energy security issues, pointed out how important
Among the conditions necessary to secure
it is for the countries in the Baltic Region to make
investment, the sector representatives mentioned,
their regional energy systems a part of the energy
systems of the Western European countries. The
discussion was devoted to projects, the aim of
which was to strengthen energy security in this
region and in Europe, to which Poland is
a participant, including, in the first line, activities
undertaken within the framework of the High-Level
Group responsible for Baltic Plan of
Interconnectors, set up by the European
Commission.
The second part of the discussion was devoted to
factors obstructing investment in the European
power sector and to the conditions which would
foster investment. It has been repeated for many
years that investment promises are not realised
because the Regulators (through tariff regulations)
limit the resources enterprises have for such
investment. Some say that, all the same, regulatory
Alessandro Ortis, President of the Italian
Regulator y, Authority for Electricity and Gas
measures lead to worsening economic indicators and
also to increasing the risk (the so called regulatory
risk), which causes deterioration of crediting
conditions for investment in the power sector. Other
analysts of the power sector say it is difficult to find
– In the electricity market we need good
sportsmen, who would compete against each
other; judges – regulators as well as a pitch,
which means a unified market. And the pitch
is yet to be built.
a more secure and profitable business sector than
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in the first line, creating competition, presenting the
He noted that in the context of investment
real value of assets by the regulator and preparing
challenge faced by the power sector and the role of
a stable ground for investment.
the regulator resulting from them, it is necessary to
The Chairman of the Board of Tauron Group, Dariusz
redefine the notion of a market. This market is no
Lubera indicated that the permanently changing
longer the market of manufactures but it is also
market situation makes it difficult and risky to make
becoming the market of customers. The investment
investment decisions and appealed to the regulators
needs and the role of the regulator should be
to perceive investment as a common goal of all the
defined also by the required investment on the
participants to the power market, i. e. both
demand side to enable active demand
enterprises and recipients. „The role of the regulator
management. The role of the regulator is to foster
should be to strike a balance between the interest of
competition in a market defined in such a way.
consumers and enterprises, seeing one common
Summarising the discussion of the energy panel, its
target for them – the possibility for investment.”
moderator Marek Woszczyk emphasised that the
At the end of the discussion the floor was taken by
most important task is to stimulate development of
Robert Zajdler, expert from the Sobieski Institute.
infrastructure.
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Energy Forum
Energy as a factor contributing to the
economic success and political
independence
While discussing the power sector, it is worth
decrease their dependence on import of energy
considering the correlation or the dissonance
resources, mostly from Russia.
between economic success, independence in the
As the former Prime Minister of the Czech Republic,
power sector and even a country’s political
Mirek Topolanek, said, nuclear power plays an
independence. Already the first discussion of the
important role in „pure and independent”
energy Forum led to such conclusions that the
satisfaction of energy needs in the region.
Central and Eastern European countries should
Topolanek supports the power sector and thinks
cooperate and play the role of EU leaders in order to
that „nothing has been done in Europe in terms of
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Richard Morningstar, Ambassador and
Special Envoy for Eurasian Energy, USA
Europe must do all it can to avoid another
gas crisis and cooperate with Ukraine,
whose authorities must reform the energy
sector. We hope that the Russian side won’t
close the gas tap for Ukraine itself. It does
not seem to me that it would be in Russia’s
interest. The last time they did it, they
suffered financial losses but they also made
Europe seriously reconsider viable
alternatives to Russian gas.
energy independence”. In his opinion politics still
influences supplies of energy resources. „Russia
wanted to sell gas, Europe wanted to buy it, Ukraine
wanted to transport it and the pipes were empty,”
he said referring to the last energy crisis. He
indicated that as long as, in case of Western Europe,
gas supplies have been diversified thanks to the
Norwegian deposits, there have been no significant
changes in the situation of the Central and Eastern
Keith Smith, Exper t, Center for Strategic
Europe in over 30 years.
and International Studies (CSIS), USA
The former Prime Minister of Hungary Viktor Orban
Gas supplies through Ukraine are still
very questionable. We have to ask
ourselves why Ukraine is always to be
an issue when we talk about gas transit.
European countries are still avoiding to
make things clear. A solution to an
uncertain situation in the area of gas
supplies is development of the gas grid
used for its transportation.
said that energy consumption will drop in 2010 due
to crisis but, at the same time, the demand will still
be covered mostly with energy derived from fossil
fuels. According to Orban, scattered buyers of the
Russian gas are not powerful enough to defy the
supplier.
In his opinion, in times of crisis the European Union
cannot define its priorities and it has not been able
to deal with the real threat to the energy
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Energy Forum
independence of Central Europe during the energy
crisis at the end of 2008 and at the beginning
of 2009. Due to the weak common energy policy in
the EU, Orban indicated that it is necessary for
Central and Easter European countries to cooperate
as, in his opinion, they are „prone” to energy crisis.
A representative of the American Eurasian Energy
Institute Richard Morningstar gave assurances that the
USA are interested in cooperation with the countries
from Central and Eastern Europe in the area of energy
security. „However, Hungary and other countries of
Aleksandr Babakov, Deputy Chairman
the region have to be leaders in Europe in this respect,”
of the State Duma, Russia
he pointed out. At the same time he indicated that
Russia cannot be accused of abusing its
position in the energy market; Russia is
protecting its own interest and that
should also be understood. Russia, as
much as Europe, cares about regular
supplies of energy raw materials. Lack
of political stability in Ukraine is the
reason why gas brinkmanship will still
take place.
Russia „will always play an important role in this
market.”„It is important that we get involved in joint
projects with Russia but, at the same time, do not give
up our principles, such as diversification and security of
supplies,” said Morningstar.
Alexandr Babakov, Deputy Chairman of the Russian
Duma stated that Russia was interested in
partnership with the European Union, however
Konrad Kreuze, Chairman of the Board of
Directors E.ON Hungar y
Russia and Central Asia have different
understandings of energy issues. In that
region politics is more important than
business, which has to follow its priorities.
The energy policy within the European
Union is based upon the rule of
profitability, which is a prerequisite for
gaining investors, as well as transparency
and credibility.
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According to many conference participants the
power sector is closely connected with the policy of
the governing elites. Especially as such countries as
Russia, Iraq, Iran and China use their energy
resources to exert pressure on foreign policy. Due to
a lack of common energy policy, the European
Union cannot change much in this respect.
Konrad Kreuze, director of E. ON Hungary indicated
that the question of „business or politics?” should be
replaced with a statement „business and politics”.
The gas crisis from January 2009 showed the
influence of the politicised energy sector upon
Viktor Orban, Member of Parliament,
former Prime Minister of Hungar y
Hungary needs an energy strategy in
order to become independent in the
power sector within the next 20 years,
just as we in Hungary, Poland, the
Czech Republic and in Slovakia
managed to become politically
independent from Russia.
there are some problems with Ukraine, through
Alexandros Petersen, Senior Fellow, Eurasia
Energy Center, Atlantic Council of the United States
which the main transportation routes go. In his
opinion, a solution could be the introduction of an
international control over the gas pipeline grid in
this country. „Russia cannot be accused of abusing
its position on the power market. Russia is
protecting its own business and this should also be
The decision makers in Moscow think in
geopolitical categories in order to control the
largest possible part of the European and EuroAsian energy market. Russian energy policy is
not determined primarily by profits but it is
conditioned by national security priorities.
understood,” Babakov said.
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Energy Forum
Imre Martha, Chief Executive Officer,
MVM, Hungar y
Two years ago, the most popular topic
was competition by reasoning that it
guarantees security of supplies. Today,
the need of diversification of supply is
emphasized by increasing the share of
nuclear and renewable energy.
energy security. Russia and Central Asia have
different understandings of energy issues. In that
region politics is more important than business,
Mirek Topolánek, Former Prime
Minister of the Czech Republic
Using nuclear energy not only solves the
problem of carbon dioxide emissions
into the atmosphere but also allows us
to become partly independent of
external sources. It is important because
nothing has changed in the area of
Europe’s energy security for many
years.
which has to follow its priorities. Energy policy
Jordi Pedret, Member of the Spanish Delegation
to the Euro-Mediterranean Parliamentar y Assembly
(EMPA), Congress of Deputies, Spain
The only way to solve disputes is to introduce
international control, i. e. the possibility of
discussing and ascertaining the situation in
an objective manner.
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within the European Union is based on the rule of
profitability, which is a prerequisite for gaining
investors, as well as transparency and credibility.
Imre Martha, General Director at MVM – Hungarian
Power Companies, Ltd. Hungary pointed out that
Justin Dargin, Research Fellow, The
contrary to gas and petroleum, electricity cannot
Dubai Initiative, Har vard University, USA
be stored in large quantities. In connection with
Central and Eastern European
countries should not be completely
dependent on one supplier because in
such a situation they are very vulnerable
in such situations as the last UkrainianRussian crisis. Poland and other CEE
countries will have to invest in gas
infrastructure if they want to diversify
their sources of energy.
the above, the sector of electricity distribution is
always most vulnerable to political turmoil in the
power sector. He reminded how two years ago
a lot was said about competition, and that it would
guarantee security of supplies. Today the need for
diversification of raw materials is emphasised by
increasing the share of nuclear and renewable
energy.
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Energy Forum
On the way to European energy
security: what to expect from the
European Union?
Serge Poignant, Deputy Chairman of the
Committee on Economic Affairs, in French National
Assembly, said that each country is independent of
its neighbours. Europe is facing such difficulties as
Germany and Italy in 2006. Then we had the gas
crisis in January 2009 between Russia and Ukraine
showed that the cut of the gas supply is possible.
France and Germany diversify their sources and
were not as affected of this crisis, as other countries,
like: Bulgaria or Hungary. The construction of the EU
has to put together the resources and common
interests. Europe has to create a legal background
Daniel Freifeld, Director of International
Programs, Center of Law and Security, USA
for the common energy policy. We have to increase
the production of energy in Europe. We do use
more than we produce. France is trying to increase
the production of nuclear energy production,
because renewable energy is not enough.
Jose Eduardo Martins, Member of the Parliament of
Portugal said that we should have free access in
energy policy on three levels: competitiveness,
Now the Congress introduced a good bill to
reduce the CO2 emission and the
administration very much look forward to
Copenhagen to prove that the US is serious
about the climate change issues. The
administration understood that showing empty
handed in Copenhagen would not be
reasonable.
sustainability and security. The future needs a clear
definition of sustainability. In european security we
have a long term discussion and long term trends.
the fact that liberalization of the gas and oil market
Vasily Likchachev, Deputy Chairman of the
should not wear features of discrimination. Russia is
Committee on International Relations, Council of
willing to diversify its energy production. Brussels
Federation, Russia, pointed out that Putin and
by signing the agreements with Turkmenistan and
Chirac 10 years ago opened a dialogue on energy.
Azerbaijan shows that the EU wants to force the
The problems of cooperation in this field are: the
implementation of its legal standards. Viacheslav
presence of Russian investors on the EU market and
Kniaznytskyi, Ambassador-at-Large for Energy
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Kniaznytskyi said that european legislation is
implemented in Ukraine and Russia should not be
angry because of that. Companies should come to
the Ukrainian market, not countries. Everyone able
to compete in this market is invited to come, in
order to modernize our system. We need to talk
about consumer power, not a supplier one.
Kjell Aleklett, Professor, Uppsala University, Sweden,
said that the Europe gas imports must increase
Serge Poignant, Deputy Chairman of the
Committee on Economic Affairs, National Assembly,
France
We must invest in nuclear energy, such as
AREVA. We have to secure European
networks. The necessary of energy supplies
which becomes from outside Europe
solidarity between the 27 European states,
which is less in time of crises.
Security, Ministry of Foreign Affairs, Ukraine thinks
that EU has done a lot for Ukraine, especially in the
energy filed. We had very productive relations with
Jose Eduardo Martins, Member of
Parliament, Por tugal
the EU in the last years in the energy and transit
field. Lessons we have to learn: it should be solidary
actions – we try to establish a framework of how to
cooperate. Ukraine was always was open for
solidary actions and this is the most important
value to take into consideration in crises situations.
The cooperation with the EU means much for us:
direct contacts and transparency of the operators.
I am not sure that the Lisbon strategy has the
instruments it have a secure energy policy.
Why do we need a common energy policy? We
should have free access in energy policy on
three levels: competitiveness, sustainability
and security. The future needs a clear
definition of sustainability. In European
security we have a long term discussion and
long term trends.
Ukraine has to reform its energy system.
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Energy Forum
Viacheslav Kniazhnytskyi,
Ambassador-at-Large for Energy Security,
Ministr y of Foreign Affairs, Ukrain
dramatically. In Western Siberia we can find 90% of
James Atkins, Chairman of Verits
the Russian production. The critical thing for the
Environmental Finance, UK
future of Europe is the Yamal Peninsula and its
Asked a question what is reasonable to do in
order to have a positive influence on climate
change. The truth is that we have a choice:
either to take an effective action or do not.
development. But the Yamal development delayed
five years. Politicians in Europe do not understand
this problem. We want to say that Russia is not our
enemy, Europe should understand that and say
„Russia welcome to make a future with the EU”.
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Impact of the financial crisis on the
energy sector
Key speaker Vladimir Peshevski, Deputy-president in
Charge of Economic Affairs, Government of the
Republic of Macedonia, said that stable energy
supply is the precondition for healthy energy
market development. Energy companies experience
a number of difficulties. The results of the financial
crisis are visible in all the countries not only the
OECD countries. Now there are numerous openings
for renewable energy. The projections are that in 10
Claude Mandil, former Executive
years 25% of the energy is going to be produced
Director of the International Energy Agency,
France
using unconventional sources. What is also very
important is energy diversification versus strategic
partnership. The balance needs to be kept.
Poland, Serbia, Switzerland, Tajikistan,
Michal Krupinski, Alternate Executive Director of
Turkmenistan, Uzbekistan thinks that the CEE
the World Bank for Azerbaijan, Kyrgyz Republic,
region has a lot to share when it comes to the
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lesson we have taken over the last 20 years
including energy architecture. At present global
economy has contracted for the first time on
record. The emerging market spreads have
narrowed since the beginning of the crisis. There
have been a sharp downturn in private flows and
syndicated bank lending dropped sharply in 2009.
Large external financing gaps would require
Adalbi Shkhagoshev, Member of
Parliament, State Duma, Russia
The global crises has impacted the CEE
countries but also particullary the economic
situation in Russia. Talking about the EU
members the majority of the Russian experts
are talking about diversification and
restructuring.
Marko Mikhelson, Chairman of the EU Affairs
Committee, Parliament of Estonia
The issue of interconnections between countries
has not appeared now. Already in 2006 we
dealt with breaks in oil supply from Russia via
Belarus. Currently in negotiations between the
European Union and Russia we have to do with
the issue of supply and transit guarantees. Not
only political factors should be important in
energy relations in Europe, but also
transparency of intermediaries and mutual
obligations between gas trading companies.
greater involvement on lenders on the IFIs. The
matter of fact is that ECE region was stuck the most
by the crisis. Infrastructure constrains must be
addressed to stay competitive.
Mark O. Bettzuge, Director of the Institute of
Energy Economics, University of Cologne,
Germany, said that the economic crisis has helped
gas crises and prevented Europe from even more
severe gas crisis. It was one fortunate effect on the
gas crisis. The price situation on gas market
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effected by the financial crisis. Oil price and gas
price – there is a tremendous difference between
these prices as a result of the financial crisis. In
Europe, regions look out for competiveness in the
energy sector. For European gas, the industry is on
the crossroad now.
Enno Harks, senior Fellow at Large, Global Public
Policy Institute, Germany, thinks that, financial crisis
has had enormous effect on the energy sector. Any
impact on investment? Yes, especially on oil
Gyorgy Szabo, Chairman of the Board, Falcon,
Hungar y
investments. Anyway we do have more oil security
than before – sort of strange effect of the financial
crisis. There is now the issue of transparency in the
oil market. There are only 28 countries that carry
out transparent policy with energy issues,
reporting all the required data to IEF. Energy
independence is technologically possible but
Regional cooperation is very important for
Growth and innovation, especially in the
Central-European region. As an example of
this type of dialogue and cooperation, we can
have a look at a Hungarian-Romanian-Czech
initiative concerning the Cutting-edge laser
sciences in the EU.
politically it is a disaster.
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Energy Forum
Is the power sector attractive to
investors?
Investment in the power sector requires long-term
foreign investment requires specifying an exact
financial outlay. The power sector, and in particular
location of the investment, transparent law and
renewable energy resources, are prospective
stabilisation. A predictable business environment is
investments, however investors fear the political risk
necessary for energy sector development and that
involved.
is why politicians should do their best to eliminate
Nuno Ribeiro da Silva, Head of the Endesa, thinks
the discrepancies between their promises and
that it is not worth investing in countries where
actions. Da Silva thinks that today the actions of
there is no political stability. In his opinion direct
investors active in the power sector resemble the
Grzegorz Onichimowski, President of the Board, Polish Power Exchange, Poland
One of the main reasons for poor liquidity in the market is lack of privatisation. It is
hard to imagine a market in which all the players have the same owner.
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actions of a person gambling in a casino, as
changing prices or imprecise long-term
requirements regarding carbon dioxide emissions
make it difficult to take rational business decisions.
Despite the current crisis, legislators should treat
the energy sector as their priority because it has to
be competitive. Promoting renewable energy in
a populist manner has to be accompanied by
realistic promises and not by contradictory actions,
such as creating special tax relief schemes for fossil
fuels.
Nuno Ribeira da Silva, President,
ENDESA Por tugal
The rules are changing, the role of
regulators in the energy market is
changing, there are no set prices or
limits for carbon dioxide emissions.
How can we invest in such conditions?
Unfortunately, Josef Auer, economist specialising in
investment projects at Deutsche Bank, also expressed
a great deal of criticism regarding this issue and said
that there are many negative examples of investment
Michal Krupinski, Alternate Executive
Director for Azerbaijan, Kyrgyz Republic,
Poland, Serbia, Switzerland, Tajikistan,
Turkmenistan, Uzbekistan, The World Bank
We will have to face up to a gap in
external financing of the power sector
in the developing countries reaching
800 billion dollars for all the
developing countries and to a gap of
300 billion dollars only for Europe and
Central Asia.
in Central and Eastern Europe, which may be due to
lack of stability, unfavorable economic conditions in
this region or lack of protection for foreign investment
(no reliable court proceedings, transparent
regulations and an oligarch system). Auer strongly
emphasised that it is important not only to attract
investors but also to ensure investment protection.
Equally important are trust, common goals, strong
and transparent rules and long-term strategy, rather
than a merely populist approach realised by
undertaking short-sighted actions.
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Energy Forum
Josef Auer, Senior Economist,
Deutsche Bank Research, Germany
Capital will always find a
place to go, and recently
Central and Eastern
Europe has shown that it
is not a 100% certain
place for investing in the
power sector.
According to Grzegorz Onichimowski, President of the
will be missing. Krupiński explained that he meant
Board at the Polish Power Exchange, financial investors
new EU member states, other European and Central
have bigger opportunities than industry investors
Asian countries. Such a gap requires, in his opinion,
when it comes to invest in the power sector.
greater involvement on the lenders” side and due to
Michał Krupiński, deputy Executive director in the
the crisis we are dealing with a credit crunch.
World Bank, forecasts poor prospects for financing
Krupiński stated that the sector providing
investment in the power sector. In his opinion the
financing for the power sector constitutes up to
„gap” in external financing of the power sector in
one third of the total global financing by banks, as
the developing countries will amount to 800 billion
a modern electrical and energy infrastructure has
dollars. As for Europe and Central Asia it is
become a prerequisite for economic
estimated that investment worth 300 billion dollars
development.
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The role of alternative sources of
energy
The gas crisis, growing petroleum prices and
savings caused by the financial crisis have put
renewable energy and changes in energy
management systems forced by the need to save
energy in an even brighter limelight than ever.
„The shape of today’s energy system is the result of
the decisions made over a century ago and it was
created according to the fundamental rule saying
that energy is produced in order to satisfy
Laszlo Varro, Senior Vice President for
Strategy Development of MOL Group, Hungar y
Tomasz Zadroga, CEO of PGE
While Sweden has to reduce 10 dg of
carbon dioxide per kilowatt of energy used,
Poland has to reduce over 90 dg. As
a result, taking into consideration costs of
production and permits, an average energy
consumer in our country has to pay double
to achieve this goal.
We should be worried about carbon
dioxide emissions, because, contrary to
the non-existent energy crisis, climatic
problems do exist.
consumers” needs. The new supply structure based
upon such changeable sources as, for instance, the
strength of wind, geothermal factors or solar energy
will require a much more flexible energy system
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Energy Forum
and a new approach to the energy consumer. The
Sustainable Energy (Risoe) in Denmark. However,
new system should combine power plants,
investors demand a certain element of
industrial infrastructure, enterprises and households
predictability i. e. defining long-term goals for
using IT systems, which would continuously
winning energy from renewable resources and
communicate with one another and define the
stabilisation of energy policy.
energy demand of particular users,” explained
Vladimir Peshevski, Deputy Prime Minister of the
professor Hans Larsen, director of the System
Republic of Macedonia responsible for economic
Analysis Department in the National Laboratory for
affairs, said that there are plenty of possibilities to
Konstantin Simonov, Director General of National Energy Security Foundation, Russia
The Russian political elite is anxiously awaiting the summit in Copenhagen, but at the
same time, there are many questions that need to be answered. First of all, why is carbon
dioxide the main enemy of humankind and why does reducing carbon dioxide emissions
seem to be the key solution? Why don’t we first comply with the provisions of the Kyoto
Protocol and only later start thinking about a new agreement?
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develop methods of winning renewable energy
sources. Konoplyanik also emphasised that costs
today. In his opinion, in 10 years” time 25% of
of investment in intelligent infrastructure for
energy will come from unconventional sources.
energy systems are so high that renewable energy
Andras Pentek from the Hungarian MOL concern
sources will not diminish the role of traditional
said that climatic changes and policies aimed at
sources of energy.
reducing carbon dioxide emissions in the EU
Participants of the energy debates devoted to
determine technological development of
renewable energy shared the opinion that investors
renewable energy sources, however the investment
demand a certain amount of predictability i. e.
process in this sector is still too slow.
setting long-term goals for winning energy from
Andrey Konoplyanik, advisor to the board of
renewable sources and stabilisation of energy
Gazprombank, pointed rather to more
policy. However, they expressed their doubts about
technological obstacles in development of
whether such stabilisation was possible as long as
infrastructure for winning energy from renewable
energy supplies are an element of politics.
resources. In his opinion, nobody knows how to
Eduardo Oliveira Fernandes, President of the Porto
store and gather larger amounts of such energy
Energy Agency from Portugal is convinced that in
and how to protect oneself against the
the year 2100 90% of the energy produced and
changeable character of supplies from these
used by municipal areas will come from renewable
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Energy Forum
sources, and the rest from traditional fossil fuels.
Today, the situation looks quite different. In his
opinion, we should remember that energy
efficiency and energy saving are the key categories
when it comes to green future. Energy should be
produced and used locally, and energy resources
are already now managed in municipal areas, as
buildings store most energy. That is why we need to
further perfect thermal insulating technologies in
the construction industry in order to reduce energy
Brian Binley, MP, Chairman of the Parliamentar y
Enterprise Group, United Kingdom
losses. Fernandes emphasised that there is no other
option in the future other than resorting to
renewable energy sources and all the decisions
Clean coal technology may play an important
role in energy policy development. It is
a modern solution which should be
implemented in Europe on a broad scale.
relating to the power sector, which are made now,
have to account for this fact.
His opinion is shared by Hans Joachim Ziesing,
Senior Advisor at the Ecological Institute in
Germany. He claims that energy efficiency can be
achieved only by using renewable energy. The
Germans” target is to double their energy
capacities by 2020, but, in order to achieve this,
they have to develop the renewable energy sector.
Ziesing also pointed out that we not only need to
deal with the power sector but also with the
construction sector (energy saving and selfsufficient houses), as well as with transportation, as
they are intertwined with one another when it
comes to increasing energy efficiency. However,
Ziesing indicated that implementation of the new
policy on renewable energy is difficult due to the
conflict of interest of the numerous entities
Eduardo Oliveira Fernandes,
President, Energy Agency of Por to, Por tugal
operating in this sector.
The region of Central and Eastern Europe also has
the aim of achieving the highest possible energy
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Hans Larsen, Director of Systems Analysis Division, Risø – National Laborator y for Sustainable Energy,
Technical University of Denmark
efficiency. Peter Kaderjak, Director of the Chairman
of the Energy Regulators Regional Association from
Hungary, said that the renewable energy sector was
created in Hungary only a few years ago, whereas
the Germans are the leaders in this area. We need
higher subsidies and stronger stimuli in our region
for this sector to develop. There is no potential for
solar energy in Hungary, solar panels and solar
energy are still very expensive. However, we are
introducing new wind electricity generators. In his
opinion very high subsidies for energy coming from
fossil fuels (coal and gas) are a significant barrier for
renewable energy both in Hungary and in most of
the other CEE countries. Kaderjak pointed out that it
Andrey Konoplyanik, Advisor to the
is easy to make political declarations but no
Board, Gazprombank, Former Deputy Secretary
General of the Energy Charter Secretariat, Russia
government, as for instance in Poland, is ready to
lay miners off and close mines down.
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Energy Forum
Challenges for nuclear energy
development
Another source of energy which has not been
allows countries to become at least partly
used to its fullest potential yet – just as in case of
independent from external energy sources. In his
renewable energy sources – is nuclear energy.
opinion it is particularly important as nothing has
During the first plenary session Mirek Topolanek,
changed in the area of energy sovereignty in
former Prime Minister of the Czech Republic said
Europe.
that nuclear energy equals energy independence.
According to Joachim Pfeiffer, Bundestag member
Topolanek emphasised that using nuclear energy
and spokesman for energy issues of the German
not only solves the problem if reducing carbon
CDU Parliamentary Group, nuclear power plants
dioxide emissions into the atmosphere but also
will be most efficient among all the other types of
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power plants built after 2010 and later, and it
won’t change in the near future.
Gerard Cognet, representative of Commissariat
a l'Energie Atomique (CEA) for CEE countries said
that the key challenges when it comes to nuclear
technology development, are: guaranteeing
access to uranium deposits, and waste
Thomas Epron, Central Europe & Near East Area
Director, AREVA, France
Gerard Cognet, representative of
Nuclear energy meets the demand for energy
in France in 80 percent. Nevertheless,
construction of nuclear power plants requires
huge financial outlays, which must be frozen
for years before they begin making profits.
Europe does not have a comprehensive
concept for the future of nuclear power
engineering. The EU does not have any special
support project allocated for this purpose.
Commissariat a l'Energie Atomique (CEA) in
France for Central and Eastern Europe
Nuclear energy has two fundamental
advantages: first of all, it does not
cause climatic changes and second it
cannot become a pawn in geopolitical
games.
management. These problems may be solved by
the ongoing work on fourth-generation nuclear
reactors, the capacity of which will be much
higher than that of the presently-implemented
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Energy Forum
reactors. In his opinion nuclear energy has two
fundamental advantages: first, it does not cause
climatic changes and second of all it cannot
become a pawn in geopolitical games, contrary
to, for instance, gas which is supplied to Europe.
Thomas Epron, Development Director for Central
Europe in the French AREVA company, said that in
France 80% of energy demand is covered by
nuclear energy. However, building nuclear power
plants requires immense financial outlay, and the
money has to be frozen for many years before it
eventually starts bringing profits. At present,
about 50 nuclear reactors are being built in the
world. In his opinion Europe lacks a complex
concept for the future of nuclear energy and the
European Union does not have any special
supporting project in this area.
Professor Gilbert J. Brown, Director of the Nuclear
Energy Scheme at the University of
Massachusetts, stated that the USA has the
longest traditions in the area of nuclear energy. At
Joachim Pfeiffer, Member of German
Bundestag, Energy Spokesman of CDU
Parliamentar y Group, Germany
Nuclear power plants will be the most
profitable of all power plants built
after 2010.
present 104 nuclear reactors cover 20% of the
energy demand in the USA. The rest of the
demand is covered by energy derived from mostly
provide components necessary for production of
coal (48%) and gas (25%). In his opinion nuclear
nuclear energy and the procedure for issuing
energy is the only solution which can replace
decisions by the supervisory authorities, the role
fossil fuels on a large scale.
of which is to ensure safe use of nuclear energy, is
British professor specialising in nuclear energy,
too long. It is also still difficult to obtain financing
Stephen Thomas from the University of
for such long-term investments.
Greenwich, did not share that point of view. He
According to most of the participants in the
claimed that we cannot talk about any
discussion nuclear energy is not developing as
renaissance of the nuclear idea as the nuclear
fast as it should and the main obstacles are legal
energy sector has been badly affected by the
regulations, inadequate financial means and
economic crisis, we lack the skills and means to
frequent lack of social approval.
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Global Gas Report
When presenting the Global Gas Report, Thierry
Bros, Senior Financial Analyst of the Gas Market at
the Société Générale Group said that the main way
to avoid a gas crisis is to maintain adequate stocks
of gas. Many countries excuse themselves with very
high costs of storing gas. However, if we examine
the real costs, it turns out that they are not that high
and amount to merely 2% of the final fee. Another
unfavorable phenomenon is that the main
company storing gas on the old continent is
Gazprom, whereas Europe needs many different
strong entities operating in this market segment.
Today in Europe, there is only one company which
thinks that storing gas is the best method of
avoiding a future gas crisis. It is Snam Rete Gas, an
Italian company, which, since the beginning
of 2009, has kept stocks of gas of 97%. Large stocks
of gas also secure against problems in obtaining
energy from renewable sources.
Thierry Bros indicated that we need transparency in
Reinhardt Mitschek, Managing Director,
Nabucco Gas Pipeline International GmbH, Austria
the gas sector, as it would make it more efficient. He
stated, however, that such a policy is not popular in
Europe as governments of many countries consider
it detrimental to competition in the market.
A counterargument here could be the market in the
United States, where the above mentioned data
constitute a public good.
While discussing investment in energy projects
Thierry Bros declared himself in favor of the
Nabucco project because, as he claimed, there is no
Unlike any other project, Nabucco offers the
possibility to transport 16 billion cubic
metres of gas to other countries. This pipeline
will be a spine for other connections, for
instance from Bulgaria to Greece, from
Romania to Serbia, from Hungary to Croatia
and Slovenia, from Romania to Ukraine.
When we have completed Nabucco, there will
be plenty of new possibilities for further
development of the gas grid and gas
transportation.
certainty about what gas will flow in this pipeline.
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Energy Forum
He also has serious reservations about the method
of financing this, in his opinion, uncertain
investment, with public money because, as he
pointed out, it could be a private investment.
In the meantime the managing director of the
Nabucco pipeline project, Reinhard Mitschek,
expects that by the end of this year, future transit
countries (Austria, Romania, Bulgaria and Turkey) will
have ratified an intergovernmental agreement on
Maximilian Teleki, President,
building a pipeline which is to connect Europe
Hungarian American Coalition, member of
International Board and Constellations Energy
Institute (CEI), USA
mostly with the Caspian deposits. The estimated
cost of the project amounts to 7.9 billion Euro and its
financing is at present being negotiated with,
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among others, the European Bank for
which is to be completed in 2014, to be a reasonable
Reconstruction and Development. Construction of
project, which will bring gas to Northern Germany,
the Nabucco pipeline, the length of which is 3,300
the Netherlands and England.
kilometres, is scheduled to begin in 2011 and finish
The report commentator Ole Gunnar Austvik,
in 2014. Its industrial capacity is to amount to 31
Research Expert from the Norwegian Lillehammer
billion cubic metres of gas a year. Nabucco is
University College, thinks that the only way to
a flagship project of the EU countries, which will
prevent gas crisis in the future is to gradually replace
make Europe independent of supplies of the Russian
fossil fuels with renewable, alternative energy
gas. The head of the project Reinhard Mitschek has
sources, and also by increasing energy efficiency,
said that this investment is much more economically
which is still in its fledgling stages. One day it may
relevant than the South Stream, whose estimated
turn out that the key gas suppliers have run out of
cost is three times as high as the cost of Nabucco. He
this raw material and this is why we should think
also says that he considers the Nord Stream pipeline
about how to avoid such a situation now.
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Energy Forum
Contents
Preface
Zygmunt Berdychowski
3
Address by László Sólyom
President of the Republic of Hungary
4
Energy for Central and Eastern Europe
A word from the president of the Energy Regulatory
Office (URE) Mariusz Swora
5
European solidarity versus energy security
8
Between the East and the West: investment predispositions
and regulations in the electro-energy sector in Central
and Eastern European countries
12
Energy as a factor contributing to the economic success
and political independence
16
On the way to European energy security: what to expect
from the European Union?
22
Impact of the financial crisis on the energy sector
25
Is the power sector attractive to investors?
28
The role of alternative sources of energy
31
Challenges for nuclear energy development
36
Global Gas Report
39