Serbia: Energy crisis ahead, ready or not?

, News Serbia Energy

If a new gas crisis occurs, Serbia would miss about 660 million cubic meters of gas. Energy company EPS is facing the hardest winter since 2000, for import of electricity necessary up to 200 million euros, possible power cuts.

When Russia, after very serious sanctions imposed by the EU, temporarily reduced quantity of gas to Poland and Slovakia, the entire Europe received another warning about a possible new gas crisis break out, like those in 2006 and 2009. Many people believe that it will be even worse. Unlike Serbia, countries of the EU weren’t caught by surprise, nor are they unprepared for the uncertain winter ahead. Since the crisis in Ukraine, they have been preparing and searching the alternative for the Russian gas. In other words, the citizen of the EU would hardly freeze this winter even if Russia temporarily or entirely suspends gas supplies. Poland was well prepared for two-day gas reduction, first by 20% and then by 45%. This country, which, because of traditional harsh attitude towards Russia and inviting additional NATO troops and because it could be affected by restrictions, now it is far more prepared for possible interruption of supply from Russia than it was in 2009. More precisely, it is able to withdraw up to 70% of the required amount of gas from the West and with stored amounts to fulfill the needs of the country for this winter.  Czech Republic, which gets 75% of gas from Russia, has also provided quantities for the whole winter.  Slovakia filled its storages, sufficient for five months, and it has a possibility to get the gas from Western Europe.

While European countries have been prepared for “Russian” cold winter for some time now, the citizens of Serbia have all the reasons to be worried. Contradictory messages of the Government, in which the relevant minister Aleksandar Antić claims that there won’t be any power cuts, nor lack of energy generating products, and Deputy Prime Minister Zorana Mihajlović claims that we are on the brink of an energy crisis, because there is a lack of gas, electricity, coal and heavy oil, are creating panic among already frightened citizens. In addition to these psychological reasons for fear, from which the sellers of heating appliances, coal and fuel can make a serious profit, there are very rational ones.  Not only that possible gas crisis would affect us much more than other countries, the Members of the EU, but after the floods, Serbia is threatened by “electricity” crisis. Damage, caused by floods, is estimated by EPS to 350 million euros, and the largest damage is caused to MB “Kolubara”, where there has been a lack of necessary coal amounts of 30 % since May. In TPP ”Kostolac” dewatering of open pit mines has started  four months after the May floods, while the floods in September reduced the capacity of HPP Đerdap 2 by 30 %. According to all the facts, it is obvious that the electricity supply during winter will mostly depend on import.

By starting  the production in OPM “Veliki Crljeni”, in early August, the coal production in MB “Kolubara” increased to 65,000 tons, but this amount is still 25,000 tons less than before the floods, so the “Nikola Tesla”  TPPs operate  with reduced capacity.

EPS claims that they have been elaborating with the Government all scenarios for the upcoming winter, including the import of coal and electricity. At the same time they have been working on renewal of capacities. “With the beginning of the production in OPM “Veliki Crljeni”, in early August, the coal production in MB “Kolubara” increased to 65,000 tons, while the usual amount, before the floods, was about 90,000 tons. TPPs “Nikola Tesla” operate with reduced capacity, due to the lack of 25,000 tons of coal per day, and at the same time the stockpiles are being filled, in order to be prepared for the upcoming winter season”- it is said in EPS.

The damage from floods is estimated in EPS at 350 million euros, and the greatest damage was inflicted to Mining basin Kolubara that lacks 30% of required quantities of coal since May.

NIN’s source close to this company claims that this will be the most severe winter since 2000/2001 and that the record import of electricity is waiting for us with amounting to 200 million euros. We are particularly concerned that, after New Year, the emergency procurement of the electricity will start, which will be especially expensive this winter, due to the high demand on the European market, and will create for the electricity traders the opportunity to make good profits on our need. This is something that could have been anticipated and assumed.

How come that Government only now, a few weeks before the heating season, which begins on 15th October, realizes that everything is missing – coal and electricity and gas and oil, while the whole Europe is ready or finalizing the preparations for winter? It does not matter whether we talk about the incompetence, political conflicts between the minister from SPP and SPS or feverish struggle of the directors of EPS and Srbijagas to keep their chairs rather than to worry about the steady supply, bottom line is that the consequences will be felt by the citizens.

“Unfortunately, the only good action that has been timely taken so far by EPS and Government is the reactivating the flooded open pit mine “Veliki Crljeni”, because the situation would be even more severe without that. In all other respects, there is a huge delay”, says for the NIN Mr. Slobodan Ružić, the energy expert. The needed electricity import for the whole winter has not been agreed yet, nor is the energy balance for the winter period closed. “That should’ve been done so far for security of supply and for the import price of the electricity which will certainly increase in the upcoming months”, says Mr. Ružić adding that the electricity import is delayed for the time when the demand in the region and electricity price on the market is higher.

He points out that the needed import should have been performed in July or in the first half of August for the period until the end of February 2015. Also, he sees no excuse for the fact that the pumping the water out from the open pit mine Tamnava – West Field has started now, because even if the water from this artificial lake were pumped out by the end of the year, it would be slightly possible that the coal production at this field could to start before the end of winter. “For all that, I think that Government and EPS are not properly prepared for the upcoming winter. Mostly ad hoc measures are taken, and making necessary strategic decisions is postponed. In the statements of our officials, with rare exceptions, prevails the ungrounded optimism”, says our interlocutor.

His calculation shows that only for the import of the electricity from mid-May 2014 until the end of February 2015, the 180 million euros is needed and it is unrealistic to expect EPS to provide that from the current revenues. Therefore, there is a loan. He points out that is not the only thing to be serviced but there are also pumping costs, costs for repairing the damaged facilities, so he believes that the electricity must be increased.

“This increase could be maintained at 10 percent of the adjusted boundaries of the red zone in tariff system from 1.600 to 1.100 kilowatt-hours. It would provide additional revenue equivalent to that which would be obtained with an additional five percent price increase”, shows Ružić’s calculation.

With the possible electricity price increase, probably after winter, it could easily happen to come to the gas price increase, according to the announcement of the Director of Serbia gas company Mr. Dušan Bajatović that this company should operate in market next year. The most important question is whether there will be enough gas so that thermal power plans could heat the homes and the industries operate during winter. Annual gas consumption in Serbia is 2.8 billion cubic meters, but the trouble is, say Mr. Ružić, that three quarters of annual needs is consumed during winter. At the same time, from domestic sources it could be provided approximately 17-18 percent or around 485 million cubic meters, while the rest is imported – the largest amount from Russia and small quantities are taken from Hungary and Switzerland. The gas storage Banatski Dvor je currently full and has approximately 450 million cubic meters of gas. According to Ružić’s estimation, approximately 560 million “cubic” meters of natural gas could be replaced with oil, heating oil and liquefied petroleum gas in the industry departments, transport and agriculture.

”With all this, if it occurred that natural gas supply from Russia ceased, in the period October-April, we would require another 660 million cubic meters of gas. This amount could probably be compensated by heating plants switching to the liquid fuels instead of using gas“, explains Mr. Ružić, but he also adds that it all should be agreed with no hesitation whatsoever. According to him, almost all European countries have secured alternative supply lines. Serbia is not one of them, because it falls behind with regards to that matter as well, given that the gas pipeline Niš-Dimitrovgrad should have been constructed a  long time ago.“ What we can do in this situation is to keep the gas storage Banatski Dvor full, to secure with NIS the maximum possible, national production over winter, to try to contract some, at least small quantities of gas from Hungary, Austria and other EU countries and to provide as much fuel oil, heating oil and LPG on the market as we can. Besides having Banatski Dvor full, I am not sure whether the competent authorities have done anything else“, says Mr.Ružić.

And when we sum all up, what awaits the citizens this winter?

Very uncertain heating and electricity supply, having very expensive firing. Mr.Ružić does not exclude the possibility of power restrictions, regardless the optimism of the competent minister. In case of an extremely cold winter and river inflows below average, power reductions would be inevitable.
Few people would frankly say to the citizens that there was a possibility that they could be freezing this year, but the few can also guarantee that it would not be the case. Experts advise that all who use distant heating should insulate their homes better and not to use electricity for heating in order to prevent the system from breaking down. Those who use electricity for heating are advised to use other sources, but those sources are in deficiency and also their price went up. If it happens that we do not have Russian gas, the advice to use electricity to heat one to two rooms in the homes seems as the most realistic solution. Cynics would say that there is something good in every bad thing – long and cold winter could keep tightly together hither alienated or dispersed families. Near the fireplace,  in the living room.
The needed electricity import for the whole winter has not been agreed yet, nor is the power balance for the winter period closed. “That should’ve been done so far for security of supply and for the import price of the electricity which will certainly increase in the upcoming months – Slobodan Ružić

Coal and wood more expensive

The  price of delayed reaction and failures in the work of the Government and EPS is paid by the citizens as always, who are also forbidden to buy coal from MB “Kolubara” and TPP “Kostolac”. Those who are heated with coal are forced to buy coal at the private warehouses at much higher prices, and the problem is that there is no even the expensive coal in sufficient quantities.  The difference in price is almost triple. Instead of 6,000 – 8,000 RSD for ton of domestic coal, they now pay 15,000 to 18,000, even 21,000 RSD, and many of them cannot afford this. For NIN, EPS says that there is no prohibition, but recommendation in order to provide steady electricity supply in the upcoming winter period, and it refers to the delivery of all coal types for wholesale and retail trade for the customers in the industry category and mass consumption. If for winter, on average, we need five tons of coal for household, that’s an expense of 60.000 to 70.000 RSD in cash, which cannot be paid by many people. The price of wood has increased as well, so one cubic meter costs from 3.000 to 4.000 RSD. For the whole winter at least 5-6 cubic meters is needed, so that is approximately 20.000 RSD. As a rule, for the poorest one, that is too much. It seems that no one will be warmed this winter.