The Energy Community of South East Europe

1
The Energy Community of South East Europe

• 4th Poverty Reduction Strategies Forum
• June 26-27, 2007
• Athens, Greece
• Henk Busz
• Europe and Central Asia Region
• The World Bank

2
Why the Energy Community?

• Connect or reconnect to EU and its networks
• Replace aging power generation facilities
• Least cost regional approach would save 3.0
  billion in investment and operating costs (fuel)
  through 2020
• Enhance security of supply
• Increased interconnection and trade
• Diversify the fuel mix based on least cost
  options
• Diversify supply routes and sources of gas
• Competition and customer choice (efficiency,
  prices)
• Important pre-accession mechanism
• de facto condition of EU membership
• integrate over time with EU energy market

3
Regional Energy Markets in Europe an interim
phase (?)
4
EC Treaty signed Oct.28, 2005
Regional Members
EU Member States
Observers

Germany
Ukraine
Austria
Moldova
Hungary
Slovenia
Romania
Croatia
Italy
Serbia Montenegro
Bosnia Herzegovina
Bulgaria
Kosovo
FYROM
Albania
Turkey
Greece
5
Current Parties/Participants/Observers(source
EC Secretariat)
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Parties/Participants/Observers (cont.)

• Contracting Parties
• Albania, Bosnia and Herzegovina, Croatia, the
  former Yugoslav Republic of Macedonia,
  Montenegro, Serbia and UNMIK
• Participants
• Austria, Bulgaria, the Czech Republic, Cyprus,
  Germany, Greece, Hungary, Italy, the Netherlands
  (applied for status, to be confirmed at MC),
  Romania, Slovakia, Slovenia, UK
• Observers
• Moldova, Norway (applied for the status of
  Participant), Turkey, Ukraine, and Georgia
  (applied for status, to be confirmed at MC)

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European Energy Agenda
Security of Energy Supply
Competition Customer Choice
Interconnection, creating European grid,
regulation ensuring open access by suppliers to
transmission, enforcing customer choice of
supplier
Diversification of routes and
suppliers, integrated and well-coordinated
networks, gas storage, energy efficiency,
renewable energy
Environment
Energy efficiency, increased use of natural gas,
emission standards, CO2 emission trading and
sequestration, renewables, nuclear energy (?)
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Energy Challenge in SEE

• Electric Power System of about 80,000 MW needs
  significant investment and upgrade
• Turkey 35,000 MW and growing, rapid demand
  growth projected, shortages potentially within
  this decade
• Rest of South East Europe 45,000 MW (nominal
  capacity is higher), lower demand growth but old
  and aging power systems requiring extensive
  rehabilitation and replacement
• Environmental upgrades to meet EU standards
  (incl. SO2 and CO2)
• Natural Gas System not well developed and highly
  dependent on Russian gas
• Security of supply concerns
• Only Turkey has significant alternative sources
  of gas supply and could transmit large volumes of
  gas to SEE
• Regional and national gas networks need to be
  developed

9
Power - Generation Investment Study

• Rehabilitation 11.5 GW (6 billion) over
  2005-11, but much less if FGD retrofitting is
  required (4.0 GW)
• New capacity 11.0 GW (10 billion) over 2005-20
• 2.5 GW before 2010
• 50 lignite fired (Serbia, Kosovo, Bulgaria)
• 21 gas fired (across region)
• 26 nuclear (Romania)
• 8.5 GW before 2020
• 45 lignite (Kosovo, Serbia)
• 34 gas fired (across region)
• 20 nuclear (Bulgaria)
• Study was updated in Oct 2006 to reflect
  changing gas and carbon prices. Large hydro
  (2,100 MW), imported coal, electricity imports
  and renewables (biomass, wind) now more
  cost-effective.

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Gas- Proposed Priority Routes for Pipelines (2004)
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Western Balkan Gas Ringa preliminary WB proposal
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Western Balkan Gas Ring (cont.)

• initial demand from combined cycle gas turbine
  (CCGT) power stations would be necessary to
  anchor development of the ring
• a 24-inch ring should be enough to serve the gas
  demand of five new-gas fired CCGT power stations
  totalling 2,100 MW
• four well-spaced injection points could deliver 7
  bcm/year of gas with a 65 load factor
• the capital cost of 2,100 MW of CCGT would be
  about US1.0 - 1.3 billion
• the capital cost of a 1,264 km 24-inch ring
  covering seven SEE markets would be about US1.0
  billion, incl. 5 compressor stations, 14 offtake
  stations and 8 border metering stations.

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Energy Community Main Objectives
Establish EU-compatible energy policies, laws and
regulations, and institutions (independent
regulators, unbundled utilities)
Establish a regionally integrated energy market
for electricity and gas (promotes stability and
prosperity)
Contracting Parties to
Progressively integrate with the wider EU
internal energy market by 2015
Liberalize electricity and gas markets in
line with EU directives but with a transition
period 2008 (non-res)/2015(res)
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EC Coordination and Implementation Mechanisms

• Ministerial Council
• Permanent High Level Group
• EC Regulatory Board
• Power and Gas Fora (IFIs, donors, regulators,
  other stakeholders). Conclusions are sent to
  PHLG
• EC Secretariat
• Task Forces
• Regulators Task Force, works with the Council of
  European Energy Regulators (CEER)
• SEE Transmission System Operators (SETSO), works
  with the European Transmission System Operators
  (ETSO) and Union for the Coordination of
  Transmission of Electricity in Europe (UCTE)

15
Thank You!

• hbusz_at_worldbank.org