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Special Envoy for Strategic and International Affairs, Nuclearelectrica
The Rt Hon. Charles Hendry
CBE PC Professor, University of Edinburgh; Former Minister of State for Energy, United Kingdom
H.E. Michał Kurtyka
Amb. Richard Morningstar
Founding Chairman, Global Energy Center, Atlantic Council
Phillip Cornell, Senior Fellow, Global Energy Center, Atlantic Council
PHILLIP CORNELL: So thank you very much, everyone, for joining this panel today. We will be talking about options for getting off Russian gas, practical steps for Europe. Obviously, these are issues that we’re dealing with both in a very short term, short term, medium term, and a longer term.
And so I’m really excited to have our guest panelists here today. On my left is Ana Birchall, the special envoy for strategic and international affairs from Nuclearelectrica. Beyond her is Mr. Charles Hendry, former minister of energy for the UK and currently a CBE professor at the University of Edinburgh.
Further down the line, His Excellency Michal Kurtyka, the COP24 president of Poland, and at the end our esteemed ambassador, Richard Morningstar, the chairman of the Global Energy Center at the Atlantic Council. So thank you, everyone, for joining me here today.
I’d like to start off with a first question for all of you. How do we think about European gas and the structure in, let’s say, just the coming year? So how do we respond in the coming year to some of the challenges that we’re going to see, given all of the uncertainties that we know about the current situation in Ukraine?
Please, Ana, first.
ANA BIRCHALL: Thank you so much. Firstly, please allow to say thank you and congratulaions to Atlantic Council for having us here. I think it couldn’t be more timely. And if we are talking about getting off Russian gas, what we are seeing today is that the current Ukrainian war demonstrated the importance of a balanced energy mix in the EU and for a resilient energy system.
And I have to say that I’m quite proud and it’s quite encouraging to see over the last two days the discussions, including in the Atlantic Council debates, that more and more people are saying to get the energy weapon out of Putin’s hands. It’s something that countries such as Romania—my country—we’ve been advocating for many, many years and it’s encouraging to see that, finally, this is coming to more the public domain because the overreliance of Russian imports was a vulnerability of the EU even before the war started.
So to answer to your question, I think what we need to do is to have that balanced mix and the resilience, and there are important steps that are being taken at the EU level. I don’t know if you would like me to touch it now or later on. But, you know, just a few days ago on March 25th there’s been an announcement of an important agreement, practically a new groundbreaking initiative between the EU and the United States, and allow me to look at my notes to make sure that I get the numbers right.
So, practically, it is a plan that foresees the supply of 15 billion cubic meters of LNG for 2022—that’s in the short term—and additional 50 billion cubic meters per year until 2030 from the US. Alongside with this, obviously, the challenges will remain and those need to be addressed both on a short-term but long-term, you know, perspective as well.
You have the security of the supply, the decarbonization, and maintaining an affordable energy price for the consumers. So what are the solutions short term to find the solution in order to allow the countries that are still very dependent on the Russian gas?
But building the long-term EU resilience plan to aim at reducing the reliance on Russian import, and that needs to be focused on maximizing the indigenous, really, you know, realities on each country. And here I would like to speak probably, if you give me a chance, about what Romania is doing on the nuclear front because that’s something that is very, very important and I think we are positioning ourselves as leaders in our region, and not just leaders in terms of being courageous in investing in nuclear energy when it wasn’t necessarily quite fashionable, but it was a wise investment and I’m very proud to say that the presidency, the—you know, the office of the prime minister, the prime minister, the parliament, everybody in Romania, is supporting this because we saw it as an energy security issue.
But, likewise, Romania is that exporter of energy security in our region, including to Republic of Moldova, and maybe a little bit later we can elaborate on that. So those are a few ideas in terms of solutions, and I guess the final solution, if I can speak like this, is to really have that energy as a reliable energy, as a secured energy, and an affordable energy, and from that point of view, I think technological neutrality is quite key.
PHILLIP CORNELL: Thanks very much. So, clearly, one of them is thinking about different fuel options. Nuclear is back on the table in a lot of places, given the energy concerns right now. But you also mentioned, for example, bringing in additional gas. Part of it is bringing it into Europe. Part of it is actually distributing it within Europe, which is the next step.
Maybe, Charles, you can speak a little bit to some of those things.
CHARLES HENDRY: Philip, thank you very much. And first of all, can I say I’m delighted to be with my distinguished colleagues, but as they’ll allow me, a particular privilege to be with Ambassador Morningstar, one of America’s most renowned and successful ambassadors. Did an extraordinary job in Azerbaijan and the Caspian, and somebody who for whom I have the most profound admiration.
The issues which we’re talking about, and you raised a very direct and proper question as what can we do in the next 12 months, and that means there are certain things we can’t do. We can’t build new nuclear plants. We can’t develop a hydrogen economy. We can’t build new pipelines. We can’t build new LNG facilities.
So we have to work with—within the construction and constraints that we currently have and how we try to move that forward. We, certainly, can look at how we bring on new sources of supply. There are projects which are ready to go but which just need the pipeline joined up, potentially, in some small areas—projects in Kurdistan which could be brought into the TANAP pipeline network; can we do more to get Türkmengaz across the Caspian, to Baku, and then into the TAP pipeline across Europe.
So there are areas which we can look at like that. Is the time now right to look at whether we can bring Syria back into the global economy and to open up some of those facilities, perhaps, with the money not going to the Syrian government but to humanitarian projects in Syria instead.
So there are areas like that which we can look at and see how we can move those forward with some degree of urgency. There is, certainly, capacity in some of the LNG facilities. So whilst we can’t build new ones we can use the existing ones better, and I think some of this goes back to the whole issue of diversity.
Diversity isn’t just about a diverse range of places from which we can get the gas. It’s about a diverse range of options for how we bring that gas to market, and so using the LNG capability better with the interconnectivity that already exists is an important part, I think, of that solution.
I think the—we have to think as a continent on this. Europe—the European Commission—already has a list of projects of common interest, which are interconnection projects which would strengthen European resilience, and we have to ensure as part of this process that countries like Poland can never be isolated from the gas supplies which they’re going to need, which has been the case, I think, too much in the past. And I think one of the concerns about Nord Stream was that it bypassed Poland and, therefore, made Poland’s situation more difficult. Providing that resilience to Poland and countries like that, I think, is an absolutely critical part of it.
There are other things we can do. We can work immediately on energy efficiency so we will need less gas when we come to next winter. We can roll out renewables and so we can actually get some of those installed and operating within a period of a few months. And so we have a few months before we start hitting the colder period of next winter. But we haven’t got a few months to start doing the work. We need a very cold analysis of which projects can deliver quickly and we need to start building them.
PHILLIP CORNELL: Thanks very much, Charles.
Michal, as Charles was mentioning, I mean, Poland has been in the sights of many of these energy security questions around gas for decades now. At the same time, it’s also been one of the most vocal countries about potential next steps on sanctions and also moving very quickly in terms of diversification. How do things look in the next year from the Polish position?
MICHAŁ KURTYKA: Well, thank you very much, and I join in welcoming Ambassador Morningstar, with whom we spent a lot of time and who did an excellent job in Washington when the Polish voice was somehow isolated in this regard, and we were very vocal and very radical saying that energy security and especially gas supply is not about price. It’s about diversity of supply, and that if we want to be independent per se we need to be independent in terms of energy supply.
And it’s sad to say this, we were right. For already quite a lot of time Poland was very determined and very stubborn in convincing our European partners about the necessity to diversify and especially not to increase the dependence on Russian gas.
Of course, we spent and why so? Because we were the most exposed, as you said, Minister. We had also experienced blackmails from the gas promise—the gas supplier, and we experienced also cuts of energy. I remind 2008.
But Poland engaged in diversification strategy for already 20 years and this strategy is paying, and by the end of this year, it happens. It’s not—it’s a coincidence, lucky coincidence or unlucky coincidence, depending from which side you look at it, that our system will be completely isolated and able to work without supplies from Russia.
Why? Because we built LNG terminal—I just recall to you that our neighbor of Germany didn’t—and that we brought gas from Norwegian shelf via Baltic pipe. Baltic pipe is going to be finalized this year in October.
So Poland is one of the few countries in the region which is not anymore, as was the case when Nord Stream started, asking for solidarity—gas solidarity—but which is providing, actually, gas solidarity to the region.
We are prepared for cutting Russian gas. Yes, it will be costly. Yes, it will be extremely unpleasant. Yes, we will need to introduce rationalization in Europe, and I think it’s better to do it like that. Otherwise, we will be having a very chaotic process, country by country.
So we need European Commission to get engaged in it. But as things are going right now, I think that the call from my country, which is, again, one of the first within European Union to cut from Russian supplies, will be heard and I’m sad to say Polish infrastructure was right, in a way, and our pessimistic view on the situation was completely justified, but being also optimist, saying, OK, we must handle it. We must make sure that this happens because on the other side of the balance you have life of Ukrainians and peace on the continent.
PHILLIP CORNELL: Thank you very much, Michal.
Ambassador Morningstar, you spent much of a long and illustrious career focusing on European energy security and, indeed, preparing for situations very much like this one. How do you see today’s crisis, given decades of preparing, including in some of the measures that Michal was talking about?
RICHARD MORNINGSTAR: Well, thank you. Thank you, Phillip, and I wish I could be with you in person. It’s good to see my friends on the panel and thank you for your—you know, for your kind—overly kind comments that you’ve made.
Let me say a few things, and I agree with everything that’s been said. Let me—and maybe three or four major points.
Yeah, a lot of progress has been made and somewhat surprising what’s—how Europe, the United States, countries in Europe, have been unified on this issue since the Ukraine crisis and war has begun.
Couple of things that I think are going to be really important over the next coming year or two and going forward. First of all, the message, and on the US side and US administration side, has to continue to be clear and that message has to be that gas is going to continue to be important and that message has to go to the financial community, the investment community, the companies, that gas is going to be important and that gas in the energy transition, that it’s not an either/or proposition and that gas can be decarbonized and needs to be decarbonized and that we have to double down with respect to the various technologies that have been talked about that are going to be important to the energy transition. It’s all going to be important.
Second thing that I’m somewhat concerned about the political will has to continue with respect to this. Yeah, it seems to be there right now and that’s all positive. Hopefully, in some way, one way or another, things will settle down in Ukraine and, hopefully—and God willing, it will and the horrific damage will begin to be limited. It may not be an absolute settlement but, hopefully, things will get better.
If it does—if that does happen, the political will has to continue with respect to the dependency on Russian energy and Russian gas. There can’t be backtracking from where things are now. We can’t get back into a situation, oh, well, things are getting a little better. Yeah, we can, you know, go back to our old ways. That can’t happen.
Third thing that I would mention—and I think it’s great that we have Ministers Birchall and Kurtyka on the panel—the countries in the region have to work both regionally and on their own to make sure that that dependence doesn’t continue and that’s happening in both Romania and Poland, and I think the job that is being done in those countries has been terrific and that needs to continue.
So, yeah, it’s—I think things are going well right now. Things are going about as well as can be expected, although we also have to recognize that even today there’s more gas—at least as of a few days ago, more gas was going to Europe from Russia than just before the war started.
So, you know, that’s still—we have to recognize that, and the steps that we’re talking about have to be taken, the political will on both sides of the ocean has to continue, and countries in the region have to, on their own, do their own thing to help to mitigate and minimize the situation, which Romania and Poland are both doing.
PHILLIP CORNELL: Thanks very much, Dick.
Let me go then to our two ministers. Clearly, there’s a lot of—if we’re going to be facing a situation of such serious reduction in gas over such a short period of time we’re going to take—we have to take some very clear steps. The Commission put out its Repower EU plan just a couple of weeks ago with some very ambitious statements about how we can not just get more bcm but also achieve savings in other parts of the economy.
Maybe you could talk a little bit about those plans—the realistic nature—within the next year and also maybe a little bit about how do we think about the internal market, particularly from your role as the deputy prime minister.
ANA BIRCHALL: Well, firstly, thank you, Ambassador, for mentioning the efforts of Romania and please allow me to answer to your question by talking a little bit about Romania. There’s a best practice in the region because we had a national strategy many years back to diversify and we are among the very lucky ones in the region that we don’t depend on Russian gas. I mean, we have less than 15 percent from Russia.
So, for us, like, for example, nuclear and Nuclearelectrica, to be honest with you, I’m very proud to say that it’s one of the leaders not just in the region but, you know, through the Cernavodă plants they are among the, you know, safety example type of plants, and I encourage everybody who is keen to come and, you know, get in touch with us and all the time they are welcome to come to visit Cernavodă and see it with their own eyes.
But, for example, nuclear energy in Romania covers 20 percent of Romanians’ energy consumption and those figures will increase to around 40 percent with the commissioning the two additional nuclear units that we are—you know, we are well underway of taking care of them to have them in place in the years to come.
Further than that or complementary with that we—Romania has been courageous to commission along with—it’s public knowledge so I can say—with NuScale to have the first SMR in Romania and in the region to—and it is a national policy and national plan supported to be not just, you know, first of a kind in Romania but to be—Romania to be a hub in the region and, as I said, to try to, you know, achieve this ambition plan of ours but which is quite realistic to be the exporter—to continue to be the exporter of the energy security in our region.
And we’ve been working very closely with Poland. I think, you know, is one of those stories that two plus two makes five. We complemented each other, you know, in the region and having our voices in the EU, but, likewise, through our own efforts, as the ambassador was mentioning, to really make sure that countries—two large countries in the region are not dependent so much about, you know, the Russian gas.
So in terms of the EU, I think, what we see now it is a strong unity, a strong determination, to have this plan on a medium to long-term basis, not to be just one off now. And as you mentioned, you know, the concrete plans, and I can—the ones on the short term, if you allow me to just—for our colleagues here, so is refilling the gas stocks for the upcoming winter, which is—that’s very short term, diversification of the EU supply sources and routes, as you were saying, maximizing the LNG uptake capacity, increase use of the low carbon and renewable technologies, and, obviously, accelerate the European Green Deal.
And with your permission, I just want to touch on the legislation, because at the EU level now we have—we passed the Commission the taxonomy, the so-called Complementary Delegate Act and it’s an important provision there about the gas and nuclear in the so-called taxonomy, which is giving a huge incentive for the investment in nuclear and in gas, and we all know that those are not—you know, not cheap investments. They are incredibly awarding reinvestments and wise investments if you look on the term—medium—you know, medium and long-term basis.
So now the battle is in the European parliament and I’m hoping that this Complementary Delegate Act is going to go, you know, forward, being voted in the European parliament as it is now in the language of the Commission. And with that in mind, you will have the taxonomy who will further incentive—you know, will be a strong incentive for investing in technologies, in renewable, you know, in gas, in nuclear where, you know, nuclear it is a green energy.
It’s a clean energy, if you think about it, and those are incredible weapons where you will tackle exactly what we were talking at the very beginning, to take the energy gas weapon from the Russians’ hands, who misused it so many times, not just at the EU level but at the bilateral level with certain countries from the EU.
That’s the reality, if we want to talk very honestly and very frank about it, and knowing that you can address the policies—sound policies—not just for tomorrow, for the next winter, but for the years to come. Thank you.
PHILLIP CORNELL: Thanks so much. And I think the point about investing into, particularly, gas production and trying to turn around some of the momentum that’s been sort of anti-gas over the last several years is going to be critical here.
Maybe—Minister Kurtyka, maybe you could speak a little bit to how do we actually incentivize those within the context of the European Green Deal and looking at alternatives?
MICHAŁ KURTYKA: Well, arithmetics are merciless here, and we will be lacking gas for the next winter as European Union. No doubt about it. The question is how we handle it. And we were calling, as Poland, since already 2014 for a common strategy for buying gas. We were calling for storage strategy and Poland has introduced obligatory storage.
We have been calling for LNG terminals. We put—and our terminal is one of the best field within European Union, first with Qatari—two Qatari contracts—but then there is a number of contracts signed with American companies. So Polish LNG terminal is extremely well prepared.
We were calling for stopping Nord Stream 2, and not because of Poland but because of Ukraine. And right now, I think, is the right moment to ask ourselves how do we handle the looming shortage of gas for European Union for the next winter, and in this regard repower is not enough. It needs to clearly state what will be the rules for rationalization of gas for Europe.
I estimate 50 bcm, maybe 30 bcm if we really are lucky, the gap. So it’s one-tenth, one-fifth—one-tenth, one-eighth of European supply. It’s a lot. But we can do many things in order to control supply in order to make sure that also demand strategies, reduction strategies, energy efficiency strategies, are put in place.
But then, again, we cannot do it alone. I mean, no country, Romania nor Poland, working together for years already on energy security and facing the same kind of challenges, cannot substitute themselves to the European Commission because imagine what chaos it will be if each industry, each country, was trying to grab neighbors’ resources, stocks, for the next winter.
So we need a common strategy. We need to say clearly priority goes to families, then normal usage of—and then industry will have to be accommodated. That’s the only way I can see. But we need a key role of the European Commission and I bet that having a clear situation on the market will also bring more clarity for prices.
There will be probably less volatility, because today gas prices are volatile like crazy because, in fact, markets do not know whether yes or not are we going to continue importing, not continue. This is what Ambassador Morningstar said.
Paradoxically, after the Russian aggression on Ukraine, Europe continues to buy more gas than previously, and so there is a problem of cohesion here and we need to make sure this is what Europe can have in terms of alternative supply, this is how we are going to manage the shortage and this, in my opinion, will calm down also price volatility of gas prices.
PHILLIP CORNELL: Yeah. Indeed, we’re looking at some of the most extreme market intervention options, I think, out there and, you know, in terms of how we deal with supply crises the options are usually tapping storage, emergency fuel switching, and then, you know, thinking about how we can affect demand.
Maybe—Ambassador Morningstar, what are some of the ways that we can think about incentivizing more investment, particularly in some of the infrastructure that we’re going to need above and beyond what’s there already when it comes to sort of future gas crises?
RICHARD MORNINGSTAR: I go back to some of the points that I made earlier. Part of that, again, is political will and I’ll keep emphasizing the importance of maintaining political will.
The points that Minister Kurtyka made about unity within Europe and the European Commission being a unifying factor is critically important. I think the Commission has been doing a pretty good job. There can be no backpedaling, for example, on the part of Germany if things, again, settle down a little bit.
We have to look at ourselves, all of us, on the US side and on the European side, at least for now that we’re on a wartime footing and that we need to encourage—the US government has to take whatever regulatory steps to encourage investment. If we say we can supply 15 bcm additionally this year of LNG, we have to—you know, we have to work to supply more than that.
If Azeri gas—if more Azeri gas is available we have to look to see if that—even if that goes to Turkey and frees up more gas going through TANAP into Europe. The interconnections from Greece to Bulgaria to Romania are absolutely critical.
So, you know, there are some specific steps that can be taken in the short term to help and it will be more if we have the political will. If we look at ourselves in World War II—I mean, and I’m not saying this is World War II, but in World War II what the United States did to increase production and wartime production, we have to look at it a little more that way as to what’s necessary to be done in the energy field and just do everything we can to increase gas availability as well, again, doubling down on all the other technologies that have come up, whether it be renewables—I think what Minister Birchall said about nuclear is critically important, other—you know, other technologies as well. Energy efficiency has been mentioned, also critical. So all of these things we have to do in the short term and just stick to it. Follow through with what’s critical.
PHILLIP CORNELL: Absolutely. Part of the problem here, when we ask companies to invest much more in some of this infrastructure that can have, you know, 15-year time spans is the uncertainty about what the post-war situation will look like, what the long-term relationship with Russia and Russian gas is going to be.
Charles, how do we think about the next step after the war and what—and how do we actually convince companies that over the long term there’s a justification there for investment?
CHARLES HENDRY: This is a really difficult issue because even before the war we were seeing real pressure on some of those investments because people who were supporting new oil and gas developments were saying, look, if it is the stated intention of governments to move, fundamentally, away from those, if we’re investing billions in developing new fields which won’t be open for a decade, then they’re not going to be wanted in 20 years’ time.
So we were already seeing a lot of projects being shelved on financial grounds alongside some which were being shelved on environmental grounds so that we were starting at this sort of fairly low base, and so that we have to find ways of encouraging the industry, which could be sort of modeled on some of the measures in the UK where it’s a government guarantee that if they undertake certain investments then they won’t lose out on that.
This is a time for government intervention in energy. Some people say—somebody said in one of the panels yesterday just get government out of the way. Let industry and business get on with it.
Energy is too critical to national security for governments just to leave this to the market. There has to be a much more interventionist approach to make it clear where government wants investment to go and for government support to be abundantly available.
Just picking up on a couple of the other points which have been made, I think President Putin made a number of judgments. Most have been shown to be fundamentally flawed. He assumed that China would come in actively to back China. It hasn’t. It hasn’t been entirely—it hasn’t been quite neutral, but it hasn’t been where he expected it to be.
He assumed that Europe wouldn’t stand together but it has. He assumed that President Biden wouldn’t come, to get involved, but he has. And so there are a number of areas he’s got these fundamentally wrong and, most of all, he underestimated the resilience and determination of the Ukrainian people.
The one which we haven’t seen tested yet is that he took a view that the European consumer would not take pain—would not take economic pain, and if they find in a few weeks’ time they can’t fill up their diesel vehicles because that diesel exports from Russia are down dramatically—half of European diesel comes from Russia—if we then start having shortages and people can’t travel where they expected to, they can’t see an ill parent or go and see a child, then in those circumstances then we’re going to start to test that. And that’s where we come back to Richard Morningstar’s key point about we have to double down on the pressure because we have to have a wartime spirit.
This is not a time when we can afford for the sake of Ukraine to say, well, look, it’s a bit inconvenient for us now. Some of us have got elections coming up and therefore we need to try and soften the blow. We’ve got to condition people to expect that we’re in for a very long haul. It’s going to be a difficult year, but—it is going to be a difficult few years, probably. And therefore the need to focus on those technologies which can ensure that in the future we can never be held hostage as a continent again economically, then we have to—really, to move those forward.
I think the public will buy into that and the public understand the critical importance of doing it. But I don’t think that aspect of the case has been made properly yet.
RICHARD MORNINGSTAR: Phillip, can I just—
PHILLIP CORNELL: Yes. Please.
RICHARD MORNINGSTAR: Phillip, can I just very briefly follow up on what Charles was saying? Because I agree totally that government intervention is going to be critical. And I just don’t buy into the stranded assets argument. I mean, if we believe that gas and gas investment is critical and, hopefully, decarbonized gas investment in the short to midterm, then there should be and we’re concerned that, well, and it may be a good thing 20 years from now that those assets are no longer needed, that’s a cost of the energy transition.
We’re spending—we’re already talking about spending billions and billions and billions of dollars with respect to the energy transition. If that’s an added cost, I think that would be—you know, that’s going to be worth it if it’s absolutely critical that these investments be made. So I agree fully with Charlie.
ANA BIRCHALL: And if I can jump in.
PHILLIP CORNELL: Please.
ANA BIRCHALL:—that’s why I was talking about the importance of this Complementary Delegate Act, because there is the taxonomy, as I said. So is the—you know, is the incentive for the investment bonds in gas and nuclear. And those are two very crucial, you know, areas where you could diversify and you could actually continue to advance the policy of getting strongly resilience for the EU from the Russians’ gas.
So this piece of legislation and, obviously, will be others to follow. The EU leaders called on the Commission to come, I think, if I’m not mistaken, by the end of May, again, with a serious plan, with serious steps, not just policy talking but the concrete steps that needs to be taken.
So this taxonomy, it’s absolutely critical in order to have that investment going forward for medium to long-term basis, exactly what Charles and the ambassador were saying earlier.
PHILLIP CORNELL: Getting the taxonomy right and, perhaps, also with those kind of gas investments making sure that they’re transition proof—what can they be used for next, for example, building out a European hydrogen economy. What are ways that, for example, in thinking about sort of the hydrogen future that we can think about gas investments in that way?
CHARLES HENDRY: Well, the hydrogen debate is going to change dramatically. The Kremlin produced a hydrogen strategy just a few months ago and it wanted Russia to become, I think, after Saudi Arabia the second biggest hydrogen exporter in the world with international partners co-investing alongside Russian companies, be that Rosatom or Rosneft and others.
That strategy is in tatters. The world will never allow itself to depend on Russia for hydrogen just as the world will never allow itself to depend on Russia for gas again. The reputation over 50, 60 years of not interrupting gas supplies to Germany, even through the Cold War, is now fundamentally broken.
So the hydrogen debate, I think we’re a few years off being able to develop a hydrogen economy. The obvious place to start is blue hydrogen with gas. Green hydrogen from renewables or hydrogen from nuclear will become an important player. But at the moment, we haven’t got the infrastructure and at the moment we haven’t got the investment going in.
So we will have hydrogen economies, and looking at the German strategy for that, I think, that’s a really encouraging approach how the industry will be able to move from using gas to using hydrogen. But not in this decade, I don’t think. So we need to be focusing on what can be done and the time scale for doing it. But we need to be realistic that it doesn’t solve this crisis now.
MICHAŁ KURTYKA: Yeah. Let me also add on what the minister and the ambassador said. I think we have different time scale. So, yes, going for hydrogen makes sense but it will bring us solutions in—not quicker than eight or 10 years.
Yes, nuclear is part of the answer and we want also to develop nuclear in Poland. But, again, this is 12, 15 years, if we are realistic in terms of scale. And the problem is here and now, and so we must make sure that we also are able to liberate the potential which is at our hands.
And so, for example, we have very unbalanced LNG terminals within—repartition within European Union. We have a lot of them in Spain and none in Germany, yeah. But we do not—we lack pipes. So but there are possibilities, for example, with gas from Algeria, to send more of gas—Algerian gas to Italy, for example, less to Spain so that Spain can fill at LNG terminals, et cetera, et cetera.
So there are different strategies which can be put in place in order to face the next winter because that’s the challenge.
Second, what is the shortest available response time to prepare us for the winter? So the problem for the winter will be for heating purposes, and the heat pump industry is growing like hell in Europe. In my country, 2017, the heat pump industry was tenth in terms of European Union ranking. Now it’s the third.
Within two years, we nearly tripled the provision of heat pumps in Poland. This is because we introduced a very ambitious policy of eliminating pollution from houses, so equipping them with photovoltaics, heat pumps, and then charging infrastructure. Eight hundred thousand homes were equipped with rooftop PV since two and a half years. That’s a record.
And so we need—it’s the wartime and we need to have wartime answers, and wartime answers needs to gather exceptional resources and be able to do it at exceptional speed. So this is something that we need.
Then what about rationalization for industry of gas? I think we should eliminate industries which are using gas not for technological purpose but, for example, for heating purposes—there are lots of them still—while, for example, fertilizer industry is absolutely crucial because otherwise we will have both energy and food crisis. It’s looming already. Twenty-five percent of exports of wheat—global exports of wheat have been controlled by Russia and Ukraine. It’s not anymore on the market.
So we need to make sure that there is a very intelligent strategy which is being put in place within weeks in the European Commission, and within weeks, whatever we do, we will not be able to build new facilities. This is not that I’m saying that we shouldn’t build them. On the contrary, we should accelerate them and we should make sure that Europe, as the minister eloquently also underlined, is not any more considering Russia as credible supplier.
So Europe must take all the consequences of this in terms of its own energy supply. But we have to attack questions one by one. The first question is, what do we do now? What do we do for the next winter? And then if we have answers for these questions we have to deploy the right strategy for the future.
PHILLIP CORNELL: Thanks. We’re going to open for questions in just a moment. But—please.
ANA BIRCHALL: I have a quick, well, complementary approach to what our friend from Poland was saying. Yes, we need to act quickly now for next winter. But I will argue that we need to act quickly now for making sure that we learn the lessons from the past in order to avoid being in the corner some of the countries are today, and that’s why you need to act today to invest in the SMRs, to invest in the new nuclear plants, to invest in the hydrogen from nuclear because it’s proven to be very efficient.
So, you know, that was the success story of my own country, Romania, because we acted 10, 15, 25 years ago. Cernavodă, through Nuclearelectrica, has been operating the two power plants for 25 years and we took the necessary steps at that time. That’s why we are in a strong position relatively to other countries in the region where we are not depending on the Russians’ gas.
So that—you know, acting wisely today is going to secure you for the future and, you know, we all learned that it’s important to take the necessary lessons from the past to build your present and especially to build your future.
So what I will say, yes, let’s act wisely for next winter. But let’s act wisely and courageous for the next years to come. And in order to have the SMRs, which, you know, it is—you know, is going to be proven as being a very reliable source of energy. But in order to have the SMR in 2030 you need to start acting as of today.
PHILLIP CORNELL: Thanks very much.
Let’s go to the audience for some questions. Please.
Q: Thank you much. A very interesting panel. I have lots, lots of questions. I’ll be very short. Just three quick points. Gas is going to stay very expensive even for the full year. The expectation a few months ago was that in April the price will drop with—this will be the—it’s not going to happen this time.
So three quick—three quick points.
Should we include Moldova and Ukraine in our planning in EU? Could we—is it realistic to let them depend on Russia? On electricity, already they are decoupled from Russia and are connected to the—to the European system now. Should we do—somehow introduce them in our also planning in gas?
Rationalizing. At least—OK, what do you think? Should we move this also to EU level here? Should we interrupt consumers—yeah, consumers that you pay when there is not enough—there’s too much consumption, you pay some companies not to consume, yeah? Should we move this to the EU level?
And third point, if gas is going to stay so expensive, it’s—OK. It’s expensive. It’s important itself, but it’s messing up the electricity market. I know that’s a very controversial issue, but somehow I see the logic to try to decouple the price. There’s a French proposal, more or less, yeah, to decouple the price of gas from the electricity market, to find a way so it’s not pushing actually so high because it’s creating additional economic and social problems, yeah? Thank you.
PHILLIP CORNELL: Maybe on including Moldova and Ukraine in planning?
ANA BIRCHALL: Well, obviously, and as I was hinting earlier in my intervention, Romania is helping Republic of Moldova. We are—you know, we are—not just now but for years we’ve been helping Republic of Moldova with the gas.
Obviously, at this time—and I know it’s a debate and I think it’s a decision as well to help Moldova from the supply that will be at the EU level, and the easiest pipeline that will go through Moldova will be coming through Romania. So definitely yes, from my point of view.
PHILLIP CORNELL: Someone want to speak on, perhaps, decoupling prices or some of the European proposals that we’ve seen from a few countries about things like price caps, potentially, having volatility limits and guardrails?
CHARLES HENDRY: From the UK perspective, one of the reasons why they are still connected is that we have renewables, which are now running much more cheaply than electricity from gas. But when we have to back it up, then the price—the market is set by the gas price. And so whilst that still remains a big issue, then it’s much more difficult for us to decouple them.
But there’s a very lively debate now in the UK of people saying, well, if renewables are providing electricity much more cheaply than electricity from gas, then shouldn’t that be reflected in the price people pay, and we’ve now got a debate about whether people who live near renewable installations should be getting cheaper electricity for hosting them in their communities. So I think that’s absolutely the right one to be looking at.
On your second point, if I may briefly just address that as well, clearly, we’re not in the EU anymore, but I would have been nervous, as a minister, if the EU could offer—could, essentially, agree that industries in my country where I had electoral risks could be taken off the gas supply by an act of the EU.
So I think you’ll find that people are very willing to cooperate on sustainability, on decarbonization, like the implementation of the renewable energy directive. But on energy security, they still want to maintain that as a national decision because it’s too fundamental to their economic well-being as a country. But they will accept European enhancement of the measures which they’re taking. I bow to my two European colleagues and if they would feel the same thing, or they may feel differently.
MICHAŁ KURTYKA: Thank you. Thank you for great questions. Well, Ukraine, Moldova, yes. It’s part of the same system. We must provide them with security of supply. Then on the rationalization I would have a different view. Why? I already went for negotiations.
There is a regulation within EU related with priority of supply of gas in terms of shortage, and at some point European Commission proposed that it is being governed by economic efficiency. And so I was joking at that time saying that Poland is a neighbor of Germany. That’s not a mystery in terms of geography.
So we—Zielona Góra, a city 150 kilometers from Berlin, is having some schools—it’s a big city—and in Berlin you have some casinos. So I’d say in terms of energy—economic efficiency, you would certainly be able to pay more for providing gas to a casino in Berlin than for a school in Zielona Góra, and it’s the same gas system.
So this is why if we are not having clear rules at the EU level we will be fighting and that will be a chaos. And, yes, indeed, it is a challenge in terms of some industries. But, again, if this discussion is not happening in a civilized manner at the level of European Commission, it will happen in a barbarian manner for the one who has more money to eliminate others. And I think that for some part of the market maybe, yes, we should be able to do it for some industry niches. But otherwise, you—we will get in trouble. So I think we should prepare such a plan at the level of European Commission.
And then your last question is a very good question. It’s not directly related with the war because the question was already raised last year by Spanish and French government, in particular. The problem is that, yes, indeed, we have very cheap renewables but sun is shining for, in my country, 10 percent of the year. Wind is blowing for 30 percent of the year.
So whatever you do, however cheap wind and solar would be, you inevitably end up closing the market with some existing conventional power, and what we’ve been understanding—and, again, here, I’m sorry to say, we were right saying it is not workable, and Poland introduced—and we’ve—we had a lot of discussions with European Commission—but we introduced capacity market.
So we have producers of electricity, which are obliged to sell electricity. When we call, we paid them for that availability but the result is right now since at least six months, maybe eight months—you can check—Poland is the cheapest wholesale market in European Union.
RICHARD MORNINGSTAR: Maybe, Phillip, one brief point.
PHILLIP CORNELL: Yes. Yes, Ambassador. We’re just at the end of time. So let me give you the last word, Ambassador. European solutions for both on a war footing and in terms of the market.
RICHARD MORNINGSTAR: Oh, OK. I’ll make then a couple of quick points in closing. One, I think the question—the questioner—those were excellent questions, but what it also makes absolutely clear, and we don’t talk enough about in these debates and panels and discussions, is the importance of the electricity grid, and, as I understand it, Ukraine actually connected to the European grid just before the war started and Moldova is now connected as well. Absolutely critical. Likewise, in the Baltics. To finish the synchronization project to get the Baltic countries off the European grid—I mean, the Russian grid—is absolutely critical. It gives Russia incredible leverage.
I don’t really have anything more to add from what I said. Just one follow up, and I think it’s from Minister Kurtyka. There are alternatives for gas that do need to be explored. The issue of interconnections from Spain to France and on into Europe has been going on forever. That has to be solved. Algeria also a potential source as well as any number of other sources.
So I guess I’m done with my closing comments and, again, emphasize the need to just stick to it and follow through on all the things that we’re talking about.
PHILLIP CORNELL: Thank you very much. And with that, I think we’re at the end of time.
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