On 16 October 2015 the Central European Policy Institute (CEPI) hosted a debate on the current challenges in energy security for the EU and the Visegrad region. According to the EU Energy Security Strategy adopted last year, in the long term perspective, Member States should reduce their dependency on particular fuels, energy suppliers, and supply routes. In addition, EU countries should continue to develop well-functioning internal energy market which, in view of the EU Commission, supports and will eventually ensure the overall energy security. In the context of these overarching EU goals, CEPI workshop addressed the current situation in individual Visegrad Group countries, some specificities of the region with the focus on gas and electricity markets as well as prospects for regional cooperation.
Kristián Takáč, Former State Secretary at Ministry of Economy of Slovak Republic and Associate Fellow at CEPI, and Tomasz Daborowski, Senior Fellow at the Central European Department of OSW, Warsaw, briefed the discussants on the state of affairs in gas and electricity security in Slovakia and Poland, respectively. CEPI’s Director Milan Nič mediated the debate and delivered the Hungarian perspective prepared by Péter Kaderják, Director of the Regional Centre for Energy Security (REKK) in Budapest, who could not attend in person.
In the area of gas supply, the main challenge is the insufficiency of supply diversification and the resulting vulnerability to Russia. The potential implementation of the proposed Nord Stream 2 (NS2) project is an issue of great concern. Planned to be implemented by 2020, NS2 will deliver Russian gas directly to Germany and will likely be coupled with a parallel cut of Russian gas supplies through Ukraine to Central and Eastern Europe. This development might seriously undermine the gas market diversification policies that have been recently implemented by some V4 countries – most notably Slovakia and Hungary. There is already sufficient capacity and flow available from Russia to Germany. The proposed Nord Stream pipeline extension is driven by political purpose to cut the existing Brotherhood pipeline via Ukraine, with huge negative impact for the Visegrad region. Experts present at the workshop agreed that a joint analysis to better understand the likely impact of the NS2 project on V4 diversification and supply security policies would be extremely beneficial.
According to Alexander Duleba of the Slovak Foreign Policy Associations, in order to maintain the viability of the current routes via Ukraine, Visegrad countries should invest more into long-term modernisation of Ukraine’s gas market and business environment. The Nord Stream 2 project, if implemented, would have even more profound economic impact on some other countries in Southern and Eastern Europe that are more vulnerable. Daniel Czetö of the Eustream, major gas-transmitting company in Slovakia, hence stressed the need to utilize the existing capacities more efficiently and use available funding to further develop energy infrastructure in Central and Southern Europe.
With regard to electricity, each V4 country has different challenges. The climate change related phase-out is the biggest challenge for Poland, where almost 90% of electricity is produced from coal. Poland is also not connected to the electricity market of its southern neighbours. The three other Visegrad countries have been part of a very successful day-ahead electricity market coupling project since 2012, with Romania joining in 2014. The success of the market coupling makes it imperative for the V4 to further improve cooperation and to avoid policy interventions that could undermine regional electricity market integration. This goal is being hampered by rivalry between national champions over power generation assets across the region, which are becoming less and less profitable.
The conclusions of the workshop will be further elaborated in a joint paper prepared by the main discussants and presented during the TATRA Summit conference on 4 – 6 November 2015. A potential follow-up paper will address specific challenges arising from the proposed Nord Stream 2 project and develop corresponding policy recommendations for the V4 countries on the EU level.
The event was supported by Wilfried Martens Center for European Studies.