Klaus-Dieter Borchardt: Bulgaria Has Potential to Develop into Gas Hub
"For too long Bulgaria and other countries of the region have been concentrating on large scale pipeline projects such as South Stream and have left behind the development of important regional infrastructure, notably interconnections with neighbouring countries," Klaus-Dieter Borchardt, Director Internal Energy Market at the European Commission's Directorate-General for Energy, has told Novinite.
Mr Borchardt was asked to comment on the challenges facing Bulgaria's energy sector at a time the country is no the road to electricity market liberalization and is pinning hopes on building a number of gas link with its neighbours.
Borchardt, whose professional experience at the EU Commission began in 1987, is no stranger to energy developments in Bulgaria. He is coming to the country on December 9 to attend several events here and also to meet Energy Minister Temenuzhka Petkova.
Mr Borchardt, with Bulgaria's energy exchange due to have its test launch very soon, and liberalization of the electricity market forthcoming, is there any risk of deepening the crisis in the country's energy sector, rather than solving its problems?
No, there is no alternative to market liberalization and full integration into the Single European Energy Market. Why do you have the crisis in your energy sector? It is mainly because of an old fashioned regulatory framework, too much and badly targeted state interventions and the lack of competition. All this does not create incentives for new investments which are necessary in order to modernise and transform the energy system into a system which delivers on the overarching energy objectives which are the providing security of supply through a sustainable energy production at affordable prices.
Does Bulgaria stand a better chance of integrating into Europe's electricity market now that liberalization is about to begin?
Yes, liberalization is a prerequisite for the integration into Europe’s electricity market which will bring large benefits to Bulgaria over time.
Judging from European experience so far and from your observations, are electricity prices in Bulgaria likely to soar due to the liberalization?
This is difficult to say - in the short term this cannot be excluded but in the mid-term it is certain that a functioning electricity market will keep prices in check and bring them down. What is therefore needed is a smart transition from the current foreclosed market to an open und integrated market. Therefore, accompanying measures fighting energy poverty and protecting vulnerable consumers are necessary.
Can long-term electricity supply contracts co-exist with market liberalization in the case of Bulgaria without slowing down the liberalization process?
Long term contracts as such are not a problem and can even be beneficial for security of supply. However, above a certain percentage they can foreclose a market and hamper competition. What we need is a sound balance between long term and short term products.
Bulgaria is among the EU member states severely affected by energy poverty. What measures can the EU take to fight this problem?
This is a very serious issue and needs to be dealt with as a priority. At EU level we have adopted in the framework of the London Forum for consumers recommendations and best practices. It is for the Member states to come forward with the needed measure targeted to the specific situation in the respective country. There is not a one fits all solution; fighting energy poverty has to take the national specificities into account. The Commission will however assist Bulgaria in the exercise to find the best and most efficient solution.
How do you assess Bulgaria's proposal to host a gas distribution center? Is it viable and will it contribute to Europe's (and Bulgaria's own) energy security in any specific way?
Bulgaria in view of its geographic location and existing gas infrastructure has the potential to develop into a regional gas hub. However, to achieve this objective Bulgaria must become a regulatory model in the South-Eastern European region and fulfil a number of essential prerequisites, in particular have access to diversified gas sources, develop infrastructure connecting Bulgaria to neighbouring countries and establish a well-developed trading environment. Once established such a well-functioning gas hub can secure gas supply for the whole South-Eastern European region which is today the most vulnerable region in Europe in terms of security of gas supply. Bringing security of supply to this region fits perfectly into the EU security of supply strategy which was presented in 2013 and has become one of the pillars of the European Energy Union.
Being familiar with Bulgaria's years-long effort to build gas links with its neighbors, why do you think none of them has been constructed yet? How will the inclusion of interconnectors in the list of common-interest projects speed up the process?
For too long Bulgaria and other countries of the region have been concentrating on large scale pipeline projects such as South Stream and have left behind the development of important regional infrastructure, notably interconnections with neighbouring countries. After the abolition of South Stream the Commission has put in place the CESEC High Level Group which has selected 9 priority project for the South-East European region of which 3 concern directly Bulgaria. In this group under the chairmanship of the Commission all political, regulatory and financing problems of these projects are discussed and resolved. We hope that this process will speed up the procedures and lead to a swift implementation of the projects. The PCI status as such adds 3 advantages: firstly, all necessary permits will be channelled through one single authority (the so called “one-stop-shop”), secondly the permit granting period cannot exceed 3.5 years and thirdly PCI projects have access to the Connecting Europe Facility (CEF) which provides EU funding for PCI when necessary and justified.
Bulgaria has reiterated several times it would demand "equal treatment" for Nord Stream and South Stream, a year after the latter project was abandoned. Is Sofia right to ask for this?
Sofia is completely right and entitled to ask for equal treatment. All infrastructures need to comply with EU law and like in the case of South Stream the Commission will make sure that also the Nord Stream 2 pipeline complies with EU law. The same rules and standards will apply to this project as it was the case for the South Stream project.
Are there any threats to Europe's energy security stemming from the construction of Nord Stream-2? This is what Ukraine, the Baltics and several other countries have suggested.
It is not a secret that the Commission takes the view that Nord Stream 2 does not fit into the EU’s security of supply strategy which is looking for more diversification. Nord Stream 2 is leading exactly to the contrary, i.e. more concentration on one single transport corridor. It is also weakening further the development of a diversified gas market in the South-Eastern European region and threatens the continuation of the gas transit through Ukraine.
Within the context of ongoing climate talks in Paris: many countries in Central and Eastern Europe see the Energy Union as a means to have their large-scale infrastructure projects (many of them gas-related) prioritized. Having this in mind, how will the Energy Union work to reduce dependence on fossil fuels?
There is only one way forward if we want to achieve our climate goals: we have to develop further the production of renewable energy and we have to make the Emission Trading System (ETS) work providing a reasonable carbon price. Furthermore, we should work towards the abolition of all types of subsidies and let the market play its role all over Europe. Gas can stay as a back-up fuel but large-scale infrastructures are not necessary – we should concentrate on the necessary interconnectors.
Bulgaria has seen recent efforts to revive stalled nuclear projects, but is there a future for nuclear energy in Europe?
The decision on the energy mix stays with the Member States. Therefore, I cannot answer this question.
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