Introduction to Issue Paper on gas supply security Author: Jaap Jansen Company Energy Research Centre of the Netherlands (ECN) Contact: Web: www.ECN.nl Email: j.jansen@ecn.nl

Focus countries and indicators Overview Background Focus countries and indicators Trends on gas consumption and gas import Energy security in broader sense Concluding remarks

Why this paper? In response to Russian-Ukraine stand-off the Council meeting on 21-22 March 2014 made energy security a top agenda issue Request to the Commission to prepare in-depth energy security study before the next Council meeting In the project kick-off meeting it was requested to prepare the first WP6 issue paper on gas supply security in MS on the eastern border of the EU

Some important points from the energy security strategy: COM (2014)330 final: European energy security strategy Some important points from the energy security strategy: Underlying study highly interesting; solid piece of work Emphasis on: reduction gas dependence on Russia safeguarding gas supply to meet given (forecasted) demand under disruptions of Russia-sourced gas supplies Proposing enhanced intra-EU interconnectivity and more EU-wide coordination (diplomacy, contract negotiations) based amongst others on specific EE and RES 2030 targets, supply diversification and more interconnectivity (interconnections, reverse flows) “speaking with one voice” in supply contract negotiations; offering stable EU partnerships with key external suppliers

Enhanced inland (non)conventional gas E&D activity Main strands of external gas dependency reduction Enhanced inland (non)conventional gas E&D activity Limited scope; sustainability issue Enhanced inland coal E&D activity Enhanced inland nuclear generation Poor competitiveness EU technology; sustainability issue Additional RES RD&D and deployment Additional EE RD&D and deployment →For good reasons issue paper focuses on RES and EE

Project partners selected 12 focus countries: Choice of focus countries and sectors COM(2014) 330 final,p.7: special attention for all MS on the eastern border of the EU Project partners selected 12 focus countries: Bulgaria (BU), Czech Republic (CZ), Estonia (EE), Croatia (HR), Latvia (LV), Lithuania (LT), Hungary (HU), Poland (PL), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI) Focus sectors: buildings, industry, power sector

Large differences in economic structure 12 focus MS countries are rather diverse Large difference in income per cap, e.g. 5.500 € (Bulgaria) vs. 36.400 € (Finland) Large differences in economic structure Ditto in population numbers, e.g. 38.5 million (Poland) vs 1.3 million (Estonia) Energy intensity (energy per unit of GDP) highest in Bulgaria and lowest in Finland, but all 12 focus countries have energy intensity above EU28 average

Share of gas in gross inland energy consumption (GIES) Indicators Given the focus on reducing the impact of disruptions in physical flows of Russian gas, indicators used are: Share of gas in gross inland energy consumption (GIES) Share of Russia in net extra-EU gas imports Share of gas originating from Russia in gross inland gas consumption ≈ Russian gas dependency rate

Trends: Share Russian gas in total extra-EU gas imports of 12 MS

2012 update: GIEC in PJ by fuel in % points 12 MS in total less dependent on gas than EU28: 19% versus 23% High gas shares in GIEC for Lithuania, Hungary, Romania, Croatia, Lithuania and Slovenia

2012update> Share gas and Russian gas in GIEC of 12 MS

2012 update: Gross electricity generation by fuel (in % points) 12 MS in total has lower gas share than EU28 in electricity mix: 8% versus 18% Hence, overall more limited potential in 12 MS to reduce gas in the power sector Non-hydro RES-E deployment in 12 MS has scope to go up

Industry is dominant in Lithuania and Slovakia 2012 update: Gas consumption by sector Among 12 MS with high gas share in gross inland energy consumption: Industry is dominant in Lithuania and Slovakia Buildings (household, services) is dominant in Hungary (51%) Power is important in LT and HU Country Gross inland gas consumption: energy sector and four end-use sectors   Share in gross inland energy consumption [%] Total [PJ] Energy Industry Transport Housholds Services BG 102 44% 39% 11% 2% 4% CZ 287 12% 37% 1% 30% 20% EE 23 58% 24% 0% 10% 8% HR 101 40% 33% 21% 6% LV 51 67% 15% 9% LT 111 51% 5% 3% HU 347 32% 17% 18% PL 574 42% 25% 14% RO 450 34% SI 30 22% 59% SK 183 FI 126 69% 29% EU-SMS 2385 35% EU28 16439 26% 28% 13%

Energy security is a broad, multi-faceted issue Energy security: Underexposed issues (2) Energy security is a broad, multi-faceted issue Energy security priorities are often dominated by short-term concerns. Long-term concerns tend to be underexposed. Structural reduction of the role of fossil fuels in our economy is not only consistent with 2030 C&E targets. It: enhances long-term resilience against FF price surges/volatility + sudden supply disruptions reduces international resource rent transfers  eventually lower geopolitical tensions + better prosperity prospects on both sides Primacy of short-term energy security concerns may engender lock-in of fossil fuel use *

Long term energy security concerns merit due attention. Concluding remarks Emphasis on safeguarding short-term gas supply security justified by urgent concerns on disruptions of Russian gas supplies The 12 MS studied have diverging exposure to Russian gas supply risks. Especially Lithuania, Hungary, Slovakia and Latvia have high exposure. Enhanced intra-EU interconnectivity and coordinated external diplomacy and contract negotiations is needed. Long term energy security concerns merit due attention.