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Energy Sector

Regional Energy Indicators:
Electricity Generation (TWh) 440.7
Electricity Consumption (TWh) 411.3

Energy Consumption per Capita (kgoe/cap) 1786
Energy Import Dependence (%) 61%
CO2 Emissions per Capita (kg CO2/cap) 5231
Note: kgoe – kg oil equivalent

The Danube and the Energy Future of the Balkans

By Vlad Popovici

The European Union Commission has adopted in early December the EU Strategy for the Danube Region. This new regional strategy focuses, among other things, on energy aspects, and is more than relevant for South-East Europe, as six of the fourteen countries covered by the new macro-strategy are in this region.

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The Danube River was for centuries one of the most important trade routes connecting Central Europe to SE Europe, and Europe in general to other regions, such as the Caspian region or the Near and Middle East. It provided cheap transportation and an avenue for not only economic, but also cultural, religious and political exchanges.

During the 20th century, however, the Danube lost its interregional corridor status, becoming more of a closed, impenetrable border, sometimes between countries, and sometimes between the opposed ideological camps of the Cold War. River transportation significantly declined and cooperation initiatives focused on the Danube – in business, culture, tourism, the environment and so on – virtually stopped.

EU Strategy for the Danube Region

The European Union launched in 2009 its first macro-regional strategy targeted at the Baltic Sea Region.  The strategy’s main objective is to create a long-term development and cooperation framework for the region. Encouraged by the positive reaction of the region’s governments, businesses and general public and by the strategy’s early implementation success, the EU wants to use a similar policy approach for the Danube region.

In June 2009, the European Council asked the EU Commission to prepare a strategy for the Danube region. The Danube region includes, from the EU’s perspective, the entire river’s basin: Germany (Baden-Württemberg and Bavaria), Austria, the Slovak Republic, the Czech Republic, Hungary, Slovenia, Croatia, Serbia, Bosnia and Herzegovina, Montenegro, Romania, Bulgaria, the Republic of Moldova and Ukraine ( but only the Ukrainian regions that have tributaries of the Danube).

Eight of these fourteen countries are member states of the EU. Six of them are in the Balkans – Croatia, Serbia, Bosnia and Herzegovina, Montenegro, Romania and Bulgaria. The main objective of the strategy is to create a sustainable long-term development and cooperation framework in the region. The strategy has four main pillars (PDF):

  • to improve connectivity and communication systems (covering in particular transport, energy issues and the information society);
  • to preserve the environment and manage natural risks;
  • to reinforce the potential for socio-economical development;
  • to strengthen the local governance systems and improve public security in the region.

The first step in developing the strategy was to launch a public consultation in February 2010, aimed at defining the main challenges in the region, as well as the priority issues to be addressed and the most important projects to be promoted and financed along the four mentioned pillars.

In parallel with the public consultation, the EU organized a series of conferences and debates in different cities along the Danube that ended in June 2010. As part of the new EU Strategy for the Danube Region and based on the information gathered during these two steps, the European Commission has prepared a Communication (PDF) document and an Action Plan (PDF), which were adopted by the Commission on 8 December 2010. Implementation of the Strategy will start following endorsement by Member States during the Hungarian Presidency of the EU around April 2011.

The Danube Strategy and the Energy Sector in the Balkans

Energy was mentioned as a priority in all the country contributions and position papers that were sent to the Commission during the information-gathering stages. Moreover, energy is not only a small part of the above-mentioned connectivity and communication pillar of the future strategy – without a sustainable energy sector in the region, none of the four strategic pillars can hold.

Focusing on the energy sector of the six Balkan countries that are part of the Danube region initiative, we discover a very diverse landscape, partially resulting from the economic and cultural diversity of the region, as well as different historical evolutions. However, some common features are noticeable among the six countries, be it an EU member country like Bulgaria or a non-member like Montenegro.

All these countries are increasingly dependent on primary energy – gas, oil, coal – or power imports and sometimes – as it is the case for natural gas – these imports come exclusively from one source.

Domestic production of fossil fuels – oil, gas, coal, uranium, mainly from conventional sources, is non-existent or in a state of terminal decline, while the development of renewable energy resources is generally still underdeveloped.

Power and heat generation facilities in the region, most of them built four or five decades ago, are obsolete, inefficient and highly polluting. A large part of the region’s energy transportation and distribution infrastructure – pipelines, power lines – has reached or gone beyond its design life and is in dire need of major rehabilitation or replacement.

In the same context, the national energy transportation networks have few interconnections and most of them are not bi-directional (do not allow reversible energy flows), which makes them vulnerable to supply crises like the winter gas crisis of early 2009 caused by the Russian-Ukrainian gas transit conflict.

The Balkan countries of the Danube region still have relatively low energy efficiency in all the sectors – from industry to household energy consumption. Energy poverty, the lack of or insufficient access to affordable energy (power and heat), is still a widespread social phenomenon in the Balkans, and is mainly caused by either low levels of income that negatively impact the energy affordability or by the lack of power and heat distribution networks in certain areas. Finally, other important issues are the general lack of cooperation in energy matters among the countries in the region and the absence of functional regional energy markets.

Opportunities for the Future

Although one of the requirements for the new EU Strategy for the Danube Region is to be budget-neutral – that is, to use the existing EU financing programs – and to avoid creating new institutions, the strategy can encourage better coordination among the participating countries for the use of the existing financing schemes and create momentum for existing regional and national projects.

In the energy sector, the six Balkan countries covered by the future strategy for the Danube region have the chance to define and promote their priority energy projects, to be developed at a national level or in cooperation with other countries.

The contribution papers sent by the Balkan countries to the EU Commission in preparation for the Danube region strategy highlight the priorities of the energy sector in this region. The two Serbian contribution documents list a series of energy projects such as developing a new hydropower plant on the Danube: Djerdap III (Djerdap/Porţile de Fier I and II have been built in cooperation with Romania); a new hydro-power plant in Novi Sad; the construction of the Banatski Dvor underground gas storage facility; the rehabilitation and development of the gas distribution network; the construction of an pipeline transportation network for oil products, as well as the construction of the regional Pan-European Oil Pipeline (PEOP).

Croatian energy priorities listed in the preliminary contribution document include: increasing the security of energy supply by developing the domestic production of primary energy; the development of interconnections with neighboring countries (such as the Ernestinovo-Pecs power transmission line or the Donji Miholjac-Dràvaszerdàhely gas pipeline, both of them connecting Croatia to Hungary); the use of renewable sources of energy, and increasing energy efficiency in the public sector.

Bulgaria is interested in jointly updating with Romania the assessment of hydro-power potential for the Danube segment that the two countries share; developing energy network interconnections with neighboring countries (a Bulgaria-Romania gas interconnection is under development) and regional energy transit infrastructure (Bulgaria is currently discussing its participation in regional pipeline projects such as Nabucco, South Stream and the Burgas-Alexandroupolis pipeline; expanding the power and gas distribution networks; increased use of renewable energy sources, as well as improved energy efficiency.

The first Romanian contribution document (PDF) lists priorities such as the development and expansion of the energy infrastructure; the promotion of energy production from renewable sources; the continuation of the Romanian nuclear energy program, and support for the thermal rehabilitation of buildings.

Romania also has a special interest in the creation of a regional energy market. In this context, the country’s proposal of including the Energy Community in the EU Strategy for the Danube Region is very interesting.

The next 18-24 months will prove critical for the success of the new EU initiative for the Danube region. For the Balkans, this is a unique opportunity to enhance regional cooperation between EU member countries and countries still outside of the EU, and to promote the most important projects for the development of the regional energy sector.

As the EU starts sanctioning some or all of these energy priority projects, significant short and long term business opportunities will be created in the Balkans, both for local companies and foreign investors.

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