TurkStream: It’s a go for gas, but there is still some life left in coal, News Serbia Energy
TurkStream gas does not bring significant changes in the energy sector of Serbia, it rather enables Russian gas to arrive from two directions, according to a CINS research. For now, the new gas pipeline will not reduce Serbia’s dependence on dirty coal, and the state is additionally investing in the construction of new thermal power plants. Meanwhile, the European Union is seeking to reduce pollution and open up the gas market.
The best New Year’s gift – this is how the ambassador of the Russian Federation, Alexander Bocan Harchenko, described the newly opened gas pipeline through Serbia in the Vojvodina village of Gospodjinci. The so-called TurkStream runs through the country from the Bulgarian border near Zajecar in the east, to Horgos near Hungary in the north. This gas pipeline section was developed by Russia and Serbia under a mixed company Gastrans (51% owned by Russian state Gazprom, 49% by local Srbijagas). Some ministers in the Government and the President of Serbia, Aleksandar Vučić, also attended the opening of the TurkStream.
“This a guarantee for a more certain and safer future,” Vučić said, claiming that lower gas transport costs would lead to a reduction in the price of energy, also adding that the entire deal would be paid off in 10 to 12 years.
However, while politicians say such a pipeline is cost-effective, Goran Radosavljevic, secretary general of the National Petroleum Committee and vice president of the Social Democratic Party, told the Center for Investigative Journalism in Serbia (CINS) that there was still not enough information for such a conclusion.
Considering that as before this gas will be coming from Russia, gas price will probably not change, Radosavljevic said. The price decreases when there are several suppliers of this energy source on the market, which, he explains, is not the case here. We will only pay less for transport fees.
In ideal circumstances, Radosavljević sees the possibility for Serbia to become a transit country for gas deliveries to Montenegro and Bosnia and Herzegovina and thus collects taxes, but also the possibility for the southern and eastern parts of the country to receive gas connections. However, all this is just speculation because the state’s policy regarding Turkey is not transparent, he adds, which is why it is not yet known who the gas buyers will be, bearing in mind that Serbia currently does not need gas other than the one it purchases under current contracts.
CINS received answers to these questions from the competent Ministry of Mining and Energy. They say that consumers remain the same as before and confirm that Serbia will be a transit country for natural gas transport. We currently import more than 85% of our gas, and the launch of the new gas pipeline ensures supply from two directions.
“Until last year, Serbia could only receive Russian gas from the direction of Hungary, which also meant serious supply problems in the event of disruptions along this route.”
To ensure energy security, gas needs to come from various suppliers, the Ministry explains, and announces new projects – the construction of the Nis-Dimitrovgrad gas pipeline, and the possibility of gas being procured from the Middle East in the future.
However, the state still has no answer as to whether the opening of the TurkStream in Serbia will increase gas use of, i.e. replace coal.
“These calculations will be done as part of the development of an integrated national climate plan, and any forecast they would currently make would not be objective or adequate.”
If there is no adequate cleaner energy, gas in Serbia can be a good substitute for other fossil fuels, Petar Đukić, a professor at the Faculty of Technology and Metallurgy in Belgrade, explains to CINS.
“If you need to replace dirty energy sources in cities, such as coal and fuel oil, then the easiest way to do that is with the help of gas. Gas-fired power plants emit far less harmful substances and are far more efficient than other fossil fuels,” Djukic said. It is more stable than energy from the sun and wind because it can be stored, i.e. kept in reserves.
The European Union, on the other hand, has objections to the TurkStream.
The gas market and Srbijagas are some of the key problems in Serbian energy, judging by the European Commission’s report on Serbia’s progress in accession negotiations with the EU from 2020.
The Energy Community Secretariat (EC), which implements the EU energy policy with the aim of establishing a single market, states for CINS that they have initiated several proceedings against Serbia for violating a set of European regulations, and two proceedings are currently underway.
The EC claims that the construction of the new gas pipeline leads to market discrimination, as the monopoly over the gas supply will be held by a Russian and Serbian company.
The possibility of market competition should reduce the dependence on one supplier and avoid the crisis that the economy, the population and the state can feel in case the delivery stops, Petar Đukić explains. He cited an example of the 2009 gas supply crisis, when due to the dispute between Russia and Ukraine, some cities in Serbia were on the verge of freezing, so the heating plants switched from gas to dirty fuel oil.
Although they do not have the power to make binding decisions for Serbia, in their answer for CINS, EC stated that “it must be resolved as soon as possible”.
The second procedure that the EC Secretariat has been conducting against Serbia since August 2016 refers to the failed unbundling of Srbijagas. This company transports and distributes gas at the same time, which is not in line with EU regulations included by Serbia in its Energy Law in order to establish a fair market and competition.
The EC believes that company unbundling has been postponed for years by its director Dusan Bajatovic, a high-ranking official of the Socialist Party of Serbia, when the media say that he is a reliable partner of Russia. Srbijagas unbundling is also one of the conditions to open Chapter 15 (Energy) in accession negotiations with the EU.
In January 2021, the Minister of Mining and Energy, Zorana Mihajlović, told Kurir TV that the state was “pumping” too much money into Srbijagas and that as a result the company was not profitable.
The Ministry of Environmental did not respond to the CINS’ request for information on inspections in Srbijagas between 2016 and mid-2020, and the Ministry of Finance did not provide data on whether this company took and used loans from international banks in the same period. Srbijagas did not answer CINS’ questions.
Goran Radosavljevic does not see this as a good argument, because, as he says, the EU also buys gas from Russia:
“Continental Europe has no alternative. (…) At present, there is no capacity to deliver such a quantity of any other gas to Europe, except Russian gas. There is no physical capacity.”
Petar Đukić is of a different opinion:
“It doesn’t matter there are no other competitors at the moment. You can’t artificially find competitors, but you can maintain the conditions for those competitors to arrive.”
More competitors will mean a better price and a more technologically advanced supply, added.
Competition and the energy market within the EC are not only one of Serbia’s formal obligations, but also a key precondition for improving energy efficiency and economically sustainable energy in Serbia, Đukić said in his paper “Competition, Competitiveness and Sustainability of Serbian Energy”.
According to the 2020 Energy Balance, a document determining annual energy and energy sources amounts, Serbia received the most energy from coal – 67.5%, followed by oil 9.2%, natural gas 3.1%, hydro potential 7.5%, biomass 11.4%, geothermal, solar, wind and biogas 1.2%
While the state is investing in expanding coal combustion capacity, this fuel has been causing problems for years.
Namely, thermal power plants emit carbon dioxide (CO2), sulphur oxides (SO), nitrogen oxides (NO) and PMs when burning coal. These substances cause heart and respiratory problems in humans, including bronchial asthma, chronic bronchitis and lung cancer.
As CINS previously wrote, in the vicinity of the second largest thermal power plant Kostolac B, excessive air pollution was measured every fourth day in the period from 2016 to 2018.
The capacity of this power plant is now increasing, so work is underway to build of a new, third unit B, for which the Serbian government borrowed money from the Chinese state bank in 2014, while committing to comply with Chinese laws, as previously reported by CINS . Additional investments have been announced in Kostolac A, which was supposed to stop working by 2025.
The Ministry also claims that there are investments into projects to reduce air, water and land pollution, so that, according to them, Elektroprivreda Srbije (EPS) invested 324.9 million euros from 2002 to 2019, and the value of ongoing projects is 607.7 million euros.
The problem with SO2 in Kostolac B was resolved with a flue gas desulphurization plant, the Ministry’s response reads. In October 2020, the construction of the same plants for both TENT B units began, with a plan to be completed in the first quarter of 2024.
However, according to the Balkan Energy News portal, the Energy Community recently called on Serbia to reconsider, i.e. limit subsidies in the coal sector, and on 5 February, it warned the Balkan countries, including Serbia, that they were violating their obligations to reduce harmful gas emissions.
“The energy sector is largely inefficient and highly polluting,” the latest EU report on Serbia’s progress reads.
Higher electricity bills and green energy problems
According to the latest data, for 2018, the EU gets more than a third of its energy from renewable sources (33%), while it still gets 40% from fossil fuels, including coal. In the same year, Serbia produced about 20% from renewable sources, including small power plants, wind farms, solar energy and biomass, and about 70% from coal.
In order to reduce the use of coal, Serbia has been subsidizing renewable energy sources since 2013 through the so-called feed-in tariffs, so citizens have so far given hundreds of millions of dinars through electricity bills. Small hydropower plants are the most popular among investors, although their contribution is almost negligible – in 2018, they contributed 0.7% to the energy sector. The state company EPS and companies connected with the president’s best man, Nikola Petrović, benefited the most from them.
In January 2021, the state increased the renewable sources fees paid by citizens five times, so now this figure amounts to 0.437 dinars per kilowatt-hour, thus increasing the monthly electricity bill. For example, those who used to pay around 50 dinars, now pay around 250 for the same electricity amount.
The Ministry of Mining and Energy explains for CINS that this increase was caused by a larger number of green energy producers, especially wind power plants. Although the price at which electricity is purchased from RES investors has not changed since 2015, the costs of purchasing energy have “significantly increased” because EPS had to purchase all energy from privileged and temporarily privileged power producers. According to the Ministry, that was a “serious financial burden for EPS”.
The Ministry also announces the construction of medium and large hydropower plants, increasing energy efficiency and the construction of gas power plants and gasification.
On the other hand, the state received a warning from Europe that, instead of allocating more money, it is time to abolish feed-in tariffs and introduce auctions as a riskier form of incentives for investors. The new RES Law is still being drafted, but it could change the way of incentives for investors.
On average, wind farm owners get more money than small hydropower plants for RES electricity, because they produce more, EPS data show. In our previous article we wrote that Nikola Petrović expanded his business to wind farms. This is followed by natural gas and biomass.
Our largest renewable energy source, biomass, is used today without a strategy, according to CINS research.
Fighting climate change only on paper
Serbia has committed itself to a set of EU regulations in the fight against climate change, which means reducing harmful gases. CINS research has shown that climate change is becoming more visible through floods, droughts and increasingly extreme temperatures, endangering the health and incomes of residents, and that the state is procrastinating in the fight against climate change. Hundreds of families lost their homes, fields, some their lives. The damage is also measured in money, that is, as former Minister of Environment, Goran Trivan stated earlier, Serbia sustained damages of over five billion euros from 2000 to 2015.
In November 2020, the state signed declarations in Sofia on joint trade and a green agenda with Northern Macedonia, Montenegro, Bulgaria, Albania and B&H. The document on the green agenda should implement the EU policy, which also refers to trade in CO2 emissions, and which means reducing the total amount of harmful gases that factories, power plants and other plants can emit.
Aleksandar Macura, an energy expert from the RES Foundation, told CINS that emissions trading is the “backbone of European decarbonisation policy”, and that lignite energy is “terribly burdened by the price of emissions”.
To illustrate, Macura explains that the price of emitting one tonne of CO2 in the EU is around 35 euros, and that according to that price, EPS, for example, would give a billion euros just for emitting this pollutant. However, he explains that “a European price would not be introduced for the Balkans immediately, but an adjustment would be made”, however, the rules are the same:
“Every tonne of CO2 emitted is a substantial cost and every year in total one is entitled to emit less and less.”