Executive Director of Central Europe Energy Partners – CEEP, Mariusz Kawnik is involved in a number of regional projects and a competent part in the negotiations of the EU policies. As a speaker at the Romanian International gas Conference (RIGC), an event organized by Energy Policy Group, he shared his views on the region, on the background of the latest evolutions in Brussels. This is the transcript of his initial intervention during the 3rd Day of the conference; the titles belongs to Energynomics.
I think there are a number of developments that are happening all around Central Europe and especially in Brussels which need to be well understood also by the industries in the member states themselves in order to be able to go along with the policy path that the EU is now presenting in Brussels. I must say that though I’m a very huge enthusiast of gas because myself I come from the gas sector, I’ve worked in gas for the past eight years, I must be unfortunately less optimistic than the rest of the panelists, being currently in Belgium and observing what is happening with respect to the legislation.
You probably recall eight years, we’ve had this presentation by International Energy Agency named “Golden Age of Gas – The World Energy Outlook”, where it was indicated that for the next, at least eight, years gas will play a major and key role in the energy mix of the EU, Europe and on the global level. I think that if you observe carefully the policy of Brussels for the past two years, you can see that this is no longer the case. The policy of the European Union is a policy of squeezing out gas from the energy mix of the European Union – the question is when. Currently there are a number of dates. The gas industry was pretty much comfortable understanding the at least until 2030 not much will change, and by 2050 gas will still play maybe a lesser but an important role in the energy mix. However, what’s now happening in Brussels is that this process will probably be much faster much faster than expected by the gas industry and probably within the next two or three years we will see a number of legislative proposals by the European Commission solely aimed at trying to limit the gas influence on the energy mix of the European Union.
The horror of EU Taxonomy
The natural gas that we have been using since ages, let’s say, already, is probably going to be a bad boy in Brussels within the next three years. Just to give you an example of this, for the past two months, I think there wasn’t a single week in Brussels where we didn’t have a new legislation on the table by the European Commission on Green Deal, also on other energy resources than gas. A week ago we’ve been presented in a very specific legislation by the European Commission: it is a draft delegated act on Taxonomy, something that probably not many people out of the sector have heard. But the word taxonomy brings horror to all colleagues all around Central Europe and also probably in the Western Europe with respect to what will happen with gas, what will happen with the current power generation as it is.
Six years ago, we had a discussion on the best available technologies for power generation where we had a discussion that we shouldn’t be supporting power plants which have an emission threshold either 650 grams per kilowatt hour, or 550 grams per kilowatt hour. We had this huge discussion and a huge debate in the EU whether to support the 550 or the 650 thresholds. This was six years ago! What has been presented a week ago, by the European Commission and it will be the law in one year, because the negotiations will take one year, is a threshold of 100 grams –600 less than 5 years ago; it is a 100 gram threshold of CO2 emissions per kilowatt hour installed capacity in the power generation facilities which can be supported for public or private financing through financial institutions of the EU and have a climate friendly label. So, whatever power generation you construct which is above 100 grams of CO2 per kilowatt hour generation threshold is not climate friendly and shouldn’t get the support of the EU or the of the financial institutions.
Gas is out of the picture
Where is gas here? Gas is out of the picture! All gas installations that are being constructed or has been already planned in the EU go much beyond the 100 grams threshold. There is somewhere around 200 to 300 grams. The only sources that go beyond the 100 grams threshold is renewable generation, either wind, solar or whichever you would like, or nuclear. However, nuclear is a separate question which I think will be still tackled next year. What we’re seeing now in Brussels, from the EU perspective, is that the European Union does not envisage gas to be a transitional fuel in the transformation of EU economy by 2050. Of course, it’s subject to negotiations which will take place, but remember that it’s a delegated act; it’s not being negotiated like all other legislation in the Council or in the Parliament and one way or another the Parliament strongly supports it, so from the EU perspective, they don’t see that gas should be a part of this exercise which we are doing.
I think this came as an abrupt problem for these member states from our part of Europe. I mean those who, understanding the needs for protecting climate, has decided to go with their energy policy to switch from coal to gas. I think this was discussed in Romania, in Poland, in the Czech Republic for the past three years: “let’s switch from coal to gas and everything will be fine!” This will unfortunately not solve the issue because gas-fired generation in one or two years it’s not going to be the instrument which is advised by the EU to be used. So I think this is something that member states from our part of Europe miss a lot now in understanding.
The Poland example
This has already happened in Poland, where in the past year there has been a major shift in the government’s policy on climate. The government has prepared itself to try to switch from coal to gas; now, within the past two months, there is another major shift to switch from coal directly to renewables, whether this is hydrogen generation, whether this is wind generation… A lot of photovoltaic is now developed in Poland, too, but this is a major change in the strategies of the main companies all around the Central Europe. I think Romanian companies will also have to think about it very carefully – having the transformation done through switch from coal to gas probably will no longer work.
While the investment that has already been done to power generation and the transmission distribution infrastructure will probably play a role, and the companies will be able to get the revenue from the infrastructure that has already been constructed, investing heavily in the infrastructure solely for gas for the next 20 years is a big-big question and a big risk for energy companies. As I said in the beginning, I think it’s a downside, I think it’s a wrong direction, because we could very easily use gas as a tool to decarbonize economies such as Romanian, Polish or Czech Republic ones, where coal still is an important piece of energy mix. You can very easily get rid of coal for investing swiftly and fast into the natural gas sector.