Budapest Forum 2022: Energy Transition and Energy Security in Central and Eastern Europe in the Wake of the War in Ukraine

Participants

Keynote speech: Kadri Simson, Commissioner for Energy, European Commission

• Toby Trister Gati, Former United States Assistant Secretary of State for Intelligence and Research
• Borislav Sandov, Deputy Prime Minister for Climate Policies, Minister of Environment and Water, Bulgaria
• Balázs Felsmann, Regional Centre for Energy Policy Research

Moderator: Benedek Jávor, Head of Brussels Representation, Budapest City Hall

Main takeaways

• Russia clearly uses energy as a geopolitical weapon, and its effects can be felt in the energy markets. EU is taking several measures to find a remedy against these effects and ensure the uninterrupted supply of natural gas. In the short term, the EU is focused on filling gas storages and calming the volatile market. In the long term, the diversification of the supply routes to get rid of the dependence on Russian energy is an absolute priority. As a result, Russia’s share in the EU gas supply has already dropped from 40% to just 9% in a year.
• In the short term, particularly this winter, Europe will rely on fossil fuels to produce energy, but in the long term, the crisis will help electrification and transition to cleaner energy in the EU.
• Clean energy and renewable energy sources are key to attaining European energy independence and fighting climate change at the same time. Renewable energy is quite inexpensive; it can be generated locally while they increase energy independence.
• The nuclear dependency on Russia is still significant since Russia built a lot of nuclear reactors in the previous decades, especially in CEE, and it even supplies French and American reactors with nuclear fuel. This issue is not tackled by the West, and it is not part of the discussion even after Russia has been using nuclear blackmail against Ukraine in the current crisis. Never had a nuclear power plant been used as a military base and a target of military attacks.
• In terms of rare earth materials, the West’s dependency is even more striking since these materials are mainly found in China and politically unstable African countries.
• We (Hungary) already have adequate gas supply routes, and now we need to manage the demand side. In Hungary, household gas consumption was at an all-time high last year, while the current high price is forcing companies and households alike to adapt (in terms of their energy consumption). We need to decide what services are essential to maintain in the next few months and what are “extra” ones. The situation will not be easy but manageable.
• The US is in a different situation compared to Europe. It does not legislate the same way and does not address climate change the same way. The federal government has limited capacity to act on these matters, and the states are divided along partisan lines, even in a state like Florida, which is directly affected by climate change. Therefore, a clean energy bill had to be passed as part of the “Inflation Reduction act” in Congress.

Policy recommendations

• The EU is striving to increase the share of renewable energy in its energy sector to 45% by 2030. It wants to reach 320 gigawatts of newly installed solar photovoltaic output by 2025 and double it by 2030. In terms of hydrogen, the EU wants to increase clean hydrogen production to 20 million tons by the end of this decade.
• Low-cost energy producers have significantly profited from the high price of natural gas and electricity. Taxation targeting the extra profit of energy companies is an important means to support vulnerable households.
• We can accept fossil fuel solutions in the very short term to tackle the immediate crisis, but the high prices have instantly stimulated the production of renewable energy, including solutions for how to store it. Renewables are a great investment, so this is good news for everybody in the short and long term because it is a one-way street.
• We need to put nuclear energy into a new perspective. Nuclear energy is much safer now compared to the previous incidents in Chernobyl and Fukushima. On the other hand, as we can see, the use of natural gas can be risky too. If we want new nuclear reactors, the state will need to subsidize them, and it will not solve the current issues because of the long construction time needed.