Energy security in South-east Europe
The region of South-East Europe is identified as the only one on the continent that will face a major gas security issue in case of an interruption of supply from Ukraine. This was shown by an analysis published by European Network of Transmission System Operators for Gas (ENTSO-G) and by Energy Union Choices.
In this context, it is the Security of Gas Supply Regulation that aims to ensure the customers that all the necessary measures are taken to ensure their continuous supply, particularly in case of difficult climatic conditions and in the event of disruption. But its effectiveness in real crisis was never proven.
When a solution for energy security issue is needed, the typical approach is to install additional gas supply infrastructure. However, this method could bring with it a sequence of drawbacks, like long-term dependency of imported gas and outflow of national income, high vulnerability to fuel price fluctuations, etc.
In reaction to the continuous gas dependency concerns of the region, the so-called Central and South-Eastern Europe Gas Connectivity (CESEC) High-Level Working Group was founded in 2015 in partnership with the EU.
The main objectives of the group are to identify and address the issues of the existing interconnector projects in order to speed up their completion and also to determine a limited number of priority infrastructure projects in Central and South-Eastern Europe and to concentrate joint efforts on their completion.
Current energy situation in SEE
According to a study conducted by Eurostat in 2014, the total gas consumption has declined since the beginning of the century in almost all SEE countries by about 10 bcm/a, or 30%, with a stronger trend since 2010.
Potentially this could be related to overestimated projections on GDP growth, fuel switching or energy prices, warmer winters resulting from climate change, and also if gas is a premium product that is more expensive than other alternatives. In all cases the result is that optimistic forecasts for gas demand have fallen short of the actual consumption.
Gas is used to meet essential requirements, namely heating and hot water demand in buildings, either directly in gas boilers or indirectly by generating electricity and district heating, which are in turn used for heating and hot water production.
The three countries in the region that account for over 80% of the gas consumption in the region’s buildings, representing 28% of the total gas consumption are Hungary, Slovakia, and Romania. And while in Hungary and Slovakia, over half of the buildings’ energy requirements are for gas, which means they are very vulnerable in case of a gas supply interruption, Romanian buildings are heavily reliant almost exclusively on indigenous supplies of gas.
Other countries at risk, which make little direct use of gas in buildings, but having extensive district heating networks, are Bulgaria and Serbia, where district heating is, to a great extent, supplied by gas. Other countries of the region, especially the southern Balkans, such as Albania, Bosnia & Herzegovina, FYROM, Kosovo, Montenegro, and Greece, rely to a significant extent on electricity to heat their homes, followed by biomass and heating oil.
The Buildings Performance Institute Europe (BPIE) used Eurostat’s data and an analysis on heating and cooling by Fraunhofer Institute for Systems and Innovation Research (ISI) from 2016, to derive the amount of gas that is directly and indirectly used to meet the heating and hot water demands of residential and tertiary buildings in South-East Europe.
This analysis confirms that three countries are consuming 80% of gas in the region’s buildings: Hungary, Romania and Slovakia. The remaining 20% of gas demand is spread between Croatia, Bulgaria, Serbia, Greece, Slovenia and Bosnia & Herzegovina.
Gas supply disruption risk assessment
To assess the threat of gas disruption, the severity of its potential impact on residents and businesses needs to be assessed. Buildings Performance Institute Europe (BPIE) has developed a Building stock Vulnerability Indicator (BVI) to conduct a risk assessment of the building stock and rank countries according to defined vulnerability levels.
The Building stock Vulnerability Indicator (BVI) ranks countries according to the vulnerability of their buildings to a disruption in gas supply.
In broad terms, the vulnerability (and BVI score) increases according to the importance of gas as a source of heating fuel in buildings and the level of gas import dependency. On the other hand, a low BVI score means that buildings are resilient to gas-supply shocks.
This could be for example either because they are covered by domestic production to a significant extent, or because the sector does not use a lot of gas, or because a country is not dependent on just one supplier.
A high BVI score indicates high vulnerability. An example would be a country that heats a large proportion of the building stock with imported gas from just one source. Here is an estimation of SEE countries exposure to risk of gas supply disruption:
Romania largely covers its significant gas demand from indigenous production, so the country has little import dependency. However, due to its limited interconnectivity, it could face some problems in the future, where production from national resources could be compromised.
Croatia uses a significant amount of gas in buildings, but has a large indigenous share of gas, so it lowers its risk level. Due to its diversity of supply routes, in particular its import capacity from liquefied natural gas infrastructure Greece has a low BVI.
Bosnia & Herzegovina and FYROM have relatively little reliance on gas as a heating fuel for their building stocks but their complete import dependency brings moderate risk. Also, as non-EU members, they may be exposed to a relatively higher additional risk as they are not covered by the provisions of the EU Security of Gas Supply Regulation.
Slovenia is considered as moderately vulnerable taking into account its combination of moderate gas demand in buildings, and its 100% import dependency. Serbia has an import dependency of 71% and imports gas from just one country. It also faces an additional risk as it does not currently benefit from the provisions on protected customers of the EU Security of Gas Supply Regulation.
Bulgaria is substantially vulnerable due to a relatively high share of gas use in buildings and its 100% import dependency. This vulnerability was illustrated in practice in 2009 when there was a disruption in gas imports. Hungary and Slovakia are severely vulnerable in case of a gas supply disruption.
In both countries, gas demand in buildings is half of the total demand for gas. A particular reason for this vulnerability is their connectivity to Ukraine, which is at the epicentre of geopolitical issues at present and whose gas supply, as a transit country from Russia, has been interrupted in recent years.
The import capacity accounts at 70% for Slovakia and 82% for Hungary. Therefore these two countries should therefore be at the forefront of efforts to reduce their risk.
The gas consumption in SEE region is mainly distributed between the industry, with 60% of the total gas use, and buildings, composing 32,5% of the total gas demand. The energy-generation sector is consuming only 5% of the total gas usage. Small number of countries dominate the regional gas use. These are Romania, Hungary and Slovakia with significant consumption in all sectors, and Bulgaria and Greece, which are also major consumers, but in industry only. Unsurprisingly, the energy sector makes very little use of gas, since most electricity generation is from indigenous coal deposits.
Keywords: gas security, energy security, ENTSO-G, Energy Union Choices, CESEC, Eurostat, heating, district heating, hot water demand, gas boilers, BPIE, Fraunhofer Institute, Building stock Vulnerability Indicator, BVI, gas-supply shocks
LATEST issue 4/2023