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Security of energy supply in Central and South-East EuropePublished: 1 of July, 2011
The papers of this book were motivated by the wish to get a better understanding of the threats and challenges to gas and electricity supply security in a number of countries in Central and South Eastern Europe (CSEE).

Table of contents

Measures and indicators of regional electricity and gas supply security in Central and South-East Europe

The objective of this paper is to briefly review the existing concepts of energy supply security in the context of the Security of Gas and Electricity Supply in Central and South-East Europe project. Based on this survey we are to propose a set of security of supply (SoS) measures that could regularly be quantified and compared for various regions, across countries and over time. Such comparisons will hopefully contribute to the evaluation of changes in regional energy supply security that might be of interest for private investors as well as policy makers.

Authors: Zsuzsanna Pató, Péter Kaderják, Kornél Andzsans-Balogh
The economic value of increased supply security

All electricity and gas supplying systems provide a certain level of security. Whether this level of security is adequate or not is however not easy to assess. There is a trade-off between security and costs as higher levels of security can only be reached with greater investments, while a less secure system is also less costly. Achieving an adequate level of security of supply needs the balancing between the benefits of increased security and the additional costs needed to realize it.

This paper aims to mitigate this problem by providing details and information on the demand side of security making calculations on the value of lost load for consumers in the natural gas market. The results of the paper could be used to evaluate investments and/or regulatory decisions that affect the level of security of supply, directing it closer to the theoretical optimal.

Author: Pálma Szolnoki
Forecasting demand for electricity and natural gas in Central and South-East Europe

The objective of the current study is to outline and apply a simple forecasting methodology for electricity and natural gas consumption in the countries covered by the Security of Gas and Electricity Supply in Central and South-East Europe project. In addition to describing the forecasting methods and their pitfalls, we will also introduce the available data and show the results of our calculations.

Authors: András István Tóth, András Mezősi, András Kiss
Modeling a regional gas market in Central and South-East Europe

The objective of the current study is to introduce the first version of a regional gas market model for those Central and South-East European countries, where natural gas consumption is significant. Understanding how a regional gas market could operate is of interest for several reasons. Currently, most of these individual markets are served by Russian import sources, on which they are highly dependent. Long-term import contracts are negotiated on a one-on-one basis, highlighting permanent issues with supplier market power.
In this study, we will describe a fully competitive market with similar technological constraints as one could find in the real world. The main difference is with respect to the behavior of market participants. We consider every market to be devoid of dominant players, except for the Russian import segment, where prices are assumed exogenously, in line with the terms of current long-term contracts (oil-indexation). Although this simplification is unrealistic, it makes the analysis tractable and provides a useful benchmark for actual market outcomes.

Author: András Kiss
Generation investments under liberalized conditions in the Central and South-East European region

A key component of long term supply security in electricity is the sufficient amount of investment into electricity generation. There is an ongoing discussion about whether the market conditions that have been created in Central and South-East Europe provide the proper investment incentives or not. This study seeks to contribute to this discussion by collecting the latest publicly available information on the state of expected new investments in the upcoming decade, and critically evaluate this information in light of how much new capacity would be needed until 2020 from an economic point of view.

Our findings do not refute the claim that liberalized markets and long term supply security in electricity can coexist. We find that if anything, investment plans are overabundant in our region, and a considerable portion of them should probably be cancelled, or delayed until they are really needed.

Authors: András Mezősi, András Kiss
Lessons from the 2009 January gas crisis for Central and South East Europe

The purpose of this paper is to draw the lessons from the EU’s January 2009 gas crisis for national governments and regulators of the most affected countries. The results of the study are based on the review of the crisis related experiences of Austria, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Romania, Serbia, Slovakia and Slovenia. Most importantly, we try to explain the difference in the performance of the countries under study in mitigating the effects of the crisis. The understanding of success factors in crisis management can help shaping the appropriate policy response to the risk of similar future events. Finally, we point out the need to reform some present regulatory practices regarding gas crisis management at the national level.

Regulatory preconditions to encourage multi-country new gas infrastructures in CSEE

The regional integration of national energy markets would increase security of supply by creating a larger market for generation and infrastructure investment and could contribute to better diversification of primary resources. Adequate network infrastructure with high interoperability and liquid markets is a key prerequisite for market integration. Investment into new infrastructure is indispensable to achieve better diversification of gas sources and to increase commercial relations between the countries.

The aim of the present study is to examine the regulatory framework that must be in place to carry out the necessary investment into new gas transmission pipelines and storage facilities in Central and South East Europe. Our research is not limited to study investment incentives, but try to give an overview of all the regulatory tools and practices recommended by European organisations during their work to advance regional integration of national gas markets.

Mid-term gas supply security scenarios for the CSEE region

The energy infrastructure of Central and South East Europe (CSEE) had been developed while Europe was divided by the Iron Curtain. Since independence the region’s electricity grid expanded into an integrated European system (UCTE). Meantime the gas transmission network remained almost intact and sufficient steps were not made to decrease the region’s almost unilateral dependence on Russian supplies or increase gas liquidity throughout the region. The two gas crises of the past five years (2006 and 2009) that had a significant impact on EU supplies revealed the asymmetric exposure of the CSEE region to the supply security, price and political risks related to Russian gas deliveries. The key question today for the future of gas supply security and also for gas market development in CSEE countries is how fast and deep their physical and commercial integration into the European gas market will be. Recent EU measures and initiatives seem to recognize these concerns and put forward meaningful obligations and proposals to accomplish the gas grid and market integration of Eastern Member States. However, the success of these efforts will depend on the interplay of a relatively large number of factors related to technology, geopolitics and finance that surround gas industry developments in CSEE.
The aim of this paper is exactly to reflect on this complexity and generate interdisciplinary debate about long-term risks and opportunities by presenting three middle run (20 years) scenarios for potential gas industry development in and around the CSEE region. Such a scenario development might create the basis for identifying relevant, ‘best response’ local (regional) policy alternatives to the different scenarios.

Authors: Péter Kaderják, Kornél Andzsans-Balogh
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