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The New Europe and Sustainable Energy

By Svitlana  Pyrkalo

Industrial district scene

Energy access is vital for economies and societies. No country – however rich – is immune from price or supply shocks. The EU8 countries – Poland, Latvia, Lithuania, Estonia, the Czech and Slovak Republics, Hungary and Slovenia - each have a very distinct heritage in terms of energy and there is no ”recipe” to suit them all.

Some have domestic coal resources and others are dependent on gas supplies from a single source. But they all face the same challenges: to improve energy efficiency, to diversify sources and routes of energy supply and to reach EU climate change goals. In other words, they need to ensure the long-term sustainability of their energy sectors.

“In the context of a balanced energy mix, renewable energy is one great way to cut carbon emissions and enhance energy security,” said the EBRD’s Managing Director for Energy and Natural Resources, Riccardo Puliti.

“We have financed a large number of wind, mini-hydro, biomass and other renewable power generators in central and eastern Europe. In Poland alone, electricity from EBRD-financed renewables can light 450,000 homes. Renewable energy accounts for a third of our investments in power and energy utilities.”

Renewables are a necessary and forward-looking part of the sustainable energy mix. However, homes need to be heated and industries fuelled, and that requires other sources, too. Natural gas is a much cleaner fuel than coal. But while coal is often produced domestically, gas in central Europe is overwhelmingly imported from a single source.

In recent years, the security of energy supplies has been a growing priority for many countries in emerging Europe. Governments have devoted a lot of thought to the issue.

“Energy security is not only a business issue,” says Anita Orbán, ambassador-at-large for energy security at the Hungarian ministry of foreign affairs. “It needs a concerted, comprehensive approach that encompasses political, geopolitical, economic and other aspects.”

The EBRD has been helping the countries of eastern and central Europe diversify their energy sources, invest in renewables and improve energy efficiency, so boosting the energy security of the whole region.

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Money to build new infrastructure has been – and remains – tight. “Because of the financial crisis, banks were less ready to lend for big strategic projects that could not immediately prove how they would be economical and bankable,” explained Ms Orbán, who has counterparts in most central and eastern European countries.

In 2010, Hungary’s oil and gas company MOL built a gas storage facility in Szeged in the south of the country. About a third of the project cost – €200 million – was financed by the EBRD. Since then, MOL has sold on the strategic storage to entities owned by the Hungarian government. Today, said Ms Orbán, central Europe has enough gas storage capacity. But much remains to be done.

“The EBRD, the European Investment Bank and other development banks have, and will continue to have, a big role to play in both energy security and energy efficiency,” said Mr Puliti.

“Central and eastern Europe need more facilities that would allow the region to buy gas from around the globe. In this context, the EBRD financed the construction of a liquefied natural gas (LNG) facility on the Baltic coast in Poland. With a capacity of 5 billion cubic metres per annum, this is a key piece to support the diversification of energy sources in central Europe.”

The Bank does more than support projects: we also offer strategic vision. The EBRD believes that an interconnected energy market with strong private sector participation is vital for a secure and stable energy supply.

“We are a part of the drive not only to build necessary infrastructure – like gas storage for instance – but also to make sure those storage facilities can serve several countries in a crisis,” said Mr Puliti.

As well as developing storage or transportation networks, for years Europe has been seeking new sources of energy supply. The EBRD is very active in funding new electricity generation – a lot of which is renewable energy – and energy infrastructure, which enhance security.

We are also involved in the decommissioning of Soviet-era nuclear safety reactors and in helping replace capacity with new plants. In one such project, the Bank co-financed the Elektrėnai power plant, a large state-of-the-art gas-fired facility in Lithuania.

Grant money provided by donors is at the core of EBRD energy efficiency programmes for Bulgaria and Slovakia, where the Bank is managing the decommissioning funds for the nuclear power reactors at Kozloduy and Jaslovské Bohunice, respectively.

Last but not least, energy efficiency is absolutely critical for emerging Europe and its energy security. All EU-8 countries have a higher use of energy relative to GDP than the EU average, indicating significant potential for improvement. Cutting energy use means less imported fuel, fewer greenhouse gas emissions, and more competitive industries.

Improving energy efficiency is a painstaking task consisting of many projects, big and small, whose benefits are not always immediate. But we already have impressive results. Over the last several years Europe has needed to buy less gas, and one of the reasons for this has been reduced consumption thanks to the efficiency drive, which the EBRD has strongly supported.

Under the EBRD’s Sustainable Energy Initiative, we have financed projects ranging from better building insulation for a nursery in Slovakia to massive industrial upgrades such as the one undertaken by Slovnaft Group. We finance projects directly or through credit lines to local banks, known as sustainable energy financing facilities (SEFFs), which are also supported by international donors.

Overall, since 2006 the EBRD has invested well over €13 billion in sustainable energy projects across its entire region of operations, helping companies from small shops to industrial plants reduce their energy use.

Energy efficiency is also the main pillar of our new Energy Strategy. The EBRD will continue to help emerging Europe reduce its dependence on imported fuels – and this will help economies become greener and more competitive.

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