SE Europe prepares for an energy market without borders

Ministers from 11 Balkan countries and territories will sign an historic treaty tomorrow in Athens setting up the Southeastern Europe Energy Community, which will unify their electricity and natural gas production markets, integrating EU energy laws. Albania, Bosnia-Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Greece, Serbia-Montenegro, Romania, Turkey, and the UN mission to Kosovo, along with the European Commission representation, will pave the way for a plan that has been a vision for at least a decade. Kathimerini spoke with Nikos Frydas, a Greek who heads Kosovo’s Regulatory Authority for Energy, about the prospects of the new organization and the role of Greece in the Balkan market. What will happen on October 25 in Athens? The treaty to be signed on Tuesday is the successful completion of a coordinated effort that the European Community started in 2001 and was put on course with the «Memorandum of Athens» in 2002. Effectively, the 10 members apart from Greece are obliged to adopt the EU acquis communautaire as far as energy, competition, environment and renewable energy sources are concerned. Therefore, a single regional electricity and natural gas market is created according to EU directives regarding access to networks and the Cross-Border Power Trading. What is the new market’s investment interest? Southeastern Europe is a region with little potential for electricity production and with considerable requirements for new investments. For an average annual increase of product by 2.5 percent, some 13,500 extra megawatts of installed power will be needed by 2020. From that some 6,200MW will be lignite stations mainly in Serbia and Kosovo, 4,000MW of combined cycle using natural gas as fuel and about 2,850MW will be nuclear stations in Bulgaria and Romania. The upgrading of another 11,500MW is also needed in existing stations. The investments required reach 17 billion euros. The creation of a single regulatory framework in the standards of the European Energy Market lessens the political and regulatory risk and attracts private capital investments. What does this new market mean for Greece? Undoubtedly this is positive for Greece, as it bridges the regulatory gap to its north with the rest of the European market. It also creates opportunities on business and investment levels and in know-how export. Already Greek consultancy companies are active in the whole region in energy market restructuring, while the Public Power Corporation has expressed its interest in investing in neighboring countries. Being in Kosovo as the head of a significant authority for that territory’s energy market, do you see investment interest in the Balkans? A series of companies – such as Austria’s Verbund, Russia’s Inter-RAO, Germany’s EON and RWE, Italy’s ENEL, the Czech Republic’s CEZ and the US’s AES – have made a mark in Kosovo scanning the market. The recent rise in metals prices has rekindled the interest by foreign investment and metals companies, mainly in the western Balkans. Such investments depend greatly on the price of electrical energy which they will secure in the long term. Therefore, besides the usual electricity companies or independent producers, we also have metal companies getting active, as in the case of Russia’s Russal, which recently bought an aluminium plant in Montenegro. How does this treaty affect the region’s politics? Its importance in normalizing ties in the former Yugoslavia, in particular, should not be underestimated. In Kosovo, despite the recent war, there is an agreement for technical cooperation between Serbian electricity company EPS and the local KEK. The dialogue about energy is among the first to have started, under UN auspices, between Serbia and Kosovo. There also are excellent prospects for cooperation and investments in hydrothermal activity both between Kosovo and Serbia and between Kosovo and Albania. The creation of a regional hourly spot market and of a balancing market will render this cooperation very interesting for investors. Greece is the sole EU member in this market. What does that mean for this country? Being the only EU member, Greece played a decisive role in the whole process, which, just like the Florence Convention for the European Energy Market, has named this the Athens Energy Convention. We should also particularly stress that the contribution by the Greek Regulatory Authority for Energy which, holding the presidency of the Council of European Energy Regulators (CEER), led to a great extent the process working on the institutional framework along with the European Commission and coordinating all activity required with the other 10 members, the Commission and representatives from the Stability Pact, the World Bank and the European Investment Bank. What will eventually determine the success of this effort? The Independent Transmission System Operators will play a leading role in its success. The proper operation of a competitive electricity market on a regional level requires easy access by third parties to networks, the harmonization of network use costs and the maximization of transmission interconnectability with credible criteria and its disposition with transparency, while reflecting the short-term marginal cost of use of cross-border lines. The other crucial factor is the regulatory authorities, which set the rules, since a successful regional market needs compatibility among partial national market models. The regulatory framework must solve cross-border energy transmission issues and arrange for the monitoring of the market and its participants as well as the ability to impose measures on a regional level.