The EU aims to reduce dependency on particular fuels, energy suppliers, and supply routes and to develop a well-functioning internal energy market. Our authors analyse the main current challenges in achieving these goals and discuss the role of the V4 countries in increasing EU’s energy security. Although V4 countries face different challenges, the prospects for cooperation are considerable. The paper offers policy recommendations that would help policy-makers address the current challenges and strengthen the energy security in the Visegard region and the EU as a whole.
In our view, the security situation of the gas sector has improved considerably after the 2009 gas crisis. Through implementing series of important infrastructure projects, interconnection between the V4 countries and with the liquid Western gas market is better than in the past. Some experts even speak about “quiet gas revolution” in CEE. These earlier fragmented markets are slowly integrating into one bigger regional market and the technical harmonisation processes led by ENTSO-G are pushing this process forward and as is continuing implementation of the North-South Gas Corridor projects. We believe, however, that this positive development could be disrupted by substantial modification of the traditional transit routes, especially through the Nord Stream II implementation.
Situation in the CEE power sector is a reflection of broader EU trends, stemming mainly from the policies promoting de-carbonisation of the energy sector. For Poland and Hungary, that in larger extent rely on coal, respectively gas, the transformation of the energy mix is likely to be more difficult than for Slovakia and the Czech Republic. The problem of high power end-user prices needs to be address so as to preserve the competitiveness of the V4 industry. In this context, V4 governments should refrain from action that undermine competition at the energy market and, therefore, aim at abolishing regulation of the retail prices. Low wholesale prices are a problem too but it is not solvable at V4 level only. Would the energy market conditions further deteriorate (energy-only market would collapse totally) and introduction of national capacity mechanisms becomes unavoidable, we argue for strong V4 coordination of these mechanisms and if possible, establishment of a common capacity market. This process could be helped by the development of common intra-day market that could build in the success of the day-ahead markets. Least but not least, V4 countries should continue investing in the development of the distribution and transmission grids. In this context, finalisation of the Slovak-Hungarian interconnections is of particular importance.
You can download the full-text of the analysis here.