Julian Popov: The future of gas in Europe is uncertain

Julian Popov

Gas demand in Europe will most likely continue to decline. This is the reason why the competition for additional gas import infrastructure is so fierce and politicised – there is simply no need for more, Julian Popov told euractiv.com in an exclusive interview.

Julian Popov is a Fellow of the European Climate Foundation, Chairman of the Building Performance Institute Europe, former Minister of Environment and Water of Bulgaria. He is among the 40 policy experts with influence on the EU Energy Union recently unveiled by EurActory40, a new and free service developed within the EU Community project that scans the growing amount of information about people involved in EU policy-making.

He spoke to EURACTIV’s Senior Editor, Georgi Gotev.

The European Union used to call itself leader in climate and energy policies and innovation. Is this claim still valid?

To a large extent it is. The European Union has been driving the international climate policies and the global energy transformation process in the last 20 or more years. It also had a good head start with the reaction of some of the European countries to the 1973 oil embargo. Denmark for instance reacted to the embargo with a strong set of policies promoting energy efficiency and renewable energy. That is how the new wind energy industry was born. The European leadership however is now challenged. China and the US are developing massive renewable energy markets and advancing in low carbon innovation. A telling anecdote for some of the weaknesses of Europe is the way the main economic blocks reacted to the need to reduce emissions in transport. Japan produced Prius, the US developed Tesla and Europe designed an emission cheating device for diesel cars. Europe needs bold innovation and entrepreneurial development in order to stay ahead of the low carbon competition.

So self-congratulation is outdated?

It is both outdated and dangerous. Climate policies are deeply linked to innovation and competition. We pay much more attention to old industries that might lose their current positions as a result of carbon emission regulations (through the so called carbon leakage) but not enough attention to the new low carbon industries and technologies. We should switch from jubilant leadership mode to a fighting competition, but not protectionist, mode. We know that coal is dying and we have to help it to die faster and more peacefully. We know that onshore wind is today the cheapest form of power generation when we compare new installations and we must help its further spread. We know that in many cases solar energy is cheaper than conventional energy and we must reduce the soft cost of installation. Instead of ongoing support for old energy we should channel funds to clean energy research and development that would help Europe stay ahead of the economic and innovation curve.

The EU has the ambition to build an Energy Union. What are the challenges?

The Energy Union has two sides, like the two hemispheres of our brain. The one is related to reordering and updating the existing EU energy policies. The other is linked to a more unchartered political process that is currently under development, stretches beyond the 28 member states and looks into the new energy security dimension. This is a huge opportunity for initiating policies that are in line with the new European and global energy trends. Interesting and successful example is the CESEC group [the Central East South Europe Gas Connectivity (CESEC) High Level Group which was established in February 2015 in Sofia] that initially brought together the energy ministers from 11 Central and South East Europe to work on the energy infrastructure projects in the region following the collapse of the South Stream pipeline. This group then evolved and it includes now countries that are members of the Energy Community. This is a practical example of what Energy Union beyond the EU borders could mean. A next step could be expanding this group or developing a similar arrangement that would include Ukraine, Turkey and other countries which are vital for the EU energy market and share common energy infrastructure and trade with the EU.

Will the CESEC group work only on gas infrastructure?

This is something that the group needs to decide. The gas infrastructure in the region was a legitimate immediate concern because of the high dependency on a single source and lack of market and infrastructure that could enable it. The natural next step would be to expand the work of the group to electricity and heating and cooling. We can’t have an adequate view on gas demand outside the context of other energy provisions. Gas demand is closely linked with the expansion of renewable energy and the increasing impact of higher energy performance standards. In the future we will see a growing number of buildings using electricity for heating. Buildings are also becoming energy producers and their role in energy storage, balancing and trading will also grow. So without understanding the trends in electricity, performance of buildings and renewable energy we cannot understand what might happen with the gas demand.

You are based in London, but you are originally from Bulgaria. You were the minister for environment and water in the Bulgarian caretaker government three years ago. How do you see the energy challenges for the region of the Balkans?

The Balkans and the wider South East Europe is the European region which is by far the richest in economically viable clean energy resources. The largest European onshore wind power plant is in Romania, for instance. Bulgaria and Romania has reached their renewables targets for 2020. Albania is one of the two European countries with nearly 100% hydro electricity. The region has large additional hydro potential that could provide both clean energy and storage for South East Europe and beyond. Biomass is also abundant and widely used. The question is how this abundant resource to be used for the benefit of the Balkan countries and Europe in general. There are two challenges. The first is the high political fragmentation of the region and the division between EU and non-EU members. The second is that the region is locked in the misconceived strategic definition of the “Southern Gas Corridor” and the potential beyond this transit role is ignored. There is a chance that the Energy Union process will address these two issues by creating a policy framework that would bring together all countries in the region, including Turkey, and will attract serious investors the region. That would be a solution for the regional energy supply security, for strengthening its economic growth and increasing its living standards.

You mentioned biomass. Is this a sustainable energy solution?

It could be. There are concerns related mainly to illegal logging and use of land for growing energy crops that in turn might compete with food production. However beyond these two concerns could be addressed with sustainable logging, agricultural waste, second generation biofuels and other avenues that we must explore. Specifically for the Balkans biomass is the main heating fuel. This is not necessarily a sign of backwardness. Finland, Sweden, Austria and other countries have much higher share of wood and wood products in their gross inland energy consumption. The problem is the low efficiency in the Balkans. What we need is sustainable production and efficient use. With high efficiency biomass installations most countries in the Balkans could fully satisfy their heating needs. A traditional stove works with efficiency of 30%, high efficiency ones – with 90%. In Bulgaria 34% of heating uses wood, in Serbia 60%. It is clear that this is a significant resource and in combination with energy retrofit of buildings, enforcement of sustainable forestry rules and efficient installations it could define the heating market in South East Europe. Biomass is one of the reasons why gas will not have a significant heating market in South East Europe. The growing solar heating could be another reason.

Gas is seen as the bridging fuel between coal and renewables, what would you say is the future of gas?

Uncertain. Gas demand in Europe will most likely continue to decline. The slight increase in demand in 2015 should not be seen as a change of this trend. This is the reason why the competition for additional gas import infrastructure is so fierce and politicised – there is simply no need for more. There is a case only for infrastructure that would facilitate market and increase competition across Europe. There might be justification for some LNG terminals or a minimal version of the Trans Adriatic Pipeline. Any further infrastructure would have a high risk to remain a stranded asset. There are two factors that could slow down the gas demand decline. The first is rapid closer of coal power plants. But it has to be rapid, otherwise coal capacity will be simply replaced by energy efficiency and renewables. The second factor could be partial gasification of transport.

How about Greece? Do you think that the way it had shaken the euro it could also become a threat for the Energy Union?

I don’t think it will become a threat, but Greece has to do a lot to connect itself, not just in terms of infrastructure, but also to connect its energy market more closely to Bulgaria and the Western Balkans.

Greece has an interesting energy problem with powering its islands. This is an opportunity to develop decentralised energy solutions that could be applied elsewhere. Greece should also focus more on building a regional gas and power markets. As most countries in the Balkans, Greece also wants to be the regional energy centre. I don’t think there is such vacant role for any country. There are emerging regional and European energy markets and also distributed energy generation and consumption. Between these two trends the importance of the national energy systems is declining.

Greece has a lot to offer in terms of renewable energy. Three countries in the region are very advanced in deployment of renewable energy – Greece, Bulgaria and Romania. Bulgaria and Romania have already reached their targets for 2020, and it would not be difficult for Greece to do the same.

With continued low prices of renewable energy, Greece is blessed with the wide variety of clean energy. What they need to is to develop their regulatory system, to liberalise their market, basically to tick all the boxes that are recommended by the Energy Union.

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