How the distribution of energy prices in Europe is hitting the southeastern economies and the Balkans!
Since the war in Ukraine cut off Russian gas supplies to Europe it has also forced countries like Greece to look for more expensive alternatives. But Southeast Europe has felt the impact much more than the Northwest. Experts say this will only expand as winter hits and will have a negative effect on economic growth. Bulk power in Greece and Italy in August was 12 times higher than in the Nordic countries and even dwarfed other southern European countries experiencing hot weather.
As of 2021, Greece has spent €11 billion on energy subsidies to try to protect customers. In 2022, spending reached 5.3% of GDP, by far the highest in the EU and double that of second-place Italy, according to experts. Countries negotiating a global treaty to curb plastic pollution failed to reach an agreement on Monday.
Despite Athens' efforts to protect citizens from rising energy costs, the situation has worsened a cost-of-living crisis in Greece following the 2009-18 debt crisis that slashed wages, pensions and investment in energy production and transport. Much of the contrast between Southeast Europe and its neighbors comes from investment. While the Northeast has power and gas lines that allow for easy energy transfer between nations, as well as a strong mix of renewables, much of Southeast Europe is fragmented and isolated.
Energy conservation, which is becoming increasingly important in northern European countries, does not exist in parts of the southeast. Germany has 1,668 megawatts (MW) of large-scale storage capacity, compared to none in mainland Greece. Southeast Europe and the Balkans lack (electrical) interconnections. Whenever there is a shortage of energy and the production of renewable resources is low, they struggle to import the necessary volumes, say analysts in the field.
In contrast, renewable energy production in Spain has increased in the last decade, thanks in part to EU funding. It produced almost 60% of its electricity from renewable energy in the first half of this year, up from 51% a year earlier. Europe's energy grid is in many ways a great success. In 2022, France increased imports from Germany when nuclear power production decreased. When Russian gas supplies to Europe via Ukraine were cut off last week, the price impact was softened because the bloc had found alternatives.
But for some, more needs to be done. After rising energy prices in Greece last summer, Prime Minister Kyriakos Mitsotakis wrote to the European Commission demanding a solution to the "unacceptable" differences in electricity costs across Europe. Greece is not alone. Much of the Balkans relies heavily on fossil fuels and the regional energy system is weak. Last June, a power outage hit Montenegro, Bosnia, Albania and Croatia when the grid was overwhelmed by air conditioning needs during a heat wave.
Kosovo, which generates more than 90% of its energy from coal, is trying to catch up with the rest of Europe in installing more renewables. In December, it launched an auction to install 100 MW of wind capacity. But the World Bank estimates that it needs 100 times more at least 10 gigawatts of new capacity to meet its goal of eliminating coal use by 2050. This transition is estimated to cost Kosovo 4.5 billion euros, an amount scary for the small economy.
Without sufficient cross-border integration or storage, there is sometimes too much power for a market, forcing producers to limit supply. If the objective is more specifically to lower prices, the easiest way to do this is to increase the penetration of renewable or nuclear sources.
While Greece has no nuclear power plants, Aristotelis Aivaliotis, secretary general of the Ministry of Energy, is optimistic, noting that renewables production is increasing, two new gas-fired power plants will come online this year, and storage of batteries will be built by 2028. Plans also call for energy links with Italy, Albania and Turkey to be improved by 2031 at a cost of around 750 million euros. "Wholesale prices will come down gradually ... and that will definitely be passed on to consumers at some point," Aivaliotis told Reuters.
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