The Nordic Dimension Of Energy Security 3030370429, 9783030370428, 9783030370435

Table of contents :
Introduction......Page 6
Bibliography......Page 10
Contents......Page 11
About the Author......Page 14
Abbreviations and Acronyms......Page 15
1.1 Security and Security Policy......Page 19
1.2 Subject and Scope of the State’s Energy Security......Page 23
1.3 Energy and Climate Security......Page 30
1.4 Energy Security and Environmental Security......Page 32
1.5 Evolution of International Cooperation on Environmental and Climate Protection......Page 35
Bibliography......Page 37
2.1 Opportunities and Challenges of the First Decade of the Twenty-First Century......Page 41
2.2 Increase in Energy Demand......Page 45
2.3 Energy Production and Greenhouse Gas Emissions......Page 50
2.4 New Trends in the Global Energy System......Page 54
Bibliography......Page 60
3.1 The Global Energy Balance......Page 62
3.2 Top Energy Producers, Exporters and Importers......Page 66
3.3 Current Energy Consumption......Page 76
Bibliography......Page 82
4.1 European Energy Market: Economic and Political Conditions in the First Decade......Page 83
4.2 The European Union and Energy Supply Problems......Page 89
4.3 Contemporary Challenges in the EU Energy Strategy and Energy Balance......Page 98
4.4 The EU’s Activity in Counteracting Climate Change: The Special Role of RES and EU ETS regulation......Page 105
4.5 The EU’s Climate Policy......Page 109
Bibliography......Page 113
5.1.1 Terminological Remarks......Page 116
5.2 Norden and the Energy Problems in the Baltic Sea Region......Page 125
Bibliography......Page 134
Chapter 6: The Kingdom of Denmark: Leader in Energy Efficiency......Page 137
6.1 Energy Potential: Hydrocarbon Resources......Page 138
6.2 Energy Balance of Denmark......Page 145
6.3 Activities to Ensure Denmark’s Energy Security......Page 149
6.4 A Testing Ground for Novelties: Climate and Energy Policy......Page 152
Bibliography......Page 157
Chapter 7: The Republic of Finland: Dynamic Modernization of the Energy Sector......Page 160
7.1 Energy Balance of Finland......Page 161
7.2 Activities Aimed at Ensuring Finland’s Energy Security......Page 167
7.3 Energy – Climate: Practical Actions......Page 170
Bibliography......Page 173
Chapter 8: The Republic of Iceland: Ambitious Energy Plans......Page 175
8.1 Energy Balance of Iceland......Page 176
8.2 Renewable Energy Resources......Page 179
8.3 Forms and Methods of Using the Energy Potential......Page 182
8.4 Dynamics in the Development of Energy Security......Page 186
Bibliography......Page 191
9.1 Dynamics of Changes in Energy Policy......Page 193
9.2 Electricity as the Basis for Energy Balance......Page 203
9.3 Environmental and Climate Protection Measures......Page 207
9.4 Sweden: Energy Security......Page 213
Bibliography......Page 216
Chapter 10: The Kingdom of Norway: Standing in Energy......Page 219
10.1 Norway as a Producer of Oil and Gas......Page 220
10.2 Electricity as the Basis for Energy Balance......Page 232
10.3 Environmental and Climate Protection Measures......Page 238
10.4 Norway: Basic Premises for Energy Security......Page 242
Bibliography......Page 246
11.1 Environmental Protection, Climate Change and Energy Culture......Page 249
11.2 Cooperation in Energy Policy: Effective Remedy for the Contemporary Challenges in Energy Security......Page 261
Bibliography......Page 271
Conclusion......Page 275
Bibliography......Page 282

Citation preview

Ryszard M. Czarny

The Nordic Dimension of Energy Security

The Nordic Dimension of Energy Security

Ryszard M. Czarny

The Nordic Dimension of Energy Security

Ryszard M. Czarny Katedra Krajów Europy Północnej Uniwersytet Jana Kochanowskiego Kielce, Poland

ISBN 978-3-030-37042-8    ISBN 978-3-030-37043-5 (eBook) https://doi.org/10.1007/978-3-030-37043-5 © Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To my grandson, Harry

Introduction

In today’s world, a growing number of countries are at the peak of the industrial era, while a great many are entering the information technology era. “As we know, the essence of the industrial era is the domination in social activity of energy and material power factors, and the transformation of nature’s power embodied in the physical world into enhanced mechanical power. Therefore, we are objectively reliant and dependent on energy resources as they have become the prime mover and the driving force of contemporary civilization” (Koziej 2008, p. 2). Due to the growing demand for energy and the necessity of controlling its reserves, the issue of energy security has been given a prominent place and is strongly present not only in national energy and foreign policies of individual States but also in the European Union. Changes in climate observed throughout the world pose an additional risk to all, including the EU.  As a result, energy security and climate protection have become a major issue and the main objective in the energy policies of the European Union and its Member States. A thorough and detailed analysis of overall energy demand, not only in the short term but also in a longer perspective, is invariably the point of departure for the development and implementation of a state’s policy to ensure energy security. It is therefore necessary to assess the energy balance and the energy demand of a given country. Usually, various data and forecasts come into play at this juncture, depending on the method applied in drawing up the report. The very title of this publication suggests that nonrenewable energy will be the primary subject matter of interest. The reason for it is that the global context of the issue, on the basis of forecasts offered by the International Energy Agency,1 clearly indicates that the global development of energy until the year 2030 will continue to be based on and dominated by oil, gas, and coal. Although concentrating on energy fossil resources, the author is clearly mindful of the renewable sources of energy given that in the Nordic countries, they constitute a significant and systematically growing component of energy mix. At the same

 For more details, see World Energy Outlook 2006, www.worldenergyoutlook.org/

1

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Introduction

time, renewable energy and its sustainable management, in the opinion of the Nordic States, is one of the key aspects in combating climate change and one of the most significant factors in human activities aimed at environmental protection. With the growing demand for heavy hydrocarbons, the problem of energy security has taken an increasingly prominent place in international politics. To this end, efforts must be made to reconcile these objectives with the need to protect the natural environment. The exemplary solutions offered by the Nordic countries within the field are noteworthy and definitely positive. They have become a standard model when with the end of the Cold War the perception of the Nordic Region underwent a significant change. Years before, we used to focus exclusively on the security policy, while today the issues of security and sovereignty have been broadened by economic development, environment protection, conditions of life, and cultural cooperation aspects. Positive developments in Northern Europe have been of extreme importance not only to Norway and other Nordic countries but also to the Russian Federation. The High North is considered to be an area of many unresolved disputes between States as regards maritime boundaries and fishing zones. It is also there that climate change impact is most visible. Moreover, it is in the High North that huge deposits of oil and natural gas are located. The author is well aware of the gravity of the High North in the broad sense prospects for development of the Nordic countries and its significance in the global context. With this in mind, in an attempt to respond to the need for a scholarly review of the High North as a phenomenon of the foreseeable future, I devoted a monograph to it titled The High North: Between Geography and Politics which was published in the year 2015.2 The book fully demonstrates the fact that this area of rapidly growing international significance and of interest to many countries will offer a real economic opportunity. One hopes also that as an area of competition – due to its natural resources – it will not turn into a hotbed of international conflicts. The above supposition may at any given moment dramatically change the perception of this part of the globe, the more so as currently energy raw materials seem more and more often to determine a nation’s potential power which is but a short step away from the temptation to use them as an instrument for political and economic pressure. The described situation – still fairly new – gives rise to new problems facing the countries of the North. One of them is undoubtedly energy security of the Nordic States directly related to, among others, energy resources. Some of these countries cannot even dream today of achieving energy self-sufficiency as they simply do not possess enough resources to ensure that. However, they can successfully increase their independence in the field by deepening cooperation with partner countries in the region, through building nuclear plants and through a wider use of renewable sources. Such an approach, however, is very expensive; hence, an increase in energy

 See R.  M. Czarny, The High North: Between Geography and Politics, Springer International Publishing Switzerland, Cham 2015. 2

Introduction

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security may also be achieved by diversification of fuel types used and varying sources of their supply (various geographical locations, countries, and companies) as well as employed energy-related technologies. An introduction of actions and means used to achieve the goal, as well as a description of the current state and future energy potential of the individual Nordic States in terms of main available sources of energy, both nonrenewable and renewable, constitutes one of the most important parts of this book. Although the relevance of energy security of the Nordic countries does not lend itself to an entirely satisfactory scholarly examination of the issue due to the lack of time distance, the author has decided to tackle the problem focusing on the following topics: –– The importance of energy security as a fundamental and natural task of public authorities of a state, particularly when energy and everything revolving around it constitutes a significant element of strategic policy discussion –– General conditionality of resources and energy needs of the Nordic countries against the background of European and global energy balance –– A particular role played by the Kingdom of Norway, the biggest Scandinavian exporter of energy raw materials, competing and cooperating with Russia in the High North –– Courses of action undertaken by the States of Norden, faced with contemporary energy security challenges, with the emphasis on research, development, and implementation and the direct link between energy, environment protection, and climate change It is against this background that several much interesting problems and fairly imperative questions arise, out of which the most germane for the purpose of this work seem to be: –– How to reconcile the current situation of some countries with the general need for a continuation of a clear and explicit policy on climate protection? –– Do environmental/climate protection policies and courses of action actually open up a new range of possibilities and provide opportunities for further financing of sustainable energy innovations? –– What kind of financial initiatives are necessary to stimulate new ideas and innovations in the energy sector, and are Nordic companies engaged in them to a sufficient measure? These truly intriguing questions pose an intellectual challenge prompting one to attempt to position the countries of Norden within the sphere of multiple relevant opportunities and equally great unknowns. Moreover, this triggers a need for discussing several issues, including, for example, determining the place of those countries not only within their own international environment but also in the new world order. Naturally, this must be followed with an exemplification of emerging opportunities and chances in the much complex sphere of interactions – cooperation and competition – which occur in the dynamic course of globalization processes.

x

Introduction

The introduced and in reality constitutive themes concern both the political and economic spheres in which the activity of five countries of Northern Europe encompasses cooperation with regional organizations and international projects, as well as the assessment of not necessarily identical points of view on the specificity of Norden’s contemporary problems. In practice, it heralds an analysis of true and real interests of those countries, aside from their political rhetoric, particularly since all those countries actually have considerable potential and ability for further growth in many sectors. I stay convinced that such an approach will enrich the knowledge about The Nordic Dimension of Energy Security. The monograph is not just an organized compendium of current data but primarily a set of analyses of much complex and evolving actions and efforts comprising foreign and security policy of these countries. Such an approach allows to examine the phenomenon, drawing attention not only to its internal Nordic dimension but also to its external aspect which might occasionally create barriers but at the same time presents an opportunity of making choices. The answers to the questions and concerns formulated this way are hopefully to be found in the overall structure of the book and the contents of each of the 11 chapters which represent author’s subjective preference in selection, order, and review of the subject matter. All of them jointly offer an overall picture of how the Nordics currently understand and perceive energy security, and this approach is supplemented with a great deal of additional information, sources, and references. Each chapter is intended to enhance the body of knowledge on a given topic and to encourage readers to further studies of their particular interest. The content layout is tailored to meet the needs of the questing reader who is interested in legal, political, and economic determinants of security in international relations, including integration processes in all their complexity. It is my hope and desire that such a perspective will allow the reader to identify the prevailing trends, set them in the current political and social context, and detect their connection with the present practices. The book draws from extensive literature on the subject, to a large degree on Scandinavian- and English-language sources. Alongside with monographs and scholarly articles, other works are referenced, including mostly expert reports published in the examined countries as well as those by international organizations (OECD, EU, IEA, ILO, World Bank, and others). Both empirical analyses and theoretical literature have proved extremely useful in this work. Perhaps it should emphasized at this point that although foreign scholarly literature discusses multifaceted interests and transformations of Norden States in the first decades of the twenty-first century, it is somewhat lacking in narrowed-down comparative studies on energy security. This is especially true for case studies examining novel processes of power industry modernization in the Nordic States, the philosophy guiding their approach toward the aspect of power generation for sustainable development in comparison to other countries, as well as analyses of their cooperation and characteristic features in the regional configuration.

Introduction

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This last last-mentioned theme is prevalent in the book and constitutes its core. In my opinion, the book belongs to the part of mainstream research, attempting to employ a holistic approach toward a group or regional activity and its characteristics as compared to the rest of Europe and the world. Nordic accomplishments and the introduced solutions should be referred to as often as possible to illustrate the best practices and exemplary models worthy of following by other countries. It is a pity that we so rarely notice the magnitude of transformations which have occurred in the countries of our northern neighbors within nearly two decades of the twenty-first century. Northern Europe has changed so much that from a scholarly point of view, we should not only look at current energy issues, alongside with climatic and ecological ones, and their relations with the politics and economies of Norden States but also endeavor to consider their practical solutions. I should like to express my gratitude to my nearest and dearest and to my friends and acquaintances who supported me in my work, offered invaluable advice, and extended assistance in drafting individual chapters of the book and found time and interest to review it critically in terms of its content and language.

Bibliography Czarny RM (2015) High North: Between Geography and Politics. Springer International Publishing, Cham Koziej S (2008, April 24) Bezpieczeństwo energetyczne elementem większej całości. Paper prepared for the conference of the General Staff of the Polish Armed Forces: Bezpieczeństwo energetyczne – współczesny wymiar bezpieczeństwa międzynarodowego. Author’s archives. World Energy Outlook 2006. Retrieved from www.worldenergyoutlook.org/

Contents

1 Energy Security: Contemporary Challenges����������������������������������������    1 1.1 Security and Security Policy������������������������������������������������������������    1 1.2 Subject and Scope of the State’s Energy Security����������������������������    5 1.3 Energy and Climate Security������������������������������������������������������������   12 1.4 Energy Security and Environmental Security ����������������������������������   14 1.5 Evolution of International Cooperation on Environmental and Climate Protection����������������������������������������������������������������������   17 Bibliography����������������������������������������������������������������������������������������������   19 2 Global Energy Market Dilemmas����������������������������������������������������������   23 2.1 Opportunities and Challenges of the First Decade of the Twenty-First Century��������������������������������������������������������������   23 2.2 Increase in Energy Demand��������������������������������������������������������������   27 2.3 Energy Production and Greenhouse Gas Emissions ������������������������   32 2.4 New Trends in the Global Energy System����������������������������������������   36 Bibliography����������������������������������������������������������������������������������������������   42 3 Energy Balance in the Second Decade of the Twenty-First Century ����������������������������������������������������������������������������������������������������   45 3.1 The Global Energy Balance��������������������������������������������������������������   45 3.2 Top Energy Producers, Exporters and Importers������������������������������   49 3.3 Current Energy Consumption ����������������������������������������������������������   59 Bibliography����������������������������������������������������������������������������������������������   65 4 Energy Policy of the European Union in the Twenty-First Century ����������������������������������������������������������������������������������������������������   67 4.1 European Energy Market: Economic and Political Conditions in the First Decade����������������������������������������������������������������������������   67 4.2 The European Union and Energy Supply Problems ������������������������   73 4.3 Contemporary Challenges in the EU Energy Strategy and Energy Balance��������������������������������������������������������������������������   82

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4.4 The EU’s Activity in Counteracting Climate Change: The Special Role of RES and EU ETS regulation����������������������������   89 4.5 The EU’s Climate Policy������������������������������������������������������������������   93 Bibliography����������������������������������������������������������������������������������������������   97 5 Norden States in the Context of Energy Security: Fundamental Issues ��������������������������������������������������������������������������������  101 5.1 Nordic States in the International Arena������������������������������������������  101 5.1.1 Terminological Remarks������������������������������������������������������  101 5.2 Norden and the Energy Problems in the Baltic Sea Region��������������  110 Bibliography����������������������������������������������������������������������������������������������  119 6 The Kingdom of Denmark: Leader in Energy Efficiency��������������������  123 6.1 Energy Potential: Hydrocarbon Resources ��������������������������������������  124 6.2 Energy Balance of Denmark ������������������������������������������������������������  131 6.3 Activities to Ensure Denmark’s Energy Security�����������������������������  135 6.4 A Testing Ground for Novelties: Climate and Energy Policy����������  138 Bibliography����������������������������������������������������������������������������������������������  143 7 The Republic of Finland: Dynamic Modernization of the Energy Sector��������������������������������������������������������������������������������  147 7.1 Energy Balance of Finland����������������������������������������������������������������  148 7.2 Activities Aimed at Ensuring Finland’s Energy Security ����������������  154 7.3 Energy – Climate: Practical Actions ������������������������������������������������  157 Bibliography����������������������������������������������������������������������������������������������  160 8 The Republic of Iceland: Ambitious Energy Plans������������������������������  163 8.1 Energy Balance of Iceland����������������������������������������������������������������  164 8.2 Renewable Energy Resources ����������������������������������������������������������  167 8.3 Forms and Methods of Using the Energy Potential��������������������������  170 8.4 Dynamics in the Development of Energy Security��������������������������  174 Bibliography����������������������������������������������������������������������������������������������  179 9 The Kingdom of Sweden: Transition to an Ecologically Sound Society ������������������������������������������������������������������������������������������  181 9.1 Dynamics of Changes in Energy Policy ������������������������������������������  181 9.2 Electricity as the Basis for Energy Balance��������������������������������������  191 9.3 Environmental and Climate Protection Measures����������������������������  195 9.4 Sweden: Energy Security������������������������������������������������������������������  201 Bibliography����������������������������������������������������������������������������������������������  204 10 The Kingdom of Norway: Standing in Energy��������������������������������������  207 10.1 Norway as a Producer of Oil and Gas��������������������������������������������  208 10.2 Electricity as the Basis for Energy Balance������������������������������������  220 10.3 Environmental and Climate Protection Measures��������������������������  226 10.4 Norway: Basic Premises for Energy Security��������������������������������  230 Bibliography����������������������������������������������������������������������������������������������  234

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11 The Nordic Countries and the Current Challenges in Energy Security������������������������������������������������������������������������������������  237 11.1 Environmental Protection, Climate Change and Energy Culture��������������������������������������������������������������������������������������������  237 11.2 Cooperation in Energy Policy: Effective Remedy for the Contemporary Challenges in Energy Security��������������������������������  249 Bibliography����������������������������������������������������������������������������������������������  259 Conclusion��������������������������������������������������������������������������������������������������������  263 Bibliography����������������������������������������������������������������������������������������������  270

About the Author

Professor Ryszard Michał Czarny  Expert in Scandinavian issues, lawyer and political scientist researching political and economic conditions of the cooperation among the North European States. He is full professor of long standing at Jan Kochanowski University in Kielce (Poland) and, since 2012, professor of the Faculty of Social Sciences of the University of Ss. Cyril and Methodius in Trnava (Slovakia). Moreover, he is author and editor of many monographs and major works on Scandinavian countries, including Regionalism in International Relations; Sweden in the European Union: Political and Legal Analysis; Sweden – Poland – The European Union; In the New Europe: Glossary of Terms; Energy Dilemmas of the Nordic Region Countries; EU Northern Dimension: Development Study; The Northern Spaces: Contemporary Issues; The Arctic and Nordic Countries in the World of Economy and Politics; The High North: Between Geography and Politics (Springer International Publishing Switzerland 2015); A Modern Nordic Saga: Politics, Economy and Society (Springer International Publishing AG Switzerland 2017); and Sweden: From Neutrality to International Solidarity (Springer International Publishing AG Switzerland 2018), and numerous articles and essays on contemporary international relations.

xvii

Abbreviations and Acronyms

Barrel [USA, petroleum] a unit of volume for crude oil and petroleum products in the United States; 1 barrel equals 0.159 m3 or 159 liters BEMIP Baltic Energy Market Interconnection Plan BENTE Baltic Energy Technology Scenarios 2018 BkWh billion kilowatt hours = TWh terawatt hour boe/d barrels of oil equivalent per day BP British petroleum Brent a type of crude oil that is extracted from several oil fields at the bottom of the North Sea and transported via the Brent pipeline system to the Shetland Islands where it is blended with oil sent through the Ninian pipeline system from other oil fields. This produces a crude oil blend that is considered one of the basic benchmarks in oil pricing and trading on international commodity markets. Btu the British thermal unit, a traditional unit of heat; 1 Btu = 1.055 kJ (kilojoules) CCS carbon capture and storage is a technology that can capture up to 90% of the carbon dioxide (CO2) emissions produced from the use of fossil fuels in electricity generation and industrial processes, preventing the carbon dioxide from entering the atmosphere CEO chief executive officer CFC chlorofluorocarbon CHP combined heat and power CO2 carbon dioxide DEA Danish Energy Agency DKK the currency code for the Danish krone, the official currency of Denmark as well as the provinces of Greenland and the Faroe Islands EPA Environmental Protection Agency xix

xx

ETBE ETS EU EUAs EU ETS FOI FPEG

Abbreviations and Acronyms

ethyl tert-butyl ether EU Emissions Trading System European Union European Union Allowances European Union Emissions Trading System Swedish Defence Research Agency Forum des pays exportateurs de gaz (French); GECF, Gas Exporting Countries Forum (English), an informal organization of natural gas producers different from OPEC GA General Assembly (United Nations) GDP Gross Domestic Product GEF Global Environment Facility, a trust fund to tackle global environmental issues GHG greenhouse gases GJ gigajoule; 1 GJ = 1 000 000 000 J GW gigawatt; 1 GW = 1 000 000 000 W GWh gigawatt hours; 1 GWh = 1 000 MWh (Megawatt hour) = 3 600 000 000 000 J IAEA International Atomic Energy Agency IEA International Energy Agency IEEM International Conference on Industrial Engineering and Engineering Management IPCC Intergovernmental Panel on Climate Change IRES International Recommendations for Energy Statistics J Joule; 1 J = 1 Ws (watt second) kb/d kilobarrels (of oil) per day; 1 kilobarrel = 1000 barrels kcal kilocalorie; 1 kcal = 1000 cal kg kilogram kgoe kilogram of oil equivalent kJ kilojoule; 1 kJ = 1000J kW kilowatt; 1 kW = 1 000 W kWh kilowatt hour; 1 kWh = 3600000 J LNG liquefied natural gas m meter MJ megajoule; 1 MJ = 1 000 000 J mld milliard MPE Ministry of Petroleum and Energy MSW municipal solid waste MTBE methyl tert-butyl ether Mtoe million tons of oil equivalent; 1 Mtoe = 4.1868 × 1016 J MW megawatt; 1 MW = 1 000 000 W MWe megawatt electrical MWh megawatt hour (1 MWh = 1000 kWh) = 3 600 000 000 J

Abbreviations and Acronyms

xxi

MV megavolt NCS Norwegian Continental Shelf NETP Nordic Energy Technology Perspectives NGL Natural Gas Liquids NIC Nordic Innovation Centre NPD Norwegian Petroleum Directorate NREAP National Renewable Energy Action Plan OEB Oil Emergency Board OECD Organization for Economic Co-operation and Development PDO Plan for Development and Operation PJ petajoule; 1 PJ = 1015 J; 1 PJ = 23884.6 toe (tone of oil equivalent) = 0.2778 TWh (terawatt hour, mostly relevant for electricity production) = 947817.12 million Btu (British thermal unit, commonly used in the United States) PPP purchasing power parity, GDP in relation to purchasing power RCN Research Council of Norway R&D research and development RES renewable energy sources RF the Russian Federation R/P reserves-to-production ratio SEK the currency code for the Swedish krona, the currency of Sweden SDGs Sustainable Development Goals Sm3 standard cubic meters (for natural gas or oil production volumes) Sm3 o. e standard cubic meters of oil equivalents (for trading and sales pricing) T ton TJ terajoule; 1 TJ = 1 000 000 000 000 J toe ton of oil equivalent, a unit of energy defined as the amount of energy released by burning 1 ton of crude oil; 1 toe = 42 622 000 000 J = approx. 42.6 GJ TPES total primary energy supply TSO transmission system operator TWh terawatt-hour; 1 TWh = 1000 GWh = 3 600 000 000 000 000 J, V volt UN United Nations UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change UPS Unified Power System

xxii

Abbreviations and Acronyms

USA United States of America USD the currency code for the US dollar USSR Union of Soviet Socialist Republics W watt Wh watt-hour; 1 Wh = 3600 J WNA World Nuclear Association Ws watt second; 1 Ws = 1 J

Chapter 1

Energy Security: Contemporary Challenges

Abstract  Today, security issues should be considered in a broad economic, social, cultural, environmental and climate context, where energy is becoming one of the main topics of political strategic reflection and one of the most important prerequisites for the competitiveness of the economy. In this context, energy security becomes a synonym for national security and economic security. This gives rise to a whole range of political and economic implications, both for individual countries and for international cooperation. Keywords  National security · Energy policy · Security of supply · Diversification of sources · Energy sector and climate policy

1.1  Security and Security Policy Democratic stability and security of a State must have solid economic and civic foundations which on the one hand are indispensable to ensure means for the security policy in its internal aspect, while on the other, they create the necessary components of the stability of State, its national identity and civic vitality, as well as constitute the premises of a country’s international position as a desired ally and partner. It is commonly agreed that by nature security of a State in international relations is of international character. Security could be defined negatively, i.e. taking into account the narrow understanding of the word which simply means a lack of threat (Latin: sine cura – securitas, sine – without, cura – care, worry, securitas – free of worry, the state without threats, assurance). Then security would denote a situation characterized by the lack of threat and a peaceful, comfortable state (Dubisz 2006, p. 234) or a state of affairs in which there exist no overall threats to individuals, entities, national or international structure (Żukrowska and Gracik 2006, p. 132). As pointed out by Józef Kukułka (2006, pp. 40–41), it is a certain state of existence of the entities and States in their subjective, objective and processual state.

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_1

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Professional literature does not define the notion of security unequivocally. In the Cold War period, the category of “international security” basically referred to international relations and defined the state and order of international relationships which were to guarantee peace and peaceful cooperation of States.1 Security was then synonymous with national security in which military potential constituted a fundamental component while the realized international policy was important to a lesser degree. As of the 1970s, new aspects of security emerged, including political, economic, environmental, social, minority rights and human rights. In other words, internal policies together with the situation and tensions within separate States influenced to a much larger degree than before a given situation within a region as well as the international security.2 States ceased to be the only main subjects of international relations and many organizations and groups, including social entities or even individuals, gained subjectivity in the international arena, the consequence of which, or the exemplification of which is a possibility of appealing to international tribunals. These phenomena also influence the perception and understanding of security. The issue of the impact of globalization on international security is a separate, comprehensive subject which in this study, by its very nature, may be somewhat marginalized or treated only incidentally. This, however, does not diminish the need to include the whole issue in the broad context of international security, globalization and regionalization processes. As the Norwegian researcher N. Wegge (2003) writes: Security refers to existential threats to the legitimate authorities of the state, territory and society. Security policy is connected with the threat of the use of force, in practice often military force. At the end of the Cold War, the concept of security was increasingly broadened, linking it, apart from threats to territorial integrity, also with the threat to society by economic, social and environmental challenges and the growing importance of threats to individuals and social or national groups. Therefore, today’s security issues cannot refer only to their military and political aspects, but must be considered in a broad economic, social, cultural, environmental context, including climate. Professor Roman Kuźniar points out that in the times of a relative decline in purely military threats, the attention of states and the entire international community shifts to the challenges and risks of a civilization.3 Kuźniar’s argument is complemented by the statement that threats to the existence of individuals, societies and nations are now increasingly connected not only with external security, but also with internal security, and the differences between them

 Compare the definition of European security in Encyklopedii prawa międzynarodowego i stosunków międzynarodowych, Wiedza Powszechna Warszawa 1976 p.  35 and in Edmund J. Osmańczyk, Encyklopedia spraw międzynarodowych i ONZ, PWN Warszawa 1974, pp. 93–95. 2  Compare the influence of globalization processes on regional and global security in D.  Held, A. McGrew, D. Goldblatt, J. Perraton Global Transformations. Politics, Economics and Culture, Polity Press Cambridge 2001, pp. 99–103 and in John Baylis and Steve Smith The Globalization of World Politics, Oxford University Press 2001, pp. 300–303. 3  See Bezpieczeństwo w stosunkach międzynarodowych w pracy Stosunki międzynarodowe. Geneza, struktura, dynamika, E. Haliżak and R. Kuźniar (Eds.), WUW2006 pp. 143–144. 1

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have begun to fade. As a peculiar illustration he recalls “...two key methodological and guiding assumptions: 1) security is dynamic  – it is a process; 2) security is related to the whole life of nations and international relations” (Kuźniar and Lachowski 2003, p. 606). The interdependence of national security with international security is also emphasized by Tadeusz Jemioło and Andrzej Dawidczyk, who stress that “international security can be considered both regionally and globally” and cite the following definition of international security for UN experts: “...a state in which states believe that they are not threatened by a military attack, pressure or economic coercion and are therefore capable of free development and progress.”4 The above statements are a kind of guiding idea for considering that security is now seen as a dynamic rather than a static concept. It is therefore a category that more generally takes into account the specific role of the state in defining strategies and anticipating negative developments, assuming increasing interdependence.5 Moreover, these are subject to specific historical, political, military and ideological conditions. This in turn leads to the conclusion that each state should draw up its own security strategy,6 i.e. a long-term concept of actions aimed at achieving the objectives defined as corresponding to the raison d’état.7 It should be borne in mind, however, that the concept of security of a given country may contradict the assumptions made by other countries, or even pose a threat to a greater number of participants in international relations (Cesarz and Stadtmüller 2002, p.  48). What follows is the need to agree and reconcile the interests and expectations of countries with different positions in the international arena (Cziomer and Lasoń 2008, p. 4). At the same time, stable economic growth and technological development are among the most important factors ensuring the overall security of a country and the necessary components of its defense capabilities. In addition to obvious similarities, the security policies of different countries are characterized by specific features resulting from the country’s strength potential as well as from external and internal circumstances, conditions and interests. It is increasingly subject to the processes of globalization, showing the diversity of national and regional interests. In this context, R. Kuźniar and Z. Lachowski (2003, p. 10) note that “instability of the situation (international – R.M. Czarny) and unpredictability of its development do not allow to create a new security paradigm or to build a solid international security infrastructure.”  See T.  Jemioło, A.  Dawidczyk, Wprowadzenie do metodologii badań bezpieczeństwa, AON Warszawa 2007 p. 37. The authors call upon the Study on Concepts of Security, The Report of Secretary General, UN–A/40/553, August 26, 1985, p. 53. 5  See R.  Zięba, Kategoria bezpieczeństwa w nauce o stosunkach międzynarodowych, in: Bezpieczeństwo narodowe i międzynarodowe u schyłku XX wieku, D.B.  Bobrow, E.  Haliżak, R. Zięba (Eds.), Warszawa 1997, pp. 3–6. 6  See M. Kozub, A. Mitręga, Podstawy strstegii bezpieczeństwa. Wybrane aspekty, Kielce 2018. 7  See P. Soroka, Polistrategia bezpieczeństwa zewnętrznego Polski. Ujęcie normatywne. Warszawa 2005, p. 25. ff. 4

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Indeed, the contemporary view of the situation in this respect allows us to conclude that, contrary to the original expectations, the development of international relations at the end of the twentieth century and the beginning of the twenty-first century not only did not bring the construction of a global and European security system closer, but on the contrary revealed new threats, which include, among others, the contemporary exposure to terrorism, failed states, authoritarian and populist tendencies in many countries, etc. New areas of conflict have also arisen, such as mass migrations or the effects of climate change (including the Arctic in terms of access to raw materials and shipping routes).8 Security policy is usually conducted through alliances, bilateral and multilateral agreements, institutions and international law based on various instruments and methods. It is hard not to acknowledge Bolesław Balcerowicz’s (2010, p. 17) point of view in which he emphasizes: “The security policy of each country results from its individual geographical and geopolitical situation, its economic, demographic and military potential and the potential of its opponents.” Thus, the dynamics, level and scope of interdependence become particularly important in relation to small and medium-sized countries. Hence, it is worth quoting the definitions of security policy found in Swedish literature. For example, Nils Andrén (Kronvall and Petersson 2012, p. 12) describes it as “a summary of the politically controlled activity of the state, which is to enable the achievement of its goals also in situations where they are threatened by other actors, especially other countries, in the international system.” The 2000 Strategic Yearbook, published by the Swedish Defence University in Stockholm, in a chapter by N. Andrén (1999, p. 34), cites the definition of security policy as “a summary of all undertakings in the areas of foreign policy, internal policy, defence policy and economic policy undertaken to secure national goals, so that they can be achieved also when the nation is confronted with an external threat.” The Parliamentary and Governmental Committee in the Förandrad omvärld – omdanat försvar 1999 Report (Changing the international environment – transformed defense), presented a new definition of security policy, explaining that it should essentially refer to those security threats that may mean a rapid and serious deterioration of the normal functions of society.9 All the above leads to the conclusion that globalization is accompanied by processes of regionalization of international security, which obviously applies, for example, to the Nordic Region.10 Moreover, important elements of the economic sphere of state security are also: trade in goods and services of strategic importance, the direction of development of the defense industry, including ensuring technological security and energy security. Therefore, each state will develop an internal system for controlling exports of goods, technologies and services of strategic importance.  See R.  M. Czarny, The High North: Between Geography and Politics, Springer International Publishing Switzerland, Springer Cham Heidelberg New York Dordrecht London 2015. 9  See Helkama-Rågård A., Wedin L. Svenska intressen, Försvarshögskolan, Stockholm 1999, p. 36. 10  See R. M. Czarny, A Modern Nordic Saga: Politics, Economy and Society, Springer International Publishing Switzerland 2017, pp. 279–300. 8

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1.2  Subject and Scope of the State’s Energy Security In view of the accelerating process of evolution of security of states and international systems, the security category is redefined, as in the subjective dimension states must take into account the security interests of other entities. In the material sphere (where the area of protected values is constantly increasing), there are several types of security: political, military, economic, environmental, social and ideological.11 These issues, in the Polish literature, are the subject of works, among others, by Adam D.  Rotfeld, Ryszard Zięba, Ryszard Stemplowski, Andrzej Karkoszka, Zdzisław Lachowski, Adam Makowski, Lech W. Zacher, Mariusz Fryc, while P.  Krasnodębski (n.d.) complements the above areas with energy security, adding that it is “a kind of security distinguished on the basis of the subject criterion.” The last few years have revealed the existence of deep links between the need to guarantee energy supplies, national security issues and the need to combat climate change.12 This has led to the rise of several definitions of the energy policy of states. The all include several objectives, three of which should be considered as fundamental, namely: –– reliability and low costs of supply; –– ensuring continuity and certainty of supplies, and –– environmental protection. In the above context it is necessary to take into account not only the demand for energy and energy raw materials, diversity of the structure of energy carriers and sources of supply of raw materials, technical condition of transmission systems, stocks and conditions of activities of energy companies,13 but also actions which are and should be taken to ensure energy security by the state. The special role of the state is not only to search for new suppliers of raw materials, but also to create legal conditions supporting the process of restructuring the energy system, shaping the conditions for development and investment in renewable energy sources, introduction and promotion of energy-saving technologies and better energy management. In other words, ensuring the security of energy supply is currently one of the main objectives of the any country’s energy policy. In the traditional, narrow approach, this term was used to ensure continuity of supply by energy carriers and to have a safe reserve of generation capacity. Nowadays, due to the complexity of economic conditions, the effective implementation of the country’s energy policy

 More on the subject in R. Zięba, Instytucjonalizacja bezpieczeństwa europejskiego: koncepcje – struktury – funkcjonowanie, Warszawa 2004, p. 31. ff. 12  It is even said that energy security today covers three main aspects of security: energy, economic (market) and environmental. In this context, the development and rational use of all energy sources is particularly important; see M. Borgosz – Koczwara, K. Herlender, Bezpieczeństwo energetyczne a rozwój odnawialnych źródeł energii, Energetyka, March 2008. 13  See A. Ciupiński, K. Malak, Bezpieczeństwo polityczne i wojskowe, Warszawa 2004, p. 340. 11

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requires a broad approach to the issue of energy security. This means in particular that simultaneous attention must be paid to such issues as: –– availability of energy resources which guarantees the continuity of their supply; –– price competitiveness of individual energy sources connected with conducting energy policy, which would limit the level of energy prices for end users and take into account the competitiveness of the domestic economy; –– environmental acceptability as a consequence of minimizing the negative consequences of the impact of energy companies on the natural environment; –– liberalization of the energy market and its integration, and thus fulfilment of the country’s international obligations in the field of energy policy (in relation to EU member states, this means in particular the need to fulfil international obligations concerning the energy and climate change package and the liberalization package); –– minimizing the risk of interruptions in the supply of energy carriers resulting from a poor condition of infrastructure. In practice, this means that the implemented energy policy must take a comprehensive approach to the factors determining the country’s energy security. Only such an approach to the issues of energy security and the involvement of various entities (e.g. government, local governments, investors, environmental organizations, end users) interested in this issue may facilitate the development and maintenance of broadly understood national energy security, guarantee a competitive level of energy prices to end users and, at the same time, ensure security of energy supply, taking into account protection of natural environment. Relatively often we are faced with a rather narrow approach to the subject and a tendency to treat it rather within the framework of our own interests or even our own specializations. With such an approach, the political context of the issue is often overlooked,14 although it is the policy that assigns responsibility for energy security to different actors and differentiates the degree of responsibility according to their role and competences. At the same time, however, one can get the impression, confirmed from time to time by various economists and publicists, that there is no generally accepted definition of energy security. S. Araszkiewicz (2008) even claims that “many public statements treat them as a kind of slogan that everyone understands. Usually there are no mistakes or slips, but the question remains whether everyone needs to understand energy security in the same way.” Americans, for example, understand it as security of supply, as evidenced by what occurred there in the 1970s. Europeans understand energy security as the physical availability of energy sources, paying attention also to the price of raw materials and the best possible relations with the supplier. It is hardly surprising that the above reflections have been made as there is indeed no single universally accepted definition of energy security. One of the reasons why

 It shows a certain research gap, which can be filled at least partially by the political science approach, including the one implemented by researchers of contemporary international relations. 14

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it is difficult to define the term is that this type of security is not permanent as it can be shaped for each country by different factors and different entities influencing the country. It is also impossible to define energy security e.g. only from a national perspective, i.e. in isolation from the international environment, especially since its rules are created by both national and international law, for example EU directives and market mechanisms, e.g. the European Energy Charter (Pronińska 2012, pp. 11, 45). According to T. Kaczmarek and R. Jarosz (2006, p. 122) as well as K. Kałążna and M.  Rosicki (2010, p.  14), in the consciousness of societies and scientific researchers, the concept of energy security began shaping as early as the 1970s, when Arab states used the oil embargo as a tool against the West. Jakub Siemek (1999, p. 60) points out that energy security is a function of the following components: the development of the state expressed in terms of GDP, demographic growth, the standard of living of societies, industrial development and CO2 emission limits, the size of mineral resources, as well as the size of energy imports. A. Chmielewski (2010, p. 10) complements this way of thinking and emphasizes the influence of the state and other entities operating within it. This leads to the conclusion that energy security is a certain state defined by a number of factors, and the process of its formation is a resultant of these factors in a specific time interval. This is confirmed by Dariusz Foremny (2009, p. 55) who emphasizes the importance of the time criterion and divides it into short-term, seasonal, medium-term and long-term safety. Rafał Riedel (2010, pp. 20–21), on the other hand, adopts a slightly different classification and distinguishes the energy security determinants, which include: import of energy fuels, degree of diversification of raw materials, stability of supplies, renewable energy and its share in the energy balance, and prices of final energy. The functioning of energy security is connected with two terms: reserves understood as energy resources known and exploited by means of technologically available solutions and resources, i.e. potential but undocumented, requiring financial outlays (for their exploitation) on mineral resources deposits (Cziomer and Lasoń 2008, p. 19). Therefore, the state’s energy potential should be understood as the state of reserves and possible resources of energy carriers. Therefore, Tomasz Młynarski (2011, p. 33) divided the countries according to their access to energy into: the poorest, developed, transit countries and those that benefit from it financially. A type of comprehensive approach is proposed by Beata Molo (2010, pp. 184–5), according to whom the following components are important to ensure energy security: –– –– –– ––

quantity and quality of energy resources; their geographical location; condition of the state’s infrastructure, its economic potential, and energy management capacity in regard to the environmental aspect.

This approach leads to the possibility of identifying risks and challenges. In the case of the latter, we should recall what has been the already discussed: growing demand for energy resources, climate change, economic growth of countries, uneven distribution of energy resources, depletion of resources, and political insta-

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bility.15 Threats include natural disasters, the possibility of conflicts over resources (including their use for political purposes and interests), terrorism and, unfortunately, the increasing number of environmental problems including environmental changes caused by physical, chemical or biological factors or human activities. Therefore, when we consider the issue of energy security, which is so often discussed in today’s national policies, we must take into account not only the economic dimension and the technical aspect of the issue, but also the political sphere. It is in this latter area that the most important decisions are made, and it is here that the interests of all stakeholders meet and even confront each other. It is difficult not to agree with the statement that “energy security is an element distinguished by subjective criteria from security in general, and it is also defined in terms of space, time and the way in which it is organized. It is closely related to economic security, as meeting the needs of energy consumers allows the broadly understood economy to function. Due to the growing importance of energy resources, they have become a strategic commodity also in the political dimension, and thus, an element of the broadly understood national security” (Krasnodębski n.d.). Prof. S. Koziej (2008, p. 2) puts this issue more broadly as in his opinion, “the energy security of the state is a category covering all the issues related to ensuring the survival of the state and the freedom to pursue one’s own national interests in an uncertain or openly hostile (dangerous, risky) energy environment, mainly by taking advantage of opportunities, taking up challenges, reducing risks and counteracting energy threats.” I think that energy security understood in this way should be placed against the background of a larger whole containing certain general categories, such as the security environment, concepts, interests and strategic goals, or the overall security system.16 The authors of the report “Bezpieczeństwo Energetyczne Polski” [Energy Security of Poland] (Biuro Bezpieczeństwa Narodowego 2006) believe that “energy security of the state means the availability of various energy carriers and ensuring continuity of their supplies, as well as a well-developed infrastructure to receive energy carriers from external suppliers and to process them. This infrastructure must ensure the reception of energy carriers from various directions, as well as provide relative ease of changing the direction of supply.” On the other hand, the energy security of the Republic of Poland has been defined as “the state of the economy allowing to cover current and prospective demand for fuels and energy in a technically and economically justified manner, while maintaining the requirements of environmental protection” (The Act of 10 April 1997 on Energy). This definition (with a small addition: “while minimizing the negative impact of the sector on the environment and living conditions of the society”) was repeated in the document “Energy Policy of Poland until 2025” (Ministerstwo Gospodarki 2005) adopted on January 04, 2005 by the Council of Ministers of the Republic of Poland. I am convinced that it can be successfully used as a kind of a guiding idea in relation to the category of energy security of members of the contemporary international community.

 See Chap. 2.  More on the subject in S. Koziej, Między piekłem a rajem: szare bezpieczeństwo na progu XXI wieku, Toruń 2006. 15 16

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At the same time, however, attention should be drawn to the difficulties involved in finding a fully satisfactory definition of energy security. These difficulties are exacerbated by the dependence of energy security on such issues as: the size of the potential of energy sources, energy self-sufficiency (the ratio of the amount of energy obtained in the country to the amount of energy consumed), the technical condition of the supply system and the form of ownership of its infrastructure, the location and use of domestic and foreign sources of supply of energy resources (including the degree of their diversification), diversification of the fuel base for the power and heat industries, the development and capacity of domestic and international energy systems (gas pipelines and power systems), and fuel storage capacities. One of the specialized publications attempts to explain these complications in the following way: “The concept of energy security is closely linked to sustainable development policies, economic factors, the development of energy markets and socio-economic changes in transport, information technologies, etc. Energy security or security of energy supply can be defined as the availability of energy at any time, in various forms, in sufficient quantity and at a reasonable price and/or at a price that is affordable. Energy security is internal: balancing supply and demand, taking into account the environment, consumers and political and economic requirements, and external: bridging the gap between domestic production and domestic needs” (Czerpak 2006, p. 122). In addition, P. Czerpak (2006, p. 122) identifies the following security risks: –– physical, e.g. short-term or even permanent interruptions in the supply of energy from one source or one region; –– economic, e.g. dependence on energy prices; –– other, such as high environmental requirements that affect oil production, consumption and supply. Thus, a state’s energy security is also determined by the state of its economy, which enables it to meet the current and prospective demand for fuels and energy from consumers.17 In other words, we can say that the state’s energy security is, in general, a state of no risk of interruption of energy supplies and raw materials for its production. In the case of fuel imports (in case of interruption of supplies from one source), they may be ensured by diversification of supply sources allowing for undisturbed operation of the country’s energy system. This scope certainly includes energy saving. Rationalization of energy consumption reduces dependence on resources from other countries – especially those that are not entirely stable – to meet state’s own energy needs.18

 The aim is also to cover the demand without harming the environment and climate, in a technically and economically justified way, while maintaining not only continuity but also reliability of supplies, while meeting quality parameters and at acceptable prices. 18  The key to such energy security are the best possible relations with the supplier, diversification of supply sources and the suppliers themselves, necessary reserves of raw materials, infrastructure and interconnection of markets, as well as flexibility in the use of various raw materials. 17

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The conditions of internal and international stability and market mechanisms should be considered equally important. Creating conditions of competitiveness understood as creating uniform principles of activity for all participants of the energy market, improving the efficiency of its production, transmission, consumption and development of renewable energy sources undoubtedly contribute to the increase of energy security not only of individual countries but also of regions and even of the entire international community. However, in times of crisis and deficit, political instability and the growing sensitivity of world markets to disturbances generated in every corner of the globe, there is absolutely no guarantee of either stability of supply or stability of prices. The complexity of the current situation has no equivalent in the history of energy problems. This undoubtedly requires a new approach to both the diagnosed and anticipated risks. For example, it is now clear that the potential huge growth of the economies of China, India and Brazil should not be based on per capita energy consumption patterns, as was the case in the past in the USA and Europe. In addition, energy conditions have changed so much that the current market approach is no longer sufficient. The analysis carried out by Shell, the energy company, leads to the conclusion that global energy demand will triple by 2060 compared with the current situation. In practice, this will mean that “Survival on the global energy security scene (...) depends on two key threats, related to the imperative to ensure the diversity and flexibility of energy sources and the huge risk of over-dependence on one source” (Malko 2006, p. 799). It is also worth remembering that terrorism is an important threat to the supply of energy resources, especially in relation to transport and infrastructure. Possible attacks can further disrupt the global economy at a time when the distribution of energy supply means that we are particularly vulnerable to attacks on energy transport routes across the globe. The West’s attachment to oil and gas implies fear of these threats, especially when energy plays a key role in creating the lives of citizens and has a direct impact on economic growth. Secure supply of energy carriers is also a priority for maintaining the competitiveness of the economies of the EU Member States. Hence, the supply of energy resources to these countries is becoming an increasingly serious problem, particularly when the analysis of current and projected natural gas consumption shows that in the next 15–25 years a number of EU countries will be forced to significantly increase their imports of natural gas, despite the fact that rich countries are able to save money when the price of gas rises. Against this background, it is worth returning to the findings of the leaders of the G8 countries (15 July 2006  in Stronielno near St. Petersburg), who adopted an action plan to ensure global energy security and stressed: “We support the principles of the Energy Charter and the efforts of the signatory states to improve international energy cooperation” (PAP 2006). They also committed to strengthening it by working towards: increasing transparency, predictability and stability in global energy markets; improving the investment climate in the energy sector; diversifying energy sources; increasing energy efficiency and savings; ensuring the physical security of critical infrastructure; and addressing climate change and sustainable development. They acknowledged that they pursue energy security and climate protection in vari-

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ous ways by saying: “Those of us who have plans to use and/or develop safe nuclear energy believe that its development will contribute to global energy security, while reducing harmful air pollution and addressing the problem of climate change”(PAP 2006). At the same time, they pointed out that guaranteeing an adequate global energy supply will require a trillion dollars’ worth of investment in this area by 2030.19 It will not be possible to achieve global energy security without addressing the growing demand for energy, high prices of energy carriers and the growing dependence of many countries on energy imports.20 All of this gives rise to concern, a series of questions and doubts about the reality of the energy situation. It is therefore worth quoting the statements most frequently repeated among the various diagnoses, comments and forecasts of recent years: –– despite the increase in efficiency and significant savings, global energy consumption will continue to increase over the next two decades; –– although it is often claimed that it is necessary to dethrone oil-derived fuels, there is no indication that they may cease to be an important element of the energy balance in the foreseeable future. This also applies to gas and coal, but burned with clean technologies; –– the vision of a fully stable, long-term and regular supply of energy “guaranteeing a steady, stable over time and fully reliable supply of electricity dependent on the electricity of tomorrow’s societies’ seems to be an illusion. Such a pattern is unsustainable. If we make efforts to achieve the objective thus defined, they will not have a lasting effect. Random events and transformations always make themselves felt and always make it impossible for such idealized systems to function” (Malko 2006, p. 800). –– “the best type of security results from the diversity and choice between a wide range of primary and secondary energy sources. Such an approach is effective at national, branch, business, utility and communal/living levels. In either case, diversity is necessary and cost-ineffective choices are unavoidable, but the measures in place in the information society make such patterns both more achievable and beneficial overall” (Malko 2006, p. 800). –– there is an urgent need to define a new set of policy objectives in which the need for energy savings must be incorporated and which need to be supported by a “top-down” radical change of mindset. Thus, ensuring energy security is a natural task for public authorities in the state, especially when politics is entering the mechanisms of supply and demand, and the transport of energy resources is becoming an increasingly serious problem in international relations.

 The signatories of the document declare: “We will create and maintain the right conditions to attract these funds to the energy sector through competitive, open, fair and transparent markets” (PAP 2006). 20  “Achieving energy security and the Millennium Development Goals will not be fully possible without sustainable access to fuels for 2.4 billion people and electricity for 1.6 billion people who are currently without them in developing countries” (PAP 2006). 19

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1.3  Energy and Climate Security Energy has been and all points to the fact that it will continue to be the basis for civilizational development in the future, and the need to protect the environment and combat climate change forces us to manage it rationally. The connection between the environmental policy and the energy policy results from the fact that energy is the sector with the greatest impact on air quality. It is also a source of concentration in the atmosphere of greenhouse gases responsible for global warming. The energy sector is one of the largest emitters of CO2 and plays a fundamental role in the decarbonization of the world economy. Over the years, the availability of raw materials, continuity of supplies and stable prices have been the main variables shaping energy security. Along with the intensification of efforts to counteract global warming, the requirements of the climate policy, which determines the structure of fuels used (eliminating coal fuels), increasingly influence the shape of the national energy policy, which is the main element of national security. It also forces the modernization of the energy infrastructure and reduction of the energy consumption of the economy through investments in innovative green technologies. Thus, linking climate policy objectives with the energy sector has serious consequences for the energy security of states and for the economic security of economies. This is particularly true for economies based to a high degree on carbon fuels. It should be emphasized that the growing awareness in the international community of the need to counteract GHG emissions raises the significance of the ecological dimension of energy security, which includes limiting the negative effects of impact on the natural environment at all stages of energy management (extraction, processing, transport, storage and consumption). At the same time, due to the cross-border nature of greenhouse gas emissions, climate change consequently undermines the classical understanding of energy security, so far associated mainly with the scarcity of raw materials. In order to take into account the cooperation of societies in various geographical areas of the world, in practice the concept of energy security should be extended to include the dimension of climate security. The international community is increasingly affected by the adverse effects of climate change, which poses a challenge if not creates an imperative need to design appropriate measures to prevent, adapt and limit the negative effects of climate change, and to make an effective effort to transform the global energy system. Today, there is a growing consensus that the only way of sustainable development is for policy makers to agree that the objectives of energy security and climate change prevention must be compatible and implemented simultaneously. This is reflected in the progressive institutionalization of the “climate regime”21 effort, which integrates the objectives of economic policies with environmental objectives.  See Pietraś M., Międzynarodowy reżim zmian klimatu, Wydawnictwo Adam Marszałek, Toruń 2011. 21

1.3  Energy and Climate Security

13

The effects of global warming and the awareness of limited resources of fossil fuels have led over the last decade to perceive the issue of climate and energy security as a global problem. This reflects a fundamental change in the way governments deal with energy production and environmental issues. Conceptualization of energy and climate security makes it necessary to extend its conceptual category so that it takes into account not only the problem of availability of fossil fuel resources, but also, or perhaps above all, the aspect of sustainable development, i.e. satisfying the civilization needs of the present generation without compromising the development opportunities of future generations. This means that the relations between economic growth and environmental care should be shaped in a way that balances economic, social and environmental needs. In other words, it is in line with the philosophy of sustainable development. The above approach to the issue has made the conviction, which has been deepening since the beginning of the 1990s, concerning global climate change one of the main premises having a general impact on the issue of security in the energy sector, and at the same time defining national energy security policies. Gradually, this led to a mutual interpenetration of challenges and threats, and then to the integration of energy and climate policies. By reducing the use of fossil fuels, improving energy efficiency and increasing CO2 absorption capacity, their goal was to ensure socio-­ economic development while reducing CO2 and other greenhouse gas concentrations in the atmosphere. These objectives can be achieved by implementing a variety of measures and methods – from changes in fossil fuel combustion technologies, the development of alternative energy sources, to energy efficiency, to fiscal policies (carbon tax) and market tools (emissions trading system). Each country – within its own capabilities – seeks optimal solutions for the energy mix and climate policies, while taking into account its own specific conditions (e.g. size and access to energy resources) and economic priorities (primacy of development needs). It is worth mentioning here the relationship between energy security and the necessary need to limit climate change in the twenty-first century which T. Młynarski (2017, p. 5) bases on the following assumptions: 1. “Global climate change caused by excessive anthropogenic emission of greenhouse gases, especially carbon dioxide, into the atmosphere may lead to an imbalance in the ecological balance on the scale of the whole planet, 2. No country, however powerful, can cope with global warming alone, so there is a need for coordinated collective action to reduce greenhouse gas concentrations in the atmosphere, 3. Despite the considerable uncertainty about the causes, pace, scale and possible costs of climate change, the international community must act in solidarity to limit the negative impact of human economic and industrial activity, 4. The emitting states present quite varying approaches and different preferences towards the necessity of counteracting climate changes and the development of the international climate change regime is a result of the ‘game of interest’ of various groups of emitting countries, 5. The low-carbon energy transformation has real socio-economic benefits, including climate change mitigation, health impacts and increased energy independence and flexibility of the energy system.”

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6. Looking for a good punchline for this part of my deliberations, I would like to quote the words of N. Myers, who already in 1986 stated that: “national security is not just about the use of force and armaments. It also refers to access to water, agricultural land, forests, energy resources, climate and other factors that rarely appear in the minds of military experts and political leaders (Myers 1986, pp. 251–57).

1.4  Energy Security and Environmental Security Climate change has serious environmental, social, economic and therefore political consequences. Over the last two decades, climate warming and its effects have led to the perception of environmental issues, or rather environmental security, as a global problem. There seems to be a fairly fundamental contradiction between the dimensions of energy and environmental security (of which climate security is a part). If we agree that energy is crucial for the functioning of today’s industrial and post-industrial societies, then security of supply, production and availability is a guarantee of the prosperity and development of countries and societies. On the other hand, climate security is blurred in so far as it is associated with specific threats that in many cases do not produce immediate effects and are rather postponed. There is no doubt, however, that the growing global GHG emission, which is the result of burning fossil fuels, intensifies the problem of climate threats. Unfortunately, in practice, the energy security of countries is based on the use of fossil fuels, and their consumption has negative consequences that are harmful to the environment. We are therefore faced with the need, forced by modern times, to reinterpret the definition of state security, not only because of the growing range of threats, including disruptions and interruptions ranging from external wars to internal rebellions, or from blockades and boycotts to shortages of raw materials and destructive natural disasters such as epidemics, catastrophic floods and droughts.22 R.  Floyd and R. Matthew defined threats to national security as “actions or sequences of events” which, first, threaten drastically and in a relatively short period of time to degrade of the quality of life of residents or the state, and, second, significantly threaten the freedom of decision of governments in shaping the policies of the state, or non-­ governmental entities, groups of corporations within the state.23 The already mentioned N.  Myers (1993, p.  21) pointed out, however, that national security is increasingly becoming a function of access to water resources, farmland resources, forests, biodiversity balance sheets, climate and other factors (often referred to as the ecological dimension) rarely considered by military exports and political leaders, which for national security are no less important than military factors. This calls for a change in the way we think about both security and the environment. Both categories are evolving and changing, and should not be understood  See R. Ullman, Redefining Security, “International Security,” Summer 1983, p. 133.  See R.  Floyd, R.  Matthew, Environmental Security: Approaches and Issues, Routledge, pp. 70–71. 22 23

1.4  Energy Security and Environmental Security

15

solely in the traditional, classical way. While it is clear that the environment is not given once and for all, and security is a matter of political priority, climate change and related phenomena (environmental changes) that pose a threat to societies and their security cannot possibly be “charmed.” Therefore, ecological security, which includes, among others, counteracting climate change, is one of the non-military dimensions of state security, and ecological problems (health risks, climate change, water shortages and growing energy needs) have been recognized as sources of threats in strategic documents of many security organizations and institutions (including the NATO Strategic Concept of 2010). Research on environmental security includes spatial and objective analysis. In spatial terms: –– at the national level – environmental problems imply risks related to local pollution and threats; –– at the regional level – they concern devastation of common resources (seas and oceans, border rivers, forests, or overexploitation of raw material deposits); –– at the global level, environmental threats cross national and regional borders and pose a challenge to the entire international community (e.g. global warming). –– In this context, we must be aware that environmental problems give rise to various and complex effects, including: –– geopolitical, destabilizing fragile and unstable states, for which the costs of adaptation or inability to solve environmental obstacles are too high and may lead to weakening of state structures; –– economic and social, slowing down economic growth and having serious negative social consequences for human health and life in both developed and developing countries (e.g. decrease in yields, increase in poverty); –– military, which may lead to an escalation of tensions and armed conflicts, as well as become an instrument of aggression or a source of environmental devastation. Today’s environmental safety researchers are increasingly concerned about the security implications of climate change, which we can successfully describe as climate security. The inclusion of environmental concerns in both international and national security is an expression of interdependence resulting from the use of common goods (e.g. sea basins, atmosphere, forests and rivers). Therefore, ecological safety can only be achieved under conditions of shared responsibility for counteracting threats and removing their effects. In view of the complexity of environmental problems and their multiple interactions and links with the sphere of safety, it is difficult to use one universal definition of environmental safety. It is much easier to identify features characterizing the types of ecological threats, which undoubtedly include: unpredictability, multiplicity of causes and diversity and long-term effects leading to permanent disturbances in the functioning of ecosystems (land, freshwater, sea waters), threats to human health and life, or the possibility of economic losses. Thus, ecological security can be defined as a desirable state of the natural environment, free from threats disturbing the balance of ecosystems and biosphere. Ecological safety may also be understood as a state of balance of the economic system of the State and the environment in which human activity does not cause its

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degradation. Recognizing as Marek Pietraś (2011, p. 11) that “man – environment” relations are a key factor determining ecological safety, they can be defined as: “the state of social relations, including the content, forms and ways of organizing international relations, which not only limits and eliminates ecological threats, but also promotes positive actions, enabling the realization of values essential for the existence and development of nations and countries.” An exceptionally accurate illustration of this issue is the following categorization of threats to environmental safety developed by T.  Młynarski (2017, p.  34) (Fig. 1.1).

Non-anthropogenic (naturogenic)

Natural disasters - hurricanes/whirlwinds, earthquakes, volcanoes, avalanches, droughts and heat waves, floods, tsunamis, tornadoes, prolonged severe frosts, locally occurring development of parasites or locally emergent parasites or pests Example of sources of danger

Example of effects

air and water pollution by toxic waste,

- soil degradation, deforestation, contamination of surface/underground waters threatening flora and fauna, seas and oceans

long-term emission of harmful substances to the atmosphere, environmentally harmful industrial technologies, and

unintentional

Anthropogenic

failures in production and transmission processes, uncontrolled exploitation of natural resources, transportation of hazardous materials, arms race and warfare

- acid rain, ozone depletion and global warming, melting glaciers, rising sea and ocean levels, - extreme weather events (droughts, water shortages, cyclones) - migration of environmental refugees - chemical or radiological (nuclear) disasters - an increase in mortality caused by diseases

intentional

Synergic (simultaneous occurrence of a natural disaster and adverse impact of human activities)

intentional criminal activities against and/or using the environment (eco-terrorism deliberate release of harmful substances into the environment e.g. poisoning of water reservoirs, water supply systems, destruction of critical infrastructure e.g. oil and gas pipelines, oil wells, storage facilities), warfare

radioactive contamination (permanent adverse health effects, radiation-related illnesses, genetic mutations)

earthquakes, floods, emission of harmful substances into the natural environment, etc.

climate change desertification/ water scarcity forest fires

destruction of energy and food sources, restricting the consumption of and access to drinking water disturbances in the functioning of the economy

Fig. 1.1  Categorization of environmental safety hazards Source: T.  Młynarski, Bezpieczeństwo energetyczne i ochrona klimatu w drugiej dekadzie XXI wieku. Energia – Środowisko – Klimat, Kraków 2016

1.5  Evolution of International Cooperation on Environmental and Climate Protection

17

1.5  E  volution of International Cooperation on Environmental and Climate Protection Environmental protection is one of the most important areas of international cooperation in modern times. This is understandable, since environmental risks are, by their very nature, of a transnational dimension. Hence the need for an effective but also coordinated environmental policy on a global scale. The open nature of the natural environment results in its transboundary scope, as ecosystems cannot be subordinated to political boundaries. Thus, violation of the state of the natural environment may generate security problems both on a regional and international scale. For years, the natural environment has been the subject of security analysis mainly in the geopolitical context, i.e. from the perspective of the analysis of the effects of warfare or the race of countries for strategic goods and resources. This led to situations where, despite growing global interdependence, challenges and threats such as environmental degradation and global warming were not considered sufficiently relevant to the security of States. Through UN General Assembly Resolutions 2398 (XXIII) and 2581 (XXIV), and Resolution 1346 (XLV) as well as the work of the UN Economic and Social Council, research into environmental problems has been internationalized and developed. The report of the UN Secretary-General U’Thant entitled “Man and his Environment” of May 1969 elaborated the most serious threats in this area in the world. Already then, the work recognized the problems of degradation of ­ecosystems and their negative consequences for the entire planet, warned against the possibility of a serious crisis resulting from the deteriorating state of the natural environment and called for cooperation and joint undertakings aimed at solving problems and protecting the natural environment. The World Conference on Environmental Protection, convened on the initiative of the UN General Assembly (5–16 June 1972 in Stockholm), attended by representatives of 113 countries, announced the Stockholm Declaration (14 June 1972) obliging the UN system to thoroughly address environmental issues. The Declaration contained 7 points in the preamble and 26 principles which should guide the human being in the process of civilization development. Most importantly, it emphasized the obligation of cooperation in the field of environment among countries, prevention of transboundary damages, prohibition of the so-called ecological aggression consisting in directing pollution to foreign lands and the obligation of mutual exchange of information on the ecological situation, liability for damage and damage to the environment. Thus, it gave rise to the standards of human behavior in the process of development and established the United Nations Environment Programme (UNEP), which for so many years has been the most important institution in the UN system dealing with environmental protection.24  UNEP is still an active participant in the development of climate change protection instruments, A/RES/43/53 70th plenary meeting 6 December 1988, see www.un.org/documents/ga/res/43/ a43r053.htm. Further steps included: the World Climate Conference (WCC-Geneva 1979), the 24

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At the same time, ecology became the subject of research and scientific definitions. However, the first significant step towards combating climate change was the World Climate Conference (WCC) in Geneva in 1979, which organized the body of knowledge about this phenomenon. The result was to draw governments’ attention to the problem of global warming and to initiate research to better understand climate change. With the publication of the “Our Common Future” report (April 1987) by the World Commission on Environment and Development, the so-called Brundtland Commission on Environment and Development (WCED),25 environmental protection measures have gained a clear momentum. The work of the aforementioned Commission resulted in the creation of the concept of sustainable development, broadly defined as “the right to satisfy the development aspirations of the present generation without compromising the right of future generations to satisfy their development needs,” in which the economic and civilizational development of the present generation should not be at the expense of depleting non-renewable resources and destroying the environment (Prandecki and Sadowski 2010, p. 108). The document stresses that a sustainable development model leading to a gradual improvement in the quality of human life on Earth must be combined with environmental protection measures. To this end, rational mechanisms must be developed to limit the use of resources and improve the condition of natural ecosystems (Brundtland and World Commission on Environment and Development 1987). The right to development must be exercised in such a way that the needs of present and future generations are fairly matched. This principle is relatively well established in international positive law, as exemplified by Article 3 of the Convention on Climate Change which states that Parties to the Convention should protect the climate system for the benefit of present and future generations (Kenig-Witkowska 2011, p. 73). Two important documents relating to international cooperation on nature conservation were adopted in the 1980s: The World Conservation Strategy, 1980, and the World Charter for Nature, 1982. During this period, a number of intergovernmental conferences on climate change were held, whose participants appealed for global action. At the end of the 1980s, the interest in environmental protection issues on the part of States, international organizations and the global public opinion became the basis for the decision of the UNO (1989) to prepare the next global environmental conference (UN, 44/228 1989). After the work of the Intergovernmental Negotiating Committee began in 1990, the IPCC published its first report stating that “emissions resulting from human activity significantly increase the concentration of greenhouse gases in the atmosphere: CO2, methane, CFCs26 and nitrogen oxide.” Higher concentrations of these gases will increase the greenhouse effect, which will translate into an increase in the surface temperature of the Earth (Ephraums et al. 1990). establishment of the Intergovernmental Panel on Climate Change (IPCC- 1988), The Intergovernmental Panel on Climate Change. History, organization; see: http://www.ipcc.ch 25  The Commission was set up by General Assembly Resolution 38/161 of 19 December 1983; see http://www.un.org/documents/ga/res/38/a38r161.htm 26  CFCs – chlorofluorocarbons.

Bibliography

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A breakthrough event on a global scale was the UN International Conference “Environment and Development” (Rio de Janeiro, 3–14 June 1992), which resulted in the adoption (9 May 1992) of the United Nations Framework Convention on Climate Change (UNFCCC), which entered into force on 21 March 1994.27 The UNFCCC has become the most important legal basis for action to halt climate change, aiming to stabilize greenhouse gas emissions at a level that allows ecosystems to naturally adapt to climate change. Not only did it introduce an international climate regime in the spirit of global solidarity and responsibility for climate protection, but it also created political and legal conditions for climate protection and reduction of greenhouse gas emissions in the world. Although as a framework document it did not contain any specific obligations, did not impose on individual countries limits on greenhouse gas emissions, nor did it define mechanisms for their enforcement, but it did set the direction of actions that received an operational dimension during subsequent climate conferences (Conference of Parties – COP) overseeing the process of implementing the provisions of the Convention. We can therefore state that, in the twentieth century, international cooperation for environmental protection evolved from the narrowly understood protection of endangered species, through combating pollution of the marine environment, to the development of preventive standards. It was only at the beginning of the twenty-first century that actions to stop global climate change became one of the most important directions of environmental protection, which was reflected in international climate negotiations and the development of an international regime of climate change.

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UN, Problems of the Human Environment. General Assembly resolution 2398 (XXIII) of 3 December 1968 UN, Resolution adopted by the General Assembly 2997 (XXVII). Institutional and financial arrangements for international environmental cooperation, 2112th plenary meeting 15 December 1972. Retrieved from http://www.un-documents.net/a27r2997.htm UN, Resolution 1346 (XLV), the Economic and Social Council, 30 July 1968 UN, Study on Concepts of Security, Secretary-General Report, UN--A/40/553, 26 August 1985 UN, United Nations Conference on the Human Environment, General Assembly resolution 2581 (XXIV) of 15 December 1969 UN, United Nations Framework Convention On Climate Change, FCCC/INFORMAL/84 UN 1992. Retrieved June 15, 2016 from http://unfccc.int/resource/docs/convkp/conveng.pdf UN, World Charter for Nature, A/RES/37/7, 48th plenary meeting, 28 October 1982. Retrieved June 15, 2016 from http://www.un.org/documents/ga/res/37/a37r007.htm UNEP (United Nations Environment Programme). (1972). Declaration of the United Nations Conference on the Human Environment, 21st plenary meeting, 16 June 1972. Chapter 11. Retrieved from http://www.unep.org/documents.multilingual/default.asp?documentid=97&art icleID=1503 Wegge N (2003) Med Brussel som tyngepunkt? Svensk og finsk sikkerhetspolitikk i det nya Europa. Forsvarsstudier/Defence Studies 5 Zięba R (1997) Kategoria bezpieczeństwa w nauce o stosunkach międzynarodowych. In: Bobrow DB, Haliżak E, Zięba R (eds) Bezpieczeństwo narodowe i międzynarodowe u schyłku XX. Scholar, Warszawa Zięba R (2004) Instytucjonalizacja bezpieczeństwa europejskiego: Koncepcje-struktury-­ funkcjonowanie. Scholar, Warszawa Żukrowska K, Grącik M (2006) Bezpieczeństwo międzynarodowe: Teoria i praktyka. Szkoła Główna Handlowa - Oficyna Wydawnicza, Warszawa

Chapter 2

Global Energy Market Dilemmas

Abstract  The world economy is facing the problem of energy fuel resources and the issue of stability, or rather instability of raw material supplies, in the understanding of non-renewable energy carriers such as oil and natural gas. Obtaining energy from renewable sources, as well as future-oriented solutions for obtaining clean energy, may significantly reduce demand for fossil fuels within the next several years. However, unless there is a revolutionary technical and technological breakthrough, it is unlikely that in the perspective of the 2030s and even the middle of the present century, these new sources, including renewable energy, will be able to cover all or most of the world’s energy needs. Keywords  Energy raw materials · RES · Energy and economic growth · Sustainable development · Power sector

2.1  O  pportunities and Challenges of the First Decade of the Twenty-First Century The development of our civilization is inextricably linked with the use of mineral resources, including fossil fuels. The latter have become the basis for global energy production, first in the form of heat and then in the form of electricity. Energy obtained from coal formed the basis for the so-called industrial revolution in the eighteenth century. At the turn of the nineteenth and twentieth centuries, oil enabled the amazing development of the automotive industry, which continues to this day. After WWII, natural gas proved to be a versatile raw material used widely not only in the power industry, but also in the chemical industry. In the second half of the twentieth century, nuclear energy was considered to be a great prospect for further development of energy, but at the same time it was treated to some degree as a threat.1  There is no doubt that the Chernobyl nuclear power plant disaster has contributed to this perception of nuclear energy. The latest technical solutions through the construction of safe and economic nuclear reactors should gradually change the traditional, and I hope, no longer realistic an image of nuclear energy. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_2

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An equally significant problem was the long-term increase in the prices of energy carriers, which was clearly above a justified level. This was particularly true of oil. Among the reasons for this situation one should mention the very high demand for fossil fuels formed after WWII. The increase in this respect, especially in the second half of the twentieth century, led to the serious depletion of some deposits, for example hard coal reserves in Western Europe. In Poland and Ukraine, there are still considerable reserves of this fuel, but they happen to be placed in difficult geological-­ mining conditions, with a high risk of mining damage and gas explosions, and in conditions of progressing depth in extraction. All this poses a great threat, and counteracting these phenomena increases the price of coal as a result.2 Nevertheless, things seem to be moving in the right direction. One of the innovative solutions - centrifuge technology - reduces the cost of capturing carbon dioxide tenfold, but it is still 30% more expensive than traditional coal combustion methods. It cannot be ruled out that thanks to rapid research programs, culminating in the implementation of new technologies, hard coal will regain its historical role as a “first choice” fuel. However, in the short term, natural gas is still perceived as a fuel that will serve as a bridge to a new, more environmentally friendly era, and its oversupply means that blue fuel prices should remain low. Economics is another factor that can significantly change the situation on world energy markets. Will the global markets recover and economic growth driving energy demand return? Or is there a risk of protectionism and slowing down, which translates into a drop in demand, as individual countries will try to protect their economies from imports? For the time being, it is also difficult to predict whether the Western world will be able to cleanse itself of toxic debts. The same applies to oil. Countries once considered to be oil States, such as Romania or Ukraine, today have relatively small oil and gas reserves. The North Sea oil-gas-bearing basin, discovered at the end of the 1950s, now shows a decline in oil production. This means that even an increase in proven reserves in this area does not compensate for the amount of oil extracted. This is particularly true for countries such as the UK and Norway. Significant losses of crude oil resources should also be noted in the United States, which was considered to be the largest consumer of crude oil. In 2006, the USA consumed as much as 938 Mton of this raw material.3 On the other hand, new oil fields are being discovered all over the world, the exploitation of which requires large capital outlays. We are talking about deeper parts of

 See K. Brendow, Global and Regional Coal Demand Perspectives to 2030 and Beyond Sustainable Global Energy Development: The Case of Coal, Part I: Global Analysis. Chapter 6, WEC, London. 2004; T.J., Chmielniak, Energetyka na węglu  - konieczność czy strategia? Karbo no. 2, 2007, pp.  77–80, E.  Mokrzycki, Perspektywy wykorzystania węgla kamiennego, Górnictwo i Geoinżynieria, no. 30, book 3/1, 2006. 3  Data after E.  Mokrzycki, R.  Ney, J.  Siemek, Światowe Zasoby Surowców Energetycznych  – Wnioski dla Polski, Rynek Energii, no. 6/2008. 2

2.1  Opportunities and Challenges of the First Decade of the Twenty-First Century

25

sea basins (already below 3000 m deep), as well as deposits lying in climatically difficult areas.4 At the same time, nearly 2 billion people (at the beginning of the twenty-first century) are still deprived of access to commercial energy from fossil fuels and have little access to energy from renewable sources. The low level of technics and technology in these areas does not allow for a full use of solar, wind and water energy. In general, energy from simple biomass combustion is used in these areas. However, even this is not always possible because there are places on our planet (not only deserts and steppe areas) where biomass is simply lacking or there is a significant deficit of it. In practice, this means that universal access to electricity remains unachievable and increasing access to clean cooking is an even greater challenge. Nevertheless, there are some positive signals. According to World Energy Outlook 2017 (IEA, World Energy Outlook 2017), more than 100 million people have gained access to electricity every year since 2012, compared to around 60 million a year in the years 2000–2012. Progress in India and Indonesia is particularly impressive, while in sub-Saharan Africa progress in electrification in 2014 for the first ever caught up and even surpassed demographic growth. Despite these achievements, some 675 million people – 90% of them in sub-Saharan Africa – will still be without access to electricity in 2030 and 2.3 billion will continue to use biomass, coal or kerosene for cooking their meals (2.8 billion in 2016).5 Although more and more attention is being paid to air quality and global emissions of all major pollutants are declining in all projections, their impact on health remains serious. Ageing populations in many industrialized societies are becoming increasingly vulnerable to air pollution, and urbanization can also increase exposure to traffic-based pollution. In some scenarios (IEA, World Energy Outlook 2017), the number of premature deaths from external air pollution will increase worldwide from 3 million today to more than 4 million in 2040 despite attempts to control pollution through technology and reduction of other emissions through more efficient energy services as in the case of wind or solar energy which do not require burning fuels at all. So what do we see when we look to the future from the perspective of the end of the second decade of the twenty-first century? The only thing that could be predicted with a great deal of certainty was that the then stabilization of prices on world energy markets would not last long. There were many factors, influencing both the demand and supply side, which might have exorbitantly raised prices or caused their collapse. In addition to objective reasons for the increase in energy commodity prices, there were also subjective reasons, such as political instability in the Middle East, including the war in Iraq. It is known that 61.5% of documented oil and 40.4% of  See R.  M. Czarny, High North: Between Geography and Politics, Springer International Publishing Switzerland, 2015. 5  Household air pollution from these sources currently causes 2.8 million premature deaths per year, and the many billions of hours that mainly women spend collecting wood for cooking could be used for more productive activities. 4

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natural gas reserves are located in this area. All these problems suggest raising the question of the sufficiency of mineral resources, especially energy resources, for future generations. As we know, the Earth lives at its rhythm and processes are also taking place on it today, which lead to the formation of new deposits of mineral resources, including energy resources. However, the time scale of these processes is calculated in millions or even billions of years, while our civilization operates on a scale of hundreds or thousands of years at the most. Hence the simple conclusion, the fossil fuels: oil, natural gas and coal, currently have no substitutes that can meet the contemporary energy demand. In a sense, nuclear energy may be a substitute, albeit limited, but it is not only a question of psychological objections, but also of the still unresolved technological problems of fourth generation reactors. A growing trend in recent years, and at the same time a growing need, even a necessity, is an increasingly growing pressure for the use of clean energy from renewable sources (Paska and Surma 2008). New, more technically and economically efficient technologies are being developed in this area. Until recently, for example, the output of individual wind turbines was mostly around several hundred kW. Nowadays, it can even reach 2–4 MW. Simultaneously, new problems are emerging regarding the use of renewable energy, such as the economics of renewable energy production, the need for conventional back-up sources and the real magnitude of greenhouse gas emission reductions through the use of renewable energy. It would be a success if, in the middle of the twenty-first century, 30–35% of the energy consumed in the world came from renewable sources. Obtaining energy from renewable sources, as well as future-oriented solutions for obtaining clean energy from hydrogen, fuel cells and other sources, may significantly reduce the demand for energy from fossil fuels within the next several years. However, unless there is a revolutionary technical and technological breakthrough, it is unlikely that in the perspective of the 2030s, or even the middle of this century, these new sources, including renewable energy, will be able to cover all or most of the world’s energy needs. This raises the question of whether the modern world is threatened by an energy crisis. This approach reflects the belief, fueled by some analysts, that the energy security of the West is seriously threatened when exporters nationalize the energy sector and this sector becomes an instrument and the center of their foreign policy. Moreover, the global economy is facing the problem of energy fuel resources and stability, or rather instability of raw material supplies, as understood by non-­ renewable energy carriers such as oil and natural gas. Years ago, Pierre Noel of the University of Cambridge formulated the recipe for these problems by saying that first of all, the free market mechanisms must be allowed to work. The events of the 1970s should teach us one thing above all: the best way to defend consumer interests is through the free market. In 2002, it was the lack of price controls that protected the U.S. from the effects of the Venezuelan strike. A similar mechanism worked after the hurricanes in 2005. Controlling prices and imports is the only reason for the continuing shortage of oil in China. Even Beijing is beginning to

2.2  Increase in Energy Demand

27

understand that the security of energy supply must be left to market mechanisms. Higher prices are a solution to the problem of energy security rather than its cause. Since the first shock, energy consumption in the U.S. has fallen by almost 60%. The process of reducing energy consumption slowed sharply when the price of oil fell, but has doubled since 2005 compared to the 10-year average (Amsterdam 2008). In this context, it is worth remembering that the gas and oil sector is one of the largest ones of the world economy and the main source of energy. Therefore, events affecting the prices of these raw materials are important here. In the United States, mass production of shale gas forced a significant drop in the prices of domestic natural gas. For example, in 2008, the price of gas from Henry Hub (Louisiana’s natural gas hub) was nearly $13 per million cubic feet (mcf), and in April 2012 it was only $2 per mcf. In December 2012, the price bounced back slightly to 3.3 USD/mcf (IEA). Estimates, especially for long-term forecasts until 2030,6 indicate that global reserves7 of all energy sources would correspond to around 1 trillion conversion tons of hard coal units, which for Europe should be sufficient for circa 75 years. More than two thirds of the world’s oil reserves are in the Middle East (61%) and Russia (6.4%). Africa and South and Central America account for 18.5% of the surveyed oil reserves. Thirteen countries have their own resources of more than 2%. Only seven of these countries have their own surveyed reserves of 5%. Apart from Venezuela and Russia, these countries are in the Middle East (Iran, Iraq, Kuwait, United Arab Emirates, and Saudi Arabia). Global crude oil reserves have been growing at an average annual rate of 2.4% since the early 1980s. Estimates by the British corporation BP indicated that the surveyed global oil reserves would allow for 41.6 years of use, assuming that current production will remain unchanged. The ratio of resources to production volume was higher for the Middle East (82.2 years). For Russia, the ratio was 21.8 years.

2.2  Increase in Energy Demand The increase in global demand for primary (non-renewable) energy sources is an undeniable fact. Together with nearly 5 billion equivalent tons of crude oil in 1971, it grew to just over 9 billion in 2000. Meanwhile, medium- and long-term forecasts predict their further increase to over 11 in 2010 and over 15 billion equivalent tons of crude oil in 2030 (Cziomer and Lasoń 2008, p. 16). The scale of this phenomenon is illustrated by the Figs. 2.1 and 2.2 below.8 It is worth noting its prognostic value dated to 2005, which in comparison with more  See U.  Wagner, Ebergieeffizienz-und Einsparung, in: Nachhaltige Energiepolitik fuer den Standort Deutschland.Anforgerungen an die zukuenftige Energipolitik, Koordination A. D. Little, Berlin 2005, pp. 39–40. 7  In this context, the term means the known and exploited resources of energy resources. 8  Compare Cziomer and Lasoń (2008), p. 18. 6

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2  Global Energy Market Dilemmas

1971

2000

2010

2030

Coal

1.449

2.355

2.702

3.606

Average annual growth 20002030 in % 1.4

Crude oil

2.450

3.604

4.272

5.769

1.6

Natural gas

895

2.085

2.794

4.203

2.4

Nuclear energy

29

674

753

703

0.1

Hydro energy

104

228

274

366

1.6

73

233

336

618

1.7

4.999

9.179

11.132

15.267

1.7

Energy carriers/ Years

Other renewable energy sources Total non-renewable energy demand

Fig. 2.1  Global energy needs 1971–2030 per Mtoe

Energy carrier/production year Crude oil

1970

2003

2030

46%

37%

37%

Natural gas

19%

24%

28%

Coal

28%

26%

24%

Nuclear energy

1%

6%

4%

Hydro energy

5%

6%

6%

Fig. 2.2  Percentage consumption of energy products on a global scale by periods Source: W. Bohnenschaefer, Beitrag der Energieträger zur sichicheren und wettbewerbswahigen Energieversorgung, in: Nachlaltige Energiepolitik fuer den Standort Deutschland.Anforgerungen an die zukusenftige Energiepolitik, Coordination A.D. Little, Berlin 2005, p. 66

recent data (2016–2017) shows exceptionally vividly the dynamics of transformation processes in the energy sector: The International Energy Agency (IEA) estimated that global energy demand would increase by 40% by 2035, which would mean an average annual growth of 1.3%. By 2035, there will also be an increase in demand for energy from all sources, and while fossil fuels (oil, gas and coal) will remain the main source of energy, demand for oil and coal will grow the slowest, at less than 1% per year. On the other hand, the increase in demand for natural gas will amount to 1.7% annually, for energy obtained from water – 2.1% annually, and for energy obtained from other renewable energy sources – as much as 7.8% annually (although in this case the relatively lower base should be taken into account, hence the significantly higher percentage increase). Hard coal remains the main source of energy for countries such as the United States, China and Poland (Poland has the largest reserves of black gold in Europe). The problem is to find a technology that would make it possible to burn coal cleanly. Chinese cities, suffering from excessive air pollution, are desperately seeking help.

2.2  Increase in Energy Demand

29

Clean coal combustion technologies are available, but they are also very expensive, and it is not entirely clear what to do with the captured carbon dioxide. Fossil fuels (oil, gas, coal) will remain the main energy sources in 2035, but the IEA has estimated that their share will fall from around 80% (2007) to 75%. The IEA also predicted that demand would increase in all regions of the world, but almost 90% of this increase would come from non-OECD countries, of which 60% from China, India and the Middle East. Natural gas will remain a fuel for which global demand will continue to grow (let us reiterate that it was 1.7% on average annually until 2035). The strongest demand growth can be seen in China, India and the Middle East. In China alone, gas consumption was expected to increase from 130 bcm in 2011 to 545 bcm in 2035. In the U.S., low prices and high gas supply will make gas the most important fuel in the energy mix, ahead of oil around 2030. Demand growth in Japan has been and will probably be constrained by higher gas prices and policies to strengthen renewable energy and energy efficiency (IEA 2012). According to the IEA World Energy Outlook 2012, oil and gas will remain the main sources of energy – their continued dominance would amount to 65% of the energy consumed,9 although a higher growth rate was expected for renewable energies. As expected, oil prices started to fall from 2013 and there are many indications that this trend may continue until 2020. It might seem that this is due to, among other things, the growing popularity of American shale oil. In this decade, the cost of fuel production from shale will show a decreasing rather than increasing trend, which is why fuel prices should decrease rather than increase. A very interesting thing about the new shale fuel sector is that this industry may be perceived as a traditional manufacturing industry, unlike most of the currently developing areas in countries which are not members of OPEC, where fuels extracted from under the seabed are mainly produced. Therefore, falling prices and the time from the start of the investment until the profits made are less important than before. The IEA also predicted that by 2020, US net oil imports could fall by 4–5 million barrels per day as a result of reduced demand for oil and increased shale fuel supply. A decrease in imports to the U.S. should mean cheaper oil for Europe and Asia, which means that the “shale revolution” in the United States has an impact on the global economy. However, in order to maintain sufficient energy supply, capital expenditures of USD 17 trillion by 2035 are necessary, including USD 1 trillion annually (!) by 2020. According to the estimates of the International Energy Agency, demand for electricity will increase from 17,200 TWh in 2009 to over 31,700 TWh in 2035, which indicates an average annual growth of 2.4% (i.e. more than the projected  It is worth noting that although nuclear energy and hydropower have been important carriers, in global energy demand they clearly give way to oil and natural gas. On the other hand, despite a significant increase in the indicator concerning the demand for renewable sources and carriers, their share does not constitute a significant portion in the global energy balance, be it due to technical and technological problems as well as high production costs. 9

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average annual growth in total energy demand of 1.3%). In order to meet the growing demand and modernize old power plants, capital expenditures of USD 10 trillion plus USD 7 trillion for transmission lines and distribution are required until 2035 (IEA 2011). In other words, in order to keep up with such a large increase in demand for energy, investments in the energy sector are necessary, which on average exceed 700 billion dollars per year, with the largest share going to occur in the period up to 2020 – as much as one trillion (!) dollars per year. Annual investment in the extraction and production of gas and oil will amount to approximately USD 600 billion and will increase in relation to previous years in order to meet the growing demand. All the above forecasts, made in 2008, 2011 and 2012, give rise not only to the need to update the data, but also to an attempt to confront and compare their accuracy with the current global energy balance of the second decade of the twenty-first century. In this context, it should be added that over the years economic growth has been a clear trend which brought an increase in primary energy demand (IEA 2011).10 This relationship should be explained by the asymmetry in economic growth that had existed for more than 100 years. The economy of rich countries grew faster than that of poor countries, and at the same time the share of the former in the global population decreased. As a result, despite the intensive development of economies in non-OECD countries, the energy needed to produce a GDP unit is still three times higher than in the OECD.  In 2007, developing countries needed 4.4 boe for GDP growth of 1000 USD, while OECD countries used only 1.4 boe for the same amount of growth.11 Changes in energy consumption in particular regions, groups of countries and especially in the dynamically developing so-called “new economies” are illustrated by the percentage indicators in Fig. 2.3. Our attention is drawn to the growing demand from large Asian countries. In 2003, China consumed 5.6 million barrels of oil per day, i.e. approximately 800,000 tons. In 2008, their needs increased to 8 million barrels per day.12 India needed 2.5 million barrels per day, and its demand was growing at a similar rate to that of China. The situation in Brazil, which in the 1970s and 1980s grew in debt because of oil imports, changed dramatically. On September 2, 2008, oil from the Jubarte oil field, located 1.3 km below the sea level, gushed out. This allowed around 18,000 barrels of oil to be pumped daily. But the field itself is only a small part of the huge deposits called, respectively, Tupi (about 8 billion barrels of high quality raw material),13 Jupiter (mainly natural gas) and Carioca (estimated at 33 billion barrels)  If energy is understood as the presence in a given substance of a potential capable of generating heat and motion, then primary energy is divided into non-renewable (oil, gas, nuclear energy and coal) and renewable energy. 11  Data after Ch. Rühl (2008). 12  Only half of China’s needs were met by its own production. 13  British concern BG Group, which also has a part of shares in these fields, announced that it 10

2.2  Increase in Energy Demand

31

Regions/years

1970

2003

2030

OECD America

37%

28%

23%

OECD Pacific

7%

9%

7%

OECD Europe

26%

19%

14%

Russia

15%

7%

6%

China (PRC)

5%

12%

16%

India

1%

4%

5%

Other countries

9%

22%

30%

Fig. 2.3  Energy consumption in regions and groups of countries in the years 1970–2030. (In 2005, most experts adopted 2030 as a time caesura for the rational determination of energy forecasting data) Source: Bohnenschaefer, W. (2005). Beitrag der Energieträger zur sicheren und wettbewerbswaehigen Energieversorgung, In Nachlaltige Energiepolitik fuer den Standort Deutschland. Anforgerungen an die zukuenftige Energipolitik, Koordination A. D. Little, Berlin 2005, p. 67

which stretch for about 250  km along the southern coast of Brazil.14 The huge deposits of oil and gas discovered in the Atlantic are of great economic and political importance, as thanks to them over 200 million-strong Brazil should become energy self-sufficient. In the long term, however, this discovery will lead to an increase in the importance of the Republic of Brazil (the energy supplier country) in both South America and the world, which in turn should translate into its potential importance and strength. This development will hit the neighboring Venezuela, the fifth largest oil exporter in the world at the time, with a daily production of 2.3–2.4 million barrels, the tenth largest producer in the world. Algeria has also been developing its energy potential very dynamically for several years. In turn, Azerbaijan (less than 10 million people) produced 0.8 million barrels of oil per day, of which 0.7 million were exported. Turkmenistan has also begun to grow into an energy powerhouse. Independent auditors for the first time confirmed (Associated Press 2008) that it has the fourth largest gas field in the world. The Yolotan gas fields near the border with Afghanistan certainly hold the deposits of 6 trillion m3 of gas, and according to analysts of the American company Gaffney, Cline and Associates, there may be as much as 14 trillion m3 (Associated Press 2008). Equally optimistic news came from Cuba, where the Spanish company Repsol (to which Havana granted oil exploration) on the seabed off the coast of that country discovered fields containing 20 billion barrels of oil.15 These resources would be equal to those in the USA, and much larger than the oil fields of Mexico or Norway. “The US Geological Survey

would be possible to extract about 50 million tons of oil annually from Tupi; after Kublik, 2008a. 14  The 80 km wide fields probably contain about 80 billion barrels, which is over five times more than Brazil’s current oil reserves, and can make Brazil one of the world’s top ten oil producers and exporters within a few years; after Stasiński (2008). 15  According to data by the state Oil Concern Cubapetroleo (Cupet).

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has recently officially estimated these reserves at between 4.6 and 9.3 billion barrels of oil” (Kublik 2008b). Should these data be confirmed, Cuba would become one of the 20 largest oil producers in the world.

2.3  Energy Production and Greenhouse Gas Emissions Energy production based on fossil fuels and the increased consumption of energy resources has lead to amplified greenhouse gas (GHG) emissions and environmental pollution. Climate change is a global problem, with serious ecological, socio-­ economic and political consequences, so counteracting these processes is becoming one of the biggest challenges for humanity in the twenty-first century. The surge in global population growth over the last two decades has fueled the rapid growth in energy demand, particularly in developing countries. However, many of them are of the opinion that environmental protection must not hinder further economic development. As a result, global GHG emissions are growing rapidly. In 1990, OECD countries emitted 11,005 million tons/CO2 and non-OECD countries emitted 8987 million tons of CO2. Already in 2013, there was a clear shift of responsibility for emissions to developing countries (non-OECD countries), which accounted for 19,053 million tons/CO2, while OECD countries emitted 12,037 million tons/CO2 (International Energy Agency 2018, p. 48) (Fig. 2.4). When we recall that the highly developed, rich OECD countries have achieved their economic status through industrialization based on the intensive use of fossil fuels, it is quite logical that developing countries want to follow the same path. The relationship between energy production (energy security) and environmental impact (environmental security, often called ecological security) is a kind of direct correlation between greenhouse gas emissions and their impact (intended to be counteracted) on climate change. Energy production is one of the most environmentally harmful branches of industry, accounting for 80% of anthropogenic g­ reenhouse

EU-28 China USA Asia Middle East Russia Africa Rest of the World World

1995 2434 2797 2251 2155 2661 2453 1386

2000 2381 2764 2546 2178 2688 2402 1406

2005 2342 3042 2524 2223 2625 2297 1508

2010 2254 3078 2479 2269 2565 2253 1480

2014 2183 3080 2389 2398 2549 2141 1471

2015 2184 3056 2335 2414 2570 2160 1485

2352

2389

2378

2374

2364

2364

2394

2391

2439

2451

2456

2499

Fig. 2.4  World CO2 intensity by region (Kg CO2 per toe – Average) Source: EU Energy in Figures, Statistical Pocketbook 2018, https://publications.europa.eu/pl/ publication-detail/-/publication/99fc30eb-c06d-11e8-9893-01aa75ed71a1. Retrieved December 11, 2018

2.3  Energy Production and Greenhouse Gas Emissions

EU-28 China USA Middle East Asia Russia Africa Rest of the World World

1995 4012 2951 5211 816 3277 1562 614

2000 4036 3160 5790 950 3836 1488 700

2005 4207 5458 5854 1230 4412 1497 896

2010 3898 7847 5496 1596 5204 1552 1053

33 2014 3426 9171 5282 1843 5896 1551 1162

2015 3472 9184 5109 1874 5994 1533 1182

3640

4040

4487

4926

5126

5132

22084

23999

28040

31555

33457

33481

Fig. 2.5  World CO2 emissions by region (Mio ton CO2) Source: EU Energy in Figures, Statistical Pocketbook 2018, https://publications.europa.eu/pl/ publication-detail/-/publication/99fc30eb-c06d-11e8-9893-01aa75ed71a1. Retrieved December 11, 2018

gas emissions in the world. According to the OECD, only two sectors generate 2/3 of global CO2 emissions: electricity and heat generation – 42% and transport – 24% (OECD/International Energy Statistics 2017, p. 16). In the world, the share of coal (fossil fuel with the highest CO2 emission intensity factor) in electricity generation is still very high and amounts to over 40% in 2015 (European Union 2018, p. 16). Contrary to international efforts to date, CO2 emissions in the world are unfortunately rising steadily (by as much as 56% between 1990 and 2013). The emissions are the highest in the Middle East (208%) and China (307%) and in Asia as a whole excluding China (197%), Africa (103%), South America (103%), OECD countries both Americas (13%), OECD countries – Asia and Oceania (44%); only European OECD countries registered a decrease by 8.9%, while the EU-28 17% (International Energy Agency 2018, pp. 48–50) (Fig. 2.5).16 The figure below authored by T. Młynarski (2017, p. 8) exceptionally well illustrates the above remarks (Fig. 2.6). The implementation of climate change mitigation objectives must be reflected in the energy policies of individual States, as well as in a number of new, currently established regulations in international law. In practice, this heralds the need to transform the economy into a low-emission one and is connected with gradual reduction of the role of fossil fuel-based power generation. This in turn creates a contradiction at the junction of energy and climate policy, because in order to prevent further climate change, societies must make greater use of relatively expensive low-carbon emission energy sources.17 In this respect, the main factor that will lead to a reduction in carbon dioxide emissions into the atmosphere is a reduction in the production of energy from coal combustion and an increase in the production of energy from renewable sources.

16  At the same time, China, Russia and the USA have significantly reduced their CO2 emissions per unit of GDP (1990–2012). 17  See Symons (2012).

34 Energy sources

2  Global Energy Market Dilemmas Emission kg CO2/KWh

Crude oil

0.80

Coal (black/brown)

0.96

Natural gas

0.4

Nuclear power

0

Renewable energy sources

0

Environmental impact relatively high emission of CO2 and sulphur oxide, nitrogen, other greenhouse gases and dust increasing the acidification of the atmosphere; - risk of ecological catastrophe (transport, extraction) and, consequently, pollution of soils, surface and underground waters, plants, animal and human organisms, sea and ocean waters, coasts; - high GHG emissions related to the exploitation of the resource due to the combustion of natural gas (gas flaring). - very high emission of GHG and dusts increasing the greenhouse effect, acid rain damaging the ozone layer; - negative impact on human health (lung diseases, skin diseases, other) as a result of dust emission; - distortion of the terrain, lowering of the ground water level, pollution of drinking water associated with the exploitation of raw material. - emission of GHG as a result of gas combustion and possible escape of methane from wells; - waste from gas desulphurization (sulphur) and mercury removal from gas); degradation of extensive areas by drilling and transport infrastructure. - risk of radioactive contamination in case of accident or accident in case of transport of radioactive materials or incorrect disposal of waste and spent fuel; - emissions to air and water from enrichment of uranium ores; - thermal pollution of rivers and lakes by the cooling water of power stations; - risk of destruction of flora and fauna as a result of radiation illnesses. - landscape transformation; - disturbance of water ecosystems (noise and vibrations), disturbance of water relations by artificial reservoirs; - risk of birds colliding with turbines; - generation of hazardous waste (e.g. from batteries).

Fig. 2.6  Impact of energy production on the natural environment Source: T.  Młynarski, Bezpieczeństwo energetyczne i ochrona klimatu w drugiej dekadzie XXI wieku. Energia  - Środowisko  – Klimat, Kraków: Wydawnictwo Uniwersytetu Jagiellonskiego, 2017

In other words, the risks of climate change require a re-evaluation of traditional energy security concepts. This also applies to the continued preference for cheap energy sources. Yet it is precisely them that make it impossible to effectively reduce CO2 emissions. Energy security based on a diversified energy mix structure and the implementation of the sustainable development concept requires the development of alternative energy sources in the form of renewable and nuclear energy. On the one hand, therefore, it is absolutely right to make assumptions based on a scientifically documented need to react and prevent current and increasing threats and challenges. On the other hand, we face the rather “dramatic” international reality - today based not on a lack of understanding of the problem, but on an attempt to “chase” the best, and in fact on a brutal economic calculation, according to which the poor simply cannot afford these fully justified but, unfortunately, exceptionally capital-intensive modernization and solutions. For developing countries, the inclusion of the costs of climate policies into energy prices places a huge financial burden

2.3  Energy Production and Greenhouse Gas Emissions

35

on them, limiting their development capacity. The prospect of future environmental benefits is also insufficient to gain acceptance from poorer societies for the costs of protecting the common good of climate balance. Meanwhile, in the era of global warming, industrialized countries are trying to convince poorer societies of the need to protect the climate and the need to modify their plans and development aspirations based on the cheapest energy technologies (conventional fuels), as this threatens the common good. This is the main barrier to the development of climate protection policies, and gaining acceptance for costly investments in the prevention of climate change has become not only a huge economic and social challenge, but also, to no lesser extent, a political one. The afore-mentioned context may give rise to a presumption somewhat resembling a kind of paradoxical misunderstanding, or rather a misunderstanding of the mutual needs between the “rich” and the “poor” of the contemporary world. And such is the situation although it is the same common world whose climate and the perturbations associated with its changes can affect the whole of humanity in an equal measure. As if this were not enough, the influence of global energy on the greenhouse effect is heatedly debated all over the world. In the light of the data available so far, there is no final decision on the extent to which the emission of gases from the broadly understood energy sector has a real impact on greenhouse effect and the phenomena associated with it. There is also irrefutable geological evidence that in the past, when man was not yet on Earth, in the Earth’s climate there were warm and cold periods. The Earth is a living planet, which is also affected by the Sun. The problem of the Earth’s climate change requires further research and analysis. At the same time, however, there is no doubt that limiting the combustion of energy resources, especially coal, will contribute to reducing greenhouse gas emissions, especially those of CO2, SO2 and CH4. This is particularly important for reducing low emissions and improving air quality in urban and industrial agglomerations. It should also be noted that World Energy Outlook 2018 was the first to take into account the dimension of the water problem (in the Sustainable Development Scenario), showing how restrictions on access to water will affect the choices of fuels and technologies used. It also details what energy needs must be met to ensure universal access to clean water and sanitation. Can the oil and gas sector improve its environmental performance? In 2040, natural gas and oil will continue to cover the lion’s share of the global energy demand, even in the Sustainable Development Scenario. Not all oil and gas sources are equal in terms of their environmental impact. An overall analysis by the IEA (IEA, World Energy Outlook 2018, Scenarios) of indirect emissions from the production, processing and transport of oil and gas to consumers shows that they are responsible for about 15% of greenhouse gas emissions in the energy sector (including CO2 and methane). There is a very large difference in the intensity of emissions between the different sources: a transformation from the most carbon intensive to the least carbon intensive would reduce emissions by 25%, and replicating it for gas would reduce

36

2  Global Energy Market Dilemmas

emissions by 30%. In order to reduce emissions, more could be done in the area of supplying oil and gas to consumers. Many leading companies are making commitments in this area which, if widely adopted and implemented, will have a significant impact on decarbonization. There are also several options that would completely change emissions, including the use of CO2 to support increased oil recovery, greater use of low-carbon electricity in operational processes and the potential to convert hydrocarbons to hydrogen (with CO2 capture). Many countries, in particular Japan, are looking closely at the possibility of increasing the role of zero-emission hydrogen in the energy system. So where are we now and where do we want to be in terms of emissions and universal access to energy? The New Policies Scenario of the IEA (IEA, World Energy Outlook 2018, Scenarios) assumes a slow upward trend in CO2 emissions from the energy sector until 2040, which is far removed from the trajectory required by scientific knowledge to cope with climate change. If not every country individually, then together the countries that have declared emission reductions under the Paris Agreement will meet the objective of the agreement. The projected upward trend in emissions is a major failure for the world in terms of the environmental consequences of energy consumption. Even lower emissions of major air pollutants in this scenario will not be enough to halt the increase in premature deaths due to poor air quality. Against this background, the question must arise as to whether the growing threat that unites us will make it possible to find the right, forward-looking, satisfactory solution for everyone in this area.

2.4  New Trends in the Global Energy System The world is gradually building a new and different type of energy system, the key pillars of which should be: –– Affordability: the costs of solar photovoltaics and wind power continue to fall, but in 2018, for the first time in 4 years, oil prices rose above USD 80 per barrel, which in some countries means a threat to the task of reforming fossil fuel subsidies achieved with such difficulty; –– Reliability of supply: threats to the continued supply of oil and gas remain strong, as shown by the fall in production in Venezuela. In addition, one eighth of the world’s population has no access to electricity and challenges are increasing in the power sector - from system flexibility to cyber security. –– Sustainability: after 3 years of decline, carbon dioxide (CO2) emissions from the energy sector increased again by 1.6% in 2017 and many data suggest that this trend continued in 2018. These results are very far from a trajectory drawn to meet climate targets. The frightening fact is that the air pollution associated with the energy sector causes millions of premature deaths every year.

2.4  New Trends in the Global Energy System

37

Affordability, reliability of supply and sustainability are closely interlinked, so existing or appearing problems must be a concern. Each of these pillars separately and the compromises between them require a comprehensive approach to energy policy. Simultaneously, the relationship between these elements is constantly evolving: e.g. wind power and solar photovoltaics are a major source of affordable and low-carbon electricity, but pose additional challenges in the reliable operation of electricity systems. The situation is somewhat similar in the interconnected global gas market as a result of growing trade in liquefied natural gas (LNG), which increases competition between suppliers while changing the way countries have to prepare for potential supply disruptions. Growing revenues and an expected additional 1.7 billion people worldwide (most of whom will live in urban areas in developing countries) will increase global energy demand by more than a quarter by 2040. This increase would be double if not for continuous energy efficiency improvements, which is a powerful tool for energy policies to address energy security and sustainability issues (World Energy Outlook 2018, Executive Summary). All growth in energy demand by 2040 will come from developing economies, with India at the forefront. Still in 2000, Europe and North America accounted for more than 40% of global energy demand while developing economies in Asia for only 20%. By 2040, the situation will be completely reversed. A deep shift in energy consumption towards Asia will be evident in all fuels and technologies, as well as in investments in the energy sector. By the year 2040, Asia will be responsible for half of global growth in natural gas consumption, 60% growth in wind and solar photovoltaics, more than 80% growth in oil consumption and more than 100% growth in coal and nuclear power (taking into account decreases in other countries). Fifteen years ago, European companies dominated the list of the world’s largest electricity companies, measured by installed capacity; today, six out of ten largest companies are Chinese. The shale revolution continues to shock the oil and gas industry, allowing the United States to leave other countries behind and enjoy its position as the world’s largest producer of oil and gas. According to the IEA and its New Policies Scenario, the United States will be responsible for more than half of global oil and gas production growth by 2025 (almost 75% for oil and 40% for gas). By 2025, every fifth barrel of oil and every fourth cubic meter of gas in the world will come from the United States. Shale gas increases pressure on traditional oil and gas exporters who rely heavily on raw material export revenues18 for their development. In addition, the energy world is changing the paths of sectoral interactions due to changes in supply, demand and technological trends. International energy trade flows are increasingly channeled to Asia – from all over the Middle East, Russia, Canada, Brazil and the United States – as Asia’s share of global trade in oil and gas will grow from around half today to more than two thirds by 2040. But new ways of

 See the report: https://webstore.iea.org/weo-2018-special-report-outlook-for-producer-economies

18

38

2  Global Energy Market Dilemmas

generating energy are also visible at the local level, where digitization and increasingly cost-effective RES technologies enable the development of distributed models in which a micro system provides energy production for the local community. The convergence of cheaper RES technologies, digital applications and the growing role of electricity is a fundamental vector of change and key to meeting many of the world’s sustainable development goals. The electricity sector is undergoing the biggest transformation since its inception more than a century ago. Electricity is increasingly the “fuel” of choice in economies that rely on lighter industries, services and digital technologies. According to the International Energy Agency estimates, electricity demand will increase from 17,200 TWh in 2009 to more than 31,700 TWh in 2035, an average annual growth rate of 2.4% (more than the projected average annual growth rate of 1.3% of total energy demand).19 The share of electricity in the final world consumption is approaching 20% and the IEA expects it to continue to grow. In order to meet the growing demand and modernize old power plants, capital expenditures of USD 10 trillion plus USD 7 trillion for transmission lines and distribution are needed until 2035. Support in the form of state policies and reduction of technology costs lead to a rapid increase in the share of RES, which positions the power sector as a leader in efforts to reduce emissions, but at the same time forces a change in the model of operation of the entire system.20 The current shape of the electricity market in the world is not fundamentally adapted to the rapid change in generation sources. Revenues from wholesale markets are often insufficient to trigger new investments in fixed generation capacity, which can threaten the stability of supply without adequate safeguards. On the demand side, savings from stricter efficiency standards have played a key role in reducing consumption: 18 of the 30 Member States of the International Energy Agency have seen their electricity consumption fall since 2010. Growth prospects depend on the rate at which electricity can be used more widely in heating homes, offices and factories and as a fuel for transport. Doubling electricity demand in developing countries puts cleaner, more accessible and affordable electricity at the heart of global economic development and emission reduction strategies. One in every five kilowatt hours of growth in global demand will come from China’s electric motors alone; the growing demand for indoor air conditioning in developing countries will give a very similar volume boost to consumption growth. In the absence of a greater focus on energy efficiency policies, almost one in three dollars invested (globally combined) in all energy sectors on the supply side will be spent on electricity generation and grids in developing countries. However, in highly regulated markets there is also a risk that the installed generation capacity will be ahead of demand; the IEA estimates that currently there are 350 gigawatts of overcapacity in regions such as China, India, South-East Asia and  Data after Bank DnB NORD Polska SA, 2013.  Otherwise the continuity of electricity supply will not be maintained. Although the growth in demand for electricity in developed economies is modest, the need for investment is still huge as the structure of production sources changes and infrastructure is improved. 19 20

2.4  New Trends in the Global Energy System

39

the Middle East, which is an additional cost that the system and consumers cannot afford. Flexibility is the new buzz word in the power systems. Increasing competitiveness of solar photovoltaics will cause that by 2025 its installed power capacity will be greater than that of wind energy; around 2030, it will overtake water power and by 2040 also coal. Most of these will be large-scale projects, although investments in distributed solar energy by households and businesses also play an important role. WEO-2018 (World Energy Outlook) introduces a new cost calculation mechanism to assess the competitiveness of different electricity generation options, based on the changing costs of the technology and the value it adds to the system at different stages. This mechanism confirms the competitiveness of wind power and solar photovoltaics in systems where flexibility can be achieved at a relatively low cost. New solar photovoltaic installations are more competitive than new coal installations almost worldwide, but are not competitive with existing thermal installations without the clear support from national policies. In the New Policies Scenario (World Energy Outlook 2018, Scenarios), RES and coal change places in the energy balance: the share of energy generated from RES will increase from 25% currently to about 40% in 2040; coal moves in the opposite direction. The increase in solar photovoltaics and wind energy gives unprecedented importance to the flexibility of energy systems to ensure that lights remain on. However, many countries in Europe, but also Mexico, India and China, will require a significant increase in the degree of operational flexibility of power systems. A much stronger drive for electricity driven mobility, electricity heating and universal access to electricity could lead to a 90% increase in electricity demand between 2017 and 2040 – in the New Policies scenario, this increase is already 60% (World Energy Outlook 2018, Scenarios), and this means demand is more than double today’s electricity consumption in the US.  In the Future is Electric Scenario (World Energy Outlook 2018, Scenarios) the share of electricity in the final energy consumption in the world increases to one third.21 Electrification brings benefits, in particular by reducing local pollution, but requires additional measures in order to decarbonize electricity systems if it is to show its full potential to achieve climate goals; otherwise there is a risk that CO2 emissions will simply shift from end-use sectors to the source of its generation. The cost of battery storage is rapidly decreasing and batteries are increasingly competing with gas storage to manage short-term fluctuations in supply and demand. However, conventional power plants will remain the main source of system flexibility, supported by new interconnectors, storage and demand reduction. The European Union’s objective of building an “Energy Union” illustrates the role that regional integration can play in facilitating the systemic integration of RES. The share of generation from nuclear power plants – today the second largest source of low carbon electricity after hydropower  – will remain globally at around 10%, but the  This is based on the assumption that almost half of the car fleet will be powered by electricity in 2040 and electricity will rapidly enter the residential and industrial sectors. However, some important elements of the energy system – such as long-distance road transport, maritime transport and aviation – are not adapted to the electricity supply of today’s technologies. 21

40

2  Global Energy Market Dilemmas

geography of plant deployment will change as production in China overtakes that in the United States and the European Union before 2030. Around one third of today’s nuclear generator installations in developed economies are more than 30 years old. Decisions to extend or close down these generating capacities will have a significant impact on energy security, investment and emissions. And what will then happen to fossil fuels with such an increase in the role of electricity, RES or energy efficiency? In the New Policies Scenario, the growing production of electricity, RES and improved efficiency will stop the growth of coal consumption. Coal consumption rebounded in 2017 after 2 years of decline, but final investment decisions in new coal capacity are far below the level observed in recent years. When the coal-fired power plants currently under construction are opened, the wave of new coal-fired projects starting operations will rapidly slow down after 2020. But it is too early to remove coal from the global energy balance; the average age of a coal-fired power plant in Asia is less than 15 years, compared to about 40 years in developed economies. With industrial coal consumption showing little growth by 2040, the decreases in China, Europe and North America will be compensated for by increases in India and South-East Asia. The use of oil for car propulsion will peak around mid-2020, but the petrochemical sector, trucks, aircraft and ships will continue to maintain overall demand for oil in an upward trend. Improved fuel efficiency in the conventional car fleet has a three times greater saving effect on potential oil consumption than an increase in the electric car fleet to 300 million units in 2040. This in itself will result in 3 million barrels per day (mb/d) of reduced consumption (World Energy Outlook 2018, Scenarios). However, the fast pace of change in the passenger car segment (25% of global oil consumption) is not repeated in other sectors. Petrochemical products will be the largest source of increased oil consumption. Even if the global plastics recycling rate doubled, it would only reduce demand by about 1.5 mb/d from an expected increase of more than 5 mb/d. The overall increase in demand for oil to 106 mb/d in the New Policies Scenario will come from developing economies only. Natural gas will overtake coal in 2030 to become the second most important fuel in the global energy balance. Industrial consumers will be the largest contributor to the 45% increase in global gas consumption by 2040. LNG trade will more than double in response to growing demand from developing economies, led by China. Russia will remain the world’s largest exporter of natural gas as new routes open to Asian markets, but an increasingly integrated European energy market will provide more gas supply options for buyers. Higher shares of wind energy and solar photovoltaics in energy systems will reduce the use of gas turbines for electricity production in Europe and the refurbishment of existing buildings will also reduce gas consumption for heating. However, gas infrastructure will continue to play an important role, especially in winter, providing heat and guaranteeing uninterrupted electricity supplies. As the Sustainable Development Scenario is an integrated strategy to achieve universal access to energy, better air quality and climate goals, it is assumed that it will contribute to the broad transformation of the world’s energy mix by advancing in all energy sectors and using low carbon technologies – including CO2 capture,

2.4  New Trends in the Global Energy System

41

use and storage. In this scenario, the electricity sector is moving further and even faster towards developing low-carbon electricity generation, and renewables are a major axis for ensuring universal access to energy. All economically viable energy efficiency improvement tools are being implemented, keeping overall demand at today’s levels in 2040. Electrification of final consumption is increasing strongly, as is direct use of RES – bio-energy, solar heat and geothermal energy – in the heating and mobility sectors. The share of RES in the energy mix in this scenario will increase from a quarter today to two thirds in 2040; in terms of heat supply it increases from 10% now to 25% and in transport it reaches 19% of today’s 3.5% (including both direct and indirect consumption, such as the use of RES-E). One thing is absolutely certain: it is the governments’ policies that will shape energy markets in the long run. The fast and possibly cheapest energy transformation requires accelerating investment in cleaner, smarter and more efficient energy technologies. But policy makers must also ensure that all key elements of the supply chain – including electricity grids – remain reliable and efficient. The risks of traditional supply disruptions and investment risks on the hydrocarbon side do not diminish and may increase as the energy transformation progresses. Developments in the electricity sector require continued attention to ensure that markets remain stable despite the decarbonization of electricity systems. More than 70% of the $2 trillion of annual investments in global energy supply systems in all sectors are either made directly by state-owned companies or are subject to national regulations that guarantee a full or partial return on investment. Also in terms of the pace of energy efficiency improvements or technological innovation, governments are key in providing a regulatory support framework. Government policies and preferences will play a most important role in shaping the world’s energy future. Although in 2017, for the first time in history, the number of people without access to electricity fell below 1 billion, the universal energy access targets have not been met. In 2040, more than 700 million people, mainly in rural settlements in sub-­ Saharan Africa, are projected to remain without electricity and only limited progress will be made in reducing the dependence on the traditional use of solid biomass as cooking fuel. The above considerations provide an opportunity to see different possible scenarios for the future and the reasons that induce them as well as the interactions that arise in a complex energy system. They also lead to the conclusion that if current energy policies are not changed, this could lead to increasing tensions in much of the energy security area. An accelerated transition towards clean energy can put the world on track to meet the goals of climate change combating, universal access to energy and clean air. However, the gap between this scenario and the current practice remains huge and none of the potential solutions are predetermined although all of them are still possible. It is the action taken by governments that will determine which way we will go and how we can change the energy sector.

42

2  Global Energy Market Dilemmas

Bibliography Amsterdam R (2008, January 14) Retrieved September 03, 2008 from http://www.robertamsterdam.com.polska Associated Press cable dispatch (2008, October 14) Bank DnB NORD Polska SA (2013, July 08) Światowy rynek energii: rośnie popyt, muszą rosnąć inwestycje. Retrieved December 07, 2018 from https://www.cire.pl/pliki/2/RYNEK_ ENERGII.pdf8.07.2013r Bohnenschaefer W (2005) Beitrag der Energieträger zur sicheren und wettbewerbswaehigen Energieversorgung. In: Nachlaltige Energiepolitik fuer den Standort Deutschland. Anforgerungen an die zukuenftige Energipolitik, Koordination A. D. Little, Berlin Brendow K (2004) Global and regional coal demand perspectives to 2030 and beyond. In: Sustainable global energy development: the case of coal. World Energy Council, London Chmielniak TJ (2007) Energetyka oparta na węglu – konieczność czy strategia?. Karbo 2007(2) Czarny RM (2015) High North: Between Geography and Politics. Springer, Cham Cziomer E, Lasoń M (2008) Podstawowe pojęcia i zakres bezpieczeństwa międzynarodowego i energetycznego. In: Cziomer E (ed) Międzynarodowe Bezpieczeństwo Energetyczne w XXI Wieku. Kraków, Krakowskie Towarzystwo Edukacyjne – Oficyna Wydawnicza AFM European Union (2018) EU energy in figures: Statistical pocketbook 2018. Publications Office of the European Union, Luxembourg. Retrieved December 11, 2018 from https://publications. europa.eu/pl/publication-detail/-/publication/99fc30eb-c06d-11e8-9893-01aa75ed71a1 https://webstore.iea.org/weo-2018-special-report-outlook-for-producer-economies. Retrieved December 10, 2018 IEA, World Energy Outlook (2011) IEA, World Energy Outlook (2012) IEA, World Energy Outlook (2017) Retrieved May 11, 2018 from https://webstore.iea.org/ world-energy-outlook-2017 IEA, World Energy Outlook (2018) Scenarios. Retrieved December 15, 2018 from https://www. iea.org/weo2018/scenarios/ International Energy Agency (2018). CO2 emissions from fuel combustion 2018. Retrieved from http://data.iea.org/payment/products/115-co2-emissions-from-fuel-combustion-2018-edition. aspxs Kublik A (2008a, April 20) Brazylia – naftowy kolos XXI wieku. Retrieved from http://gospodarka.gazeta.pl/gospodarka Kublik A (2008b, October 19) Kuba – nowa potęga naftowa świata? Retrieved from http://gospodarka.gazeta.pl/gospodarka Młynarski T (2017) Bezpieczeństwo energetyczne i ochrona klimatu w drugiej dekadzie XXI wieku: Energia – środowisko – klimat. Wydawnictwo Uniwersytetu Jagiellońskiego, Kraków Mokrzycki E (2006) Perspektywy wykorzystania węgla kamiennego. Górnictwo i Geoinżynieria r 30 (z. 3/1) Mokrzycki M, Ney R, Siemek J (2008) Światowe Zasoby Surowców Energetycznych – Wnioski dla Polski. Rynek Energii 6 OECD/International Energy Statistics (2017) CO2 emissions from fuel combustion: Highlights. Retrieved from http://www.indiaenvironmentportal.org.in/files/file/ CO2EmissionsfromFuelCombustionHighlights2017.pdf Paska J, Surma T (2008) Wytwarzanie energii elektrycznej z zasobów odnawialnych w Polsce i Unii Europejskiej. Rynek Energii 1 Rühl Ch (2008) Introduction. In: BP Statistical Review of World Energy: June 2008. BP, London. Retrieved from www.bp.com/statisticalreview Stasiński M (2008, September 03) Brazylia na progu potęgi naftowej. Retrieved from http://gospodarka.gazeta.pl/gospodarka

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Symons J  (2012) Introduction: challenges to energy security in the era of climate change. In: Anceschi L, Symons J  (eds) Energy security in the era of climate change: the Asia-Pacific experience. Palgrave Macmillan UK, London Wagner U (2005) Ebergieeffizienz-und Einsparung. In: Nachhaltige Energiepolitik fuer den Standort Deutschland.Anforgerungen an die zukuenftige Energipolitik, Koordination A.  D. Little, Berlin World Energy Outlook (2018) Executive summary. Retrieved from https://webstore.iea.org/download/summary/190?fileName=English-WEO-2018-ES.pdf

Chapter 3

Energy Balance in the Second Decade of the Twenty-First Century

Abstract  The world’s energy needs are steadily increasing. In a large part, it is directly related to economic growth. But at the same time there is an improvement in energy intensity (or energy efficiency): the amount of energy needed to generate a production unit. Despite the extremely strong development in OECD countries, the vast majority of the increase in global energy consumption comes from developing countries. Keywords  Balance of energy reserves · Hydrocarbon producers · Increase in energy consumption · RES · Improvement of energy efficiency

3.1  The Global Energy Balance World crude oil reserves (compared to 2006) have changed as the global proved oil reserves in 2017 fell slightly by 0.5 billion barrels (−0.03%) to 1696.6 billion barrels, which would be sufficient to meet 50.2  years of global production at 2017 levels. Higher reserves in Venezuela (up by 1.4 billion barrels) were outweighed by declines in Canada (−1.6 billion barrels) and smaller drops in a number of other non-OPEC countries. OPEC countries currently hold 71.8% of global proved reserves (BP Statistical Review of World Energy 2018). The distribution of oil reserves worldwide by region (Fig. 3.1). Since 1980 natural gas reserves in the world have steadily increased (an average annual increase of 3.4%) and their total value has doubled.1 This rise in the world’s reserves on the one hand springs from discoveries of new fields, and on the other from increased exploitation of the existing fields in the Middle East, in Asia/Oceania and in Africa. It appears that natural gas reserves are significant. Some estimates  According to BP’s estimates (2008), approximately 41% of the studied gas resources are located in the Middle East. By the end of 2007, the former USSR territories have held over 30% of the total reserves. In Oceania and Africa there were 8% of the resources. Only seven countries have their own proved natural gas reserves amounting to over 2% of the total global. Based on EIA, at that time, Russia, Iran and Qatar held 58% of the world’s proved gas reserves. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_3

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3  Energy Balance in the Second Decade of the Twenty-First Century End 1997

End 2017

R/P ratio

127.1

226.1

30.8

Total S. & Cent. America

93.4

330.1

125.9

Europe

21.3

13.4

10.4

CIS

121.4

144.9

27.8

Middle East

683.2

807.7

70.0

Africa

75.3

126.5

42.9

Asia Pacific

40.3

48.0

16.7

Total World of which:

1162.1

1696.6

50.2

151.4

242.6

27.8

1010.6

1454.0

57.9

OPEC

820.7

1218.8

84.7

Non-OPEC

341.4

477.8

24.6

8.7

4.8

9.0

Total North America

OECD Non-OECD

EU

Fig. 3.1  Oil: Total proved reserves of oil (thousand million barrels). Compiled by author on the basis of BP Statistical Review of World Energy, 2018, 67th edition, p. 12. The estimates in this figure have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and independent estimates of Russian reserves based on official data and Chinese reserves based on official data and information in the public domain. Canadian oil sands ‘under active development’ are an official estimate. Venezuelan Orinoco Belt reserves are based on the OPEC Secretariat and government announcements. Reserves include gas condensate and natural gas liquids (NGLs) as well as crude oil. Shares of total and R/P ratios are calculated using thousand million barrels figures Total proved reserves of oil – generally taken to be those quantities which geological and engineering information indicates with reasonable certainty that can be recovered in the future from known reservoirs under existing economic and operating conditions. The data series for total proved oil reserves does not necessarily meet the definitions, guidelines and practices used for determining proved reserves at company level, for instance as published by the US Securities and Exchange Commission, nor does it necessarily represent BP’s view of proved reserves by country. Reserves-­ to-­production (R/P) ratio  – if the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate

indicate that given the current rate of consumption, the future prospects of ­undiscovered yet potential gas resources could extend their approximate lifetime by 130 years.

3.1  The Global Energy Balance

47 End 1997

End 2017

R/P ratio

Total North America

8.0

10.8

11.4

Total S. & Central America

6.6

8.2

45.9

Europe

4.9

3.0

12.2

CIS

40.3

50.2

72.6

Middle East

48.6

79.1

119.9

Africa

10.2

13.8

61.4

Asia Pacific

9.4

10.3

31.8

Total World of which:

128.1

193.5

52.6

13.8

17.8

13.6

114.2

175.6

74.2

3.6

1.2

10.0

OECD Non-OECD EU

Fig. 3.2  Natural gas: Total proved reserves (trillion cubic meters) Compiled by author on the basis of BP Statistical Review of World Energy 2018, p. 26 Total proved reserves of natural gas – generally taken to be those quantities which geological and engineering information indicates with reasonable certainty that can be recovered in the future from known reservoirs under existing economic and operating conditions. The data series for total proved natural gas does not necessarily meet the definitions, guidelines and practices used for determining proved reserves at a company level, for instance as published by the US Securities and Exchange Commission, nor does it necessarily represent BP’s view of proved reserves by country

Gas resources are not distributed evenly around the world. They are characterized by the geographical concentration and usually found near oil deposits. About 70% of conventional natural gas deposits are located in Russia and the Middle East. According to the estimates, Russia holds the world’s largest natural gas reserves2 and second largest amounts of oil deposits. In turn, the Middle East holds the largest reserves of oil and world’s second- largest reserves of gas. A more detailed comparison of estimated resources cannot be fully provided as data are either classified or confidential (Fig. 3.2).

2  New gas fields estimated at 1.22 trillion m3 were discovered in Siberia, which in volume match recently found deposits at the Kovykta gas field in Eastern Siberia. In 2007, the proved gas reserves volume from the field was estimated at 1.51 billion m3; in the near future, the Irkutsk region may be set to become China’s top supplier of natural gas. The export value has been estimated at approximately USD 1 billion. See Kommiersant 2007.

48

3  Energy Balance in the Second Decade of the Twenty-First Century

Anthracite and bituminous

Subbituminous and lignite

Total

Share of total

R/P ratioa

226306

32403

258709

25%

335

Total S. & Cent. America

8943

5073

14016

1.4%

141

Total Europe

24220

76185

100405

9.7%

159

Total CIS

130162

93066

223228

21.6%

397

Total Middle East and Africa

14354

66

14420

1.4%

53

Total Asia Pacific

314325

109909

424234

41%

79

Total World of which:

718310

316702

1035012

10.0%

134

OECD

320377

177608

497985

48.1%

282

Non-OECD

397933

139094

537027

51.9%

91

EU

22913

53416

76329

7.4%

164

Total North America

Fig. 3.3  Coal: Total proved reserves at end 2017 (million tons) Compiled by author on the basis of BP Statistical Review of World Energy (2018), p. 36 a Reserves-to-production (R/P) ratio – If the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. Reserves-to-production (R/P) ratios are calculated excluding other solid fuels in reserves and production. Shares of total and R/P ratios are calculated using million tons figures

As shown in the table above, “Global proved gas reserves in 2017 rose slightly by 0.4 trillion cubic metres (tcm) or 0.2% to 193.5 tcm. This is sufficient to meet 52.6  years of global production at 2017 levels (BP Statistical Review of World Energy 2018, p. 27). Israel was the largest single contributor to growth (0.3 tcm), while the CIS region also added 0.2 tcm to reserves. By region, the Middle East holds the largest proved reserves (79.1 tcm, 40.9% of the global total), followed by CIS (59.2 tcm, a 30.6% share). Coal  resources are much more abundant than oil or gas. With the current consumption, proved coal resources will last for 130–150  years. Unlike gas and oil, coal reserves are readily found in some 70 countries. North America, the former Soviet republics and Asia/Oceania hold a similar share of world coal reserves, fluctuating around 27–30% of the total world coal reserves. Nevertheless more than 80% of the world’s total coal reserves are located in USA (28.6%), Russia (18.5%), China (13.5%), Australia (9%), India (6.7%) and South Africa (5.7%) (Fig. 3.3). Therefore, “World proved coal reserves are currently sufficient to meet 134 years of global production, much higher than the R/P ratio for oil and gas. By region, Asia

3.2  Top Energy Producers, Exporters and Importers

49

Cobalt reserves

World 7100

of which: Democratic Republic of Congo – 3500, Australia -1200, Cuba – 500

Natural graphite reserves

270000

of which: Brazil - 70000, China - 55000, Mozambique - 17000

Lithium reserves

16000

of which: Chile - 7500, China - 3200, Australia - 2700

Rare earth metal reserves 120000

of which: China - 44000, Brazil - 22000, Russian Federation - 18000

Fig. 3.4  Key materials for the changing energy system (thousand tons), end 2017 Compiled by author on the basis of BP Statistical Review of World Energy (2018), p. 51

Pacific holds the most proved reserves (41% of total), split mainly between Australia, China and India. The US remains the largest single reserve holder – 24.2% of the total (BP Statistical Review of World Energy 2018, p. 37). Just as important are the reserves of cobalt, lithium and other key materials, as presented in the Fig. 3.4.

3.2  Top Energy Producers, Exporters and Importers The world overall energy balances for 2016, amounting to 13,764 Mtoe, including contribution of each different source, are illustrated by Fig. 3.5. The world energy production by region is as follows: EU  – 5.5%; China  – 17.2%; USA – 13.9%; Africa – 8%; Russia – 10%; Middle East – 14.8%, Asia – 11.7%, rest of the World – 18.8% (European Union 2018, p. 10), as presented in Figs. 3.6 and 3.7. The quantity of energy generated from the primary energy raises many questions and the issue of a sufficient supply of mineral resources, and energy fuels in particular, for future generations is undoubtedly paramount. In this context, it is worth examining oil and natural gas production in individual years, keeping in mind that in 2018 world oil production increased by 0.6 million b/d, i.e. below the previous average for the second year in a row. The U.S. (690,000 b/d) and Libya (440,000 b/d) recorded the largest increase in production, while Saudi Arabia (−450,000 b/d) and Venezuela (−280,000) registered the largest decline (BP Statistical Review of World Energy 2018) (Fig. 3.8). Global oil supply hit a record high in 2018 at 100 mb/d and the increased demand for oil decelerated significantly on a global scale during the entire second quarter of that year. On the other hand, in August the OPEC countries produced the most since November 2017–32.63  mb/d. Why then the oil prices are at a 4-year high? The world’s market seems to anticipate future problems when tightening of the oil supply could potentially be significant. U.S. sanctions on Iran were imposed only on November 3rd, 2018, but as observed by the IEA, a reduction in tanker traffic in Iranian ports indicated a reduction of exports from this country by as much as 0.5 mb/d. Buyers fear a repeat of the 2012 situation when the previous round of

50

3  Energy Balance in the Second Decade of the Twenty-First Century

Coal a

Crude Oil Natur oil produ al gas cts

ktoe

ktoe

Production

3 657 185

4 473 266

ktoe

Imports

795 2 27

Exports

Nucl ear

Hyd ro

Geothe rmal, solar, etc. ktoe

ktoe

ktoe

ktoe

0

3 032 408

679 649

349 225 627 223

2 379 318

1 329 400

915 5 23

0

0

833 4 27

2 354 631

1 414 628

932 5 27

0

International marine bunkers c

0

0

0

0

International aviation bunkers d

0

0

0

Stock changes

111 8 99

15 32 1

TPES

3 730 886

Transfers

Biofu els and waste ktoe

Electr Heat icity

ktoe

ktoe

Total b

ktoe

1 344 867

0

0

23 92 2

62 10 6

6

5 505 502

0

0

19 44 0

62 24 8

-5

5 616 906

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

7 206

19 55 0

0

0

0

-60

0

0

108 86 2

4 482 631

92 43 4

3 034 954

679 649

349 223

225 62 7

1 349 289

-142

1 76 13 761 5 449

1 356

232 9 99

262 0 87

0

0

0

0

0

0

0 27 731

Statistical differences

28 63 0

11 24 7

14 35 2

11 25 9

0

0

90

839

1 137

-350

42 413

Electricity plants

1 672 038

40 47 5

178 5 54

868 1 83

672 059

349 223

177 95 7

120 9 71

1 811 299

-719

2 268 880

CHP plants

623 8 43

-12

17 98 9

314 5 71

7 59 1

0

-2 564

60 58 3

335 9 94

239 303

451 85 6

Heat plants

23 38 5

-830

10 95 3

61 70 3

0

0

-1 557

13 13 1

-464

102 630

-9 393

Gas works

13 32 0

0

2 169

5 418

0

0

0

-270

0

0

10 341

Fig. 3.5  World: Balances for 2016 Source: IEA World Energy Balances 2018 a The column of coal also includes peat and oil shale where relevant b Totals may not add up due to rounding c International marine bunkers are included in transport for world totals d International aviation bunkers are included in transport for world totals

1 76 13 763 4 991

51

3.2  Top Energy Producers, Exporters and Importers

Coal a

ktoe

Crude Oil Natur oil produ al gas cts

Hyd ro

Geothe rmal, solar, etc.

Biofu els and waste

ktoe

ktoe

ktoe

ktoe

Electr Heat icity

ktoe

0

4 246 760

4 165 654

0

0

0

0

0

0

0

Coal transformation

297 5 10

0

2 365

-38

0

0

0

-153

0

0 300 06 7

Liquefication plants

12 08 4

15 15 9

0

16 47 1

0

0

0

0

0

0

13 396

Other transformation

-298

46 64 5

35 90 2

13 00 9

0

0

0

90 53 9

0

-682

93 786

Energy industry own use

75 27 5

11 23 7

208 0 02

296 1 71

0

0

0

13 46 4

181 9 60

36 4 822 60 99 7

Losses

4 906

8 686

-473

18 70 6

0

0

-11

-139

169 6 54

22 2 224 83 63 9

Total final consumption

1 035 501

14 68 3

3 893 250

1 440 262

0

0

43 628

1 050 877

1 793 937

283 185

9 555 323

Industry

826 9 50

6 657

299 7 07

537 7 74

0

0

919

198 3 30

746 6 94

135 572

2 752 604

66

11

2 533 202

101 8 86

0

0

0

81 97 0

30 73 2

0

2 747 867

Other

152 7 84

18

423 1 73

631 8 24

0

0

42 709

770 5 77

1 016 510

147 613

3 185 209

Residential

72 72 9

0

209 3 04

431 2 42

0

0

31 640

728 6 00

488 4 40

99 1 97

2 061 152

Commercial and public services

33 89 9

0

85 72 2

187 4 46

0

0

7 877

28 27 9

395 5 18

36 9 775 73 90 1

Agriculture / forestry

16 07 7

8

104 1 99

9 662

0

0

2 073

9 844

52 79 4

3 21 197 86 0 6

2

56

0

0

54

13

551

Transport

Fishing

ktoe

ktoe

Total b

ktoe

Oil refineries

ktoe

Nucl ear

81 10 6

0

5 681

Non -specified

30 07 8

10

18 26 8

3 418

0

0

1 065

3 840

79 20 7

Non -energy use

55 70 1

7 997

637 1 68

168 7 78

0

0

0

0

0

0

869 64 3

-of which chemical/petrochemical

3 466

7 949

447 2 43

167 6 19

0

0

0

0

0

0

626 27 7

Fig. 3.5 (continued)

53

ktoe

6 411

8 16 144 04 3 9

52

3  Energy Balance in the Second Decade of the Twenty-First Century 1995

2000

2005

2010

2015

2016

EU-28

967

951

910

843

772

759

China

1065

1124

1671

2236

2514

2361

USA

1659

1667

1631

1724

2023

1916

Middle East

1137

1324

1516

1624

1885

2043

Asia

934

1062

1255

1497

1566

1615

Russia

968

978

1203

1280

1334

1374

Africa

773

884

1086

1172

1120

1108

Rest of the World

1760

2039

2286

2434

2598

2588

World

9263

10029

11558

12808

13811

13764

Fig. 3.6  World energy production by region (Mtoe) Source: EU Energy in figures, Statistical Pocketbook 2018, p. 10

1995

2000

2005

2010

2015

2016

Petroleum and Products

3,397

3,703

4,050

4,084

4,411

4,473

Solid Fuels

2,219

2,278

2,998

3,663

3,886

3,657

Gas

1,812

2,065

2,369

2,715

2,989

3,032

Renewables

1,210

1,287

1,396

1,595

1,814

1,878

Nuclear

608

675

722

719

670

680

Other

17

21

23

32

40

44

Fig. 3.7  World energy production by fuel (Mtoe) Source: European Union. (2018). EU energy in figures: Statistical pocketbook 2018, p. 11

sanctions reduced Iranian exports even by 1.2 mb/d. The other significant and growing problem of oil market is Venezuela. The Venezuelan production at 1.24 mb/d is another indicator reaching its lowest point in the past 50 years and the IEA says production could fall below 1 mb/d by the end of the year. The market still bears in mind the Venezuelan production level of 2.3 mb/d as this country has an enormous own potential of the raw material (100 billion of oil barrels), not supported at ­technological, national, legal and political levels (Oil Market Reports 2018). Not more than a few months ago, it was believed that the country which could compensate for the fall in exports from Iran and Venezuela would be Brazil. It turns out, however, that due to internal problems this year global markets can expect from

3.2  Top Energy Producers, Exporters and Importers

53

barrels per day

million tones

2007

2016

2017

2007

2016

2017

13628

19292

20112

632.6

883.0

916.8

Total S. & Cent. America

7344

7418

7182

374.7

381.9

368.3

Total Europe

5032

3566

3519

236.1

165.6

162.6

Total CIS

12795

14162

14288

629.5

695.1

699.6

Total Middle East

25440

31849

31597

1218.2

1500.3

1481.1

Total Africa

10139

7687

8072

481.7

366.2

383.3

7951

8050

7879

381.4

385.0

375.5

82330

92023

92649

3954.2

4377.1

4387.1

OECD

19136

21139

23901

889.4

1060.1

1090.3

Non-OECD

63194

68884

68748

3064.9

3317.0

3296.8

OPEC

35835

39601

39436

1722.2

1878.1

1860.3

Non-OPEC

46494

52422

53213

2232.0

2498.9

2526.9

2416

1484

1464

114.1

70.6

69.2

Total North America

Total Asia Pacific Total World of which:

EU

Fig. 3.8  Oil: Production in thousands of barrels and in million tons per day Compiled by author on the basis of BP Statistical Review of World Energy 2018, pp. 14, 16 Includes crude oil, shale oil, oil sands and NGLs (natural gas liquids – the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and derivatives of coal and natural gas

Brazil only a marginal increase of in the order of 30 kb/d (while expecting at least 260 kb/d). Also the U.S., where the oil output is set to increase again by 1.7 mb/d in 2018 and an additional 1.2 mb/d in 2019, is possibly not a solution. Only when at the beginning of 2020, American ports will increase their export capacity and that will improve the global supply situation. Capacity limitations will result in strong production data in the U.S. for the next several months but the export figures will not follow that trend. In addition, with the lower average oil reserves (by 50 million barrels from the five-year average in OECD countries) and the enormous growth in air travel in India and China,3 the path to all-time high prices accompanied by a growing steadily global demand for oil appears inevitable. 2019 may be a challenging year for the oil markets. Significant involvement of financial institutions in commodity markets, especially oil, results in

 A slight decrease in demand for motor fuel due to the development of the electric vehicles fleet should be taken into consideration. 3

54

3  Energy Balance in the Second Decade of the Twenty-First Century

Producersa

Mt

% of world total

Net exportersb

Mt

Net importersc

Mt

United States

563

12.9

Saudi Arabia

373

China

378

Saudi Arabia

560

12.8

Russia

254

United States

371

Russia

548

12.6

Iraq

187

India

214

Canada

237

5.4

United Arab Emirates

120

Japan

162

Iran

229

5.2

Iran

119

Korea

146

Iraq

225

5.2

Canada

113

Germany

91

China

192

4.4

Kuwait

108

Italy

65

United Arab Emirates

178

4.1

Venezuela

90

Spain

64

Kuwait

149

3.4

Nigeria

87

Netherlands

61

Brazil

137

3.1

Angola

82

France

55

Rest of the World

1347

30.9

Others

548

Others

506

World

4365

100.0

Total

2081

Total

2113

Fig. 3.9  Producers, net exporters and net importers of crude oil Compiled by author on the basis of IEA, Key World Energy Statistics Includes production of crude oil, NGL, feedstocks, additives and other hydrocarbons; excludes liquids from other fuel sources (renewable, coal and natural gas) a 2017 provisional data b 2016 data c 2016 data

an optimistic outlook for OECD countries notwithstanding the complicated situation on the oil market – dependence of these countries on imports is at its lowest level in 27 years which in theory significantly improves energy security and reduces the impact of market instability on the Organization member countries’ economies (Fig. 3.9). Natural Gas  as energy raw material is becoming increasingly important. In the last 100 years its production increased a thousand fold (Fig. 3.10). Russia is the world’s second-largest producer and exporter of natural gas.4 In 2017, gas production amounted to 635.6 billion cubic meters. Also, Russia has the largest proved gas reserves. The deposits are estimated at 44.6 trillion m3, which account for about a quarter of the world’s total proven reserves. Compared to others,

 USA is number one producing 631.6 mln tons of oil equivalent w 2017.

4

55

3.2  Top Energy Producers, Exporters and Importers in billion cubic meters

in million tons of oil equivalent

2007

2016

2017

2007

2016

2017

Total North America

743.4

944.6

951.5

639.2

812.2

818.2

Total S. & Cent. America

160.7

178.8

179.0

138.2

153.7

153.9

Total Europe

287.6

238.6

241.9

247.3

205.1

208.0

Total CIS

777.4

769.8

815.5

668.5

661.9

701.2

Total Middle East

367.7

630.8

659.9

316.2

542.4

567.4

Total Africa

197.4

207.0

225

169.7

178.0

193.5

Total Asia Pacific

407.1

580.3

607.5

350.0

498.9

522.4

2941.3

3549.8

3680.4

2529.1

3052.3

3164.6

OECD

1072.7

1286.6

1313.6

922.3

1106.3

1129.5

Non-OECD

1868.7

2263.2

2366.8

1606.8

1946.0

2035.1

196.8

121.8

117.8

169.3

104.8

101.3

Total World of which:

EU

Fig. 3.10  Natural gas: Production in billion cubic metersa and in million tons of oil equivalentb Compiled by author on the basis of BP Statistical Review of World Energy 2018, p. 26 a Excludes natural gas converted to liquid fuels but includes derivatives of coal as well as natural gas consumed in gas-to-lquids transformation. In addition, whenever possible, the data above represents standard cubic metres (measured at 15 °C and 1013 mbar) as they are derived directly from tons of oil equivalent using an average conversion factor and have been standardized using a gross calorific value (GCV) of 40 MJ/m3 b Excludes gas flared or recycled. Includes natural gas produced for gas-to-liquids transformation

even the leading natural gas producers, Russian gas reserves are impressive. Iran and Qatar, next in the rankings, hold less than half of the reserves.5 The main Russian natural-gas production regions are located in West Siberia. It is home to the most productive gas fields: Urengoy, Yambur and Medvezhye. Other gas fields are located on the Yamal peninsula, in the Orenburg region, the Southern Urals and the North Caucasus – Stavropolskoye deposit (Wrona 2006, p. 281). Gas production from these fields is of less significance than West Siberia where about 5  For comparison, all EU Member States in May 2008 had only 3 billion m3 of natural gas; data after BP Statistical Review of World Energy 2008.

56

3  Energy Balance in the Second Decade of the Twenty-First Century

Producersa

bcm

% of world total

Net exportersb

bcm

Net importersc

bcm

United States

760

20.2

Russia

217

Japan

115

Russia

694

18.4

Norway

123

China

86

Iran

214

5.7

Qatar

121

Germany

85

Canada

184

4.9

Australia

62

Italy

69

Qatar

169

4.5

Canada

61

Turkey

54

China

142

3.8

Turkmenistan

55

Mexico

50

Norway

128

3.4

Algeria

54

Korea

49

Australia

105

2.8

Indonesia

29

France

43

Algeria

94

2.5

Malaysia

28

United Kingdom

37

Saudi Arabia

94

2.5

Nigeria

27

Spain

32

Rest of the World

1184

31.3

Others

151

Others

296

World

3768

100.0

Total

928

Total

916

Fig. 3.11  Producers, net exporters and net importers of natural gas Compiled by author on the basis of IEA, Key World Energy Statistics Net exports and net imports include pipeline gas and LNG a 2017 provisional data b 2017 provisional data c 2017 provisional data

90% of blue fuel is extracted. The Western Siberian fields are slowly nearing ­depletion. The production has been declining year after year. A viable alternative can become the gas resources of the Russian Arctic shelf – in the Barents and Kara Seas, the Sakhalin Shelf as well as the Kovykta gas field in Eastern Siberia (Łoskot et al. 2003, p. 9). New investment and research projects have been dedicated to these sites (Fig. 3.11). Coal’s  share in primary energy fell to 27.6%, the lowest since 2004. Despite this, world coal production grew by 105 mtoe or 3.2%, which is the fastest rate of growth since 2011. Production rose by 56 mtoe in China and 23 mtoe in the U.S. It is worth pointing out that coal (forgotten by some in Europe) is often the leading energy choice for other regions. Two dominant trends in coal market can be observed: moving away from coal production and consumption by industrialized countries, and at the same time, the boom (in South-East Asian countries) where coal is the fuel of choice bringing electricity to millions of people for the first time. Asia’s share of the coal market has grown steadily and is expected to continue. In 2000, the United States and the European Union jointly accounted for 37% of global coal consumption, while China and India for 35%. Currently, China and India use

57

3.2  Top Energy Producers, Exporters and Importers

over four times more coal than the US and EU combined. This trend is expected to continue as the decline in the U.S. and the EU seems inevitable. In 2023, the total coal consumption in Japan and Korea will for the first time exceed that of the European Union. Since 2015, on the average, more than 40 GW of coal-fired power capacity is added annually in China (more than all installed coal capacity in Poland) and coal fired power stations have reached the capacity of 980 GW. Electricity generation in China accounts for 25% of global coal consumption. India increased its coal consumption by 4.4% to 942 million tons in 2017; Japan’s coal use also rose to 189 mln tons (by 0.8%) and Korea’s by as much as 11%  – to 150 million tons in 2017. China’s coal imports grew by 15 million tons in 2017 and the larger importers, including Korea, Taipei, Malaysia, Turkey, Philippines, Brazil, Mexico, Vietnam, Pakistan and Morocco had record imports. Japan’s, Thailand’s and Chile’s coal purchases surged, nearing a historic high. With such sustained demand, prices remain high but higher prices, however, do not drive new investments (Fig. 3.12). In 2018, the share of renewables in energy generation increased by 17%, which was higher than the 10-year average and the largest increment on record (69 mtoe). In China, renewable energy production rose by 25 mtoe – a country record and the Mt

% of world total

Net exportersb

Mt

Net importersc

Mt

China

3376

44.7

Indonesia

387

China

263

India

730

9.7

Australia

379

India

207

United States

702

9.3

Russia

86

Japan

188

Australia

501

6.6

Colombia

120

Korea

148

Indonesia

488

6.5

United States

81

Chinese Taipei

68

Russia

387

5.1

South Africa

71

Germany

48

South Africa

257

3.4

Mongolia

33

Turkey

38

Germany

175

2.3

Kazakhstan

27

Malaysia

31

Poland

127

1.7

Canada

24

Thailand

24

Kazakhstan

106

1.4

Mozambique

Brazil

21

Rest of the World

700

9.3

Others

1263

Others

244

7549

100.0

Total

2081

Total

Producersa

World

2

Fig. 3.12  Producers, net exporters and net importers of coal Compiled by author on the basis of IEA, Key World Energy Statistics Includes steam coal, coking coal, lignite and recovered coal a 2017 provisional data b 2017 provisional data c 2017 provisional data

1280

58

Producersa

3  Energy Balance in the Second Decade of the Twenty-First Century

TWh

% of nuclear in total domestic electricity generation

% of world total

Net installed capacityb

GW

Country(top ten producers)c

100

France

73.1

United States

840

32.2

United States

France

403

15.5

France

63

Ukraine

49.7

China

213

8.2

Japan

40

Sweden

40.5

Russia

197

7.6

China

31

Korea

Korea

162

6.2

Russia

26

United Kingdom

21.3

Canada

101

3.9

Korea

23

Unites States

19.5

Germany

85

3.4

Canada

14

Russia

18.1

Ukraine

81

3.1

Ukraine

13

Canada

15.2

United Kingdom

72

2.8

Germany

11

Germany

13.2

Sweden

63

2.4

Sweden

10

China

3.5

Rest of the World

389

14.8

Rest of the World

60

Rest of the World

7.3

World

2606

100.0

World

391

World

29

10.4

Fig. 3.13  Producers of nuclear electricity Compiled by author on the basis of IEA, Key World Energy Statistics Excludes countries with no nuclear production a 2016 data b 2016 data, sources: International Energy Agency, International Atomic Energy Agency c 2016 data

second largest contribution to global primary energy growth from any single fuel and country, behind natural gas. Renewable energy is the amount of electricity generated as a result of converting solar, wind or other renewable or alternative energy sources. It should be noted that the global nuclear power generation grew by 1.1%. The growth in China (8 mtoe) and Japan (3 mtoe) was partially offset by declines in South Korea (−3 mtoe) and Taiwan (−2 mtoe) (Fig. 3.13). Hydroelectric power rose by just 0.9%, compared with the 10-year average of 2.9%. Last but not least, the growth in China was the slowest since 2011 and European output declined by 10.5% (−16 mtoe) (Fig. 3.14). Wind provided more than half of renewables growth, while solar energy contributed more than a third despite accounting for just 21% of the total (Fig. 3.15). There are high hopes pinned on photovoltaics. Since 2010, the cost of installed solar has dropped by 70% and wind power installation by 25%. Already in 2016,

59

3.3  Current Energy Consumption

Producersa

TWh

% of world total

China

1193

28.6

Canada

387

Brazil

Net installed capacityb

GW

Country(top ten producers)c

% of hydro in total domestic electricity generation

China

344

Norway

96.2

9.3

United States

103

Brazil

65.8

381

9.1

Brazil

97

Venezuela

60.1

United States

292

7.0

Canada

80

Canada

58.0

Russia

187

4.5

Russia

51

Turkey

24.5

Norway

144

3.5

Japan

50

China

19.2

India

138

3.3

India

45

Russia

17.1

Japan

85

2.0

Norway

32

India

9.3

Venezuela

68

1.6

Turkey

27

Japan

8.0

Turkey

67

1.6

France

26

Unites States

6.8

Rest of the World

1228

29.5

World

4170

100.0

Rest of the World World

302 1157

Rest of the World

14.9

World

16.6

Fig. 3.14  Producers of hydro electricity Compiled by author on the basis of IEA, Key World Energy Statistics Includes electricity production from pumped storage; excludes countries with no hydro production a 2016 data b 2016 data, sources: International Energy Agency, United Nations c 2016 data

global solar PV capacity growth has been higher than any other renewable source, as illustrated in Fig. 3.16.

3.3  Current Energy Consumption The growth in global demand for primary energy sources (non-renewable) is an indisputable fact. The demand increased from nearly 5 billion tons of oil equivalent in 1971 to slightly above 9 billion in 2000. Medium and long-term forecasts ­indicated a further rise in consumption to over 11 in 2010 and above 15 billion tons of oil equivalent in w 2030 (Cziomer and Lasoń 2008, p. 16). However, it should be noted that the presented information was compiled in 2005. Since then, significant changes have taken place in the world energy balance, including energy consumption, as shown in the following figures.

60

Producersa

3  Energy Balance in the Second Decade of the Twenty-First Century

TWh

% of world total

Net installed capacityb

GW

Country(top ten producers)c

148.6

Spain

17.8

% of wind in total domestic electricity generation

China

237

24.8

China

United States

229

24.0

United States

81.4

Germany

12.1

Germany

79

8.2

Germany

49.6

United Kingdom

11.0

Spain

49

5.1

India

28.7

Italy

6.1

India

45

4.7

Spain

23.0

Brazil

5.8

United Kingdom

37

3.9

United Kingdom

16.2

United States

5.3

Brazil

33

3.5

Canada

12.0

Canada

4.6

Canada

31

3.2

France

11.5

France

3.9

France

21

2.2

Brazil

10.1

China

3.8

Italy

18

1.8

Italy

9.4

India

3.0

Rest of the World

178

18.6

Rest of the World

2.2

World

958

100.0

World

3.8

Rest of the World World

76.9 467.4

Fig. 3.15  Producers of wind electricity Compiled by author on the basis of IEA, Key World Energy Statistics Excludes countries with no wind production a 2016 data b 2016 data c 2016 data

Global primary energy consumption grew strongly in 2017, led by natural gas and renewables, with coal’s share in the global energy mix continuing to decline. Primary energy consumption increased by an average 2.2% in 2017, up from 1.2% 2018 and the fastest since 2013. This compares with the 10-year average of 1.7% per year (Fig. 3.17). Thus, global energy demand increased by 2.2% in 2017, compared with 1.2% in 2018 and above the 10-year average of 1.7%. This above-average growth was driven by the OECD, and the EU in particular. Much of this strength can be directly related to economic growth. However, it also reflected a slight slowdown in improvement of the overall energy intensity (or energy productivity): the quantity of energy needed to produce one unit of output. In spite of the unusually strong growth in the OECD, the greatest part of the increase in global energy consumption came from the developing world that accounted for nearly 80% of the growth. By fuel use, natural gas had the largest increase in energy consumption, followed by renewables and then oil. China’s energy consumption grew by 3.1% and this

3.3  Current Energy Consumption

Producersa

TWh

% of world total

61

Net installed capacityb

GW

Country(top ten producers)c

% of solar PV in total domestic electricity generation

China

75

22.9

China

77.5 Italy

7.63

Japan

51

15.5

Japan

42.0 Germany

5.87

United States

47

14.2

United States

41.4 Japan

4.82

Germany

38

11.6

Germany

40.7

Italy

22

6.7

Italy

19.3 Spain

2.94

India

14

4.3

United Kingdom

11.9 Australia

2.42

United Kingdom

10

3.2

India

9.4 France

1.47

France

8

2.5

France

7.3 China

1.21

Spain

8

2.5

Australia

5.6 United States

1.08

Australia

6

1.9

Spain

5.0 India

0.96

49

14.7

328

100.0

Rest of the World World

Rest of the World World

40.0

United Kingdom

Rest of the World

300.1 World

3.07

0.57 1.31

Fig. 3.16  Producers of solar PV electricity Compiled by author on the basis of IEA, Key World Energy Statistics Excludes countries with no solar PV production a 2016 data b 2016 data c 2016 data

country was the largest growth market for energy for the 17th consecutive year (BP Statistical Review of World Energy 2018) (Fig. 3.18). In the assessment made by BP in 2018, global oil consumption growth averaged 1.8%, or 1.7 million barrels per day (b/d), above its 10-year average of 1.2% for the third consecutive year. China (500,000 b/d) and the US (190,000 b/d) were the single largest contributors to the growth (Fig. 3.19).6 Inland demand plus international aviation and marine bunkers and refinery fuel and loss. Consumption of biogasoline (such as ethanol), biodiesel and derivatives of coal and natural gas are also included. Differences between these world consumption figures and world production statistics are accounted for by stock changes,

 The oil price (Dated Brent) averaged $54.19 per barrel, up from $43.73/barrel in 2016. This was the first annual increase since 2012), BP Statistical Review of World Energy 2018. 6

62

3  Energy Balance in the Second Decade of the Twenty-First Century 2007

2010

2015

2017

2809.5

2720.7

2739.7

2772.8

587.0

632.5

701.1

700.6

2041.7

2001.1

1908.7

1969.5

Total CIS

989.8

967.8

960.7

978.0

Total Middle East

618.2

714.3

848.3

897.2

Total Africa

346.9

386.9

429.4

449.5

4195.2

4696.1

5472.4

5743.6

11588.4

12119.4

13060.2

13511.2

OECD

5693.9

5574.9

5494.6

5605.0

Non-OECD

5894.5

6544.6

7565.6

7906.1

EU

1823.9

1774.7

1649.2

1689.2

Total North America Total S. & Cent. America Total Europe

Total Asia Pacific Total World of which:

Fig. 3.17  Consumption of primary energy (Mtoe) Compiled by author on the basis of BP Statistical Review of World Energy 2018, p. 8

consumption of non-petroleum additives and substitute fuels, and unavoidable disparities in the definition, measurement or conversion of oil supply and demand data It follows from the above that both global oil demand and supply are now close to new, historically significant records of 100 mb/d in 2018. At the same time, there is no indication of a slowdown in growth in the near future. Supply growth projections proved to be strongly overstated. In fact, production increased, owing to the U.S. shale revolution supported by big growth in Brazil, Canada and other countries. In the future, other potential suppliers may come into play on the oil market, meaning Iran, Iraq, Libya, Nigeria and Venezuela, assuming that their problems and challenges of a very complex nature can be overcome. Petrochemicals are the largest driver of global oil consumption. In a new IEA study The Future of Petrochemicals (Oil Market Reports 2018), the Agency report points out that the raising standards of living, particularly in developing countries, are already contributing to a significant increase in demand for plastics which will continue for many years. As IEA estimates, coal-fired power generation capacity has grown by nearly 900 gigawatts (GW); however, only 400 GW will be added from today to 2040. Many of these additions will come from the plants already under construction (Czy światu 2018). Recently, international environmental organizations (the Sierra Club, Greenpeace, and CoalSwarm) in the report titled Boom and Bust 2018. Tracking the Global Coal

63

3.3  Current Energy Consumption in billion cubic meters

in million tons of oil equivalent

2007

2012

2017

2007

2012

2017

Total North America

772.1

854.6

942.8

663.9

734.8

810.7

Total S. & Cent. America

143.1

162.2

173.4

123.0

139.4

149.1

Total Europe

550.7

512.3

531.7

473.5

440.5

457.2

Total CIS

609.9

600.5

574.6

524.4

516.3

494.1

Total Middle East

315.8

417.6

536.5

271.5

359.1

461.3

94.6

116.2

141.8

81.3

99.9

121.9

472.0

663.6

769.6

405.8

570.6

661.8

2958.0

3327.1

3670.4

2543.4

2860.8

3156.0

OECD

1465.2

1564.1

1677.6

1259.9

1344.9

1442.5

Non-OECD

1492.8

1763.0

1992.8

1283.6

1515.9

1713.5

505.4

457.9

466.8

434.6

393.7

401.4

Total Africa Total Asia Pacific Total World of which:

EU

Fig. 3.18  Natural gas: Consumption in billion cubic metersa and in million tons of oil equivalentb Compiled by author on the basis of BP Statistical Review of World Energy 2018, pp. 29, 31 a Excludes natural gas converted to liquid fuels but includes derivatives of coal as well as natural gas consumed in gas-to-lquids transformation. In addition, as far as possible, the data above represents standard cubic metres (measured at 15 °C and 1013 mbar) as they are derived directly from tonnes of oil equivalent using an average conversion factor and have been standardized using a gross calorific value (GCV) of 40 MJ/m3 b Excludes gas flared or recycled. Includes natural gas produced for gas-to-liquids transformation

Plant Pipeline (Shearer et al. 2018) presented data on the future consumption of coal. The report shows that in 2017 alone, global investment in new coal-fired power plants declined by 29% compared to 2016, and as much as by 73% compared to 2015. The number of new coal blocks and planned projects is much lower. And there is more: the report authors claim that in 2022 the number of existing coal plants being phased out will exceed that of those under construction, despite the ever-increasing energy demand. At the same time, however, after several years of steady decline, the coal market experienced a revival in 2017, with both global consumption and production increasing. Global coal consumption rose by 1% (25 mtoe), with India (4.8%, 18 Mtoe) recording the fastest growth, as demand both inside and outside of the power sector increased. After 3  years of decline, China’s coal consumption also rose (0.5%, 4 Mtoe).

64

3  Energy Balance in the Second Decade of the Twenty-First Century barrels per day

million tons

2007

2012

2017

2007

2012

2017

25111

22915

24219

1170.1

1059.2

1108.6

5742

6742

6794

273.9

320.7

318.8

16356

14443

14980

804.8

710.5

731.2

Total CIS

3844

4206

4282

186.4

202.6

203.4

Total Middle East

6970

8595

9290

330.7

408.3

420.0

Total Africa

3040

3569

4047

148.6

181.5

196.3

Total Asia Pacific

26041

30038

34574

1253.3

1442.9

1643.4

Total World of which:

87105

90509

98186

4167.8

4304.9

46221.9

OECD

49744

45600

47033

2366.8

2160.0

2206.8

Non-OECD

37361

44908

51152

1801.0

2144.9

2415.1

EU

14868

12977

13211

732.5

639.4

645.4

Total North America Total S. & Cent. America Total Europe

Fig. 3.19  Oil: Consumption in thousands of barrels per day and in million tons oil of equivalent Compiled by author on the basis of BP Statistical Review of World Energy 2018, pp. 15, 17

In general, global power generation increased by 2.8% and came close to its 10-year average. Almost all that growth came from the developing world (94%). It should be noted that energy from renewable sources accounted for almost one half of growth in power generation (49%) whereas most of the remainder came from coal (44%). Moreover, the share of renewables in global energy production increased from 7.4% to 8.4%.7 It is the Renewable Energy Sources (RES) that are to be the driving force behind the investments in energy, owing in part to the decreasing cost of clean technologies.

 As regards key materials for energy, “Cobalt production has grown by only 0.9% per annum since 2010, while Lithium production has increased by 6.8% p.a. over the same period. Cobalt prices more than doubled in 2017, while Lithium carbonate prices increased by 37%.” BP Statistical Review of World Energy, June 2018, https://www.bp.com/content/dam/bp/en/corporate/pdf/ energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf. Retrieved December 8, 2018. 7

Bibliography

65

Bibliography BP Statistical Review of World Energy, June 2008. Retrieved from www.bp.com BP Statistical Review of World Energy, June 2018. Retrieved December 8, 2018 from https:// www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review/bp-statsreview-2018-full-report.pdf Cziomer E, Lasoń M (2008) Podstawowe pojęcia i zakres bezpieczeństwa międzynarodowego i energetycznego. In: Cziomer E (ed) Międzynarodowe Bezpieczeństwo Energetyczne w XXI Wieku. Krakowskie Towarzystwo Edukacyjne – Oficyna Wydawnicza AFM, Kraków Czy światu wystarczy energii? (2018, April 19). Rzeczpospolita. Retrieved May 23, 2018 from https://www.rp.pl/Nauka/304199905-Czy-swiatu-wystarczy-energii.html European Union (2018) EU energy in figures: statistical pocketbook 2018. Publications Office of the European Union, Luxembourg. Retrieved December 11, 2018 from https://publications. europa.eu/pl/publication-detail/-/publication/99fc30eb-c06d-11e8-9893-01aa75ed71a1 Ias, „Kommiersant”, www.gazeta.pl. 31.01.2007 IEA Key World Energy Statistics. Retrieved October 28, 2018 from https://www.iea.org/statistics/ kwes/supply/ IEA World Energy Balances. Retrieved October 28, 2018 from https://www.iea.org/statistics/?co untry=WORLD&year=2016&category=Key%20indicators&indicator=TPESbySource&mode =chart&categoryBrowse=false&dataTable=BALANCES&showDataTable=true Łoskot A, Paszyc E, Sarna A, Wiśniewska I, Paczyński W (2003) Kłopotliwe bogactwo – sytuacja i perspektywy sektorów ropy i gazu na obszarze byłego ZSRR. Prace OSW. Ośrodek Studiów Wschodnich, Warszawa Oil Market Reports, Highlights (12 October 2018). Retrieved November 30, 2018 from https:// www.iea.org/oilmarketreport/omrpublic/ Shearer Ch, Mathew-Shah N, Myllyvirta L, Yu A, Nace T (2018) Boom & Bust 2018: tracking the global coal plant pipeline. CoalSwarm, Greenpeace, Sierra Club. Retrieved December 21, 2018 from https://endcoal.org/wp-content/uploads/2018/03/BoomAndBust_2018_r4.pdf Schultz S (2005, December 28) Calls made to strengthen state energy policies. The Country Today, pp. 1A, 2A Wrona J  (2006) Podstawy geografii ekonomicznej: Praca zbiorowa. Polskie Wydawnictwo Ekonomiczne, Warszawa

Chapter 4

Energy Policy of the European Union in the Twenty-First Century

Abstract  The security of electricity, natural gas and crude oil supply in the EU countries is regulated by a number of EU legal acts. However, taking into account many aspects: historical, business, geopolitical, legal, and even emotional, it should be remembered that it is still important to establish a framework for cooperation between the activities of the European Community and those of other countries, in particular the Russian Federation, all the more so as if we had remained with the solutions from the early twenty-first century, in 20–30 years the EU’s dependence on energy imports would have increased to 70%. Ensuring energy security is becoming one of the most important priorities in this situation. Keywords  Sources of energy supply · EU energy mix · European energy market · Climate policy

4.1  E  uropean Energy Market: Economic and Political Conditions in the First Decade There have been long periods when oil prices have been falling in the last few decades, for example, 1957–1967 and 1982–1986. In 1998, oil prices had fallen to the lowest level since the end of WWII and then started to increase again or even to gallop towards the end of the first decade of the twenty-first century. In 2006, the cost of producing a barrel of oil ranged from USD 4 in Africa to 6.8 in the U.S. and 8.3  in Canada. To the cost directly related to oil extraction the expenditures for prospecting and explorations as well as development should be added, whether in the Middle East or off Alaska’s coast. This shows the generated profit range with the price of oil at USD 100 per barrel1 split among: States  – the owners of natural resources, oil production companies, governments levying taxes on oil corpora In 2007, ExxonMobil posted a profit of USD 40.6 billion. The company distributed USD 35.6 billion to shareholders (dividend payments, share buybacks). Investment in production amounted to USD 15.7 billion. In that same period, Royal Dutch Shell’s profit was USD 31.9 and BP’s USD 21.1 billion. All data after Gadomski 2008. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_4

67

68

4  Energy Policy of the European Union in the Twenty-First Century

tions’ profits, traders and banks facilitating transactions. Hence the next wave of oil price hikes2 followed by a sharp correction was the most discussed phenomenon in the first seven months of 2008. Prices of not only crude oil and energy raw materials but also of the so-called “soft commodities” (food and feed) were first sharply rising and then falling dramatically. Even if the allegations of a crucial impact of speculation on the prices of commodities (mainly oil) are assumed to be true, with a change in market sentiment we witnessed dynamic changes in the opposite direction. Such situation had definite consequences for the countries which in their 2009 budget provisioned an average oil price of no less than USD 80 per barrel.3 Due to the drop in demand in Asia caused by the deepening recession, on December 23, 2008 crude oil was getting cheaper in the market. In November 2008, Japan’s imports and fuel demand in South Korea slumped. Even with planned by OPEC deeper supply cuts by 4 million barrels a day as of January 1, 2009, further drop in production could not be ruled out. This took place when on December 23, 2008, a barrel of West Texas Intermediate (WTI) – light, sweet crude oil fell in electronic trade on NYMEX in New York by 86 cents or 2.2% to USD 39.05.4 Thus, oil prices fell in the U.S. by 73% of the record high at USD 147.27 a barrel on July 11, 2008. On January 7, 2009, the Brent oil price,5 on the London market stood at USD 47 a barrel,6 almost 50% more than half of the price in mid-December 2008.7 The gas also traded higher on energy exchanges. In Germany, its price with the following day delivery jumped to USD 350 per 1000 m3. However, given the fact that four-­ fifths of gas consumed in this country was secured under long-term contracts,8 it did not have significant impact on energy prices in Germany. As natural gas prices adjust to oil prices with a six or nine month delay, there was also a drop in the price of Russian gas in Europe. It was important since according to analysts in Moscow, Russian gas was the most expensive in Europe in December  The USD 100 per barrel of oil was exceeded in April 2008, in May it was already 30% higher, and on 11 July 2008 the barrel of the Brent crude was paid USD 147.27 per barrel. 3  Russia’s Prime Minister Vladimir Putin said that the country would survive the oil price of USD 70 per barrel. However, Russia estimated its budget allocations based on an average crude oil price of USD 120 a barrel; Walewska 2008. 4  Compare www.gospodarka.gazeta.pl/gospodarka, December 23, 2008. Brent Blend is also called Brent Oil, Brent Crude and London Brent. 5  Brent Blend comes from the U.K. and Norwegian sectors of the North Sea – “Brent” actually refers to oil from four different fields in the North Sea. BRENT type is relatively sweet and light crude (API: 38.06 degrees, sulfur content of 0.37%). Its properties make it easy to refine. Brent’s daily production accounts for about 1% of the global daily output but still is one of the most important benchmarks for world oil market and two-thirds of all crude contracts around the world reference Brent for much of the world’s oil trading from the Mediterranean Sea basin, Africa, Australia and some Asian countries. 6  Data after Goldman Sachs, Interfax, AFP, 2009. 7  Having no access to Russian gas, Hungary, Romania and Bulgaria instead of gas started using crude oil products as the main fuel for power generation. 8  Usually, long-term contract prices are about one third higher than on the spot market. 2

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2008. And because oil prices had fallen in the second half of 2008, in early 2009 prices began to decrease – from the range of USD 400 to USD 500 per 1000 m3 to around USD 200 (Goldman Sachs 2009); actually, gas traded on NYMEX exchange was below USD 200 per 1000 m3 in January 2009. Clearly, the recession in Europe and a serious economic crisis in Ukraine drove the demand for energy raw materials down. Prices of oil and gas followed the decline. The downturn was particularly pronounced in the Western Hemisphere, where the Americans offset the natural gas shortage with liquefied gas (LPG) imports the prices of which fell following a reduction in natural gas prices in Europe. According to the data from the Russian Ministry of Energy (Wiedomosti 2009), from January 1 to March 15, 2009 Gazprom exported to the ‘far abroad’ countries 24 billion m3 of gas over the same period of 2008. Sales of gas to these countries amounted to 40 billion m3 which meant reduction in exports by about 40%. Gazprom production output also dropped and from January 1 to March 15, 2009, the production compared to the same period last year declined by about 21%. Interestingly, the usage of gas from Gazprom underground storage tanks decreased in comparison to the same period of 2008. Analysts pointed out that this situation would adversely affect Gazprom financial planning. In December 2008, the gas giant projected that revenue from gas sales in 2009 would amount to RUB 2.4 trillion while the maximum level of sales would be reached in the first quarter – about RUB 768 billion. The estimates of exports to the ‘far abroad’ in the first quarter of 2009 were expected to have reached 43.6 billion m3 which translated into RUB 530 billion in revenues. According to revised forecasts, Gazprom exports in the discussed period amounted to 29 billion m3, i.e. a reduction of about 33% compared to planned sales. Given this level of export, Gazprom revenues amounted to RUB 670–685 billion in the first quarter of 2009 and were lower than planned by 11–15%, whereas in comparison with data from the first quarter of 2008, the holding’s revenues decreased by 4–6%. According to Gazprom experts, the drop in exports reflected European buyers’ severe cuts in purchases of the expensive gas from Russia. However, throughout 2009, the demand for blue fuel leveled off due to the increased need to replenish gas supplies in underground storage facilities. It is worth recalling that the EU imported more than half of the energy and fuels it consumed. In the case of gas, this dependence on imports was even greater and reached 63%, with Russia by far the largest supplier. Such a model of energy policy is expensive (on average at a cost of EUR 700 per every EU citizen annually) and dangerous. As many as eight EU member states relied on a single supplier for 100% of their gas needs (Słojewska 2008). Moreover, when it comes to gas supplies, the Iron Curtain still seemed to cut Europe in two. In the West, markets are large but diversified. In Eastern and Central Europe, the markets were smaller but much more dependent on Russia. The extreme variations throughout Europe were a main reason behind the EC efforts to integrate energy markets. Therefore The Financial Times’ statement came as no surprise when it said that EU’s biggest problem was its fragmented gas market which gave Russia upper hand in playing European partners (Financial Times 2008).

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In these circumstances, energy experts emphasize the desirability of a single European gas pipeline system by linking already existing ones and expanding the network by adding new sections. Thus, in the case of an enduring supply disruption, mutual assistance between member states would be possible. Greek and Italian plans fit the scenario to reduce Southern Europe’s dependence on Russian gas imports. However, Turkey–Greece–Italy (TGI), the countries interested in building the pipeline to transport natural gas from Azerbaijan have divergent interests. At issue here is Turkey’s position attempting to use the pipeline as a leverage to accelerate Turkey’s EU accession process and strengthen its position in the regional energy market (Niezawisimaja 2009). The Azerbaijani side disagreed, which resulted in the suspension of negotiations on a four-party intergovernmental agreement (Greece, Turkey, Italy, Azerbaijan) and prevented signing a transit agreement by the gas companies involved in the project. It is undeniable that the real beneficiary has been the Russian Federation. Gazprom reached a deal on the construction of the land-based part of the Turkish Stream branch which will run across Turkey to the Turkish-European border with one of the EU countries.9 Greece, whose gas consumption reached ca. 4.3 billion m3 (70% of which came from Russia) declared it would reduce its dependence on Gazprom gas to 45% in the coming years. The implementation of TGI will play key role in the diversification of natural gas supplies for that country. Italy is also interested in cooperation with Azerbaijan on gas deliveries. Italy has supported building Baku–Tbilisi–Erzurum pipeline (BTE) and declared that the project is of primary importance to Italy. The Russian alternative “South Stream” has been deemed of secondary importance. In turn, Spanish petroleum company and the National Energy Commission (Comisión Nacional de Energía – CNE) urged for stepping up efforts to accelerate the creation of a gas link between France and Spain in order to offset the spending of EUR 900 million on the construction of the Medgaz gas pipeline linking Algeria and Spain across the Mediterranean Sea, inaugurated on 1 March 2011.10 It has contributed to improve energy interconnections between North and South of Europe. The European Investment Bank (EIB) has considered Medgaz pipeline a strategic project enhancing the stability of Europe’s energy market.

 As reported by Kommiersant and Wiedomosti, on May 28, 2018, the Turkish Stream gas pipeline project (Turkish Stream) involves laying two strings of pipeline along the bottom of the Black Sea with annual capacity of 15.75 billion cubic meters. At the end of April 2019, Gazprom announced the completion of construction of the sea section of the first string, which will deliver gas to meet Turkey’s internal consumption. Russia intends to dedicate the second string for deliveries of gas supplies to the southern EU countries, among others to Greece, Bulgaria and Italy. 10  One should bear in mind that the key driver of the Medgaz project was the idea of linking it with France to strengthen energy security of not only the countries across which the pipeline runs but the whole Europe. The pipeline begins in the Hassi R’Mel gas field in Algeria and its first section runs to the port of Beni Saf. The offshore section begins in Beni Saf and the landfall site is at the Perdigal Beach in the coast of Almería, Spain, where it connects to the existing Almería-Albacete gas pipeline. 9

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The gas pipeline project connecting Norway to Sweden and Denmark, i.e. the Skanled project, which was to be completed by 2012, was suspended in 2009 due to: “increased commercial risk combined with the global economic developments that have given an uncertain view on future gas demand” (Skandled Project Group 2009). It should be remembered that prior to 2005, outside of the EU natural gas had become an instrument for political maneuvering and political games. The transit of gas kept filling filled states’ coffers in Ukraine, Belarus and Moldova. Their own natural gas demand and dependence on transit revenues tied them to Russia more and more. There was less chance for alternative solutions and gas profits were becoming increasingly important of which a good example is Belarus’s balancing act between the EU and Russia. Paradoxically, Ukraine remained unaffected for many years although four-fifths of Russian gas supplies to Europe were transported through the territory of Ukraine and any sudden change of the situation seemed unlikely. Given the growing EU gas demand, Russia may not be able to give up transiting gas through Ukraine even with the construction of both offshore gas pipelines. At the same time, their construction, with a decline in corporate investment, may add to the pressure on Russia’s government budget and drain its reserve fund. Simultaneously, the debate on the advisability of building additional pipelines to Europe keeps continuing in Russia, while most of the existing energy infrastructure is in urgent need of modernization. Growing exports without proper investment in development of new reserves and technologies that reduce the energy intensity of the economy may lead to Russia’s domestic gas shortages. In the meantime, however, it seems that there’s no way around dependency on Russian gas. Unfortunately, it appears that the former Slovak Prime Minister Robert Fico may be right pointing out that in view of the recent gas crisis there is not much of a chance for reducing European dependence on imported Russian gas in the foreseeable future. Fico even claims that Europe’s dependence on Russian gas will only increase with the growing energy demand. In his view, gas imported from Norway or any other countries will never replace supplies from Russia. The only way to prevent another crisis, according to R. Fico, is the rapid construction of additional gas pipelines linking North and South. In this way, it would also be possible to offset gas shortages by using other delivery systems. “To think that this could be a way of breaking away from dependence on Russia in the coming years is pure fantasy” (Die Presse 2009). It is probably so, especially given the fact that numerous problems and recurring crises of gas supply in the long run, unfortunately, expose the weaknesses and limitations of the EU’s common foreign policy. The EU, as the biggest consumer of Russian natural gas, does not have at its disposal any instruments to bring political pressure on Moscow to take into account EU’s wishes. EU’s rhetoric is reduced merely to empty words as the organization is not strong enough to take action. The main reason is that relations with Russia fall under the scope of an exclusive competence of foreign policy and an implementation of the decisions made lacks any competent central institutions. All Member States – from small to large countries –

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fiercely defend the right to make their own decisions. Obviously, Russia is included in almost all important foreign policy calculations of every EU Member State. The Member States’ views expressed in their capitals unfortunately often diverge ­considerably. This is also true in the case of energy policy which at the Union level is actually also non-existent. Unfortunately, energy issues in relations between countries to a great extent remain in the shadow of foreign policy. The ongoing internal conflict within the EU over the division of powers between the EC and the Member States together with the fragmentation of the EU energy markets do not improve the situation in the least. In the EU Member States, private companies are gas providers which owing to the intensive competition cannot be expected to divulge information on the prices or other sensitive issues. There is no question that Moscow will demand more and more. In the event that the EU still fails to take all necessary steps, the January 2006 and 2009 crises will be repeated. From the EU point of view, besides political calculations, there would seem to be a moral dimension of this situation. There would be no supply without demand and all the problems which go along with that. One of the reasons why the undemocratic and unfriendly regime in Russia still feels certain about maintaining its grip on power is the very same billions of dollars that the EU Members spend on gas and oil imports. Transit revenues bolster and support Alexander Lukashenko’s anachronistic autocracy in Belarus and “feed” corruption in Ukraine. After all, to some extent, also the EU bears responsibility for financing despotic dictatorships in Central Asia. It calls for serious steps and all Member States agree that the Union must play “hard ball” in negotiations with Russia. However, they all have divergent opinions on what it means. It is almost certain that the EU will again try to encourage good behavior from Russia. However, it is also certain that once an agreement has been reached with the Union, Russia will cherry peak what is most favorable to the Russian side. The key test will be Russia’s implementing its WTO commitments and Russia’s treatment of its neighbors.11 As for the Russia-Ukraine gas dispute, we should have no illusions that it is anything different that business as usual, or getting the best deal on gas process and transit.12 I believe that had it been “just about a compromise,” the agreement would have been reached a long time ago. Without doubt, Ukraine wanted to pay as little as possible for the Russian gas and earn as much profit as possible from transiting gas, and above all, retain control over its gas transit system, alongside with winning over the EU Member States to its cause. Russia’s primary objective was to humiliate Ukraine and its President to pave way to power for the pro-Russian Party of Regions as well as to portray Ukraine as an unstable and unreliable partner for the EU. After all, the not so old gas dispute for the first time in its history has brought the EU into one of the most serious direct confrontations of strategic importance. “The confrontation was somewhat covert and not much publicized. The question is if the EU was a target of a random or rather premeditated hit? In other words – whether

11 12

 More on the subject in Czarny 2009.  Quite contrary perception of the events was presented in De Volkskrant, January 05, 2009.

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losses suffered by the EU Member States due to gas cut-offs have been mere collateral damage of the Russia-Ukraine skirmishes or a result of a willful operation intentionally and deliberately aimed at the cohesion and integrity” (Koziej 2009). All that happened in the Russia-Ukraine-EU triangle could hardly be considered accidental or attributed to no control over the situation. It may rather lead to a presumption that the Russian leadership during the conflict with Ukraine decided to verify the coherence of the EU response, its solidarity and possible vulnerability to gas blackmail. It is in the economic interests of Gazprom to cause a small deficit in gas supplies in the European market while controlling gas transit infrastructure. A game theory can be applied to explain the deficit: it must be high enough to charge profit-­ maximizing prices; at the same time it must be kept in check in order to jeopardize economic viability of constructing infrastructure for alternative gas supplies or making investments in alternative energy sources. A side effect of this situation is the political pressure which Russia may exert through Gazprom on individual countries within the European Union. Gas shortages will lead to a competition with one another to secure supply of gas. In addition to the afore-mentioned strategy of price maximizing mechanism, Russia will be able to favor or disfavor some countries. The cost of goods is strongly affected by the price of energy carrier like natural gas. Gazprom’s differential pricing strategy will allow it to have the power to impact competitive positions of the EU economies. Given many gas transmission options, differential pricing according to Gazprom can be easily justified on economic grounds such as varying delivery transmission routes. Moreover, high gas pricing, for obvious reasons, favors the richer countries. This, combined with the gas deficit, as experience shows, could result and already has resulted in a rift between the wealthier and poorer EU countries, i.e. the so-­ called old and new member states. And that exactly is, after all, Russia’s strategic objective: to undermine European energy solidarity so that it becomes just a fairy tale.

4.2  The European Union and Energy Supply Problems In the meantime, the European Commission remains hopeful to introduce a common energy policy, with a framework providing more diversity but also more harmonization (Czech 2012, pp. 251–262), in a spirit of solidarity, between Member States who depend on Russian gas supplies to varying extents. The European Commission places its hopes on new suppliers of gas from the Caspian Basin and the Middle East, the expansion of the liquefied petroleum gas (LPG) storage so that it could be at the disposal of EU Member States. The EU is also increasingly looking to liquefied natural gas. Several governments in Europe consider this method of transporting natural gas from different regions of the world as one of the future solutions. At the same time, it is fairly obvious that it is most economically viable alternative for the coastal States.

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The EU is also committed to developing gas interconnections across Europe. According to the expert, Pierre Noel (European Council on Foreign Relations), the most effective way for the EU to counter Russian attempts to divide Member States is to restructure its internal gas market, making it much more difficult for Russia to advance its political interests (Les Echos 2009). At the same time Europe, mindful of the negative experiences of recent years, remains committed to finding solutions to reduce Europe’s dependency on Russian gas. It could, however, prove even more effective should it decide to proceed with implementation of a real gas market in Europe. Although each year the EU becomes a hostage to Russian gas blackmail, it becomes less dependent on it. Back in 1990, Russian gas accounted for 80% of European gas imports. In 2008, it was below 40% because since 1990 a significant part of supplies have been coming from Norway, Algeria and Nigeria. The review of estimated natural gas consumption in Europe for 2005–2020 indicates that with a significant decline in the own EU-27 gas production (by 43%), gas imports are set to double – in 2005, indigenous productions amounted to 247.5 billion m3 and imports to 267.2 billion m3; in 2020, respectively, to 140.0 and 510 billion m3 (Strobl 2007). It is worth noting that already 15  years ago individual countries imported the blue fuel from various places. For example, Germany bought 90.7 billion m3 from 6 countries: Denmark (2.28 billion m3), the Netherlands (21.3 billion m3), Norway (26.3 billion m3), Great Britain (3.08 billion m3), Russia (36.54 billion m3) and Ukraine (1.2 billion m3). Italy’s purchase of 70.99 billion m3 of gas from external sources had even more diversified import mix than Germany with 7 different suppliers (no country had more). The external supply to the Italian gas market included 2.5 billion m3 from Germany, 8 billion m3 from the Netherlands, 6.9 billion m3 from Norway , 0.54 billion m3 from Great Britain , 23.33 billion m3 from Russia, 25.23 billion m3 from Algeria and 4.99 billion m3 from Libya. To balance its gas needs, France had to import only half of what the Italian economy needed. France’s main suppliers for imported natural gas (the total of 36.2 billion m3) were Belgium (1.9 billion m3), Germany (0.1 billion m3), the Netherlands (8.3 billion m3), Norway (14.2 billion m3), Great Britain (0.2 billion m3) and Russia (11.5 billion m3). Turkey, whose import demand at the time stood at 22.15 billion m3, had only two suppliers: Russia (17.83 billion m3) and Iran (4.32 billion m3). Belgium purchased its gas from Germany (1.2 billion m3), the Netherlands (7.95 billion m3), Norway (8.5 billion m3), Great Britain (0.97 billion m3) and Russia (0.3 billion m3). Holland imported gas from Denmark (2.13 billion m3), Germany (4.5 billion m3), Norway (6.16 billion m3), Great Britain (1.82 billion m3) and Russia (2.97 billion m3). Great Britain bought its gas from Belgium (1.8 billion m3), Germany (1 billion m3), the Netherlands (0.3 billion m3) and Norway (11.55 billion m3). Spain, like Turkey, contracted gas only from two suppliers: Norway (2.1 billion m3) and Algeria (9.49 billion m3). Hungary, in turn, bought its gas from Germany (0.83 billion m3), Russia (8.32 billion m3), Ukraine (0.3 mld m3) and, as was the case with Poland, 1.37 billion m3 came from the so-called Eurasian countries (BP Statistical Review 2005).

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The above breakdown can lead to the conclusion that in reality there is no ideal method to secure individual countries’ gas requirements. Furthermore, it shows that the ‘old’ EU member states are characterized by mutual cooperation and a cross-­ border trade of gas as an energy resource. For instance, Germany has been not only a major importer of natural gas but also its exporter selling abroad over 15 billion m3. It is hardly surprising if we recall that Germany was Gazprom’s main partner at that time. Furthermore, Russian gas encountered there favorable economic situation as the SPD/Greens coalition government pushed for shutting down all 17 nuclear power plants by 2022 which meant building new power plants. In particular, this would involve constructing natural gas–fired power plants. The EU CO2 emission reduction strategy by 2020 makes the coal, which Germany has in abundance, much less attractive than natural gas (Kublik et al. 2009). An interesting element of the “gas puzzle,” indicating a growing trend in the bundling of energy production and transmission networks, is the current Kazakhstan’s position. Kazakh authorities intensified pressure on their partners to gain full control over its gas transmission networks to customers in the global market. It is precisely Kazakhstan, Turkmenistan and Azerbaijan which are endowed with abundant energy resources and therefore seen in the EU as interesting of not exceptionally promising gas suppliers. It is hardly surprising, given that on earlier occasions these countries had already expressed their interest in and willingness to participate in the EU projects without the involvement of Russia. It is therefore concluded that today the EU must, first and foremost, ensure security and diversity of gas supply from various sources. A clear example here is the United Kingdom’s energy policy which has already implemented its diversification strategy and made further investment in its own and Norwegian gas industry: construction of liquefied natural gas (LNG) terminals and building new gas interconnections all over the European continent. It seems that such a national energy strategy is highly desirable and appears to be necessary. At the same time it should be kept in mind, however, that irrespective of the willingness and potential capability to adapt the British model by other countries, due to a set of mutual interests, the EU and Russia are in a way forced to cooperate in spite of several problems on both sides. While the EU would wish to base its mutual relations with Russia on the provisions of the existing Partnership and Cooperation Agreement (PCA), including respect for democratic principles, human rights and market economy, Russia seems to be moving away from those European values. Russia does not identify with the principle of negotiation and compromise between partners which underlies the success of the EU. In addition, Russia refuses to take EU’s opinion seriously when problems arise in its relations with individual EU members. Furthermore, it is quite clear that there are diverging points of view on events taking place in Russia among EU member states, including ways of how to deal with them. For these reasons, bilateral relations with Russia take priority

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over relations between Brussels and Moscow. Another reason Russia prevails over the EU is that the former has much better defined goals.13 Russia is not a member of the European Union but it is considered a part of Europe. Thus, according to V. Putin, there is nothing wrong with its return to imperial grandeur and creating its own system. The policy of alliances is very simple in this case: it is not about words but rather specific dependencies, e.g. deliveries of Russian gas that give rise to dependency ties between countries. Europe, according to the Russian side, is a natural gas pipeline network, defined by the spheres of political influence and mutual interdependencies. The European Union acknowledges these interdependencies on annual basis, whenever the gas stops flowing. In reality, however, the transmission infrastructure symbolizes an error in the institutional design of the EU, and poses a potential threat to its stability, or in the future perhaps even to peace on the European continent. V. Putin does not want to see the monolith such as the EU to be on the side of Russian gas customer countries as it would weaken Moscow’s position. It needs a highly fragmented gas supply system whose sole purpose is transmission. Ever since Russians purchased transmission infrastructures in Serbia, the Balkan countries have been heavily affected by the “iron embrace.” When Russia entered into an agreement with Germany for the construction of the Nord Stream 2 pipeline, Poland, the Baltic States and Ukraine felt threatened by isolation and increasing dependence on their eastern neighbor. The risk of blackmail aimed at smaller Central European States is quite real. If the EU Member States decide to confront the monopolistic position of Gazprom as the sole exporter of Russian natural gas which holds exclusive rights on gas pipeline exports from Russia in Russia’s own markets, they should not stop only at liberalization of their internal markets. The drawback of this approach is that one-­ way liberalization of the EU gas markets without any deregulation of gas exploration and production industry in Russia can result in an asymmetric relationship between the monopolistic supplier and customers competing with each other due to their gas deficits. It has acquired even more relevance when fluctuations in prices for energy carriers, conflicts and frictions over the direction of supply flow, political pressure and pipeline disputes could in fact be seen as a direct consequence of a completely new qualitative situation connected with the soaring demand for energy as a result of dynamic global economic growth. A clear example is the transmission of natural gas where potential conflicts are subsequently the outcome of four strategies: those of superpowers, exporters, importers and transit countries. As P. Błoński (2007) quite rightly points out: “Control over energy sources and their delivery routes is very much part of the global political game. For exporters, it is about guaranteed profit by controlling the gas market, diversification of sales markets and securing gas transmission routes. The third concern addresses transit countries which seek to boost their energy security by capitalizing on their geographic location. The fourth category covers the countries that import and consume energy whose main concern is the stability of gas supplies and reduction of its cost. Russia

13

 More on the subject in Czarny 2009, pp. 43–58.

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happens to be in a special position as it is aiming to develop three out of four strategies: as a superpower, an exporter and a transit country of oil and gas for the Caspian Sea region while at the same time being envious of the southern neighbors and former Soviet republics abundance of energy resources.” In this context, it should be underlined that Russian fuel and energy sector constitutes an important element strengthening Russia’s international position. Collaborating with Russia is far from easy, especially given that energy cooperation is determined by four factors. The first one is the diverging approaches to tackling energy issues. Strong centralization is the corner stone of present-day Russia energy security: vertical integration and monopoly of power. In the Soviet times, a main driver of economic growth was the defense industry, whereas nowadays it is the energy sector.14 The EU, for its part, sees adopting an effective regulatory policy (without differentiating between internal and external actors), diversification of energy sources, its suppliers and transmission routes as key drivers of energy security. The second factor is to increase demand along with a widening supply deficit. To further deepen the imbalance, Russia actively seeks to restrict and weaken the position of independent players on both the internal and external markets. However, experts claim that without a substantive restructuring and liberalization of the market, Russia may not be able to achieve the task of and meet the challenge of increasing gas deliveries both to external and internal markets.15 The third factor is the aggressive rather than pro-investment oriented policy of the state-controlled gas sector geared towards offsetting gas deficit growth in Russia but not to combat this phenomenon. Gazprom is taking over gas export infrastructure and foreign companies but at the same time hunts for alternative supply resources in other regions of the world. Finally, the geo-economics of near abroad is the last factor. Historical connections among ruling elites, cultural similarities in the institutional management and governance as well as mutual interdependencies contribute to Russia’s ability to use geopolitical concessions, compromises and subsidies to limit the national sovereignty of the neighboring countries. Since this policy has proved effective in the past, it is hard to resist temptation to employ it today. It is most apparent in Ukraine, Lithuania and Poland. For countries of this region, it certainly is a cause for serious concern. That is all the more so as the worst case scenario on energy security cannot be ruled out, particularly in Central and Eastern Europe.16 Moreover, unlike Western European countries which had not been affected by gas supply interruptions and shortages until the end of 2008, Central Europe has experienced them and therefore is much less optimistic about the future. Russia has been using energy resources as a powerful weapon to bring pressure on the neighboring countries and promote its  More on the subject in Młynarski 2011, pp. 133–216.  Russia needs annually some USD 11 billion for the development of new gas deposits. 16  “During a harsh winter, there might be a reduction of Russian gas supplies to tens of millions of people in the countries that had recently joined the EU. I believe such a scenario is not beyond the realm of possibility,” as I stated in 2007. See Czarny 2008, p. 73. 14 15

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foreign policy goals. Furthermore, this is not the first time that Russia used it as a foreign policy tool as Russia has already cut off gas deliveries to the Baltic States 11 times in the 1990s.17 As a result, countries like Lithuania, Latvia, Estonia, or even Poland and Finland, were for a number of years unable to guarantee energy security by themselves. These countries would greatly benefit from an EU common energy policy which will have required considerable time, money and effort to attain. For now, the Community is not in a position to mobilize and coordinate such efforts.18 This must, for obvious reasons, give rise to a number of problems and differences in the manner the energy policy will be implemented, including relations with the largest supplier, i.e. the Russian Federation. All this is happening while the EU’s and the neighboring Eastern European States’ neighbors markets are traditional consumers of Russian and the former Soviet republics’ resources. The main areas of concern include: the lack of sufficient transparency in all aspects of the supply chain, from the exploration well to a customer, monopoly tendencies in the gas market, and restrictions in competition. The enlargement of the EU has made relations between the Community and the Russian Federation even more complex due to, among others, the energy issues. One possible way to address the problem, although in breach of EU antitrust rules, would be the creation of a strong consumers’ cartel that would be sufficiently powerful to limit the dominant position of Gazprom. Another solution could be to intensify efforts aimed at diversification of supply sources, first of all, by adding new gas pipelines and eliminating gaps in the European gas transmission network. The Community should come to recognize that the unilateral decisions of the individual Member States on occasion could be harmful to the interests of the Community as a whole. When the energy interests of the Member States are not absolutely convergent, it may well be that the single greatest threat to the EU energy security is not Russia or the situation in the Middle East but the short-sighted national interests. Europe stands a chance of succeeding only if it works together to promote its interests. A thorough examination of Russia’s actions and decisions regarding the EU indicates that in fact all these disputes so far are merely surrogates masking the real problem: Russia’s pursuit of new spheres of influence, greater power and international status. To this end, Russia cultivates an atmosphere of fear, hostility and danger together with over-exaggerated threats. On the other hand, the frequent lack of internal cohesion of the Union may be of great benefit to Russian leadership, creatively crafting a divide between European Union Member States that pursue cooperation with Russia and those who do not. Moreover, based on a cost-benefit analysis, the Russian leadership already knows perfectly well that both the cooperative and conciliatory posture of the Yeltsin era and later solidarity in the fight against  At the April NATO summit, Estonian President T. Ilves said that Russia had used the threat of reduced energy supplies more than 40 times in the last year (2007) as part of political blackmail. See Frankfurter Allgemeine Zeitung 2008. 18  See Czermińska 2016, pp. 62–73. 17

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terrorism have resulted in a number of commitments with no strategic advantage. Therefore, there came a change of course at the time when it became possible to conclude agreements more favorable to Russian interests. It should be kept in mind that the Kremlin’s self-esteem has depended on oil and gas (among others) in recent years, making Russia strong, independent19 and capable of aggressively pursuing its interests. It would be fair to ask whether the above statement regarding the leading natural gas producer20 and largest oil producer prevailing at the turn of the first and second decade of the twenty-first century is still valid today. Unfortunately, the case of Ukraine may still support the argument. As it usually happens in such moments, Russia reached for a “traditional” solution as regards the “chaotic neighbor.” As if the gas crisis was not enough, other hardline solutions have been used, including the annexation of Crimea or the hybrid war in the Donbass. When considering several aspects of the issue, historical, business, geopolitical, legal and even emotional, it should be remembered that a framework for cooperation between the European Community’s undertakings and other countries’ actions will continue to be important and needs to be established, and with the Russian Federation in particular. The question arises, however, how in this web of interconnections and political interests Central and Eastern European and other EU countries position themselves as an active stakeholder in energy policy on a global and regional scale. It is important to emphasize that the European Commission is fully aware of the risk associated with the dependence on energy supplies from third countries. It is all the more so that should we continue with arrangements available at the beginning of the twenty-first century, in the next 20–30 years the EU’s dependence on energy imports would increase to 70%. In these circumstances, ensuring energy security has become one of the key priorities. In this context, W. Skomudek (2015) quite rightly states that “the creation of a common energy market in the EU, alongside with the objectives of the security of energy supply and reduced environmental impact of energy industry, has been in recent years one of the three key priorities for this sector. The Union is firmly committed to achieving its aspirations, seeking to integrate the individual Member States’ energy markets in the both the regulatory and physical elements.” This leads to the conclusion that a common European market may be able to provide the security of energy supplies. Beneficiaries will be as many as the number of the EU Member States, although the level of economic and geopolitical advantages might vary.

 Gazprom achieved a record profit in the first half of 2008 (US$10.2 billion), but it was the result of a surge in oil and gas prices. See Gadomski 2009. 20  Russia, Iran and Qatar, which hold around 60% of the world’s gas reserves, announced in October 2008 that they would merge into the “three” gas producers. This caused concern among importers, who were afraid of creating a gas cartel modelled on OPEC. 19

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The Energy Charter Treaty is the EU’s fundamental legal act addressing energy market.21 It was signed in December 1994 and has 55 states as signatories from Europe and Asia (out of which 51 have ratified the ECT). The European Union is also a contracting Party to the Treaty. The Charter has been established to provide a multilateral framework for energy cooperation between countries that are energy resources-rich but capital-scarce, and those that are capital-abundant but poor in energy resources. Its main objectives are the protection of investment, trade and transit of energy materials and products. The major success of it is laying down rules for a foreign investor-state dispute settlement through inter-state arbitration, providing effective means for foreign investors to assert their claims against a host State. In other words, it provides unrestricted access to the energy markets of signatory States and allows exploration and exploitation of energy resources in a non-­ discriminatory manner together with freedom of oil, gas and electricity transit.22 The Treaty constitutes a good basis for developing international energy relations although the creation of the EU’s internal energy market requires the removal of barriers and obstacles to international trade, approximation and convergence of pricing and taxation policies, norms and standards as well as introduction of binding rules on security and environmental protection. The aim is to ensure efficient functioning of the energy market, characterized by fair access, a high level of consumer protection and adequate interconnections as well as generation capacity. Today, the security of supply for electricity, natural gas and oil in Community countries are governed by several EU legal acts or rules. For instance, the Directive 2005/89/EC (European Parliament 2006) sets the measures to safeguard security of electricity supply, with the aim to ensure the proper functioning of the EU internal market for electricity, an adequate level of interconnection between Member States, an adequate level of generation capacity and balance between supply and demand. In the light of the key importance of significant contribution of gas to EU energy supply in response to the Russian-Ukrainian gas crisis, the Regulation (EU) No 994/2010 was adopted, concerning measures to safeguard security of gas supply. The purpose of the Regulation was to enhance prevention and crisis response mechanisms. To assure the security of supply for crude oil, Directive 2009/119/ EC (European Council 2009) obliges Member States to maintain minimum stocks of crude oil, corresponding to the higher of the two quantities: 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. In response to concerns about gas supplies from Russia through Ukraine, the European Commission released its Energy Security Strategy in May 2014 COM/2014/0330 (European Commission 2014). The Strategy aimed to ensure  The Energy Charter Treaty summarizes the debate the European Energy Charter and develops its political declaration. The Charter was signed in Lisbon on December 17th, 1994. The Treaty was the first economic agreement whose signatories were countries of the former Soviet Union, Central and Eastern Europe as well as the members of the Organisation for Economic Co-operation and Development (OECD), with the exception of the USA, Canada, Mexico and New Zealand. On the basis of the Treaty, The Energy Charter Secretariat and Conference were established. 22  For the content of the Treaty and the Energy Charter Protocol, see ISAP. 21

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81

a stable and abundant supply of energy for European citizens and the economy. It set forth relevant measures such as increasing the energy efficiency, boosting local energy production and building missing infrastructure links to respond quickly to supply disruptions and redirect energy across the EU to where it is needed. On 8 November 2017, the Commission adopted a legislative proposal for a targeted revision of the 2009 natural gas directive  – COM/20170660 (European Parliament 2017). This was to make key provisions of the gas directive immediately applicable to cross-border gas pipelines with third countries or more specifically, to those parts of the pipelines that fall within the territory of the EU. It was to help to ensure that no current, planned and future gas infrastructure project between an EU Member State and a third country distorts the energy single market or weakens security of supply in the EU. In its communication entitled ‘A Budget for Europe 2020’ (COM/2011/0500), the Commission put forward a new mechanism, the Connecting Europe Facility (CEF) for funding priority projects in the field of energy, transport and critical digital infrastructure from 2014 to 2020. In November 2013, Parliament endorsed the deal reached with the Council on the budget for the CEF, with EUR 5.12 billion earmarked for the development of trans-European energy infrastructure projects – P7_TA/2013/0463 (European Parliament 2013a). Several projects of common interest were selected for EU support, based on the energy infrastructure guidelines endorsed in March 2013 by the Council and Parliament  – P7_TA/2013/0061 (European Parliament 2013b). Last but not least important in this respect are major resolutions of the European Parliament. Among the most recent and important resolutions the following should be mentioned: –– 12 September 2017: new rules were adopted to allow neighboring countries to help each other to manage gas crises, provide for cross-border solidarity and transparency of gas supply contracts; –– 2 March 2017: MEPs approved the rules requiring Member States to inform the Commission of their plans to negotiate energy supply deals with third countries before opening negotiations; –– 25 October 2016: Parliament supported a resolution for an EU strategy for liquefied natural gas (LNG) to make energy supplies more secure, cut carbon emissions and deliver affordable prices; –– 13 September 2016: Parliament’s resolution entitled ‘Towards a new energy market design’ advocates a combination of liquid short-term markets and long-term price signals, in order to make the market fit for a growing share of renewables and active consumers; –– 26 May 2016: Parliament’s resolution on delivering a new deal for energy customers calls for citizens to be empowered to produce, consume, store or trade their own renewable energy, to engage in the energy market and to participate in demand response (European Parliament, Fact Sheets). Thus, it can be concluded that in an effort to harmonize and liberalize the EU’s internal energy market, measures have been adopted since 1996 to address market

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access, transparency and regulation, consumer protection, supporting interconnection, and adequate levels of supply. These measures aim to build a more competitive, customer-centered, flexible and non-discriminatory EU electricity market with market-based supply prices. They strengthen and expand the rights of individual customers and energy communities, address energy poverty, clarify the roles and responsibilities of market participants and regulators and address the security of the supply of electricity, gas and oil, as well as the development of trans-European networks for transporting electricity and gas.

4.3  C  ontemporary Challenges in the EU Energy Strategy and Energy Balance The European Union is trying to redefine its energy policy still importing huge volumes of gas originating from Russia. In this case, however, one’s point of view is determined to a considerable extent by the geographic location in Europe. To the French, it makes the most sense to pursue nuclear energy development using French technology. The British advocate carbon pricing through a policy mechanism – a charge called a carbon price for emission of carbon dioxide, to give impetus to investing in alternative sources of energy, such as wind farms. Spain would wish to become a gateway to the EU through which energy-producing raw materials from Africa would come and maybe also clean electricity from new Solartech power plant under construction in Morocco being built with financial support from Germany. Germany and Russia have enjoyed many years of successful cooperation on energy although it seems to be currently changing due to modifications in German legislation effectively prohibiting foreign entities, for example Russian, from gaining control over assets deemed as strategic. This mixed picture provides the background for the ongoing discussions in Europe on improving energy security. Developing a common policy which would take all, often conflicting interests of stakeholders into consideration will be quite a challenge. One of the most interesting issues seems to be the functioning of the electricity market where there is a lot of talk but nothing is being done about a unified power system. It is notable that, despite the Union’s declarations on its development, in practice individual States are creating energy autarchies. Germany has opted for wind and solar energy, France for nuclear energy and Poland for coal. Given the situation, one can hardly imagine how the problems which might be bound to arise from the development of a common European power system could be solved. It is enough to look only at the German Land of Bavaria which opposes building high voltage transmission lines running through its territory despite electricity shortage in the region. People do not want to live near high-voltage power lines or substations, power plants or coal mines. That gives rise to the question of how to reach consensus on the international level since it is so difficult even domestically.

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At the same time, in addition to the afore-mentioned pessimistic instances, there are many examples of effective forms of energy cooperation on an inter-regional and cross-border level in Europe supporting the claim that better connected EU energy networks and markets could promote diversification of energy sources and facilitate access to cleaner energy. Such networks and markets may also to some extent act as a buffer against global energy crises and dramatic fluctuations in prices. In this context, a greater degree of deconcentrating electricity generating capacity may prove helpful, e.g. connecting rooftop photovoltaic (solar) power panels to the electricity distribution network and improving the demand and supply chain management processes, e.g. by installing smart meters. The EU’s Energy Union Strategy (2050 long-term strategy n.d.) has focused on key issues such as energy efficiency and security, and its objective is empowering European consumers with a fully integrated internal energy market to ensure a regular supply of climate-friendly energy at affordable prices for all energy users. Undoubtedly, the European Union strives to create a single European energy market. Although there exist technical or regulatory barriers that still stand in the way of its establishing but these are not insurmountable. There is considerable evidence to indicate that during the transition phase regional markets will be developed bringing together countries at similar levels of economic development and similar energy system characteristics. There is no question that there exists political pressure to limit using coal as fuel. This is the official line but how does this look like in practice? The IEA asserts that several countries of Eastern and Southern Europe, and the state of Victoria in Australia, are among the few places in the world where lignite remains the cornerstone of the electricity system. The EU is responsible for 6% of global coal consumption and its share will decrease to 5% by 2023. Sweden and France will have closed their last coal power plants by 2023 and Germany will be the only significant coal consumer remaining in this part of Europe. It is however worth noting that in 2017 France consumed 1 million tons of coal more than in 2016 – 14 million tons in total – due to problems at nuclear power plants (IEA 2018b). Spain and Norway have recorded an increase in the share of coal in the energy balance, by 17 and 18% respectively. In Eastern and Southern Europe, the share of coal has remained steady and new lignite power generation capacity is planned in the Balkans, Greece and Poland. Since the new electricity generation installations will for the most part replace power plants being shut down, it should not lead to the increased consumption in the region. Poland, according to the afore-mentioned IEA report is one of the EU’s biggest consumers of hard coal (74 million tons), along with Germany (51 million tons). Poland has also consumed 60 million tons of brown coal, also known as lignite. Interestingly, Germany has recorded the usage of 171 million tons. Germany remains the biggest consumer of coal in the EU. However, in 2017 alone, hard coal use dropped by 16% with the year-over-year consumption of coal remaining unchanged (IEA 2018b). Primary production of energy within the EU-28 in 2016 was 755 million tons of oil equivalent (Mtoe). It was 1.6% lower than in the previous year which indicates a

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Fig. 4.1  World energy production by region (Mtoe) Source: EU Energy in Figures, European Union, 2018

1995

2000

2005

2010

2015

2016

EU-28

967

951

910

843

772

759

China

1065

1124

1671

2236

2514

2361

USA

1569

1667

1631

1724

2023

1916

Middle 1137 East

1324

1516

1624

1885

2043

Asia

934

1062

1255

1497

1566

1615

Russia

968

978

1203

1280

1334

1374

Africa

773

884

1086

1172

1120

1108

Rest of the World

1760

2039

2286

2434

2598

2588

World

9263

10029 11558 12808 13811 13764

continuation of the downward trend.23 A long-term review of the production of primary energy in the EU-28 was 14.7% lower in 2016 than it had been a decade earlier. The general downward development of EU-28 primary energy production may, at least in part, be attributed to supplies of raw materials becoming exhausted and/or producers considering the exploitation of limited resources uneconomical. The figure below shows Energy potential of the EU in comparison with the major economies in the rest of the world (Fig. 4.1). The highest level of primary energy production among the EU Member States was in France (17.3% share of the EU-28 total), followed by the United Kingdom (15.8%) and Germany (15.3%). Compared to a decade earlier, the main changes were falls of 5.1 and 1.3 percentage points in the shares of the United Kingdom and Denmark and increases of 2.1 and 1.1 percentage points in the shares of France and Italy. Relative shares of the remaining Member States did not vary by more than +/−1.0 percentage points. Aside from the United Kingdom and Denmark, the only other Member States whose shares fell during the period under consideration were the Netherlands, Germany, Greece, Czech Republic and Lithuania. In absolute terms, 15 of the 28 EU Member States recorded an expansion in their level of primary energy production during the past 11 years to 2016. The largest expansion in the production was registered in Italy (an increase of 3.7 Mtoe), followed by Spain (2.8  Mtoe), Ireland (2.5  Mtoe), Austria (2.4  Mtoe), and Sweden (2.3 Mtoe). By contrast, the production of primary energy in the United Kingdom fell by as much as 66.0  Mtoe, while Germany (−22.8  Mtoe), the Netherlands

 The year 2010 was the exception as production rebounded following a relatively strong fall in energy production in 2009 that coincided with the global financial and economic crisis. 23

4.3  Contemporary Challenges in the EU Energy Strategy and Energy Balance Fig. 4.2  World gross inland consumption by region (Mtoe) Source: IEA 2018a, b, and European Union 2018

85

1995

2000

2005

2010

2015

2016

EU-28

1 648

1 695

1 796

1 730

1 590

1 599

China

1 055

1 143

1 794

2 550

3 005

2 973

USA

2 067

2 274

2 319

2 217

2 188

2 167

307

354

469

622

729

734

Asia24

1 521

1 761

1 984

2 294

2 483

2 547

Russia

637

619

652

689

710

732

Africa

443

498

594

700

796

818

Rest of the World

1 547

1 691

1 887

2 075

2 171

2 192

World

9 226

Middle East

10 036 11 495 12 876 13 672 13 761

(−15.3 Mtoe), Denmark (−14.4 Mtoe) and Poland (−10.4 Mtoe) also reported contractions in excess of 10 Mtoe (Eurostat 2017) (Fig. 4.2). In 2015, gross inland energy consumption, which reflects the energy quantities necessary to satisfy all inland consumption, amounted in the European Union (EU) to 1626 million tons of oil equivalent (Mtoe), below its 1990 level (−2.5%) and down by 11.6% compared to its peak of almost 1 840 Mtoe in 2006. Accounting for nearly three-quarters of EU consumption of energy in 2015, fossil fuels continued to represent by far the main source of energy, although their weight has constantly decreased over the past decades, from 83% in 1990 to 73% in 2015. However, over this period, EU dependency on imports of fossils fuels has increased, with 73% imported in 2015 compared with just over half (53%) in 1990. In other words, while in 1990 one ton of fossil fuels was imported for each ton produced in the EU, by 2015 three tons were imported for each ton produced. With 314  Mtoe (or 19% of total energy consumption in the EU), Germany remained in 2015 the main user of energy in the EU, ahead of France (253 Mtoe, or 16%), the United Kingdom (191 Mtoe, or 12%), Italy (156 Mtoe, or 10%), Spain (121 Mtoe, or 7%) and Poland (95 Mtoe or 6%). Compared with 1990, the largest decreases in energy consumption in 2015 were recorded in the three EU Baltic States  – Lithuania (−57%), Latvia (−45%) and Estonia (−37%) – as well as in Romania (−44%) and Bulgaria (−33%). In contrast, the highest increases were registered in Cyprus (+41%), Ireland (+38%), Spain (+35%) and Austria (+33%). In every EU Member State, the share of fossil fuels in energy consumption decreased over the period 1990–2015, most notably in Denmark (from 91% in 1990 to 69% in 2015), Latvia (from 83% to 61%) and Romania (from 96% to 74%). However, the large majority of Member States remains highly reliant on fossil fuels

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for their energy consumption. In 2015, fossil fuels made up less than half of the energy consumption in only three Member States: Sweden (30%), Finland (46%) and France (49%). Denmark and Estonia are least dependent on energy imports. Most of the EU Member States have seen their dependency on fossil fuel imports increase between 1990 and 2015. This was notably the case for the United Kingdom (from a dependency rate of 2% in 1990 to 43% in 2015), the Netherlands (from 22% to 56%), Poland (from 1% to 32%) and the Czech Republic (from 17% to 46%). In 2015, the Member State by far the least dependent on fossil fuel imports was Denmark (4%), followed by Estonia (17%), Romania (25%) and Poland (32%). In 2016, the total gross inland energy consumption in the EU-28 amounted to 1640.6 Mtoe. The mixture of fuels and their shares in gross inland energy consumption were as follows: Petroleum and Products – 34%; Gases – 23.4%; Renewables – 13.2%; Nuclear – 13.2%; Solid fuels – 14.7%; Wastes, Non-Renewables – 0.9% (Eurostat 2018). Currently, the European Union imports more than half of the gross inland energy consumption and a small fraction of the energy produced in the EU is exported. Despite declining share of fossil fuels in the energy mix and falling consumption, fossil fuels continued to represent by far the main source of energy in the EU accounting for nearly three-quarters of EU consumption of energy in 2015. Moreover, the EU dependency on imports of fossils fuels has increased. In 2005, one ton of fossil fuels was imported for two tons produced in the EU; while by 2015 three tons were imported for each ton produced (Eurostat 2017). Russia and Norway are the main suppliers of crude oil (Oil Market Report 2019) and natural gas (Eurostat n.d.) to the EU. In 2015, imports of crude oil and natural gas from Russia were 29% and 37%, respectively, while for Norway they stood at 12% for crude oil and 32% for natural gas.24 According to Eurostat – 2018 edition: “The EU imports more than half of the energy it consumes each year, with a particularly high level of dependency for crude oil and natural gas. In 2016, Russia (166.0 million tonnes) accounted for nearly one third (31.9%) of the EU-28’s crude oil imports, followed by Norway (12.4%). A similar pattern was observed for natural gas, as Russia (153.2 billion cubic metres) accounted for more than two fifths (40.2%) of the EU-28’s natural gas imports, followed by Norway (24.9%). For solid fuels, more than half of EU-28’s imports came from Russia (30.2%) and Colombia – 23.4%” (Eurostat 2018).

 Between 2004 and 2015, Russia also became a key exporter of solid fuels such as hard coal and lignite – in 2015. In 2015, 29% of imports of these fuels came from Russia; Eurostat n.d. 24

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The dependency rate on energy imports varies considerably across the individual Member States of the EU. Denmark and Estonia meet their energy needs almost entirely from domestic production whereas Malta, Luxembourg and Cyprus import almost all of the energy they use. “The downturn in the primary production of hard coal, lignite, crude oil, natural gas and more recently nuclear energy has led to a situation where the EU has become increasingly reliant on primary energy imports in order to satisfy its demand, although this situation stabilised in the aftermath of the global financial and economic crisis. The EU-28’s imports of primary energy exceeded exports by almost 904 Mtoe in 2016. The largest net importers of primary energy were generally the most populous EU Member States, with the exception of Poland (where some indigenous reserves of coal remain). In 2006, Denmark had been the only net exporter of primary energy among the EU Member States, but in 2013 Danish energy imports exceeded exports such that there were no longer any Member States that were net exporters of energy relative to population size, the largest net importers in 2016 were Luxembourg, Malta and Belgium” (Eurostat 2018). Dependence on imports – regardless of whether it concerns a particular Member State or the EU as a whole  – may pose economic and geopolitical risks. Should there be an international suspension of energy deliveries, the impacts could extend well beyond the exporting and the importing countries. In the above context, the electricity market is becoming increasingly important. Trading on the international energy market takes place in the form of transactions concluded between individual companies or on power exchanges. EEX (European Energy Exchange) and Nord Pool are the leading energy exchanges in Europe. Over 130 companies from 16 countries participate in EEX. Nord Pool, on the other hand, is the joint Nordic power exchange encompassing over 120 enterprises. The electricity generation mix of individual European countries is no less important. It primarily depends on having own energy resources or having a potential for renewable energy production. In a significant number of countries both lignite and hard coal are the main source of electricity generation. Countries with a potential to harness various geographical advantages have most of their electricity generated by hydroelectric power stations, mainly Austria and Sweden. Nearly half of all the electrical power is generated by nuclear plants in countries such as France, Belgium and Sweden. Natural gas has also become a very popular fuel for the generation of electricity. The share of renewable energy sources (RES) in power generation has been systematically increasing in all European countries. The major players in the European energy market include: Swedish power company Vattenfall, French electric utility company EDF and GDF Suez (now Engie), German international private energy company E.ON and German electric utilities company RWE, Spanish Endesa electric utility company, Enel – Italian-based multinational energy company and Czech Republic-based utility company CEZ. On the international level, countries can participate in this type of market whose power systems are interconnected and in practice form one common system. Participants of the interconnected system must meet certain technical requirements and set out standards ensuring its effective and smooth functioning. In extreme

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cases, a failure of a national system can produce a cascade of failures in the neighboring states. At the same time it should be born in mind that the European single market in electricity is in an interim transitional period. These are no longer separate national markets but as of yet there exists no integrated single European market. Regional markets are becoming increasingly important, i.e. the Nordic market, and they are often seen as an intermediary step towards the single European market. European countries whose national systems make up as it were a common European power system belong to the UCTE (Union for the Co-ordination of Transmission of Electricity).25 A steady increase in energy demand prompts both the States and energy companies to search for alternative sources of energy which may promote investment in clean energy generated from renewable sources. It is envisaged that in the European Union, renewables will account for 80% of new capacity and wind power becomes the 5th leading source of electricity soon after 2030 due to strong growth both onshore and offshore. In 2017, Europe installed 16.8 GW (15.6 GW in the EU) of additional wind power capacity, marking a record year on annual installations. With a total net installed capacity of 169 GW, wind energy remains the second largest form of power generation capacity in Europe, closely approaching gas installations. 2017 was a record year for both onshore and offshore installations. The EU added 12,484 MW onshore and 3154 MW offshore (WindEurope). EU country shares of new wind energy capacity (in total of 15,638 MW) installed during 2017 are as follows: Germany – 6.581 MW (42.0%); United Kingdom – 4.270 MW (27.2%); France – 1.694  MW (10.8%); Finland  – 535  MW (3.4%); Belgium  – 467  MW (3%); Ireland  – 426  MW (2.7%); Denmark  – 342  MW (2.2%); Greece  – 282  MW (1.8%); Italy – 252 MW (1.6%); Sweden – 197 MW (1.3%); Austria – 196 MW (1.3%); Croatia  – 147  MW ( 0.9%); Spain  – 96  MW (0.6%); Netherlands  – 81 MW (0.5%); Poland – 41 MW (0.3%); Czech Republic – 26 MW (0.2%); Romania – 5 MW – 0.0% (Wind Europe). In 2017, new power capacity generated by source was as follows (in total of 28,316 MW): Wind -15.638 MW (55.2%); Solar – 6.030 MW (21.3%); Gas – 2.612 MW (9.2%); Coal – 1.741 MW (6.1%); Large Hydro – 1.085 MW (3.8%); Biomass – 964 MW (3.4%); CSP  – 118  MW (0.5%); Waste  – 80  MW (0.3%); Nuclear  – 28  MW (0.1%); Small Hydro – 17 MW (0.1%); Ocean – 3 MW – 0.0% (Wind Europe). The mentioned efforts required a considerable investment of EUR 22.3 bn of which 52% was allocated to renewable energy investments in wind energy. The rest

 Sweden, Norway, Denmark and Finland are part of a separate Nordic power market. The linked systems of these countries form a group called NORDEL. 25

4.4  The EU’s Activity in Counteracting Climate Change: The Special Role of RES…

89

of the financial resources was dedicated to: Onshore wind – EUR 14.8 bn; Solar – EUR 10.9 bn; Offshore wind– EUR 7.5; Biofuels – EUR 6.5 bn; Biomass – EUR 2.3 bn and Others EUR 0.7 bn. Bioenergy is the leading renewable energy source in Europe. According to Eurostat data and calculations by the European Biomass Association (AEBIOM), bioenergy accounted for 11% of the final energy consumption in the EU-28 in 2017. Other renewable energy sources, like hydropower, wind, solar and geothermal, stand for another 7%. But still, non-renewable energy makes up 82% of the EU’s energy use (WindEurope). As these indicators give us much food for thought, it is no surprise that the European Commission has launched a wide-ranging debate on a new energy market design (Janczak 2015). Since it is not clear how the market will develop, its design will be developed by the key stakeholders. However, there must be changes. The shape of the current market is well-suited for traditional large scale industrial energy users. The growing share of renewables in electric power generation within the power generation mix gives rise to new actions and presents new challenges.

4.4  T  he EU’s Activity in Counteracting Climate Change: The Special Role of RES and EU ETS regulation Shaping the future of energy in Europe takes place within an outlined policy framework drawn by the European Union. In this context, it is worth examining the Union’s action policies which have defined the future direction in a most significant way. The first is the environment, i.e. the policies pertaining to air quality. This would without a doubt affect the coal power sector and to some extent the gas sector as well. We should also be mindful and aware of new legislation on water management limiting construction of large-scale water cooled power plants.26 The second aspect refers to competition barring State aid for transitioning of an energy sector to meet the EU’s standards. The third factor shaping the Union’s framework is the climate change. The draft legislation on the energy decarbonization is worded as a sort of long-term trend. It is reflected in the reform of the EU ETS (the EU Emissions Trading System) for the period after 2020. A carbon price for emission of carbon dioxide will be added into the price of energy production which will affect coal and gas market. The larger EU Member States take elimination of fossil fuels as a given. The last issue is directly related to energy. The first priority in this respect is building a common energy market but it is not about a physical interconnection of energy infrastructure between the Member States alone. The EU aims to harmonize

 In general, it has become harder to build large installations leaving large environmental ‘footprint;’ there is a trend towards eliminating large-scale investment projects on our continent. 26

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4  Energy Policy of the European Union in the Twenty-First Century

RES support schemes and power markets. Another important issue is that Europe moves towards changes in energy market model. The direction of current policy changes seems to lean towards decentralization and promotion of RES. In fact, it is incorporating the German Energiewende into a comprehensive European approach, which transitions the centralized model of the German energy system by integrating the emerging global trends in distributed energy and RES. Everything appears to be pointing to the fact that further decarbonization and the development of the renewable energy as well as its related transformation of European energy sector are inevitable. Initially, the policy direction and priorities have been established to ensure energy security by fossil fuel-poor European Union. The European Union’s climate policy was to be an answer to the problem of increasing dependency on external energy sources. The policy implementation has resulted in major investments in the renewable energy sector. The scientific community, public institutions and bodies as well as individual citizens from many European countries have become actively involved in green energy development. Based on it, in the following several years an entire new market has flourished – it has led to establishing innovative industries, business and previously unknown services and tens of thousands of Europeans have found employment in the RES sector. It has set in motion a process of far-reaching change which cannot be reversed today. Ideology takes a back seat in this process. Significant financial resources have been committed and a number of investors and stakeholder are awaiting a payback. For the same reason, it is doubtful that Brussels will abandon its pathway of decarbonization. Owing in large measure to the wide-ranging efforts, CO2 emissions over the period decreased by 17% and climate policy has become an area where the EU is openly aspiring to play a leadership role in the world (IEA 2016, p.  48). The Community has been actively engaged in international climate summits and has been an important initiator and chief actor of international environment governance. In 2013, renewables accounted for more than 72% of new electrical generating capacity while just 10 years ago 80% of electric-generation capacity was provided by conventional fossil fuel plants (European Union 2015, p. 44; REN21 2014, p. 21). It should be noted that Germany is the biggest emitter of CO2 on the Old Continent and at the same time the State implements a domestic program aiming at cutting carbon dioxide emissions faster than required by the EU ETS. There is a growing number of EU countries pursuing such a policy. The British have introduced a carbon tax plan and, in addition, the country has just announced its intention to close coal-fired power plants by 2025. Italian energy company ENEL began the implementation of its plan to scrape 23 coal and gas power stations in Italy with a capacity of 13 GW within 5 years. Given the situation, there is no indication that prices will increase. Moreover, the EU climate policy objectives for 2020–2030  – non-binding on Member States – seem to be less stringent than in the current long-term perspective.27 What drives adopting this approach?

27

 More on the subject at https://ec.europa.eu/clima/policies/strategies/2020_en

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The underlying reason is Europe’s changing political and economic climate. When the 20-20-20 package was being introduced,28 a staunch supporter of ­decarbonization Jose Manuel Barroso presided over the European Commission and the European economy was in great shape. Hence the targets set at the time were ambitious and binding at the Member State level (with the exception of the energy efficiency). All the plans have been largely thwarted by the financial crisis. And new problems such as in Greece and Ukraine have emerged later. It has somewhat dampened many EU Member States’ enthusiasm for climate policy. As a result, the new 2030 targets were introduced binding for the whole EU. In the EU today, the largest electricity consumers and at the same time the biggest supporters of development of international climate change regime and reduction in greenhouse gas emissions are France and Germany. France is one of the few countries that successfully achieved both goals: economic growth and reductions in greenhouse gas emissions. Taking advantage of the opportunity, it advocates low-­ emissions economy standards and pursues an active policy promoting civil nuclear technology innovations which do not produce any CO2 but generate high amounts of electricity. All this is basically intertwining economic interest of promoting nuclear energy option as an alternative clean energy source with environmental protection principles where climate policy is a tool for advancing the economic competitiveness of France globally. Germany is also among the main promoters of climate policy and development of green technologies. The State is the European and world leader in the use of several types of renewable energy sources. In addition, it is the largest producer of electricity from renewable energy sources other than hydroelectric power (with the greatest share of wind and solar power).29 Germany’s Energy transformation plan (Energiewende) assumes increasing the share of renewable energy in gross electrical generation to 50% by 2030 and 80% by 2050. In 2014, for the first time, the share of electricity generated from renewable sources in Germany was greater than the share of fossil fuels (Tost 2015). With a share of 27.3%, renewable energy muscled out coal to become Germany’s biggest source of electricity. Germany generates

 The package sets three key targets: 20% cut in greenhouse gas emissions (from 1990 levels); 20% of EU energy from renewables; 20% improvement in energy efficiency. The targets were set by EU leaders in 2007 and enacted in legislation in 2009. They are also headline targets of the Europe 2020 strategy for smart, sustainable and inclusive growth; see https://ec.europa.eu/info/ business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester_en 29  For the first time in history, Germany has briefly covered 100% of its power demand with renewables. Electricity prices reached the negative values and surplus electricity was sold to its neighbors. On Tuesday, May 1, 2018, German wind, solar, hydro and biogas power plants for two hours supplied more electricity to the national power grid (54 GW in total), briefly exceeding the entire country’s electricity demand (53 GW); see https://wysokienapiecie.pl/10005-rekord-niemiec100-zapotrzebowania-ze-zrodel-odnawialnych/. In theory, there was no need for electricity output from the nuclear, coal- and gas-fired power plants briefly in Germany. However, due to technical and security reasons it was not possible to shut them down completely. 28

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more electricity from renewable energy sources than Poland from coal.30 Germany is a global pioneer in the development of low carbon energy technologies. It has almost the highest installation of renewables and exports of green technologies provide a high contribution to German GDP. Germany has been active in addressing challenges of international energy and climate policy. Germans pursue initiatives on combating climate change and launching a global carbon emission trading scheme, and in terms of worldwide reduction of greenhouse gas emissions Germany has proposed 50% cut in GHG emissions by 2050 compared to 1990, and even to 80% for industrialized countries (Molo 2013, pp. 277–8). The development of climate policy in the EU is also strongly supported by Italy, Denmark and other Nordic countries, as well as by the United Kingdom. In 2014, Italy was the second, following Germany, largest producer of solar energy in Europe and a leader in energy efficiency. Other western European countries have been strongly in favor of the transition to a green economy and relevantly more ambitious climate policy. The United Kingdom adopted its strategy in the Climate Change Act in 2008 to reduce greenhouse gas emissions by at least 80% by 2050 as compared to 1990 (Great Britain 2008; The Integrated Energy 2007). The EU emissions trading system is the EU’s key tool for cutting greenhouse gas emissions from large-scale facilities in the power and industry sectors, as well as the aviation sector. The ETS covers around 45% of the EU’s greenhouse gas emissions and in 2020, the target is for the emissions from these sectors to be 21% lower than in 2005. In terms of RES, as absurd as it may sound, at this point – sort of post factum – discussions continue about what it really means that the obligation is “binding at EU level.” This is simply about some kind of compromise between the German approach according to which specific obligations regarding a share of green energy have been imposed on Member States (as it is the case in the current framework) and the different interests of the United Kingdom, Hungary and the Czech Republic which rejected national binding targets for renewable energy. Particularly significant was the opposition by Britain which held a strong position in the EU and has no problem with the EU’s climate policy but only with imposing the RES obligations. The UK’s seeks the reduction of greenhouse gas emissions by the development and an increase use of nuclear energy and natural gas. The growth in renewable energy is to be achieved by offshore wind energy where there are already well-developed competences in the UK. Their aversion to land-based renewable energy sources to a larger extent stems from the fact that they not wish to have the country’s landscape ruined with wind turbines. In part, it is related to the fact that Britain’s Conservatives, at the time in power, traditionally represent landowners’ interests (Bolesta 2015). The latest OECD report The joint impact of the European Union emissions trading system on carbon emissions and economic performance (https://www.oecd-ilibrary.org/economics/) presents groundbreaking findings on economic and climate

 In 2014, renewable energy sources accounted for about 156 TWh of electricity generated in Germany, whereas in Poland as much as 134 TWh came from coal. 30

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policy. According to the OECD experts, the EU emission trading scheme (ETS) had no negative impact on examined firms’ revenue, profits and employment during the 2005–2014 period. As mentioned before, the Emissions Trading System (EU ETS) is the EU’s key instrument of the climate action aimed at encouraging ETS for 8000 most polluting companies in Europe to reduce greenhouse gas emissions by increasing energy efficiency or transitioning to “cleaner” energy sources. Companies with ETS installations, such as steel-production plants or coal-fired power plants, are required to annually submit ETS certificates  – or carbon credits  – for every ton of CO2 emitted. The certificates can be sold and bought, but each year less of them become available on the market, making them more expensive as time goes on. The system has several exemptions, and offers free credits to some companies to accommodate fears – notably from eastern EU Member States – that the ETS will make their firms uncompetitive, by being undercut by competitors from outside the EU not covered by the ETS (Dechezleprêtre et al. 2018). OECD experts decided to examine those concerns and check them against the data for the 2005–2014 period. They concluded that for the 2005–2012 period the EU ETS led to a 10% reduction in greenhouse gas emissions with no impact on the economic performance of regulated companies. In fact, the OECD has found that the revenues of companies subjected to the ETS were 7–18% higher at the end of the period studied than what they would have been without the EU ETS, and their fixed assets grew by 6–10% compared to non-regulated enterprises.31 At the same time, the EU ETS had no statistically significant effect on employment levels. The above findings suggest that the EU emissions trading system induced regulated companies to increase investment in low carbon technologies, which, in turn, may have increased productivity. This is all the more important since as of 1 January 2019, there will be a market mechanism called the ‘market stability reserve’ which will take millions of carbon credits off the market if there are too many of them, thus increasing their price. This should result in a change in behavior of firms stimulating transition towards low-carbon production (Dechezleprêtre et al. 2018).

4.5  The EU’s Climate Policy The EU’s climate action began in the 1970s when due to energy crises of the time a number of resolutions were adopted laying down short-term goals of reducing oil consumption, promoting energy efficiency and developing renewable energy sources. An important role in incorporating environmental policies into the European integration process has been played inter alia by the Single European Act (JAE  More on the subject at http://www.oecd.org/economy/greeneco/can-we-reduce-emissions-without-hurting-jobs/ and https://www.oecd-ilibrary.org/economics/the-joint-impact-of-the-europeanunion-emissions-tradingsystem-on-carbon-emissions-and-economic-performance_4819b016-en 31

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1986) which de facto has provided the legal basis for the environmental policy by including in the Treaty establishing the European Economic Community (the Treaty of Rome) the Title VII, Environment (Single European Act ). The European Commission’s efforts to assign special importance to environmental issues have intensified with the Earth Summit in 1992 and the signing of the Kyoto Protocol (1997). The work concentrated within the Environment and the Energy Council which at the joint meeting on October 29th, 1990 made a commitment to stabilize carbon dioxide emissions in the EU at 1990 levels by 2000. The EU called on all the industrialized countries to undertake the effort (Młynarski 2013, pp. 249–50). Several countries linked the taking action against climate change under the EU strategy with the economic interest and the concept of ecological modernization has become widespread and gradually introduced into the EU environmental action programs. This concept involves the modernization of the EU economy by implementing technological innovations and to ensure advancing environmental objectives while gaining competitive advantage. As a result, the EU has become less dependent on fossil fuels and was getting and edge in advanced low emission energy technologies which could be exported.32 In this way, environmental goals have been linked with economic goals (climate policy becomes economic policy) and the reduction in emissions and building a low-emission economy has resulted in converging interests of countries in the vanguard of green technologies (Schaik and Shunz 2012, p. 178). On the rising tide of support of European societies for environmental protection issues, the development of EU climate policy has strengthened the Community institutions and their legitimacy as well as expanded their competence. Reaffirming the EU’s aspiration to maintain a leading role and its commitment to a new long-term European energy and climate policy was the energy-climate package adopted by the European Council on 11 and 12 December 2008 which, among others, set a target of 20% reduction in carbon emissions by 2020.33 The 2020 package is a set of binding legislation to ensure the EU meets its climate and energy targets for the year 2020.34 The package sets three key targets: –– 20% cut in greenhouse gas emissions (from 1990 levels); –– 20% of EU energy from renewables; –– 20% improvement in energy efficiency. The targets were set by EU leaders in 2007 and enacted in legislation in 2009. They are also key targets of the Europe 2020 strategy for smart, sustainable and inclusive growth.

 Compare Schaik and Schunz 2012, p. 176.  Presidency Conclusions, European Council 11–12 December 2008, Brussels, 13 February 2009. The European Commission set ambitious targets for member states until 2020, commonly known as 3x20 targets: achieve at least a 20% reduction of its greenhouse gas emissions by 2020 compared to 1990; efficient use of energy to reduce its consumption by 20%; increase the share of energy from renewable sources in gross final consumption of energy from 8.5% to 20%; obtaining 10% share of biofuels in the total sales of transport fuel. 34  See https://ec.europa.eu/clima/policies/strategies/2020_en 32 33

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In this way, the European Commission de facto separated the climate policy from environmental policy, at the same time tying climate issues with energy policy. The package as a set of the Union’s legislative acts has become the Union’s flagship instrument for building a sustainable energy model. The EU emissions trading system (EU ETS) has served as a tool for implementing adopted goals and a mechanism supporting the EU15 compliance with the objectives set out in the Kyoto Protocol.35 At the end of the first decade of the twenty-first century, the EU climate policy was afforded legal basis by the Treaty of Lisbon which came in force on December 1st, 2009 and conferred on the Union a competence shared with the Member States (Article 4, Section 2 TFEU) in the area of environmental protection. It also expanded the catalog of EU objectives in environmental protection stipulating, among others, that the EU must contribute to combating climate change and promoting measures at international level to deal with regional or worldwide environmental problems.36 In March 2011, the EC adopted an action plan leading towards a competitive low carbon economy by 2050, and in mid-December 2011, it presented a new strategic policy document, Energy Roadmap 2050, which assumed the decarbonization of the electricity sector which lays down the reduction in CO2 emissions by 96–99% compared to 1990 levels (European Commission 2011, p. 36). In a second phase, the European Council of October 23–24, 2014 adopted a new reduction (European Council 2014): reduction of greenhouse gas emissions GHG in the EU by 40% by 2030, compared to 1990 levels,37 and increase in the share of renewables by 27% for the EU (not for Member States) and the same percentage increase for improving energy efficiency by 2030 (European Council 2014).

 Notwithstanding the fact that there are three mechanisms in the Kyoto Protocol: emissions trading, Joint Implementation and the Clean Development Mechanism, according to the European Commission, ETS is Europe’s main mechanism to achieve emissions reduction targets. The EU ETS was established by Directive 2003/87/EC and amended by Directive 2009/29/EC. The GHG reduction mechanism is based on two pillars: EU ETS and EU non-ETS (transport, agriculture, trade, services, public institutions, the municipal and housing sector). 36  The Maastricht Treaty reaffirmed the direction of environmental policy integration by amending the TEC. It states that the activities of the Community shall include a common policy in the sphere of the environment (Art. 3 TWE): “Environmental protection requirements must be integrated into the definition and implementation of the Union’s policies and activities” (Art. 6 TWE). The Amsterdam Treaty has reaffirmed incorporating environmental protection into other Community policies (entered into force on 1 May 1999) by establishing the duty to integrate environmental protection into all EU sectoral policies with a view to promoting sustainable development “with a view to promoting sustainable development.” The Conference notes that the Commission undertakes to prepare environmental impact assessment studies when making proposals which may have significant environmental implications. 37  The set target will be jointly implemented by the EU through sectors covered by the EU Emissions Trading Scheme (ETS by 43%) and those not covered (non-ETS by 30%) compared to 2005 levels. It provides for compensation mechanisms including: (1). Retaining free emission allowances for energy sector after 2020, until 2030, for Member States with a GDP per capita below 60% of the EU average. (2). Setting aside a new reserve of 2% of the EU ETS allowances to address particularly high additional investment needs; and (3). Distribution of 10% of the EU ETS allowances to be auctioned by Member States among those countries whose GDP per capita did not exceed 90% of the EU average (in 2013). 35

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Given the failure to reach agreement in Copenhagen in 2009, (The 2009 United Nations Climate Change Conference, commonly known as the Copenhagen Summit), the European Union was the first major economy to submit its intended contribution to the new agreement in March 2015. Prior to the conference in Paris, the EU Member States adopted a common position which, essentially, constitutes the so-called 2030 Climate and Energy Framework38 which sets three key targets for 2030: –– at least 40% cuts in greenhouse gas emissions (from 1990 levels) –– at least a 27% share of renewable energy –– improved energy efficiency by at least 27%. This is also consistent with the long-term perspective set out in the action plan for the transition to a competitive low-carbon economy in 2050 – “Roadmap for moving to a competitive low-carbon economy in 2050,” the “Energy Roadmap 2050” and a White Paper on Transport. We are dealing here with the “2050 long-­ term strategy,” a long-term vision for a prosperous, modern, competitive and climate-­neutral economy by 2050 presented by the European Commission on November 28, 2018. It shows how Europe can lead the way to climate neutrality by investing into realistic technological solutions, empowering citizens, and aligning action in key areas such as industrial policy, finance, or research – while ensuring social fairness for a just transition.39 I believe that the Commission’s strategic vision needs to be read as a call upon all EU institutions, the national parliaments, business sector, non-governmental organizations, cities and communities, as well as citizens – and especially the youth, to participate in ensuring that the EU can continue to show leadership and hold other international partners to do the same. The above statement is particularly important when we realize that, aspiring to take a global leadership role in the reduction of the GHG emissions, the Commission aims at creating a low-carbon economy. EU Member States, however, are highly diverse in terms of their general structure of energy supply and energy intensity of the economy. Hence the transition to decarbonized economy presents a big challenge for those countries where energy sector is dominated by coal. At the same time, it is an opportunity for countries of low and zero carbon energy sources (RES or nuclear energy) and highly efficient technologies. In Central-Eastern Europe, the share of EU ETS emissions in the total GHG emissions is much greater than in other EU countries (on the average by 40%), which means that these countries will bear much higher adjustment costs. The highest costs of transitioning national economies to low emission standards will be borne by the new EU member states: Bulgaria, Estonia, the Czech Republic, Slovakia, Romania and Poland. The profits from export will partially offset the adjustment costs for the countries already employing low emission technologies (among others Germany, France, Great

 The framework was adopted by EU leaders in October 2014. It builds on the 2020 climate and energy package; see https://ec.europa.eu/clima/policies/strategies/2030_en 39  See https://ec.europa.eu/clima/policies/strategies/2050_en 38

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Britain, Spain, Denmark). In Western European countries, the climate policy goals may foster job creation.40 It is definitely worth noting the positive impact of ­ecological modernization strategy on the economy as it may turn out to be a catalyst for restructuring energy-intensive industries in Central and Eastern European countries in which CO2 emission factor is one of the highest in the European Union.

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Chapter 5

Norden States in the Context of Energy Security: Fundamental Issues

Abstract  The Nordic countries’ economies are highly efficient, thriving and performing well above the EU average. From a macro-regional perspective, they constitute a very coherent area. Facing global challenges, as other world economies, the Nordics focus their attention mostly on the energy sector and its security. Cooperation on energy between Norden and the Baltic States addresses contemporary challenges of energy security in the Baltic Sea region. Keywords  Nordic cooperation · Baltic cooperation · The Baltic Republics · Energy balance

5.1  Nordic States in the International Arena The term Norden is not commonly known in Central Europe nor is it frequently applied even by the specialists in the Scandinavian region. In the nineteenth century Scandinavia, the term denoted simply the lands in the north, such as Vesten – the territories in the west, and Syden – in the south. In turn, in Denmark, Norway and Sweden in the twentieth century the notion became very popular as a proper name and referred to a particular geographical area including, apart from the already mentioned states, also Finland, Iceland and the three autonomous territories of the Faroe and Åland Islands, and Greenland.1

5.1.1  Terminological Remarks Fully aware of more or less subtle differences, depending on interpretation, between the terms “Scandinavia” and “Norden,” including the adjectives “Scandinavian” and “Nordic,” I shall use these notions interchangeably in order to simplify the matter  An equivalent of the word “Norden” in Finland is Pohjola, while in Iceland it is Nordurland.

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and following the practice binding not only in the Northern countries but also in a world literature on the subject. Such a position is fully supported by Professor B. Piotrowski of the Adam Mickiewicz University in Poznan who rightly and accurately states: “The North (Norden) denotes not only a defined geographical, territorial and natural reality but also a historical and cultural community of mutually intertwined or crisscrossing events or historical occurrences shaped throughout hundreds of years. Therefore, the North is a political, historical, geopolitical, socio-­ economic, spiritual and cultural construct” (Piotrowski 2006, p. 9). Today, when referring to these five countries jointly, more and more frequently the term Norden is used and it is equally a geographical category and a mental concept. It pertains to a set of similar but separate entities. Above all, it denotes geographical closeness, historical ties and a relative cultural homogeneity of the states constituting this region (Zolkos 2003). U. Østergård (1997) is of the opinion that the notion is associated by the Scandinavians with “something non-European, non-­ Catholic, anti-Roman, anti-imperialist, non-colonial, peacefully inclined, small and social democratic.” One could possibly add to this list staying on the sidelines of the international “grand politics” while being actively engaged in building world peace. It needs to be noted that the countries of the region are also referred to as Scandinavian or Nordic, and in most cases all the definitions are treated as the same. The notion of “Scandinavian” is used mostly in three cases: when referring to the Scandinavian Peninsula and the countries situated there in a strictly geographical sense; in reference to Sweden, Norway and Denmark (hence the territories where North German languages are used); and, finally, to define jointly Sweden, Norway, Denmark, Iceland, Finland, and their autonomous territories (Zolkos 2003). It is in the third listed meaning that the word is used interchangeably with the term “Nordic.” Such a usage is especially popular outside of the Nordic Region while in it the terms Norden and nordisk are considered most adequate as they pertain precisely to these five countries and their autonomous territories.2 The notion of Norden pertains to the economic, cultural and social homogeneity, and not the ethnic or linguistic one, which is in opposition to the terms of Skandinavien and skandinavisk. “Scandinavian” then is narrower than “Nordic” but all are used interchangeably (Törnqvist 1998, pp. 1–3). Thus, the Nordic region includes: Denmark, Finland, Iceland, Norway and Sweden, as well as the Faroe Islands and Greenland (both part of the Kingdom of Denmark) and the Åland Islands (part of the Republic of Finland). “It is however worth noting here that several Nordic territories, e.g. Svalbard (Norway), Christiansø (Denmark) and Northeast Greenland National Park (Avannaarsuani Tunumilu Nuna Allanngutsaaliugaq), are not part of the national administrative systems” (Grunfelder et al. 2018). There are specific differences across the region both in terms of the size and population of the various administrative units at the regional and municipal levels. The four largest municipalities are all Greenlandic, whereas Qaasuitsup is the larg-

 In addition, Estonia also claims to be a Nordic country. See Estonia as a Nordic Country.

2

5.1  Nordic States in the International Arena

103

est municipality in the world with an area of 660,000 km2 (however, in 2018 it was divided into two municipalities). Even the smallest Greenlandic municipality, Kujalleq, with its 32,000 km2 significantly exceeds the largest Nordic municipalities outside Greenland, i.e. Kiruna and Jokkmokk in northern Sweden with an area of ca. 20,000 km2. Excluding Greenland and the Faroe Islands, the average size of a Nordic municipality is 1065 km2. The smallest ones are less than 10 km2 and are insular municipalities (e.g. Kvitsøy in Norway or Seltjarnarnes near Reykjavík) or within the greater capital areas (e.g. Sundbyberg near Stockholm, Frederiksberg surrounded by the municipality of Copenhagen, or Kauniainen surrounded by the municipality of Espoo near Helsinki). The average area of a Nordic administrative region is 17,548 km2. The smallest is Oslo (455  km2), followed by two Icelandic regions, Suðurnes (884  km2) and Hövuðborgarsvæði (1106  km2). The largest one in this group is Norrbotten in Northern Sweden (106,211 km2), and then Lappi in Northern Finland (just below 100,000 km2). The average population density in Norden is 66 people per square kilometer, and a population density is ranging from 1 person/km2 (Austurland, Vestfirðir, Norðurland vestra and Norðurland eystra – all in Iceland) to 1469 persons/km2 (Oslo region). Other high density regions include the Capital Region of Denmark – Hovedstaden (706 persons/km2) and Stockholm (335 persons/km2). Among the Nordic countries, Denmark, Finland (including Åland) and Sweden are Member States of the European Union (EU), although only Finland is part of the Eurozone. Iceland and Norway are members of EFTA (European Free Trade Association) consisting of four countries, which either through EFTA, or bilaterally, have agreements with the EU to participate in its Internal Market. The Faroe Islands and Greenland are not members of any of these economic cooperation organizations. It should also be noted that many of the regions and sparsely populated or inland municipalities suffer as a result of their unfavorable position in terms of physical and social “infrastructures” and fall below the national level and are far behind the main metropolitan areas. Yet, apart from the standard indicators, the northern parts of Denmark, Finland and Sweden all rank very highly on the more broadly focused European Social Progress Index.3 With the total area of 3,425,804 km2, the Nordic Region would form the seventh largest territory in the world (https://ec.europa.eu/regional_policy, p. 17). However, uninhabitable icecaps and glaciers comprise about half of this area, mostly in Greenland. In January 2018, the population of the region exceeded 27 million. More important, however, is the fact that the Nordic economy is the 12th largest in the world (Haagensen et al. 2017; Czarny 2017, pp. 207–229), and its strength stems, inter alia, from the tackling of the economic crisis of 2007–2008. It is this ability to combine a generous tax-funded welfare system with efficient public administration 3  See https://ec.europa.eu/regional_policy/en/newsroom/news/2016/02/16-02-2016-moving-beyond -gdp-new-regional-social-progress-index

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5  Norden States in the Context of Energy Security: Fundamental Issues

GII 2018 rank

Population (thousands)

Gross domestic product GDP per capita PPP$ US ($ ) billions US ($) thousands

Denmark

8

5733.55

285.47

49883.03

Finland

7

5523.23

242.44

44332.60

Iceland

23

335.03

17.73

51841.53

Norway

19

5305.38

375.94

71830.88

Sweden

3

9910.70

521.61

51474.80

Fig. 5.1  Nordic Countries: 2019 key data Compiled by author on the basis of Global Innovation Index, Analysis Explore Economy Reports from the GII 2018, https://www.globalinnovationindex.org/analysis-economy

and a competitive business sector that have impressed most the journalists of The Economist which published a special report on the Nordics.4 The above statements are well illustrated by the following figure presenting selected data for 2018 (Fig. 5.1). The Nordic countries blended into the implementation of the Europe 2020 strategy developed in 2010 (“Europa 2020”) with three key drivers of economic growth: 1 . smart growth based on knowledge and innovation; 2. sustainable growth for a more efficient, greener and competitive economy, and 3. inclusive growth capable of delivering employment, social and territorial cohesion. Quantitative targets to be fulfilled include the following: 1 . 75% of the population aged 20–64 should be employed; 2. 3% of the EU’s GDP should be invested in R&D; 3. the “20/20/20” climate/energy targets should be met (including an increase to 30% of emissions reduction if the conditions are right); 4. the share of early school leavers should be under 10% and at least 40% of the younger generation should have a tertiary degree; 5. 20 million less people should be at risk of poverty. Outlining the above targets leads to a conclusion that the Nordic countries have a good track record in all categories. According to the OECD overall assessment of countries, Sweden achieved the highest score, followed by Denmark, Finland and Norway (Sachs et al. 2017). Nevertheless, these countries continue to be faced with a significant number of sustainable development goals and challenges, as writes the Danish think-tank Sustainia. According to Sustainia, from among 19 challenges to reach all set goals by 2030, the Nordic Council of Ministers has chosen goal number  See Wooldridge 2013.

4

5.1  Nordic States in the International Arena

Denmark

105

Finland

Iceland

Norway

Sweden

Rank Score Rank Score Rank Score Rank Score Rank Score 8

58.40

7

59.60

23

51.20

19

52.60

3

63.10

Innovation Efficiency Ratio

29

0.73

24

0.76

23

0.76

52

0.64

10

0.82

Innovation Input Sub-index

7

67.43

5

67.88

22

58.22

13

64.18

3

69.21

13

49.34

8

51.38

19

44.26

24

41.08

3

56.94

Overall

Innovation Output Sub-index

Fig. 5.2  Global Innovation Index Compiled by author on the basis of Global Innovation Index, Analysis Explore Economy Reports from the GII 2018, https://www.globalinnovationindex.org/analysis-economy The overall GII score is the simple average of the Input and Output Sub-Index scores

12, to “ensure sustainable consumption and production patterns,” as its prioritized action field.5 Moreover, there are additional goals where a certain amount of effort is still needed. These are: greening of the region’s agricultural systems (SDG 2),6 reducing the high levels of CO2 emissions per capita (SDG 7 and 13)7 and improving ecosystem conservation (SDG 14 and 15).8 The Nordic countries rank high in innovation (Fig. 5.2). The following data seems to be particularly important in this context (Fig. 5.3). The Nordic countries not only demonstrate a high level of innovation performance,9 but the employment rate in the knowledge-intensive sectors is well above the EU-28 average.10 Even the most peripheral regions show a large share of high tech jobs (Fig. 5.4).

 “SDG 12 Responsible Consumption and Production is one of the main challenges across the Nordic region with Denmark, Finland and Norway all scoring negatively in the SDG Index. However, Iceland is out-performing the rest of the region due to the country’s significantly better scores on non-recycled municipal solid waste.” Larsen and Alslund-Lanthén 2017, p. 13. 6  In short, the Nordic countries need to improve the sustainability of the region’s agricultural systems in order to reach SDG 2 by 2030. 7  Looking toward 2030, the Nordic region has a head start on SDG 7 and 13 as compared to other developed countries. However, the reading of international studies also clearly concludes that continued and consolidated commitment to low-carbon energy development and increased energy efficiency is a prerequisite for reaching the goals. 8  “When it comes to SDGs 14 and 15, the Nordic region as a whole is challenged by its ecosystem conservation efforts. Recognizing the difference between the countries in terms of the aquatic and terrestrial conditions, the Nordic region as a whole needs to find more sustainable ways to engage with its natural environments.” Larsen and Alslund-Lanthén 2017, p. 19. 9  More on the subject in Czarny 2017, pp. 153–174. 10  “Persons in science and technology occupations make up over 40% or the labor force in Norway, Sweden and Denmark.” After Business Insider Nordic 2017. 5

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5  Norden States in the Context of Energy Security: Fundamental Issues

Denmark

Finland

Iceland

Norway

Sweden

Total public expenditure on R&D % of GDP (2016)

2.9

2.8

2.1

2.0

3.3

Granted patents per million inhabitants (2017)

187

224

65

69

290

Graduates at doctoral or equivalent level per million inhabitants (2016)

385

366

217

262

359

Fig. 5.3 Innovation Source: Nordic Statistics FULLTEXT01.pdf, p. 29

2018,

http://norden.diva-portal.org/smash/get/diva2:1257993/

Denmark

Finland

Iceland

Norway

Sweden

Rank Score Rank Score Rank Score Rank Score Rank Score Research and development (R&D)

8

73.50

9

68.99

24

43.65

20

55.90

6

77.02

Researchers

2

91.07

7

79.06

6

80.39

8

70.10

3

86.68

Gross expenditure on R&D (GERD)

8

67.42

9

64.53

15

49.27

16

47.76

4

76.48

Global R&D companies, average expenditure top 3

16

72.43

12

79.33

32

44.95

24

56.37

11

80.05

QS university ranking average score top 3 universities

15

63.07

18

53.07

78

n/a

24

49.37

14

64.87

Fig. 5.4  Human capital and research Compiled by author on the basis of Global Innovation Index, Analysis Explore Economy Reports from the GII 2018, https://www.globalinnovationindex.org/analysis-economy A gauge of the human capital of countries

For years, the Nordic countries have maintained a strong position in international rankings in terms of promoting a high level of innovation.11 The innovation leaders include such Nordic regions as Stockholm, Östra Mellansverige and Sydsverige (Sweden), Hovedstaden (Denmark) and Länsi-Suomi (Finland). In the years 2009–2016, all Nordic countries demonstrated a stable pattern of R&D expenditure12 although there were some regional differences. Preliminary figures from the Nordic producers of R&D statistics show that the Nordic countries spent about 375 billion Norwegian kroner (NOK) on R&D in 2016. This gives a total growth in current prices of 18 billion NOK or 5% in 2016, which is somewhat higher than the corresponding growth for 2015, at 3%. In 2016, Sweden accounted for 43% of total R&D expenditure in the Nordic countries (42% in 2015). Denmark’s share amounted to 22%, while Finland’s share was 18%. Norway accounted for 17% of R&D expenditure and Iceland for 1%. During the last ten-year period, Norway’s and Denmark’s shares have increased, and Iceland’s share is stable. Finland’s share has had the strongest decrease, while Sweden’s share has had a small decrease (NIFU). 11 12

 See Business Insider Nordic 2017.  See https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs

5.1  Nordic States in the International Arena

107

Although, all capital cities (especially Stockholm) and larger cities in the Nordic countries remain strong economic centers where knowledge-intensive activities are highly concentrated, a large share of technology and knowledge-intensive jobs can also be found in more peripheral regions e.g. Norrbotten in Sweden. Nordic countries have maintained a strong position in the field of ecological solutions.13 Although many European competitors are catching up, it is the Nordics that are still the most innovative part of Europe and almost all regions (with the exception of some areas of Finland) show significant expenditures on research and development (R&D). Moreover, the Nordics have maintained a high position in the field of ecological solutions. The eco-innovation outlook has remained distinctively positive and stable in the years 2010–2016 although the positioning of many other European countries (e.g. Lithuania, Latvia, Greece, Portugal) on the index has significantly improved in recent years. The presence of eco-innovation parks facilitates industrial symbiosis as well as improving ecosystems and enabling new and innovative business opportunities. It is important to note that greenfield-type investment has dominated the landscape of some peripheral regions. But the regions with the highest deal values are by far the capital city regions, with Stockholm as the clear leader. The Nordic Region also remains an attractive destination for foreign investment, accounting for 7% of the total Foreign Direct Investment (FDI) inflows in Europe. Sweden makes up almost half of this total and has by far the highest level of investment activity in the Nordic countries. Interestingly, all this is in a region of but 4% of the European population. All in all, the Nordic economy remains strong and, as already mentioned, the Global Innovation Index (2018b) lists Sweden, Denmark and Finland in the top ten most innovative countries in the world. Based on the above facts, the Nordic countries, and the Nordic region as a whole with a population of more than 27 million people and rich in many energy resources, seem to be particularly interesting. Sharing a long tradition of cooperation, Nordic countries still have extended its scope to many new areas including a common labor market, energy, and R&D. It is also worth noting that the Nordic power market as recently as the early 1990s is characterized by liberalization of national energy markets which advances at an accelerating pace. In 1990, Norway was the first to have adopted a new energy law thus creating an innovative, fully competitive energy market. Two years later, the Norwegian spot market was fully opened to all market players.14 In 1995, similar actions were undertaken by Sweden which as of January 1, 1996 enabled all customers with a free choice of energy providers.15 The convergence of markets and the long-term cooperation on multi-system and cross-national  More on the subject in Czarny 2017, pp. 131–148.  An independent company Statnett Marked AS was put in chargé of running the spot market for electricity. 15  It was done on the provision that the consumers will install metering devices to register energy usage on hourly basis, as in the case of Norway. The full liberalization of the electricity market in Sweden was formally achieved on December 1, 1999. 13 14

108

5  Norden States in the Context of Energy Security: Fundamental Issues

flow of electricity have launched debate on establishing a joint electricity trading exchange for both countries (Gawin 2005). As a result, the Swedish and Norwegian markets merged into a common market and January 1, 1996 marked the beginning of the world’s first, international power exchange called Nord Pool16 to be managed on a 50–50 basis by two companies: Norwegian Statnett Market and Swedish Svenska Kraftnät. In 1998, after the liberalization of its energy market, Finland joined the Nord Pool power exchange. Within the same period, the integration process into the common Nordic Power Exchange was initiated on the Danish market. Ultimately, Denmark fully integrated its market with other Nordic countries in 2000. The Nordic energy market has also assisted Iceland in creating an open energy market, as Iceland is the only Nordic country remaining outside of the common energy market. The volume of electricity traded in 2007 was 1.6 TWh (an increase in comparison with 1.1 TWh of the previous year). In 2005, the Nord Pool exchange, as the first company in the world started trading European Union Allowances (EUAs) for carbon dioxide emissions.17 Two years later, in June 2007, also as the world’s first exchange, it began offering the certified emissions reductions (CERs) trading platform (www.emisje.com.pl). The newest market segment at Nord Pool Spot SA is the natural gas exchange and its very first day of trading took place on March 4th, 2008. Nord Pool exchange is very active on the energy market. In addition to integrating the Nordic markets, Nord Pool’s other activities in the field of cross-border cooperation should also be mentioned to support the following statement claiming that “Nord Pool is Europe’s leading power market and offers trading, clearing, settlement and associated services in both day-ahead and intraday markets across nine European countries.”18 Similarly to other economies in the world facing global challenges, the Nordic countries pay great attention to the energy sector and the security of energy supply, and in this particular field they have significant capabilities, as shown in the Fig. 5.5. In 2015, the Nordic region domestic energy consumption by energy source and as the percentage of the total looked as follows: Coal – 7%; Oil – 29%; Gas – 8%; Nuclear power – 16%; Renewable Energy – 40% (Nordic Statistics 2018). In line with the Nordic countries environmental protection and climate principles (so-­ called Nordic Green), the table below reflects their commitment to the established policy (Fig. 5.6).

 www.nordpool.com; more on the subject in Nehrebecki 2009.  Trading of CO2 allowances at Nord Pool exchange was launched on February 11, 2005; see www.emisje.com.pl 18  “Nord Pool is Europe’s leading power market and offers trading, clearing, settlement and associated services in both day-ahead and intraday markets across nine European countries,” http://www. nordpoolspot.com/About-us/. Currently, this applies to 380 companies from 20 countries which trade on the markets in the Nordic and Baltic regions, and on the UK market. 16 17

5.1  Nordic States in the International Arena

109

Denmark Finland Production and Imports Mtoe, including: Oil production

Island

Norway

Sweden

35,50

44,48

6086 (ktoe)a

199,96

63,70

8,92

-

-

82,05

-

14,08

12,09

-

-

17,66

Oil products imp????

7,26

-

-

-

-

Gas production

5,48

-

-

95,57

-

Electricity import

-

7,64

-

-

??????

Bio/waste prod

-

8,96

-

-

11,22

Heat

-

-

-

-

-

Geoth prod

-

-

4163 (ktoe)

-

-

Hydro prod

-

-

1106 (ktoe)

-

-

Nuclear prod

-

-

-

-

17,32

13,62

24,72

27 17 (ktoe)

20,43

32,34

Oil products

5,24

7,45

538

8,07

9,70

Electricity

2,71

6,87

1447

9,40

10,75

Heat

2,55

4,05

535

-

-

-

5,07

-

-

6,02

Oil import

Total final consumption, including:

Biofuels and waste

Fig. 5.5  Energy production and import/Total final consumption. Balance 2013 in millions of tons oil equivalent (Mtoe) Compiled by author on the basis of data from http://www.iea.org/statistics/statisticssearch/ report/?country a Thousand tons of oil equivalent (ktoe), Conversion base: 1  ktoe  =  11630000  kWh; 1 kWh  =  8.5984522785899E-8 ktoe, https://www.unitjuggler.com/convert-energy-from-ktoe-tokWh.html

Against this background, below are the compiled data illustrating the selected Nordic countries energy potential and its policy, energy resources and needs as compared to the European Union (Figs. 5.7 and 5.8). The above data should be looked at only as an introduction to a more current and detailed analysis of the energy balance, issues and dilemmas the countries of the region are facing.19

19

 See Chaps. 6, 7, 8, 9, and 10.

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5  Norden States in the Context of Energy Security: Fundamental Issues

Environmental taxes % of total taxes Energy intensity total terajoule per million GDP Production of renewable energy % of total energy production Greenhouse gas emissions tons CO2 per capita (2015) Recycling of municipal waste % of waste that is recycled Economic growth % (2017)

Fig. 5.6  Nordic Green Source: Nordic Statistics FULLTEXT01.pdf, pp. 17, 13

Denmark

Finland

8.4

7.0

3.2

6.2

5.0

2.8.

7.6

19.0

3.3

4.9

23.4

59.9

100

6.5

50.3

9.3

10.2

13.8

10.4

5.5

28.6

29.2

25.5

28.0

32.6

2.3

2.8

3.6

2.0

2.3

2018,

Iceland

Norway

Sweden

http://norden.diva-portal.org/smash/get/diva2:1257993/

2007 2010 2012 2015 2016 2017 Denmark Finland 32.5 31.9 28.4 27.6 28.3 27.6 Iceland Norway 45.9 41.9 47.6 47.0 47.3 47.5 Sweden 54.0 51.9 55.1 53.4 52.8 54.4 Total 2041.7 2001.1 1944.3 1908.7 1934.6 1969.5 Europe

Fig. 5.7  Consumption of primary energy, million tons oil equivalent Compiled by author on the basis of BP Statistical Review World Energy 2018, p. 8 In this review, primary energy comprises commercially-traded fuels, including modern renewables used to generate electricity DENMARK Renewable energy %

32

FINLAND ICELAND 39

73

NORWAY SWEDEN EU 69

54

17

Fig. 5.8  Renewable energy: % of gross final energy consumption (2016) Compiled by author on the basis of http://norden.diva-portal.org/smash/get/diva2:1257993/ FULLTEXT01.pdf

5.2  N  orden and the Energy Problems in the Baltic Sea Region The enlargement of the EU in 2004 has changed the geopolitical map of Northern Europe and shifted the EU’s geographical focus towards the north-east. The Baltic

5.2  Norden and the Energy Problems in the Baltic Sea Region

111

Sea has almost become the EU’s internal sea, the second Mare Nostrum in the history of Europe. It is surrounded by eight EU Member States inhabited by one third of the Community’s population and generating one third of the EU GDP as well as the western part of the Russian Federation with its enclave called Kaliningrad Oblast. The Region comprises a group of countries which are not only geographically connected but also pursuing  – with mixed results  – the so-called Baltic ­cooperation. I. Budzyńska (1998, p. 7) rightly notes that the term “Baltic cooperation” most often refers to the area comprising Lithuania, Latvia, Estonia, Finland, Denmark, the German federal states of Schleswig-Holstein, Hamburg and Mecklenburg-Vorpommern, Poland and the Russian Federation regions/oblasts  – the Kaliningrad and Leningrad (St. Petersburg) Oblast, adjacent to the Baltic Sea (with the total population of almost 100 million). The term may also refer to the territory apart from the already mentioned countries, the German states and Russian oblasts, and include also Norway, Iceland, Belarus, oblast of Novograd and Pskov, Karelia and sometimes the Czech Republic and Slovakia. The following three pillars form the basis for cooperation: –– liberal model of the internal market; –– sustainable development; –– security of supply. They are of equal significance but with even a potential threat to the energy security, the other two pillars cannot be realized. Closer cooperation on security of supply in turn should support the development of the other two pillars. Moreover, countries of the region should seek to act in a concerted way focusing more on sustainable development, competitiveness and the mutual support in addressing issues. It is also important to understand problems of all the countries in the Baltic Sea Region such as energy security, liberalization and implementation of ambitious aims of the energy-climate package. A prerequisite for real security in the region is ensuring that efforts to improve energy security undertaken by one Member State will not lead to deterioration of energy security of another Member State. The cooperation is also necessary in the event of a threat posed by external initiatives and actions. All infrastructure projects should be assessed in terms of their economic viability, cost-effectiveness, impact on energy security and the proper functioning of the internal energy market. The energy solidarity in the region should be interpreted as an integrated set of actions aimed at establishing economic and legal conditions system that would demand: –– firstly, the reliability of supply that is providing stable conditions for meeting the current and long-term needs of the economy and society for energy of the right kind and quality; creating conditions to maximize the diversification of energy supply and energy carries to facilitate the use of diverse energy sources; –– secondly, competitiveness that is creating a level playing field for all energy market players by ensuring the costs and prices transparency and access to infrastructure;

112

5  Norden States in the Context of Energy Security: Fundamental Issues

–– thirdly, complying with the environmental protection requirements, i.e. preventing or reducing as much as possible the negative impact of the energy sector on the environment, climate and the quality of life of societies. It is worth remembering, however, that the threats to the energy sector may not only result from force majeure but also or even primary from political factors. Therefore, apart from political cooperation, genuine solidarity is needed, based on mutual support and creating institutional arrangements to provide energy to the countries in the region in the event of a crisis.20 A specific mechanism is needed to allow for an immediate response to the energy crisis. The established mechanism should also contribute to the liberalization of the common energy market. Undoubtedly, both Europe and the Baltic Sea Region need not only the liberalization of the market but also a greater diversification of energy sources and supplies as well as solidarity to tackle effectively threats to energy security and overall energy balance. Diversification of energy supply should entail support for infrastructure development to deliver energy carries to various States. The accession of new States to the EU was to provide the impetus for the strengthening of Europe’s energy security. Here the geographical location of Poland seems to be of key importance. However, countries in the region differ in terms of energy situation and ability to ensure energy security. For instance, the Nordic countries, with the exception of Finland, are less vulnerable to severe supply disruptions. In Poland, on the other hand, the issue of shortages arises in the context of the challenges to diversification of natural gas sources. Let us also remember that Poland, apart from coal, is not self-sufficient in key raw materials and following its accession to the EU, it became a part of a system of connected vessels. In this context, the Nord Stream pipeline is disadvantageous for Poland and a strategic failure, depriving Poland of transit revenues and transit fees. Experts and all other states around the Baltic Sea have expressed skepticism at the very least toward not only the Nord Stream 1 but also the construction of the Nord Stream 2 pipeline. The main concerns focus on the environmental impact but a number of countries make no secret of the fact that there are also political considerations at play. Given such views, it is hard not to look at the Northern gas pipeline but as a source of negative emotions and dissatisfaction giving rise to tension and friction, and even being a breeding ground for conflict in the future. It is about upsetting the fragile equilibrium, i.e. the current regional balance of power, and also about disrupting the stability of the Baltic Sea Region. The negative impact of this investment on the natural environment of the Baltic Sea seems particularly alarming. There are also other important issues with international implications. All the new investments signal the emergence of a new strategic situation throughout Northern Europe from the Barents to Baltic Seas. Energy carriers are  The European Commission’s Green Paper as well as the Conclusions of the European Council of March 2006 presuppose that such a mechanism should be based on the principles of solidarity and subsidiarity. 20

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becoming an object of political games once again. Oil and gas impact political balance in the region and may change States’ interests. Changes to the existing EU energy policy cannot be ruled out as the interests of the States might be completely reorganized.21 It is all the more so when, unfortunately and in line with a pessimistic scenario, Russia has strengthened its military presence in the Baltic Sea which for obvious reasons has not pleased many countries. The Baltic States find themselves in no less complex situation. Since the dawn of their independence, they have been working towards clearly identifying strategic and tactical objectives of energy security, import policy and the implementation. The main energy sources for the Baltic countries in 2015 were oil (26% of primary energy), biomass (22%), oil shale (22%), and natural gas (21%).22 Lithuania has a large oil refinery in the western part of the country, located near the Latvian border. The refinery is currently supplied through the Būtingė oil terminal in Lithuania. Estonia burns oil shale for electricity and district heating, and refines oil shale to shale oil, which is used to replace heavy oil in maritime transport and exported. Latvia has the highest share of biomass in the primary energy supply and a notable share of hydro power. The Baltic countries have historically received all their natural gas from Russia. Latvia has the Inčukalns natural gas storage facility, which has a 2.3 Gm3 capacity (1.5 times the annual demand), allowing Latvia to buy cheaper gas when there is less demand in the summer. Stored gas can be transported to Lithuania. In order to diversify the supply options, Lithuania completed the Klaipeda LNG station in 2014. In addition, two gas interconnectors to the Baltic countries are under construction, one from Poland to Lithuania, which is expected to be completed in 2021, and another from Estonia to Finland, which is expected to be completed in 2020. Baltic countries primary energy demand for 2015 stood at 710 PJ of which 22% was from biomass and 50 PJ nett exports of biomass. The largest consumers of biomass are: the residential sector (55 PJ), electricity and district heating (50 PJ), and industry (20 PJ) where it is mostly used to generate electricity and steam for technological processes (Lindroos et al. 2018). Oil shale is used in electricity generation, liquid fuel production, and in the chemical industry. Oil shale currently plays a dominant role in the Estonian power system.23 Although the share of electricity produced from oil shale power plants is declining, it has still exceeded 75% of the total annual generation between 2010 and 2016. It should also be added that electricity generation from oil shale is related to high CO2 costs, and Eesti Energia, which owns the power plants, has reported CO2 emissions of roughly 1200 gCO2 per kWh of electricity produced. This can be compared to the overall CO2 intensity of electricity generation in Estonia (760 gCO2/kWh),

 For more on the subject see Czarny 2009, pp. 108–126.  See Regional Investment Plan 2017 Regional Group Baltic Sea. 23  Estonia’s electricity generation capacity is based on oil shale and shale gas, which forms the bulk of the generation capacity (1650 MW/2250 MW). 21 22

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Poland (670 gCO2/kWh), and the EU (270 gCO2/kWh) in 2014 (EEA 2017). Oil shale can also be processed into liquid fuel – shale oil. In the Baltic countries, oil products were the most common energy carrier with a 36% share of the final energy demand. Eighty-four percent of the oil was consumed by the transport sector, where the demand increased from 100 PJ in 2000 to 150 PJ in 2015. After oil products, the most common fuels used in the final energy consumption were biomass (20%), electricity (17%), and district heating (15%). The largest sources of greenhouse gas (GHG) emissions in the Baltic countries are public electricity and district heating (32% at 2015), transport (21%), industry (18% when counting both energy and process emissions), and agriculture (17%). The remaining 12% are emitted from buildings, the waste management sector, and other energy use. These calculations exclude emissions from international aviation and maritime, and from Land Use, Land-Use Change, and Forestry (LULUCF). The Baltic countries’ electricity systems are currently operated in parallel with the Integrated/Unified Power System (IPS/UPS) of Russia and Belarus, but also transmission interconnections to the synchronous grid of Central Europe (Lithuania – Poland) and to the Nordic power system (Lithuania – Sweden and Estonia – Finland) are being expanded. Therefore, the current political target is to desynchronize the Baltic countries from the IPS/UPS and synchronize the Baltic countries’ electricity grid to the Central European synchronous grid. Latvia has three large hydropower plants (880  MW, 400  MW, and 260  MW) which delivered 53% of the total capacity and supplied 33% of Latvia’s electricity in 2015 (World Energy Outlook 2017). The annual variation in the hydropower generation has been high (±30%) ranging from the 3700 GWh at 2012 to 1860 GWh at 2015 while the average from 2000 to 2016 has been 2830 GWh per year. The remaining electricity generation capacity is mostly natural gas (40%) supplemented with biomass and biogas. District heating in Latvia is derived from natural gas and biomass. The amount of district heating produced with biomass has increased from 4 PJ in 2010 to 9.5 PJ in 2015 (IEA 2017) and Latvia has further plans to replace fossil fuel-based district heating with biomass. Lithuania has substantial natural gas generation capacity (2700 MW), but electricity imports have increased since Ignalina nuclear power plant shut down at the end of 2009. This country has 120 MW of hydropower and 900 MW of pumped hydro that can be used to balance short term variability in the power system. Industry generated 25% of the district heat in Lithuania which is significantly higher than in Latvia and Estonia (7% each). The public district heat was produced with biomass (61%) and natural gas (36%) at 2015 (EIA 2017). The amount of biomass used for electricity and district heating has increased in recent years and Lithuania would like to further increase the share of biomass. At the end of 2016, the amount of installed wind power in the Baltic countries was 918 MW, equaling 150 W per person. This is below the EU’s average 300 W per person, but close to countries like France (170 W per person) and on par with Italy (150  W per person). Estonia has more installed wind power per capita, whereas Latvia only has 35  W per person, which is the 6th lowest in the EU

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(EurObserv’ER 2017).24 The amount of installed solar power is still relatively low in the Baltic countries. Estonia had 2 MW solar PV installed at 2015, Latvia 1 MW, and Lithuania 3 MW. Cooperation between the Nordic and Baltic countries is regarded as one of the most dynamically developing ones in the world. The Nordic governments were among the earliest supporters of Baltic independence, and political and civil cooperation between the regions has been strong ever since. Among others, it is through initiatives like the Nordic-Baltic Eight (NB8), consisting of 5 Nordic countries and 3 Baltic countries, the Nordic Council of Ministers’ cooperation with the Baltic countries, BASREC25 (Baltic Sea Region Energy Cooperation), BEMIP (Baltic Energy Market Interconnection Plan), Baltic integration in the Nord Pool market, and others. For example, BEMIP26 plans to link the energy markets and networks of Germany, Denmark, Sweden, Finland, Poland and the Baltic countries (KE 2017). BEMIP aims to build both gas and electricity interconnectors. For the Baltic Countries, the plans include: –– electricity interconnector for Estonia-Finland – Estlink 2, 650 MW, completed in 2014; (FINGRID n.d.). –– electricity interconnector for Sweden-Lithuania – NordBalt, 700 MW, completed in 201627; –– strengthening electricity grid between Estonia and Latvia (with 3rd interconnector, 600 MW); –– gas interconnection between Poland and Lithuania  – GIPL, 2.3 Bm3 per year with the possibility of doubling the capacity (EPSOG); –– natural gas pipeline between Estonia and Finland – Baltic Connector, 2 Bm3 per year28; –– strengthening natural gas network between Estonia and Latvia. The Baltic Sea has huge offshore wind power potential which means that the Baltic States could invest in joint projects, including additional interconnectors through offshore wind power sites. The Baltic Sea Declaration, which seeks to accelerate offshore wind cooperation in the Baltic Sea region, was approved in 2017 – BSOWF.29 The Baltic countries energy and climate strategies until 2030 and for the period from 2021 to 2030 should be examined not only in the context of the EU membership but their distinctive cooperation with the Nordic States. In October 2017, Estonia’s government approved the Estonian Energy Development Plan until 2030 – ENMAK

 Compare with Wind Energy barometer 2019.  See Baltic Sea Region Energy Cooperation, BASREC, http://basrec.net/about-basrec/gseo/ 26  See Baltic Energy Market Interconnection Plan (BEMIP), https://ec.europa.eu/energy/en/topics/ infrastructure/high-level-groups/baltic-energy-market-interconnection-plan 27  See http://www.baltic-course.com/eng/energy/?doc=144175 28  See http://balticconnector.fi/en/ 29  BSOWF 2017; see Lindroos et al. 2018. 24 25

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(Republic of Estonia) and the “General Principles of Estonian Climate Policy until 2050.” Both documents were approved in the Estonian Parliament in April 2017 (Republic of Estonia). The approved legislation outlines the general framework and principles of sectoral development and it also defines long term targets to reduce GHG emissions by 70% by 2030 and by 2050, compared to 1990. Furthermore, the “Long-Term Energy Strategy of Latvia 2030” presents the energy system modelling to 2030. More practical suggestions include increasing the renewable energy share to 50% of final consumption, reaching 50% energy dependency, and reducing energy use for heating by 50% by 2030 (compared to the current average level of 200  Wh/m2). The long-term energy strategy is linked to a broader “Sustainable Development Strategy of Latvia until 2030” which outlines the key objective for the energy sector as being to ensure energy independence by using domestic resources and integrating with EU energy networks. In 2017, Lithuania’s Government proposed the revised national strategy aimed at increasing energy independence. The proposal has many specific targets for the year 2030, including renewable energy 45% of final consumption by 2030 and 90% RES-H by 2030. The previous National Energy Independence Strategy (OJ EU 2012) presented several concrete mid-term targets for 2020 and laid down guidelines for the development of Lithuania’s energy sector towards 2030 and 2050. Concrete mid-term targets for the power sector included integration of electricity markets, building new interconnectors, and building a new nuclear power plant (which was later turned down in a public vote). For the residential sector, the strategy aimed to increase energy efficiency, support renewables in the residential sector, and increase market liberalization. The strategy also included building the Klaipeda LNG terminal and a pipeline to Poland, as well as gas market liberalization. The three Baltic countries used to be so-called “energy islands” with no electricity connections to the rest of Europe. In recent years, this situation has changed with the establishment of Estlink 1 and 2 connecting Estonia and Finland, the LitPol Link between Lithuania and Poland and the Nordbalt interconnector linking Sweden and Lithuania, which all in all provide 2200 MW of interconnection capacity between the Baltic countries and the rest of the EU. In comparison, the average load of all three Baltic countries was approximately 2800  MW in 2016. The Baltic Energy Market Interconnection Plan (BEMIP 2014a) and EU infrastructure funds have been very instrumental in the development of the new interconnectors to the EU. In addition, the Baltic countries have connections to Russia of approx. 1000 MW and to Belarus of approx. 1300 MW. The sources of electricity generation are very different from country to country, but a common feature for all three Baltic countries is a very well-developed district heating network in most towns. However, a major problem results from the fact that the existing power system infrastructure is operating in in the framework of the Russian IPS/UPS30 unlike other countries within the UCTE  UPS/IPS is the system outside the Russian Federation which differs from the one existing in Western Europe. It has an installed capacity of 310 GW for the transit requirement for electric capacity of 180 GW and energy consumption level of 1200 TWh; see Kułagowski 2005. 30

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system.31 The potential advantages to energy security resulting from the synchronous interconnection of the power systems are precisely the reasons why the Baltic countries are committed to overcoming all the existing barriers and technical obstacles.32 It concerns a lack of interconnections between systems causing isolation of the Baltic countries from IEEM (Internal European Electricity Market). Integration of the Baltic States into UCTE is a long-term process, where the security of the system requires the countries to comply with many technical and organizational requirements. The project is implemented as a part of the Baltic Electricity Ring, in accordance with European Parliament and Council Directive of June 26, 2003, and listed in Annex II as one of the options for states outside the Community power system or candidate countries to connect their power networks.33 Thus the Baltic republics are not self-sufficient in energy supply. It also does not diminish the importance of the view that is necessary to achieve energy independence. Energy independence related expenditures is in fact defense spending (Neatkariga 2008). On the basis of this thesis Lithuanian, Latvian and Estonian Prime Ministers collectively agreed to join the Nordic power market in 2013 and the European Commission authorized EUR 100 million to support construction of the second submarine power cable between Estonia and Finland34 and earmarked additional EUR 175 million for building an undersea power cable to Sweden (Swedlink), and EUR 100 for Estlink. According to the latest forecasts prepared by two teams: the VTT team and the Ea Energy Analyses team (Lindroos et al. 2018), the Baltic States remain energy importers in all three scenarios: 4DS, BPO and 2DS. The lowest generation levels are observed in 4DS, where more than half of the electricity demand will be served by imports from 2030. Production from oil-fired power plants will gradually decrease from 2020 and bituminous shale production will be reduced to less than 2 TWh by 2040. In addition, a growing role in the Baltic energy system (if CO2 prices rise sufficiently, biomass-based energy can play a role (if CO2 prices rise sufficiently), as it will also provide an option to build up a disposable generation to help balance the diversity of solar and wind energy. Hence the need to cooperate with Norden and to develop a perspective based on the BENTE project exploring energy perspectives for Estonia, Latvia and Lithuania. It aims to contribute to the Baltic States’ efforts to renew and update their energy and climate strategies, with particular emphasis on how each country could achieve the proposed EU targets for 2030 and provide a perspective up to 2050.  The UCTE system has an installed capacity of 510 GW, the peak load of 340 GW and consumption of 2150 TWh; see W. Kułagowski 2005. 32  These systems differ in the time of restore system frequency 50 (±0,02) Hz and in the balancing method (a longer restoring time, pumped-storage hydroelectric power station in w IPS/UPS, compared to UCTE’s immediate balancing time and nuclear power units as a backup). 33  More on the subject in Żenkiewicz 1998, pp. 105–109. 34  The Finnish Prime Minister Matti Vanhanen was very pleased with the EC decision and stressed that the proposed financial assistance would cover round 1/3 of the total investment costs. BNS Agency, January 29, 2009. 31

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The deployment of renewable energy would undoubtedly reduce the Baltic States’ dependence on imports and provide some security against excessive prices of electricity. Thus additional interconnection capacity to the Nordic countries is to become economical, especially given that the estimated additional energy system net costs are reasonably small. Moreover, the Baltic power systems offer good opportunities for integration of wind and solar power. The most important integration measures are local hydro power, large-scale hydropower plants, interconnectors to the hydropower dominated Nordic power system, and flexible thermal power plants. In the longer term, power to heat solutions, i.e. electric boilers and large-­ scale heat pumps, could also play a key role in the integration of variable generation. It can therefore be concluded that the Nordic countries and the three Baltic countries share some common energy challenges and opportunities, similar climatic conditions, rich bioenergy resources, ample wind-energy potential and hydropower.35 The Baltics are also major trading partner with the Nordics and are integrated with the Nordic Electricity Market. In this context, particular attention should be given to the Nordic Energy Technology Perspectives (NETP) dedicated to regional long-­ term low-carbon technology pathways. After completing two editions of Nordic Energy Technology Perspectives (NETP), it was decided that a natural next step would be to conduct a similar exercise for the Baltic countries where scenarios presented in a report would identify both opportunities and challenges on the road towards the ambitious national climate targets of the region. Taking into account objective European and external conditions, all efforts to ensure energy security for Lithuania, Latvia and Estonia must be addressed in the European context in order to take full advantage of the EU’s framework and capacities and make the most of the benefits offered by the Union’s membership and its established mechanisms. The Baltic States’ solutions should not only correspond with the direction and language of the mainstream EU debate on European energy policy but also in line with European Union’s agenda and practice. The Baltic countries should seek allies within the EU, including also or perhaps above all among the Nordic countries. Undoubtedly, this is fostered by their special nature of relations with the Nordic countries.36 For its part, Norden with the traditional and recently dynamically developing regional cooperation attaches great importance the relations with the Baltic States describing them as good neighborliness marked by readiness to provide assistance. Norden cooperation programs with the neighboring countries are oriented at Baltic States, north-western Russia and the Arctic region. These programs are considered a priority direction of the Nordic countries foreign

 See Global Engagement: https://www.iea.org/countries/Latvia/; https://www.iea.org/countries/ Estonia/; https://www.iea.org/countries/Lithuania/ 36  These relations are deeply ingrained and originated prior to regaining of sovereignty by the Baltic republics. Nordic countries have always expressed special interest in and shared historical bonds with the Balts. They were very active during their EU accession process. More on the subject in Czarny 2018, pp. 155–198. 35

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policy in the region.37 The main objective of the cooperation with the neighboring regions is to promote democracy, culture, market oriented economy, sustainable use of resources and regional security.38 The activity of the Nordic countries within the neighborhood program is consistent with the EU actions implemented under the under the Northern Dimension policy. Its priority areas include, among others, environmental protection and cooperation, nuclear security, energy cooperation, infrastructure and human and social development. These efforts are complemented by the EU’s Baltic Sea Strategy39 which the then Prime Minister of Sweden F. Reinfeldt declared not only a key priority of the Swedish EU Presidency (2009) but above all the first official regional strategy in the EU. It should set the paths towards the four common policy objectives, which are the following: providing environmental safety in the region, prosperity and welfare, openness and attractiveness, as well as stability and security. Achieving these objectives will be possible by enhancing integration of the countries of the region, strengthening the common regional market and infrastructure development. These assumptions are corroborated by the renowned Japanese innovation strategist Dr. Kenichi Ohmae who claims that it is crucial when moving away from protectionism to develop innovative macro-regions that cross national borders (International Partnerships n.d.).

Bibliography BASREC – Baltic Sea Region Energy Cooperation, http://basrec.net/about-basrec/gseo/ BEMIP (2014a) – Baltic Energy Market Interconnection Plan – 6th progress report – July 2013 – August 2014. Retrieved January 11, 2019 from https://ec.europa.eu/energy/sites/ener/files/ documents/20142711_6th_bemip_progress_report.pdf BEMIP (2014b)  – Baltic Energy Market Interconnection Plan https://ec.europa.eu/energy/en/ topics/infrastructure/high-level-groups/baltic-energy-market-interconnection-plan BNS Agency (2009, January 29) BP Statistical Review World Energy, June 2018 Budzyńska I (1998) Północny wymiar w polityce Unii Europejskiej. KS  – Biuro Studiów i Ekspertyz, Informacja BSE nr 658. http://biurose.sejm.gov.pl/teksty/i-658.htm Business Insider Nordic (2017) Retrieved December 10, 2018 from https://nordic.businessinsider. com/eurostat-report-shows-exactly-how-much-the-nordics-excel-and-research-and-development-2017-3  The beginnings of cooperation date back to 1990. In 1991, in the capital cities of the Baltic States information points on cooperation programs were established that in addition to providing information also facilitate the program implementation in the neighboring countries. North-western Russia joined the program in 1994. In 1996, the Arctic region has been included. 38   Framgångsrikt samarbete i Norden  – och i EU, Tal Av Cristina Husmark Pehrsson, socialförsäkringsminister och ansvarig i regeringen för nordiska samarbetsfrågor, vid seminariet Norden – i och för Europa, ABF – huset i Stockholm i samarbete mellan Föreningen Norden och ABF Stockholm, Regeringskansliet, 7 mars 2008, www.regeringen.se 39  The conference in Stockholm gathered the representatives of all eight countries bordering the Baltic Sea that are also EU member states. The Swedish side convened the conference on September 30. 2008. 37

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Czarny RM (2009) Dylematy energetyczne państw regionu nordyckiego. Scandinavium, Kielce Czarny RM (2017) A Modern Nordic Saga: Politics, Economy and Society. Springer International Publishing, Cham Czarny RM (2018) Królestwo Szwecji: Uwarunkowania społeczno-polityczne i gospodarcze. Drukarnia Cyfrowa Compus, Kielce/Trnava EEA – European Environment Agency (2017) Food in a green light: A systems approach to sustainable food. EEA report, No 16/2017. Retrieved from https://www.eea.europa.eu/data-and-maps/ indicators/13.2-development-in-consumption-of-2/f0a7-eea-2017-food-in EIA (2017) International Energy Outlook 2017. Retrieved September 30, 2018 from https://www. eia.gov/outlooks/ieo/pdf/0484(2017).pdf EPSOG  – GIPL: Gas Interconnection between Poland and Lithuania, EPSOG Retrieved from https://www.epsog.lt/en/projects/gipl-gas-interconnection-between-poland-and-lithuania Estonia as a Nordic Country. Retrieved from http://www.vm.ee/eng/nato/1210.html EurObserv’ER report 2017: The state of renewable energies in Europe (2017). Retrieved from https://www.eurobserv-er.org/category/barometer-2017/ FINGRID (n.d.) EstLink 2 – second high-voltage direct current link between Finland and Estonia. Retrieved from https://www.fingrid.fi/en/grid/construction/arkisto/estlink-2/ Framgångsrikt samarbete i Norden  – och i EU, Tal Av Cristina Husmark Pehrsson, socialförsäkringsminister och ansvarig i regeringen för nordiska samarbetsfrågor, vid seminariet Norden – i och för Europa, ABF – huset i Stockholm i samarbete mellan Föreningen Norden och ABF Stockholm, Regeringskansliet, 7 mars 2008 Gawin R (2005) Skandynawski rynek energii elektrycznej – przypadek szczególny czy uniwersalne rozwiązania?. Biuletyn URE, Nr 4/2005 Global Innovation Index: Analysis, Explore Economy Reports from the GII 2018 (2018a) Retrieved January 31, 2019 from https://www.globalinnovationindex.org/analysis-economy Global Innovation Index: Analysis, Explore the Interactive Databases of the GII 2018 Indicators (2018b) Retrieved December 12, 2018 from https://www.globalinnovationindex.org/ analysis-indicator Grunfelder J, Rispling L, Norlén G (eds) (2018) State of the Nordic Region 2018: Theme 3. Nordic Council of Ministers, Copenhagen. Retrieved November 23, 2018 from http://norden.diva-portal.org/smash/record.jsf?pid=diva2%3A1180272&dswid=-6846 Haagensen KM, Agerskov U, Vestergaard TA (2017) Nordisk statistik 2017. Köpenhamn: Nordiska ministerrådet. Retrieved December 15, 2018 from https://doi.org/10.6027/ANP2017-747 Husmark Pehrsson C (2008, March 7) Framgångsrikt samarbete i Norden—och i EU [Successful collaboration in the Nordic countries – and the EU]. Speech by Cristina Husmark Pehrsson, the Swedish Minister for Social Security and Nordic Cooperation at the Nordic at the Nordic Association and ABF Stockholm seminar Norden—i och för Europa, Stockholm Retrieved from www.regeringen.se IEA (2017, November 14) Retrieved August 25, 2018 from https://www.iea.org/newsroom/ news/2017/november/a-world-in-transformation-world-energy-outlook-2017.html IEA-a, Global Engagement: Estonia. Retrieved from https://www.iea.org/countries/Estonia/ IEA-b, Global Engagement: Latvia. Retrieved from https://www.iea.org/countries/Latvia/ IEA-c, Global Engagement: Lithuania. Retrieved from https://www.iea.org/countries/Lithuania/ International Conference on Industrial Engineering and Engineering Management, http://www. ieem.org/public.asp?page=home.htm NIE MA TEGO W TEKSIE International Partnerships for Innovation and Growth (n.d.). Retrieved from www.norden.org/ Webb/news KE: program prac na 2017 r. [EC: 2017 Work Programme] (2016, October 25). Retrieved from https://ec.europa.eu/poland/news/161025_work_programme_pl Kułagowski W (2005, November) Energia w dobrych rękach. In Zintegrowana energia Europy. Retrieved from www.pse-operator.pl Larsen M, Alslund-Lanthén E (2017) Bumps on the Road to 2030: an overview of the common challenges for the Nordic countries in achieving the Sustainable Development Goals (SDGs).

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Copenhagen: Nordic Council of Ministers. Retrieved December 16, 2018 from https://doi. org/10.6027/ANP2017-738 Lindroos TJ, Lehtilä A, Koljonen T, Kofoed-Wiuff A, Hethey J, Dupont N, Vītiņa A (2018) Baltic Energy Technology Scenarios 2018. Nordisk Ministerråd, Copenhagen. Retrieved March 21, 2019 from http://norden.diva-portal.org/smash/get/diva2:1195548/FULLTEXT01.pdf NB8, Ministry of Foreign Affairs of the Republic of Lithuania. Retrieved from https://urm.lt/ efault/en/foreign-policy/lithuania-in-the-region-and-the-world/regional-cooperation/nb8 Neatkariga (2008, September 08) Nehrebecki AJ (2009, July 1) Giełdy energii elektrycznej w Unii Europejskiej. Biuletyn URE, Nr 4/2009. Retrieved July 9, 2014 from http://www.ure.gov.pl/ftp/Biuletyny_ URE/2009/2009.07.01-biuletyn_nr4.pdf NIFU  – The Nordic Institute for Studies in Innovation, Research and Education Retrieved December 2, 2018 from https://brage.bibsys.no/xmlui/bitstream/handle/11250/2473523/ Nordic%20newsletter%202016.pdf?sequence=1&isAllowed=y Nordic Statistics 2018 (2018) Nordic Council of Ministers. Retrieved December 10, 2018 from http://norden.diva-portal.org/smash/get/diva2:1257993/FULLTEXT01.pdf OJ EU (2012) Dz.U.UE.C.2012.278.2, Komunikat rządu Litwy dotyczący dyrektywy 94/22/WE Parlamentu Europejskiego i Rady w sprawie warunków udzielania i korzystania z zezwoleń na poszukiwanie, badanie i produkcję węglowodorów. Retrieved from https://www.prawo.pl/akty/ dz-u-ue-c-2012-278-2,68241382.html Piotrowski B (2006) Tradycje jedności Skandynawii: Od mitu wikińskiego do idei nordyckiej. Wyd. Naukowe UAM, Poznań Regional Investment Plan 2017: Regional Group Baltic Sea. Retrieved March 4, 2018 from https:// docstore.entsoe.eu/Documents/TYNDP%20documents/TYNDP2018/rgip_BS_Full.pdf Republic of Estonia, Ministry of EconomicAffairs and Communications: Development Plans. Retrieved from https://www.mkm.ee/en/objectives-activities/development-plans#natdevplanener Sachs J, Schmidt-Traub G, Kroll C, Durand-Delacre D, Teksoz K (2017) SDG Index and Dashboards Report 2017. Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN), New York Törnqvist E (1998) Scandinavian or Nordic? In: Swanson A, Törnqvist E (eds) Europe – the Nordic Countries. Rodopi, Amsterdam Wind Energy barometer 2019. Retrieved March 25, 2019 from https://www.eurobserv-er.org/ category/barometers-in-english/ Wooldridge A (2013, February 2) The Nordic Light. The Economist, Special Report World Energy Outlook 2017. Retrieved August 25, 2018 from https://www.oecd.org/about/publishing/Corrigendum_EnergyOutlook2017.pdf Żenkiewicz M (1998) Bałtycki Pierścień energetyczny – Baltic Ring. Energetyka, 3 Zolkos M, Københavns Universitet (2003) Norden discourse on human rights and democracy: The effects of “europeanization”. Institut for Statskundskab, Københavns Universitet, Kbh Østergård U (1997) The geopolitics of Nordic identity from composite states to nation-states. Danish Institute of International Affairs, Copenhagen http://www.baltic-course.com/eng/energy/?doc=144175 https://ec.europa.eu/regional_policy/en/newsroom/news/2016/02/16-02-2016-moving-beyondgdp-new-regional-social-progress-index https://data.worldbank.org/indicator/gb.xpd.rsdv.gd.zs www.nordpool.com http://www.nordpoolspot.com/About-us/. Retrieved January 30, 2016 http://www.iea.org/statistics/statisticssearch/report/?country. Retrieved November 17, 2015 https://www.unitjuggler.com/convert-energy-from-ktoe-to-kWh.html http://balticconnector.fi/en/ https://www.toolshero.com/strategy/3c-model-ohmae/ www.emisje.com.pl https://www.iea.org/

Chapter 6

The Kingdom of Denmark: Leader in Energy Efficiency

Abstract  In the last half a century, the Kingdom of Denmark has radically changed the forms and methods of conducting its national energy policy. The transformation was initiated following the oil crisis of the 1970s as that occurrence forced actions leading to increasing the efficiency of the energy sector and thus improving own energy security. The ambitious plan sets the goal for energy to be derived exclusively from renewable resources by the year 2050. Currently, Denmark is perceived as an example to follow by the countries which aim at transforming their energy policies to meet the challenges posed by the world of today. Keywords  Energy security · Diversification of energy sources · Effectiveness · Efficiency

The Kingdom of Denmark  – population: 5,770,000; population per km2 134.3 (WorldData.info-a), is a country with the energy sector offering significant potential despite the fact that in the past, i.e. in the early 1970s, Danish power industry was entirely dependent on imports: crude oil accounted for 94% of the total energy consumption.1 It is worth noting that even earlier (in the 1960s) cheap oil replaced coal.2 However, newly built power plants were being adapted to use more advanced combustion systems. The increase in oil prices (controlled by OPEC) and the issue of energy-supply security led in the 1980s to a major change in the approach to the program which resulted in reversing of the proportional share of oil and coal in the country’s energy balance (Czarny 2009a, pp. 133–6).

 More on the subject in Frączek and Kaliski 2015.  For example, in 1972, electricity production was based in 80% on oil and in 20% on coal.

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6.1  Energy Potential: Hydrocarbon Resources The most significant breakthrough for the Kingdom of Denmark Energy balance was the discovery of oil and gas reserves. In 1962, the Danish consortium A.P. Møller was granted exclusive rights to survey, exploit and produce hydrocarbon resources in the territory subject to Danish sovereignty (in 1963, the concession was amended to extend to the continental shelf).3 At present, oil production on the Danish continental shelf is dominated by three groups of companies with the following operators: Maersk (the operator of 15 fields), DONG (3 fields) and Hess (one field). Consolidation in the Danish oil industry has continued over the past decade, with many smaller companies being purchased by the larger companies. As a result, approximately 90% of the market is represented by five companies: Statoil, Shell, Kuwait Petroleum, Uno-X and OK. The acquisition by Statoil of Conoco/Jet is one of the more significant examples of this consolidation in recent years.4 Oil production in Denmark began in 1972 and rose steadily until reaching a peak in 2004, when it averaged nearly 390 kb/d. Production has since declined steeply and in 2012 averaged some 201 kb/d. Danish oil production comes exclusively from offshore installations in the Danish North Sea, where there are 19 producing fields. Oil production can be expected to continue to decline steadily in the years to come, as shown in the Fig. 6.1. a Prognosis Oil represented 36% of Denmark’s total primary energy supply (TPES) in 2012, while gas represented 20% in the same year. In 1997, Denmark became a net-importer of oi and its energy imports reached its exports level. On January 1, 2002 Denmark’s oil reserves were estimated at 313 million m3 which equals 15 years of production at 2001 level (Dietrich n.d.). The projected oil production in 2008 was increased to 20.3 million m3 against the previous estimates of 18.4 million m3. In 2009, oil production was planned to reach 19.6 million m3, and in 2010 18.3 million m3. This means that due to the increase in crude oil production from the North Sea, the additional revenues of about DKK 19 billion would have accrued to the Danish budget until 2011 (Borsen 2006). In 2012, Denmark’s total net exports of oil, including both crude and refined product, amounted to 42.7 kb/d. In the same year Denmark imported 74.6 kb/d of crude oil for domestic refining, primarily from Norway.5 Generally, Denmark is a net exporter of gasoline and fuel oil and a net importer of middle distillates.  By the Act of 1981 the consortium was obligated to relinquish the rights to areas where the exploitation had not begun or had not been planned yet. The Act of 1981 was intended to open up the possibility for exploration and exploitation activities to other licensed consortia. It provided greater efficiency in exploration which resulted in some new discoveries of crude oil and gas. 4   More on the subject at http://www.iea.org/media/freepublications/security/ EnergySupplySecurity2014_Denmark.pdf 5  In terms of refined products, Denmark is a marginal net exporter (less than 1 kb/d in 2012). This is a significant change from previous years when Denmark was a marginal net importer. 3

6.1 Energy Potential: Hydrocarbon Resources

125

1990

2000

2005

2010

2011

2012

2018a

Production (kb/d)

121.7

363.0

388.1

254.8

221.1

201.2

142.8

Demand (kb/d)

192.4

210.0

183.5

167.5

164.0

158.5

150.7

Motor gasoline

37.2

45.8

43.4

36.5

34.9

33.0

-

Gas/diesel oil

92.3

86.7

83.3

85.8

83.6

80.9

-

Residual fuel oil

28.8

22.5

19.3

13.4

11.5

10.9

-

Others

34.2

55.0

37.4

31.7

33.9

33.7

-

-

-

-87.3

-57.1

-42.7

7.9

153.0

204.6 -52.1

-34.9

-26.9

5

Net imports (kb/d)

Import dependency %

70.7

36.8

-

-72.9

111.5

Refining capacity (kb/d)

187.0

135.0

176.4

179.5

179.5

179.5

-

Oil in TPES % (Total primary energy supply)

46

43

40

35

36

36

-

Fig. 6.1  Denmark: key oil data (kb/d) Source: Energy Supply Security 2014 kb/d – kilobarrels (of oil) per day. Kilobarrel = 1000 barrels of oil

Oil product demand in Denmark totaled some 7 million tons (Mt) in 2012, or an average of 158.5 kb/d. This represents a decline in total oil use at an average annual rate of 2.7% since 2001. During this period, demand for oil use in the transformation and residential sectors declined substantially. The use of fuel oil in power generation was declining and the use of heating oil was subsiding because of the increased connection of homes to district heating which is primarily fueled by renewable energy or natural gas. At the same time, demand for transport diesel continued to grow at an average 2.5% annually in the period from 2001 to 2012. Thus it can be stated that the transport sector accounts for two-thirds of all oil used in Denmark. Diesel is the single largest component in the mix of oil products used and in 2012 it represented 40% of the oil products consumed in the country. Automotive diesel has a price advantage for consumers as it has a lower tax rate than gasoline. The total oil demand is not expected to change significantly in the coming years. The DEA’s projection for oil demand, which is the basis for forecasting the country’s oil self-sufficiency, assumes oil consumption will grow moderately, averaging 0.4% annually to 2030. However, the Danish Oil Industry Association (EOF) as well as the independent public stockholding agency, FDO, expect total oil consumption to decrease gradually in the coming decade (−0.5% annually).

126

6  The Kingdom of Denmark: Leader in Energy Efficiency

Crude Oil

Barrel

Denmark per capita Europe

Production

140,600.00 bbl

0.024 bbl

0.005 bbl

0.005 bbl

Import

77,950.00 bbl

0.014 bbl

0.019 bbl

0.019 bbl

Export

78,370.00 bbl

0.014 bbl

0.004 bbl

0.004 bbl

Compared to per capita

Compared to Europe per capita

Fig. 6.2  Energy balance: oil Source: https://www.worlddata.info/europe/denmark/index.php

The Danish potential for fuel switching  – from oil to coal or natural gas  – in power and heating plants is limited. The price structures for oil, coal and other fuels have already resulted in most of this potential being realized. The large central power plants are not oil-fired apart from peak and reserve capacity which cannot be switched to other fuels. Likewise, some heating plants are oil-fired, but cannot be switched to other fuels (Fig. 6.2). Despite declining demand for oil (reaching an estimated 150.7 kb/d in 2018), it has already overtaken the country’s indigenous production by 7.9 kb/d (resulting in an import dependency of 5%). It should be added that Denmark’s period of self-­ sufficiency in oil can potentially be prolonged with additional production coming from technological developments and new discoveries. However, the estimates for these resources, unlike the expected production profile, are subject to a high level of uncertainty. Therefore, it is expected that the expected results may come in the period from 2020 to 2035. The production is expected to decline thereafter. Such a scenario would likely result in Denmark, alternating between being a net exporter and a (marginal) net importer of oil over this period, having oil import dependency that is growing steadily in the years after 2035. Natural gas is another important source of energy in Denmark. In May 1979, with the discovery of gas deposits in the Danish sector of the North Sea, the Folketing (The Kingdom of Denmark’s Parliament) passed The Natural Gas Supply Act. Five years later, the first deliveries of gas through pipeline to the Danish mainland took place. In 1984, Denmark began producing natural gas from the North Sea and has been a net exporter of natural gas ever since. The production comes primarily from the Tyra, Halfdan, Dan and Tyra Southeast Fields, which account for three-quarters of total Danish gas production. Approximately 10% of total production is used in the field as fuel, for injection or is flared (Fig. 6.3).

127

6.1 Energy Potential: Hydrocarbon Resources

1990

2000

2005

2010

2011

2012a

2018b

Production (mcm/y)c

3137

8153

10447

8220

7065

6416

4260

Demand (mcm/y)

2058

4894

4987

4947

4182

3899

3181

Transformation

537

2413

2353

2304

1742

0

-

Industry

605

856

798

796

793

0

-

Residential

436

708

772

825

691

0

-

Other

480

917

1064

1022

956

0

-

Net imports (mcm/y)

-1079

-3259

-5460

-3273

-2883

-2517

-1079

Import dependency in %

-52.4

-66.6

-109.5

-66.2

-68.9

-64.6

-34

11

24

23

23

21

20

Gas in TPES % (Total primary energy supply)

-

Fig. 6.3  Denmark: key natural gas data Source: Energy Supply Security 2014 a Estimates b Forecast c Million cubic meters per year

On January 1, 2002, Denmark’s natural gas reserves in the Danish sector of the North Sea were estimated at 141 billion m3, an equivalent to 18 years of production at the current level (Dietrich n.d.). Production peaked in 2005, with a total of 10.4  bcm produced. Total production has declined steeply since and was some 6.4 bcm in 2012. Despite earlier estimates that gas production would continue to decline sharply in the immediate short term, it increased substantially in 2014 and 2015 because of the development of new and existing fields. Based on the DEA’s expected production profile, Denmark is expected to remain a net exporter of gas6 up to and including 2020, and given technological and prospective resources even beyond 2030. As with oil production, there is the potential for prolonging the period of self-­sufficiency in gas supplies.7 The gas consumption forecast associated with this estimate is for a decline in gas demand, averaging roughly 1.3% annually to 2030.  In 2011, some 3.1 bcm of the total production of natural gas was exported to Sweden (1.3 bcm), Germany (1.1 bcm) and the Netherlands (700 mcm). 7  Demand for natural gas in 2011 was 4.2 bcm. In that year, the bulk of gas consumption (42%) was used for power generation in the transformation sector. Industry made up the second largest group, representing 19% of gas use, while the energy sector, where gas is used for oil extraction, repre6

128

6  The Kingdom of Denmark: Leader in Energy Efficiency

Natural Gas

Cubic meters

Denmark per capita

Compared to Europe per capita

Own consumption

3.20 bn m3

553.94 m3

822.75 m3

Production

4.62 bn m3

800.40 m3

446.60 m3

Import

658.00 m m3

114.05 m3

752.04 m3

Export

2.19 bn m3

379.92 m3

387.74 m3

Fig. 6.4  Energy balance: natural gas Source: https://www.worlddata.info/europe/denmark/index.php

Demand for natural gas in 2011 was 4.2 bcm because in that year the bulk of gas consumption (42%) was used for power generation in the transformation sector. Industry made up the second largest group, representing 19% of gas use, while the energy sector, where gas is used for oil extraction, represented another 16%. Daily gas consumption in Denmark normally ranges from a level of around 4 million cubic meters per day (mcm/d) in the summer to 20 mcm/d in winter. The expected maximum daily consumption when temperatures reach −13 °C is about 25.3 mcm/d.8 Future Danish gas consumption is expected to decrease by 1.3% annually from 2010 to 2030. This would infer a gas demand of some 4 bcm in 2015 and 3.8 bcm in 2020 (Fig. 6.4). The reason for the forecast decline is greater energy efficiency, a decrease in gas use at power plants, a decrease in gas consumption at decentralized combined heat and power (CHP) plants9 as a consequence of wind power development and a shift towards biogas. In addition, the Danish natural gas market is liberalized and there are no barriers to new entrants. The state-owned TSO, Energinet.dk, owns and operates the transmission network across the country and there are three distribution network operators as well as five active players in the retail market. The combined share of the two fuels, oil and gas in the supply mix has remained relatively stable over the past three decades, at around 60% of TPES although oil’s share has been reduced dramatically from the nearly 90% it represented in the early 1970s. Even though Denmark’s economy has grown by over 80% since 1980, its energy intensity index has remained almost unchanged over the same period.

sented another 16%. Data after http://www.iea.org/media/freepublications/security/ EnergySupplySecurity2014_Denmark.pdf 8  Natural gas is used in Denmark in domestic heating, partially in district heating, CHP plants and industry. Significant amount of gas is exported to Sweden and Germany. In 2002, 23% of total energy consumption in Denmark was based on natural gas. 9  CHP – in combined heat & power (CHP) systems, thermal energy produced as a by-product of electricity generation is used for heating of nearby buildings.

6.1 Energy Potential: Hydrocarbon Resources

129

Electricity

total

Faroe Islands per capita

Compared to Europe per capita

Own consumption

285.50 m kWh

5,792.25 kWh

5,514.17 kWh

Production

307.00 m kWh

6,228.44 kWh

5,928.63 kWh

Fig. 6.5  Faroe Islands: Energy balance Source: https://www.worlddata.info/europe/faroe-islands/energy-consumption.php

The present-day energy balance of Denmark should be complemented by adding the natural resources and exploitation prospects of its two autonomous territories: the Faroe Islands10 and Greenland.11 In August 2000, the Faroe Islands government granted seven licenses to major international oil companies. The license conditions obliged licensees to cooperate actively with the Faroe Islands industry to increase its potential for supplying the oil sector with competitive goods and services. In the summer of 2001, the first exploration wells were drilled on the Faroese continental shelf. Following the completion of the three appraisal wells (2006/2007), it was estimated that these fields hold substantial quantities of hydrocarbons (Namminersornerullutik). Although it is still too early to state whether extraction of these deposits is economically viable, the prospects of acquiring its own oil represent a significant challenge to the Faroe Islands community. Currently, the most important measure in the energy balance of the Faroe Islands is the total consumption of 285.50 million kWh of electric energy per year. Per capita this is an average of 5792 kWh.12 The most important measure in the energy balance of the Faroe Islands is the total consumption of 285.50 million kWh of electric energy per year. Per capita this is an average of 5792 kWh (Figs. 6.5 and 6.6). The above figures show the Faroe Islands can provide themselves completely with self- produced energy. The total production of all electric energy producing facilities is 307  m kWh, also 108% of own requirements. “The rest of the self-­ produced energy is either exported into other countries or unused. Along with pure consumptions the production, imports and exports play an important role. Other Energy sources such as natural gas or crude oil are also used” (WorldData.info-c). The government of Greenland is naturally greatly interested in exploitation of energy resources in Greenland, which the then Minister of Minerals and Petroleum commented on by stating: “I am very pleased that some of the world largest and most experienced oil companies have decided to invest in exploration of the Greenland oil potential” (Løgmansskrivstovan (2007).13

10  Population: 49,290; population per km2: 35.31; GDP: 2232.31 M Euro; Exportations: 1048.1 M Euro; Importations: 866.1 M. Euro, WorldData.info-c. 11  Population: 56,171; population per km2: 0.026; GDP: 2444.57 M €; Exportations: 360.4 M €; Importations: 693.5 M €, WorldData.info-d. 12  WorldData.info-f. 13  Compare also www.omr.fo. Licenses were granted in March 2007 (the second phase of the licensing round took place from August 2007 to February 1, 2008). https://www.rigzone.com/ news/oil_gas/a/39252/greenland_sees_increased_interest_in_recent_licensing_round/

130

6  The Kingdom of Denmark: Leader in Energy Efficiency

Energy source

total on the Faroe Island

percentage on the Faroe Islands

percentage in Europe

per capita on the Faroe Islands

per capita in Europe

Fossil fuels

606.91 m kWh

54,0 %

49,2 %

12,313.05 kWh

8,119.98 kWh

0.00 kWh

0,0 %

7,0 %

0.00 kWh

1,154.95 kWh

Water power

348.41 m kWh

31,0 %

24,1 %

7,068.60 kWh

3,979.46 kWh

Renewable energy

179.83 m kWh

16,0 %

19,7 %

3,648.31 kWh

3,276.27 kWh

1.12 bn kWh

-

100,0 %

22,801.95 kWh

16,499.23 kWh

Nuclear power

Total production capacity

Fig. 6.6  Faroe Islands: production capacities per energy source Source: https://www.worlddata.info/europe/faroe-islands/energy-consumption.php

It is worth mentioning that the Faroe Islands’ and Greenland’ energy resources potential has become a matter of growing contention and heated disputes between the central government in Copenhagen and the autonomous authorities as to future revenues. The majority of the joint Danish-Greenland Committee on Autonomy were in favor of granting the right of use of and the right to exploit the mineral resources and revenue from mineral resource activities accrues to the Greenland authorities (Jyllands-Posten 2008). A.  Fogh Rasmussen, the Prime Minister of Denmark held an entirely different opinion taking the view that the future profits from oil production should be shared equally between Denmark and Greenland. The situation has become even more complicated with the referendum to extend Greenland’s autonomy. A “yes” vote would provide for Greenland to take ownership of its natural resources and reduce Danish subsidies to the island of over DKK 3.5 billion annually. Moreover, the government of Denmark would be obliged to consult on foreign policy with Greenland Home Rule Government more often (Berlingske Tiddende, 2008). As much as 75% of Greenlanders said “aap” i.e. “yes” to extending Greenland’s autonomy. About 72% of nearly 40,000 eligible voters turned out for the referendum. The extended autonomy would also mean, inter alia, that Greenland will take greater control over its subsoil natural resources as well as those in the Arctic. Greenlanders believe that the glaciers melting as result of global warming will uncover an abundance of natural mineral wealth. They hope that crude oil will start flowing from the Arctic continental shelf. This means that Greenlandic companies should already start drilling exploration wells in order to prove that the deposits belong to Greenland.14 Oil deposits are said to be large. The U.S. Geological Survey estimates the reserves to the northeast of the island hold some 31.4 billion barrels (Pawlicki 2008). Greenland can also utilize its hydropower to generate income but while the conditions are excellent, in order to make profit from it, hydroelectric power plants must be built first. A hasty declaration of independence is not 14

 As of late, it is done by Norwegians, Americans and Canadians.

6.2 Energy Balance of Denmark

131

Electricity

total

Greenland per capita

Compare to Europe per capita

Own consumption

468.00 m kWh

8,331.70 kWh

5,514.17 kWh

Production

538.00 m kWh

9,577.90 kWh

5,928.63 kWh

Fig. 6.7  Greenland: Energy balance Source: WorldData.info-e

Energy source Fossil fuels Nuclear power Water power Renewable energy Total production capacity

Total in Greenland

percentage in percentage in Greenland Europe

per capita in Greenland

per capita in Europe

835,44m kWh

51 %

49,2 %

14,873.18 kWH

8,119.98 kWh

0,00 kWh

0,0 %

7,0 %

0.00 kWh

1,154.95 kWh

802.68 m kWh

49,0 %

24,1 %

14,289.91 kWh

3,979.46 kWh

0.00 kWh

0,0 %

19,7 %

0.00 kWh

3,276.27 kWh

1,64 bn kWh

100,0 %

100,0 %

29,163.09 kWh

16,499.23kWh

Fig. 6.8  Greenland: production capacities per energy source Source: WorldData.info-e

without some other challenges. One risk is that the fully independent yet in reality weak Greenland and its undiscovered but potentially huge natural resources will become a target of political games between superpowers such as the U.S., Canada, Norway and Russia. Today, the most important measure in the energy balance of Greenland is the total consumption of 468.00 million kWh of electric per year. Per capita this is an average of 8332 kWh (WorldData.info-d) (Figs. 6.7 and 6.8). The above data show that Greenland can provide itself completely with self-­ produced energy. The total production of all electric energy producing facilities is 538 m kWh, i.e. 115% of own requirements.

6.2  Energy Balance of Denmark In the early 1990s, the share of crude oil in energy production was estimated at only 5%. Denmark shifted back to coal purchased from a variety of global sources beyond the control of the cartels. If one adds to this the fact that Denmark had built two of the deepest coal ports at Stigsnæs located on the Danish west coast of Zealand and Ensted in the southern part of Jutland, the increased role of coal becomes obvious at that time if only because of significantly lower transport costs. Additionally, energy companies have developed advanced coal technologies.

132

Production

6  The Kingdom of Denmark: Leader in Energy Efficiency

Coal

Crude oil

Oil products

Natural Geothermal, Biofuels Electricity Heat gas solar /waste

0

8918

0

4281

1031

2611

0

1

16843

Total

Imports

2877

5164

7259

1203

0

1161

985

4

18653

Exports

-29

-6914

-6571

-1973

0

-22

-892

0

-16402

Total final consumption

176

0

5240

1590

13

1355

2707

2549

13631

Industry

94

0

429

674

0

210

722

111

2240

Transport

0

0

3699

0

0

227

33

0

3959

Others

82

0

839

916

13

918

1952

2438

7158

Fig. 6.9  Denmark: Energy balance 2013 (ktoe) Compiled by author on the basis of http://www.iea.org/statistics/statisticssearch/report/?country= DENMARK=&product=balances&year=Select In thousand tons oil equivalent on a net calorific value basis

Energy production - Mtoe Net energy imports - Mtoe

1990

2006

2016

10.8

29.57

15.4

8.65

-7.96

2.51

Total primary energy supply - Mtoe

17.36

20.28

16.54

Electricity consumption - TWh

30.56

37.11

33.70

CO2 emissions Mt of CO2

50.98

56.4

33.46

CO2 emissions/GDP kg CO2/2010 USD

0.22

0.17

0.1

Fig. 6.10  Key stats for Denmark: 1990–2016 Compiled by author on the basis of https://www.iea.org/countries/Denmark/ and Browse all IEA statistics for Denmark

The Fig. 6.9 illustrates the energy market structure in Denmark at the beginning of the second decade of this century. Denmark is a very interesting country when it comes to legal and organizational solutions implemented in its energy sector. Thanks to the support schemes for high-­ efficiency cogeneration and through educational campaigns, high levels of energy efficiency have been achieved. In 2017, the energy consumption in Denmark stood at 31.42 billion kWh which per capita is an average of 5444 kWh. Denmark to a large extent is energy self-sufficient. The total production of all electric energy producing facilities is 27 billion kWh, i.e. 87% of the country’s own usage (WorldData. info-b). The rest of the needed energy is imported from foreign countries. Along with pure consumption, the production, imports and exports play an important role. Other energy sources such as natural gas or crude oil are also used (Fig. 6.10).

6.2 Energy Balance of Denmark

133 2017

World Rank

Total Primary Energy Production

0.397 Quadrillion Btu

56

Total Primary Energy Consumption

0.344 Quadrillion Btu

62

Total Electricity Imports 2016

15 Billion Kilowatthours

14

Total Electricity Exports 2016

9.9 Billion Kilowatthours

21

79 Billion Cubic Feet

37

Exports of Dry Natural Gas

Fig. 6.11  Denmark’s key energy statistics: 2016–2017 Source: eia Beta

In achieving the success, the key factors have been: energy saving and greater energy efficiency. The latter has been realized through widely implemented changes into heating servicing in Danish urban areas, partially through the development of large transmission networks and the construction of smaller and decentralized CHP plants, combined heat and power installations and finally converting local heating plants and power plants into combined heat and power plants. In 1980, less than 40% of all heat was produced by power plants and 19% of generated electricity came from district heating plants. If we compare these data with those in 2001 the figures were as follows: 82% and 53%, respectively. In 2002, 59% of all households were supplied with district heating (Denmark. DK 2008). These basic data on energy sector reflect the crucial role of the Kingdom in the energy market and makes a clear statement of its unique competence and knowledge in advance energy technologies (Fig. 6.11). Through well-aimed efforts and numerous educational campaigns in the years 1990–2003, energy efficiency in buildings increased by 14.2% In comparison, at the same time energy efficiency in the EU countries increased on average by 9.2% (Fornalczyk 2009). It is worth noting that in 2006 the overall electricity production in Denmark stood at 43350 GWh (in Poland – 143,500 GWh).15 A substantial share of energy was generated in combined heat and power (CHP) plants. About 60% of generation capacity was installed in this type of units. The other sources of electricity include wind farms  – 23% of installed capacity, small scale CHP  – 12%, and others. Electricity production by a specific type of power generating units is dependent on several factors. The main ones include: heat demand, climatic conditions, and above all the speed of wind. A further and equally important consideration is fluctuations in the power exchange between the energy systems of Denmark, Germany, Sweden and Norway (Czarny 2009b). As regards electricity, delivery Denmark is divided into two separate transmissions grids: Western and Eastern. These are two

15

 See Czarny 2014.

134

6  The Kingdom of Denmark: Leader in Energy Efficiency

total

Denmark Europe per capita

Compared to per capita

Compared to Europe per capita

Own consumption

31.41 bn kWh

5,444.05 kWh

5,437.14 kWh

5,437.14 kWh

Production

27.34 bn kWh

4,738.63 kWh

5,848.09 kWh

5,848.09 kWh

Import

14.98 bn kWh

2,596.37 kWh

729.45 kWh

729.45 kWh

Export

9.92 bn kWh

1,719.18 kWh

708.25 kWh

708.25 kWh

Electricity

Fig. 6.12  Denmark: Energy balance Source: WorldData.info-a

separated transmission systems, of which the eastern one is synchronous with Nordic (former NORDEL) and the western one with the synchronous grid of Continental Europe. There exist 130 distribution grid operators. A large majority of them are very small entities. Danish transmission networks consist mainly of 400 kV lines. There are also transmission lines designed for a voltage of 60 kV and direct current links that interconnect two non-synchronized power grids. Today, the most important measure in the energy balance of Denmark is the total consumption of 31.41 billion kWh of electric energy per year. Per capita this is an average of 5444 kWh (Fig. 6.12). Electricity generation in Denmark has changed fundamentally over the past two decades. Coal generation has been decreased, and the bulk of power generation now comes from wind and bioenergy. Supported by a flexible domestic power system and a high level of interconnection, Denmark is now widely recognized as a global leader in integrating variable renewable energy while at the same time maintaining a highly reliable and secure electrical-power grid. The energy balance of Denmark offers a special opportunity to highlight the successful promotion and achievements of Danish wind power in the last two decades of the twentieth century. The success stems from a number of factors including individual entrepreneurs, early official certification of wind turbines, systematic government support including favorable economic tariff schemes, and cooperative private ownership of wind turbines, which fostered broad public support (Denmark Energy Policy). On 9 July 2015 (Odnawialne źródła energii 2015), Denmark broke world record for wind energy production.16 Wind turbines harnessed so much green energy that it

 About 10% of the total production capacity of wind farms in Denmark is owned and operated by Vattenfall, the biggest owner and operator of onshore wind power. In February 2015, Vattenfall won the bidding to build and operate the offshore wind farm Horns Rev. 3 (with a total capacity of 400 MW) outside the Danish west coast which is to be launched in 2019. 16

6.3 Activities to Ensure Denmark’s Energy Security

135

would meet 140% of Denmark’s domestic energy needs.17 The surplus electricity was transmitted to Norway, Sweden and Germany through interconnectors that connect their respective electricity grids. According to Odnawialne źródła energii.pl portal [renewable energy sources], Denmark’s windfarms were not operating at their 100% capacity at the time of the peak which in practice means that there may be some reserve of spare capacity. This record is also the very proof that a world powered 100% by renewable energy is no fantasy of the RES technology enthusiasts. Storing the excess of green energy continues to be a challenge. By 2020, Denmark aims to produce 50% of its energy from renewables. There are many indications that this goal can be achieved earlier.

6.3  Activities to Ensure Denmark’s Energy Security A unique characteristic of the Danish power system is that it is divided into two fully independent and separate subsystems which are not synchronized. The Western transmission grid (Jutland and Funen) is connected to the European continental grid, while the Eastern grid (Zealand and Bornholm) is synchronized with the Swedish, Norwegian and Finnish systems. Both systems are managed by the Danish state-owned transmission systems operator  – Energinet.dk (https://energinet.dk) though the grids are run independently of each other. The 1980s fuel crisis was one of the factors driving Danish authorities to implement programs aimed at significantly reducing the country’s dependency on fossil fuel imports. The main instrument to achieve the set objectives was the promotion of cogeneration or combined heat and power (CHP) that is the simultaneous production of electricity with the recovery and utilization heat.18 Development of this type of power generation would not have been possible in Denmark without introducing subsidy schemes for electricity generation based on cogeneration and renewables. Prices for electricity produced through cogeneration stimulated construction of new cogenerational facilities and decommissioning of obsolete installations. As a result of these activities, in 2004 there were 665 cogeneration units in Denmark, while in the 1980s there were only 15. Compared to 1980, a significant reduction in primary energy consumption and in negative environmental impact of existing generating units was achieved. But despite all the benefits, the policy had also brought on negative and unintended consequences resulting in a worrying phenomenon. As a direct result of financial subsidies for cogeneration and green generating units, the price of energy produced by these units was much higher than in other European countries.

 In 2014, Danish wind turbines supplied the equivalent of 39% of the country’s annual electricity consumption. 18  Cogeneration offers the capability to make more efficient and effective use of primary energy resources as well as renewable energy (wind energy, biomass burning). 17

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In 2005, the government abolished purchasing obligations from small and dispersed cogeneration units. These “prioritized” energy units were required to sell electricity on equal footing through the Nordpool power exchange. Returning to the competitive market was not without the support from the government. However, the amount of subsidy was dependent on the size of the generating unit and the type of fuel used for production and granted depending on the current market price. In accordance with the set policy, both large CHP plants and small cogeneration units sell energy through the power exchange or on the exchanges. Small, dispersed units may seek compensation if the market prices are at a lower level. Large-scale units may also apply for a government subsidy, provided that biomass is used to produce electricity. At the same time, there is a legal obligation to supply heat regardless of the current electricity prices on the market. The subsidy scheme also covers wind installations. The amount of subsidies depends on the age of the wind farm, date of integration into the grid, the number of operating hours a year and the legal form of ownership. Should Denmark become a net importer, this would likely only be marginal in the period prior to 2035. As a net exporter, Denmark is exempt from the stockholding obligation, according to the International Energy Agency – IEA. However, it is subject to the EU obligation, which requires that all members hold stocks equivalent to at least 61 days of average daily inland consumption calculated on the basis of Directive 2009/119/EC which entered into force on December 31, 2012. The government goes well beyond this, setting a compulsory stockholding obligation on industry of 73.2 days of consumption. Some 70% of this is covered by the Danish stockholding agency, FDO, largely in the form of refined products.19 The Danish Energy Agency, on behalf of the Minister for Climate and Energy, is responsible for energy matters including the security of oil and gas. The DEA also has the over-all responsibility for handling a crisis. This includes observing minimum standards and preparing an annual plan for the security of gas supplies. The plan must describe how security of supply is ensured during the period under review and how it will be ensured in the coming year and following 10 years. In addition, the plan must account for the means used to maintain security of supply in emergency supply situations. Security of supply has been determined by the administration on the basis of an objective which stipulates that in the event of full or partial interruption of gas supply to the Danish market, the uninterruptible supply must, at a minimum, be maintained for 3  days during particularly cold periods (defined as a daily mean temperature of −13 °C), which, on average, occur every 20 years, and for 60 days during a normal-temperature winter (corresponding to the expected repair time needed after the breakdown of an offshore pipeline). Based on historical data, a daily mean temperature of −13 °C is expected to result in Danish gas consumption of approximately 25.3 mcm/d (24.0 million Nm3/day).

 See https://www.energy.gov/sites/prod/files/2018/08/f54/IEA%20Emergency%20Response%20 of%20IEA%20Countries_2014.pdf 19

6.3 Activities to Ensure Denmark’s Energy Security

137

In an emergency supply situation, Energinet.dk takes over supplies to the Danish gas market from market participants. For this purpose, Energinet.dk acquires alternative transmission capacity in the Syd Arne pipeline, reserves capacity in storage facilities and enters into agreements on interruption with a number of large customers. In order to meet the safety objective (3 days of extreme winter, 60 days of normal winter), Energinet.dk determines each year the quantities of gas to be covered by each of these emergency measures. In the worst-case scenario, the disruption of supply would be disrupted for the largest source of supply (supply via the Tyra-­ Nybro pipeline). In such a case, Energinet.dk may maintain the supply of gas to Denmark with the use of supplies from storage, emergency supply from Tira via the Syd Arne-Nybro pipeline from Harald and interruption of the largest natural gas customers on the basis of interruptible contracts. Emergency response measures Energinet.dk has access to a total capacity of approximately 215 mcm of strategic gas-filled storage capacity. This includes the amounts reserved directly by Energinet. dk (the amount is determined annually) and the quantities made available from the requirements for filling in the shipper’s warehouse. Most of the capacities in Stenlille and Lille Torup have been sold in compliance with the filling requirements so that warehouse customers commit to a certain level of inventory throughout the year in exchange for a discount. Energinet.dk compensates these two warehousing companies and therefore has additional stock in case of emergency. Every year, on 1 March, 12% of the shippers’ storage capacity must remain in storage. Energinet. dk has entered into contracts with some 40 of the largest gas consumers in Denmark for supply interruptions in the event of an emergency. Around 20% of total Danish gas consumption in winter (January and February) can be interrupted by these contracts. The terms of the contract may include an interruption of gas supply after 3 h or after 3 days or a combination of the two. Some consumers have agreed to a 100% interruption of their consumption, while others only partially reduce their consumption. Therefore, most CHPs in such situations plan to temporarily stop the production of electricity and reduce gas consumption in order to cover only the production of heat. In general, end-users (who may be affected by supply disruptions) plan to reduce their consumption by as much as 75% in the event of such an emergency. Some of these customers have a certain degree of fuel switching capacity. This concerns three large power plants (Avedøre II, H.C. Ørsted Power Station and Skærbæk) which are directly connected to the transmission grid. All three plants have the possibility to use oil as a back-up power source. It is clear that Denmark’s long-term energy goal is to become completely independent of fossil fuels use by 2050.20 In 2011, the government published the Energy Strategy 2050, a detailed and ambitious policy document that sets out a series of new energy-policy initiatives. The strategy aims to transform Denmark into a low-­ carbon society with a stable and affordable energy supply.

20

 See https://www.iea.org/countries/Denmark/

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6  The Kingdom of Denmark: Leader in Energy Efficiency

The first phase of the strategy focuses on a series of short-term initiatives that significantly reduce dependence on fossil fuels21 by strengthening and expanding existing policies in energy efficiency and renewable energy. The second and third phases will involve development and implementation of long-term energy solutions including building a green transport sector and promotion of smart grids. As a result of these actions, which have changed energy policy, Denmark maintains one of the highest levels of energy security today. This is due, among other things, to a diversified structure of primary energy sources, low energy intensity of the economy and the liberalization of the energy sector. All this is complemented by consistency of energy policy implementation and the public support for sustainable energy policies. The fundamental changes that define Danish energy policies make Denmark a model for other countries undertaking measures to improve efficiency of the sector and broadly-understood energy security.

6.4  A  Testing Ground for Novelties: Climate and Energy Policy In 2010, the Danish Commission on Climate Change Policy concluded that transition to a fossil fuel independent society is a real possibility. On March 22, 2012, the Danish parliament by an overwhelming majority (171 out of 179 members) adopted new Danish Energy Agreement for the period up to 2020. According to the Agreement, by 2020 at least one third of Denmark’s energy needs will be supplied by renewable resources with half of the electricity consumption coming from wind power. The transition to renewable energy is to be accomplished by a substantial expansion of offshore wind farms. This ambitious goal represents a transitional phase in a process towards becoming fully independent of fossil fuels. As announced by the government, Denmark plans to run its entire energy system on renewable energy by 2050. Electricity generation for households and industry, heat production and transport needs are to be covered by energy from renewable sources. There are plans to add a total of 3300 MW of new wind power capacity by 2020. In addition to the development of wind energy, plans have been made to offer subsidies for converting from coal to biomass at large-scale power plants and a two-fold increase in government subsidies (up to EUR 67 million per year) to promote investment in energy efficient use of green energy in the production processes of enterprises. Apart from necessary investments in energy, installation of oil-fired boilers and natural gas boilers in new buildings was banned as of 2013. These boilers will be replaced with renewable energy-based alternatives: heat pump systems, solar panels and biomass boilers) (Fig. 6.13).

 The 2011 review analyzes the challenges facing energy policy. The aim was to help Danish policy makers in their quest for a sustainable, low-carbon energy future. 21

6.4 A Testing Ground for Novelties: Climate and Energy Policy 1990

139

2000

2005

2010

2013

Renewable energy, total

45 704 511

80 147 160

112 711 642

138 736 213

144 965 102

Wind power

2 197 080

15 268 317

23 810 400

28 113 919

40 043 785

Hydro power

100 800

108 720

81 000

74 311

48 310

Solar power

0

4 320

7 776

21 698

1 863 148

Solar heat

9 800

330 700

411 465

635 641

2 889 199

Geothermal energy

96 000

116 078

343 983

424 656

228 970

Straw

12 481 150

15 893 450

21 023 550

23 269 600

20 637 850

Firewood

8 757 120

12 431 616

17 666749

23 778 598

18 850 932

Wood chips

1 723 680

2 744 455

6 082 192

11 318 853

11 745 970

Wood pellets

1 575 000

3 092 916

4 718 600

4 364 425

5 201 755

Wood waste

6 191 013

6 895 078

6 499 627

8 500 208

9 111 065

Biogas

752 000

2 911 659

3 829 964

4 278 002

4 641 914

Bio oil

744 000

48 900

3 392 552

4 824 033

4 297 200

Heat pumps

2 462 400

3 585 484

4 058 263

8 159 122

4 917 024

Waste renewable

8 524 468

16 715 466

20 785 521

20 973 145

20 487 980

Fig. 6.13  Dania: production of renewable energy (GJ) Source: www.statbank.dk/ene2ht 1 gigajoule (GJ) = 1,000,000,000.00 joules (J) A joule is the SI base unit for Energy. In physical terms, lifting an apple 1 m takes 1 J of energy. This should not be confused with a watt which is a unit of power and a rate of how fast energy is used While the joule is the SI base unit for energy, when speaking in real-world terms, we often use the kilowatt-hour (kW/h) instead. This is due to the fact that a joule is an extremely small amount of energy. To put how small a joule is into perspective, a liter of gasoline has 31,536,000 joules of energy in it. A kilowatt-hour is equal to 3,600,000 joules. Therefore, a liter of gasoline has 8.76 kW/h of energy in it, which is a much more manageable number; see https://energyeducation. ca/encyclopedia/Joule

As of 2016 the installation of oil-fired boilers in existing buildings in areas with district heating or natural gas will not be allowed banning installation of new oil-­ fired boilers in existing buildings in areas where district heating or natural gas is available. Over EUR 9 million was spent for building electric cars charging stations, hydrogen fueling infrastructure and natural gas powered transportation. According to the Danish Ministry of Climate, Energy and Building an average household will pay EUR 173 more for energy. Danish companies’ costs will increase by EUR 27 per employee. The total bill will amount to EUR 467 million by 2020.22

 Based on the statement of Erik B. Rasmussen, DCM of the Danish Embassy in Poland, March 04, 2012, http://www.nordicenergy.org/wp-content/uploads/2012/03/Nordic-Energy-TechnologyPerspectives.pdf 22

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6  The Kingdom of Denmark: Leader in Energy Efficiency

The Danish 2050 Energy Strategy for 100% renewable energy scenarios is built on the afore-mentioned objectives.23 This strategy is the first of its kind the world, with the long-term aim within the framework of Danish energy security policy to make Denmark fully independent of fossil fuels by 2050, setting out a series of new energy-policy initiatives the strategy aims to transform Denmark into a low-carbon society with a stable and affordable energy supply (https://www.iea.org/countries/ Denmark/). The first phase of the strategy focuses on a series of short-term initiatives (Duński Plan Energetyczny n.d.) that significantly reduce dependence on fossil fuels by strengthening and expanding existing policies in energy efficiency and renewable energy.24 In addition to the already mentioned initiatives, approx. EUR 2.7 million will be allocated to municipalities, local businesses and energy companies for strategic energy planning partnerships. Over EUR 1.3 million is to be spent to analyze implications of the phasing-in of large heat pumps in the district heating sector and EUR 2.7 million euros were earmarked for geothermal energy projects. The second and third phases will involve development and implementation of long-term energy solutions including building a green transport sector and promotion of smart grids. The complete phasing out of coal and fossil fuels from power plants is to take place by 2030. Denmark’s electricity and heat will come from renewable energy by 2035 and by 2050, the entire energy supply – electricity, heat, industry and transportation – will come from renewable energy sources. It is expected that wind power and the use of biomass will meet most of the energy needs of the country. To help achieve the goals by 2050, the government has begun allocating 0.5% of the country’s annual GDP to renewable energy investment (https://www.energyplan.eu/author/admin/). Despite the fact that in 2010 fossil fuels accounted for nearly 80% of Denmark’s total primary energy supply, the government insists that it is possible to reduce emissions without additional expenditures in the long run and energy industry is not discouraged by a vision of zero emissions future. An ambitious energy policy will stimulate economic development. The development of new technologies, deployment of smart grids, popularization of electric cars will generate 5500 new jobs annually. According to the new energy package, special regulations will be applied to the industry, particularly the most energy-intensive sectors. The Danish government is aware of the fact that export-oriented companies will need time to adapt to change. Already, energy taxes paid by Danish companies exceed the European average by 70%. While there is no doubt as to benefits of implementing a more ambitious energy package, one might wonder how Denmark intends to deal with the rising costs. On the one hand, investments in RES development and energy ­efficiency

 In March 2014, the Danish Energy Agency published scenarios for a vision to become fossil free in 2050, https://www.energyplan.eu/danish-energy-agency-energy-stategy-2050-100-renewableenergy-scenarios/ 24  A review made in 2011 provided an analysis of the energy-policy challenges. It was intended to assist Danish policy makers as they move towards a sustainable, low-carbon energy future. 23

6.4 A Testing Ground for Novelties: Climate and Energy Policy

141

are necessary, while at the same time reduced dependence on imported fossil fuels means state revenue losses from excise duties on coal, oil and gas. The solution could be bad news as electricity prices for households in Denmark are among the highest in Europe. Energy taxes on all fuels, not only fossil, for space heating, are to be allocated to fund a wide range of RES initiatives which are exempt from public service provisions. The additional charge levied to support renewable energy and included in electricity bills paid by all consumers is primarily intended for the promotion of renewable energy-based electricity generation. The new scheme also introduces an additional supplement to the gas bill. Government initiatives and the resulting energy efficiency measures may reduce the typical household energy consumption by up to 10% within 8 years. The Danish government program presents possible scenarios for an increase in household energy bills. These take into account the costs arising from governmental initiatives and purchasing energy as well as savings associated with lower energy consumption as a result of the introduction of cost-effective energy efficiencies. Last but not least, the cost of implementation was also taken into consideration. It should be noted that consumers who switched from using individual oil boilers, at present one of the most expensive options of heating, to energy efficient technologies can significantly reduce their energy bill. The overall cost of the program is estimated at EUR 467 million by 2020.25 The heating sector is also key to Danish low-carbon ambitions. Denmark’s large-­ scale use of combined heat and power plants with heat storage capacity, and the increasing deployment of wind power offer great potential for efficient integration of heat and electricity systems. However, to realize this potential, all policies and regulations need to be aligned, including finding the right levels of energy taxation. The true test of Denmark’s particular concentration of expertise in the field of energy is its level of energy consumption. Danish experience shows that it is possible to sustain high economic growth and at the same time reduce CO2 emissions. During the last few years, CO2 emission has been reduced by 14% while the GDP grew by about by 40%. In this context, Denmark – a relatively small European country of modest demographic and natural resource potential – could be described as unique testing ground for a variety of energy policy concepts. Hence, it is worth emphasizing the following: –– fuel transition from coal dominance towards energy mix consisting of hydrocarbons (oil and gas) and renewable energy sources; –– a significant share of wind energy (ca. 20% of all the electricity produced); –– building offshore wind farms; –– implementation of multi-fuel concept on a commercial scale (Avedore heat and power plant near Copenhagen); –– a significant share of distributed generation in the total installed generation capacity;  See http://www.ens.dk/Documents/Netboghandel%20-20publikationer/2011/Energy_Strategy_ 2050.pdf 25

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6  The Kingdom of Denmark: Leader in Energy Efficiency

–– a substantial share of cogenerational technologies on a macro scale (main activity producer combined heat and power plants) and on a micro level (small capacity units). Some of the pioneer solutions face challenges of which most widely known was a technical failure of some of the 91 power plant’s units installed at Horns Rev. (also known as Horns Reef) offshore wind farm26 or the unprofitable exports of wind-­ based electricity through mandated purchases from producers at times of ‘overcapacity’ on the national grid. Also, economic incentive schemes have not always worked well, e.g. wind energy sector subsidies (Malko and Wojciechowski 2011). Modern energy policy concepts, formulated in Denmark, set as priorities such activities as reduction, replacement, and recycling. European models are based on a triad of goals called 3E: Economy, Energy, and Environment, also known as integrated economy-energy-environment models. Denmark ranks high as regards research and development expenditure on the energy sector.27 The best example of the statement provide the investment projects of Maersk Contractors, a part of the Danish giant A.P.Moller – Maersk group, in construction of offshore drilling platforms. The investments reaching DKK 17 billion contributed to taking the company a leading position on the global market (up to 2010) as the first from the European continent, just behind six American companies. In the last few years, the business of renting offshore platforms has rapidly grown due to declining inland crude oil reserves resulting in price increases on equipment leases.28 Danish business is greatly valued abroad and Danish exports of energy equipment have increased significantly since the late 1990s. DONG Energy A/S, a state-­ owned company, aspires to play a leading role in the global energy market.29 The company reduces has reduced its market share in Denmark orienting its business toward expanding into foreign markets and as a consequence plans to invest abroad about DKK 15–18 billion in the energy sector. These include DONG Energy A/S investment in power plants in Germany and Norway. The power plant in Germany was to produce by 2012 an equivalent of 29% of the total electricity generated by the DONG Energy A/S in Denmark. The second project, worth DKK 3 billion, involves building Norway’s first natural gas-fired power plant. The power plant is to be operated by DONG Energy A/S for a period of 20 years using the most modern technology of capturing the carbon dioxide from the emitted smoke and injecting it into depleted offshore natural gas reservoirs in Norway.

26  See https://www.modernpowersystems.com/features/featurehorns-rev-reveals-the-real-hazardsof-offshore-wind-720/ 27  More on the subject in Czarny, 2009b, pp. 133–136, 168–177. 28  The price of renting drilling platform could reach USD 500 000 per day, while 3 years back it was USD 100 000. Borsen 2006. 29  See Orsted Annual report 2017.

Bibliography

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Moreover, over half of DONG Energy A/S turnover comes from abroad and its biggest to date investment was a purchase of 10% shares in the Norwegian Ormen Lange gas field for DKK 15 billion. Despite the fact that the Danes are against nuclear energy,30 Denmark plays an important role on the energy market. The country is also the fourth biggest wind energy producer in the world. The share of renewable energy reached 27% in 2008, including 18% wind power (Olszowiec 2003), while in 2019 wind and solar power share increased to 21% (https://energinet.dk). Thus, it can be concluded that at present Denmark plays a crucial role in the energy market and offers the most up-to-update knowledge and expertise in energy technologies. One of the key factors enforcing modernization of the Danish energy sector was also the change in the attitude of the society towards the pursued energy policy in Denmark. This direction has been particularly strongly visible in Denmark since the end of 1980s, after the publication of a report of the World Commission on Environment and Development (the so-called Brundtland Report). Danish society is prepared to bear higher energy costs in exchange for a guarantee that it contributes to environmental protection (Frączek and Kaliski 2015). It is hardly surprising then that Denmark is a leader among OECD member countries in terms of implementation of renewable energy policy and energy efficiency. The country is actively engaged in international fora for climate policy and a strong advocate of tougher climate-change mitigation measures.

Bibliography Berlingske Tiddende (2008, January 10) Borsen (2006, November 28) Czarny RM (2009a) Dylematy energetyczne państw regionu nordyckiego. Scandinavium, Kielce Czarny RM (2009b) Energy Dilemmas of the Nordic Region Countries. Scandinavium, Kielce Czarny RM (2014) Featuring Norden in Ten Episodes. Faculty of Organization Studies, Novo Mesto Denmark Energy Policy. 2018, November 3. https://onlinelibrary.wiley.com/doi/abs/10.1002/ eet.463 Denmark. DK – Denmark’s Official Web Site. Ministry of Foreign Affairs of Denmark. Retrieved February 8, 2008 from www.denmark.dk Dietrich OW (n.d.) Gyldenal Leksikon. Retrieved February 1, 2008 from www.denmark.dk/CMS. Web Duński Plan Energetyczny. Koniec epoki kotłów gazowych i olejowych w Danii (n.d.) Retrieved August 12, 2018 from https://www.ogrzewnictwo.pl/artykuly/urzadzenia-grzewcze/kotly-c-o/ kotly-gazowe/dunski-plan-energetyczny-koniec-epoki-kotlow-gazowych-i-olejowych-w-danii eia Beta. https://www.eia.gov/beta/international/country.php?iso=DNK. Retrieved November 4, 2018

30

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Energy Supply Security 2014. http://www.oecd.org/publications/energy-supply-security2014-9789264218420-en.htm. Retrieved July 24, 2016 Fornalczyk, T. (2009, February). Rynek energii elektrycznej – Dania. Polska Energia, 1. Retrieved from https://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Frynek_dania.pdf Fraczek P, Kaliski M (2015, June) Bezpieczeństwo Energetyczne Danii. Rynek Energii, 118(3). Retrieved August 24, 2016 from http://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252F07f raczekkaliskirg15.pdf Gawin R (2005) Skandynawski rynek energii elektrycznej – przypadek szczególny czy uniwersalne rozwiązania?. Biuletyn URE, Nr 4/200 Jyllands-Posten (2008, January 11) Løgmansskrivstovan (2007) [Prime Minister’s Office], The Government of the Faroe Island: January 7, 2007. Retrieved from www.tinganes.fo Łucki Z, Misiak W (2010) Energetyka a społeczeństwo: Aspekty socjologiczne. Wydawnictwo Naukowe PWN, Warszawa Malko J, Wojciechowski H (2011) Współczesna polityka energetyczna – przykład Danii. Instal, 2011 no. 9. http://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Fwspolcz_poltyk_przykl_ danii.pdf Meyer NI (2007) Learning from wind energy policy in the E.U.: lessons from Denmark, Sweden and Spain. Eur Environ 17(5):347–362 Namminersornerullutik Oqartussat, Grønlands Hjemmestyre. Retrieved January 20, 2008 from www.nanoq.gl/English/Nyheder/2006 Nehrebecki AJ (2009, July 1) Giełdy energii elektrycznej w Unii Europejskiej. Biuletyn URE, Nr 4/2009. http://www.ure.gov.pl/ftp/Biuletyny_URE/2009/2009.07.01-biuletyn_nr4.pdf Odnawialne źródła energii.pl, July 14, 2015. Retrieved August 23, 2016 from http:// odnawialnezrodlaenergii.pl/energia-wiatrowa-aktualnosci/item/1889-elektrowniewiatrowe-wygenerowaly-140-proc-zapotrzebowania-danii-na-energie Olszowiec P (2003, November) Energetyka wiatrowa. Duńskie rekordy. Energia Gigawat, 11/2003. Based on Blackaby, N. (2003, April 1). Renewable Energy Review – Might and Majesty. Power Engineering International 11(3) Orsted Annual report 2017. Retrieved December 10, 2018 from https://orsted.com/-/media/ Aarsrapport2017/Orsted_Annual_Report_2017_Final.ashx?la=en&hash=16E0E6953A3C42E DDD3EAF6BD95CC497 OZE (2015, July 15) Elektrownie wiatrowe wygenerowały 140 proc. zapotrzebowania Danii na energię. RetrievedAugust 23, 2016 from http://odnawialnezrodlaenergii.pl/energia-wiatrowa-aktualnosci/ item/1889-elektrownie-wiatrowe-wygenerowaly-140-proc-zapotrzebowania-danii-na-energie Pawlicki J  (2008, May 19) Republika Eskimosów nie chce być Królestwem Danii. Gazeta Wyborcza. Retrieved from www.wyborcza.pl/gazetawyborcza Touborg K (n.d.) Dansk kritik af atomkraft industrien, Norden: nyheter. Retrieved June 30, 2010 from www.norden.org/webb/news WorldData.info-a, Denmark: Country data and statistics. Retrieved February 14 and 15, 2019. https://www.worlddata.info/europe/denmark/index.php. Retrieved February 15, 2019 WorldData.info-b, Energy Consumption in Denmark. Retrieved November 3, 2018 from https:// www.worlddata.info/europe/denmark/energy-consumption.php WorldData.info-c, Energy consumption on the Faroe Islands. Retrieved March 7, 2019 from https://www.worlddata.info/europe/faroe-islands/energy-consumption.php WorldData.info-d, Greenland: Country data and statistics. Retrieved March 7 from https://www. worlddata.info/america/greenland/index.php WorldData.info-e, Energy consumption in Greenland. Retrieved March 7, 2019 from https://www. worlddata.info/america/greenland/energy-consumption.php WorldData.info-f, https://www.worlddata.info/europe/faroe-islands/index.php. Retrieved March 7, 2019 www.nordpool.com www.emisje.com.pl

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https://energyeducation.ca/encyclopedia/Joule http://www.nordpoolspot.com/About-us/ https://www.unitjuggler.com/convert-energy-from-ktoe-to-kWh.html http://www.iea.org/statistics/statisticssearch/report/?country http://www.iea.org/media/freepublications/security/EnergySupplySecurity2014_Denmark.pdf. Retrieved February 11, 2018 http://www.iea.org/statistics/statisticssearch/report/?country=DENMARK=&product=balances& year=Selec https://www.worlddata.info/europe/denmark/index.php. Retrieved February 15, 2019 http://pec-belchatow.pl/index.php?option=com_content&view=article&id=141:co-to-jest-1gj&catid=87&Itemid=559 www.nordpool.com www.emisje.com.pl http://www.nordpoolspot.com/About-us/ https://www.unitjuggler.com/convert-energy-from-ktoe-to-kWh.html http://www.iea.org/statistics/statisticssearch/report/?country http://www.iea.org/media/freepublications/security/EnergySupplySecurity2014_Denmark.pdf http://www.iea.org/statistics/statisticssearch/report/?country=DENMARK=&product=balances& year=Selec www.statbank.dk/ene2ht, http://www.dst.dk/Site/Dst/Udgivelser/GetPubFile.aspx?id=20195& sid=geog. Retrieved January 11, 2016 http://pec-belchatow.pl/index.php?option=com_content&view=article&id=141:co-to-jest-1gj&catid=87&Itemid=559 https://energinet.dk. Retrieved February 28, 2019 https://www.iea.org/countries/Denmark/. Retrieved October 31, 2018 http://www.nordicenergy.org/wp-content/uploads/2012/03/Nordic-Energy-TechnologyPerspectives.pdf https://www.energyplan.eu/danish-energy-agency-energy-stategy-2050-100-renewableenergy-scenarios/. Retrieved March 8, 2019 https://www.energyplan.eu/author/admin/. Retrieved February 1, 2019 http://www.ens.dk/Documents/Netboghandel%20-20publikationer/2011/Energy_Strategy_ 2050.pdf

Chapter 7

The Republic of Finland: Dynamic Modernization of the Energy Sector

Abstract  Finland can only partially supply itself with its own energy. The total production of all electricity generation equipment is 66 billion kWh. This is 78% of the country’s own use. The rest of the energy needed is imported from abroad. In addition to clean consumption, production, import and export play an important role. Other energy sources are also used, such as natural gas or oil. The most important indicator in Finland’s energy balance is the total consumption of 85.15 billion kWh of electricity per year. This means an average of 15,550 kWh per capita. Keywords  Energy balances · Nuclear energy · Environmental accounts · Energy accounts · Fuels · Energy

The Republic of Finland (population: 5,511,000, population per km2: 16.29)1 is a very poor country in terms of energy resources, hence the significance of importing these resources and the related dependence on supplies from other countries. For many years, this has in practice meant importing substantial amounts of energy: almost 70%, including 20% of electricity (2005). This is quite exceptional, not least because of the main supplier, the Russian Federation. Finland was heavily dependent on imports from that country, importing 59% electricity, 84% oil (raw material), 84% coal and 100% natural gas.2 If these imports were to be interrupted for any reason, then domestic generation would not be able to meet demand which brings particular attention to maintaining security of supply. This is all the more so as, in the words of Tarja Halonen, President of the Republic of Finland, “Finland is treating Russia as an important energy producer and is also trying through the European Union to do everything it can to make Russia want to be a reliable partner in cooperation” (Eesti Paevaleht 2007).

 GDP: 222.97 bn €, Exportations: 86.27 bn €, Importations: 85.23 bn €, Budget deficit: 1279 M €›, Energy consumption: 85.2 bn kWh, https://www.worlddata.info-b 2  This concerned the period from 1 January to 30 September 2005. Finnish Energy Production 2005. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_7

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7.1  Energy Balance of Finland In the last five decades Finland has undergone a fundamental change in the structure of primary energy sources due to changes in the global energy market caused by the oil crisis and increasing public awareness of the role of the energy sector in the competitiveness of the economy and the quality of life of the society. Until the 1970s, oil was the fundamental source of primary energy in Finland. “The oil crisis and the resulting sharp rise in oil prices forced the sector to take modernization measures to improve the security of supply of energy sources. These measures involved a fundamental change in the structure of primary energy sources and concerned in particular: –– –– –– ––

reducing the share of oil in the primary energy mix; the gradual promulgation of natural gas; constructing nuclear power plants as the modern source of primary energy; maintaining the importance of hard coal and RES – Renewable Energy Sources” (Frączek 2013, p. 280).

The basic transformations and their scale over 26  years are illustrated in the Fig. 7.1. A painful fact in Finland is the lack of its own fossil energy resources, so for years the most important challenge has been the use of renewable energy sources. If in 2005 a quarter of the energy produced was of this origin, the target was to increase this figure to 30% by the end of the first decade (including nuclear power).3 According to the forecasts of the Ministry of Trade and Industry, electricity consumption will increase at a rate of 2–3% per year, which means that by 2025 approximately 20  TWh of new electricity will be needed. Also, the industry’s demand for energy will not decrease, despite the relocation of production abroad. This means that the domestic potential of nuclear energy will have to be further increased, also after the launch of the fifth nuclear power plant. Meeting the growing demand for energy will require the construction of new thousands of megawatts of energy capacity already in the next decade. It holds true all the more because the feeling of the need to increase the country’s energy self-sufficiency and the lessons learned from the 2006 experience, when Russia suspended electricity exports to Finland for a few weeks, indicate that politicians and society are likely to have a positive attitude towards nuclear energy. 2007 was the year with the highest rate of annual electricity consumption in Finland. Consumption then declined as a result of the recession, the collapse of the paper industry, structural changes in industry, the development of technology and lighting, and climate protection campaigns. According to estimates by the Ministry of Economy and Labour (MEAE), consumption will show an increasing trend, but will not reach the level of the early 2000s, at least not earlier than 2025 (Fingrid-lehti 2017).  See Czarny 2009.

3

7.1  Energy Balance of Finland

149

1990

2006

2016

Energy production - Mtoe

12.08

18.23

17.81

Net energy imports - Mtoe

17.83

20.76

15.84

28.38

37.43

34.02

2.26

90.66

85.00

CO2 emissions Mt of CO2

53.83

66.45

45.52

CO2 emissions/GDP

0. 32

0.27

0.18

Total primary energy supply Mtoe Electricity consumption - TWh

kg CO2/2010 USD

kg CO2/2010 USD

Population, million people

4.99

5.27

5.50

Fig. 7.1  Key stats for Finland, 1990–2016 Compiled by author on the basis of https://www.iea.org/countries/Finland/ from Browse all IEA statistics for Finland

Nuclear Crude oil Production 6152 Imports 0 Exports 0 Total 0 final consumption Industry 0 Transport 0 Others

0

42 12088 0

Oil Natural Hydro products gas 0 0 1104 6134 2856 0 -9237 0 0

Geoth, 68 0 0

Biofuels/ Electricity Heat waste 8961 0 134 327 1513 0 -343 -161 0

Total 18159 26328 -9790

0

7445

713

0

1

5072

6873

4055

24716

0 0

1172 3928

610 9

0 0

0 0

3321 221

3328 63

1475 0

10403 4221

0

1249

73

0

1

1530

3482

2850

8975

Fig. 7.2  Finland’s energy balances 2013 (ktoe) Compiled by author on the basis of http://www.iea.org/statistics/statisticssearch/report/?country=I celand&product=balances

Since 2011, fuel imports from Russia have fallen dramatically, due to a significant increase in their export prices. Currently, electricity is imported from Scandinavian countries, mainly from Sweden. On the other hand, Finland also exports electricity to other countries, especially the Baltic States. New submarine cable connections have almost doubled electricity capacity: Fenno-Skan 2 (2011) and EstLink 2 (2014) (Fig. 7.2). Figure 7.2 clearly proves that statistics on energy accounts examine energy supply and use in the national economy and between the economy and the environment. This is also indicated by the Energy Accounts, according to which the final consumption of energy products by Finns in 2016 rose to 1.2 million terajoules, i.e. by 5% compared to the previous year. The increase was highest for households that consumed 7% more energy than in 2015. Households consumed 300,000 terajoules of energy, which makes up a quarter of the overall energy consumption. In the

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7  The Republic of Finland: Dynamic Modernization of the Energy Sector

2016

World Rank

Total Primary Energy Consumption

1.207 Quadrillion Btu

53

Total Primary Energy Production

0.516 Quadrillion Btu

69

Total Electricity Imports

22 Billion Kilowatthours

8

Nuclear Electricity Net Generation

22 Billion Kilowatthours

16

Imports of Crude Oil including Lease Condensate

227 Thousand Barrels Per Day

27

Finland's Key Energy Statistics

Fig. 7.3  Key energy statistics, 2016 Source: https://www.eia.gov/beta/international/country.php?iso=FIN

t­ransport and storage sector, energy consumption increased by 6%, i.e. 146,000 terajoules. The final consumption of energy products in industry increased by 3%. The share of production in total final energy consumption was 44% (Energy Accounts 2018) (Fig. 7.3). The Finnish electricity market opened up to competition in 1997. After accession to the European Union in 1995, Finland has also gradually entered the European electricity market, all the more so that after 2000 network integration and market structure harmonization have been accelerating. The first large hydropower plant was built in Finland in the 1920s, but the real development of hydropower took place between 1940 and 1960, when the largest rivers in the north of the country were “harnessed” to power generation (Czarny 2008). In later years, the increase in production was a consequence of the modernization of obsolete equipment and installations. At the end of the first decade of this century, around 20% of total electricity consumption was generated by hydroelectric power stations.4 It was also necessary to supplement the country’s energy balance by increasing the use of other renewable sources (by 2010 the share of electricity from these sources had increased to 31.5%, compared to 17% in 2005). Domestic electricity generation in 2017 was 65 TWh, which is about 2% less than a year before. Around one third of electricity was generated from nuclear power (Puka 2011). Combined heat and power production accounted for the second largest share of electricity production, i.e. 32%, while hydropower accounted for 23% of electricity production. As the water situation (water resources) in Finland was weaker than usual in the last few years, hydropower production in 2017 decreased by 6%. Wind energy production continued its annual growth of 57% and

 It was planned to increase this indicator by launching small hydropower plants supporting the economic life of local communities. 4

7.1  Energy Balance of Finland

151

Fig. 7.4 Electricity supply, 2017 Source: Statistic Finland

Fig. 7.5  Total electricity consumption, 2017 Source: Statistic Finland Data listed in Figs. 7.4 and 7.5 were updated August 14, 2018

Source

GWh

%

Atomic energy

21 575

25.2

Hydropower

14 642

17.1

Wind energy

4 802

5.6

Solar energy

27

0.0

Net imports

20 426

23.9

Other heating output

24 028

28.1

Total

85 499

100

Sector-specific consumption

GWh

%

Industry and construction

40 603

47.5

Households and agriculture

23 940

28.0

Services and public consumption

18 392

21.5

Losses on transmission and distribution Total

2 565

3.0

85 499

100

its share of electricity production reached 7% in 2016. According to preliminary data, solar power production increased by 49% (Statistics Finland). Aggregate data on electricity supply and sources of origin are presented in the Fig. 7.4. The total electricity consumption is shown in the following Fig. 7.5. According to preliminary statistics, total energy consumption in the period from January to September 2018 amounted to 997 petajoules (PJ), which is 1% more than in the corresponding period of 2017. Electricity consumption amounted to 64 terawatt hours (TWh), i.e. by 3% more than in the previous year. The use of peat significantly increased, which was the main reason for the 4% increase in carbon dioxide emissions in the energy sector – year to year (OSFb 2018), to which the data from 2014 already draw attention (Fig. 7.6). According to preliminary statistical data, the consumption of hard coal as a fuel in the production of electricity and heat amounted to 3.1 million tons (which corresponds to 79 petajoule [PJ] of energy value). This means the previous last year’s decrease by 3% compared to the previous year, and by 31% compared to the average of the 2000s (OSFa 2019). The biggest change occurred in the second quarter, when the consumption of hard coal fell by 24% compared to the previous year. In the last quarter of 2018, 1% less hard coal was consumed than in the corresponding period of the previous year. It is worth noting that the consumption of hard coal in Finland usually fluctuates seasonally, which can be explained by the natural variation in electricity and heat demand between summer and winter. At the end of December 2018, the stocks of

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7  The Republic of Finland: Dynamic Modernization of the Energy Sector

CO2 emissions in 2014

Finland per capita

Compared to Europe per capita

Total

47.30 m t

8.58 t

5.39 t

› of which diesel + gasoline

23.77 m t

4.31 t

2.22 t

5.76 m t

1.04 t

1.31 t

› of which coal

17.15 m t

3.11 t

1.72 t

› other sources

623,390.00 t

0.11 t

0.14 t

› of which natural gas

Fig. 7.6  Carbon footprint Source: Energy consumption in Finland, WorldData.info-a Source 2015 2016 Wood fuels 25.4% 26% 23.7% 23.3% Oil 18.7% 18.2% Nuclear energy 7.7% 8.7% Coal 6.3% 5.6% Natural gas Net imports of electricity 4.5% 5.1% Hydro – and wind power 5.2% 5.0% 4.4% 4.1% Peat Other 4.1% 4.0%

2017 27% 23% 17% 9.0% 5.0% 5.0% 5.0% 4.0% 5.0%

2018:I-III 26% 23% 18% 8% 6% 5% 6% 5% 5%

Fig. 7.7  Share of total energy consumption in Finland, 2015–2018 (Preliminary) Compiled by author on the basis of Statistics Finland, Energy supply and consumption, https:// www.google.pl/search?tbm=isch&q=energy+in+finland and Energy consumption in Finland, WorldData.info-a

hard coal totaled 2.1 million tons, a decrease of 6% compared to the previous year. On the other hand, the use of fossil fuels decreased by 6% compared to the previous year, and their share in the total energy consumption was 36%. In the case of fossil fuels, the consumption of coal (including hard coal, coke and blast furnace and coke oven gas) and natural gas decreased by 8% in total. The first liquefied natural gas terminal in Finland was (for the first time) in operation all year round in 2017. Oil consumption fell by 3% but maintained its position as Finland’s second most important energy source with 23% of the total energy consumption. The consumption of peat remained almost unchanged as compared to the previous year (OSFf). In this context, it is worthwhile to get acquainted with the basic data on the percentage share of individual sources in the energy market of the Republic of Finland. The Fig. 7.7 presents share percentages in the years 2015–2018, hence it makes it interesting to compare them with the latest data stating that “the most important measure in the energy balance of Finland is the total consumption of 85.15 billion kWh of electric energy per year. Per capita this is an average of 15,450 kWh” (WorldData.info-b) (Fig. 7.8). These figures clearly show that in 2017 “electricity production in Finland amounted to 65 TWh, or 2% less than one year previously. Because the consumption of electricity did not fall, reduced production was covered by net imports of electricity, which increased by 8%. The share of renewable energy sources in

7.1  Energy Balance of Finland

153

total

Finland Per capita

Compared to Europe per capita

Own consumption

85.15 bn kWh

15,450.07 kWh

5,437.14 kWh

Production

66.20 bn kWh

12,011.68 kWh

5,848.09 kWh

Import

22.11 bn kWh

4,011.76 kWh

729.45 kWh

Export

3.16 bn kWh

573.19kWh

708.25 kWh

Natural Gas

Cubic meters

Electricity

Finland per capita

Compared to Europe per capita

Own consumption

2.73 bn m3

494.62 m3

822.75 m3

Production

8.00 m m3

1.45 m3

444.60 m3

3

752.04 m3

Import

3

2.71 bn m

492.26 m

Fig. 7.8  Energy balance Source: Energy consumption in Finland, WorldData.info-a

Energy source

Other energy sources

Total in Finland 30.46 bn kWh 48.41 bn kWh 33.90 bn kWh 30.89 bn kWh 0.00 kWh

Total production capacity

143.66 bn kWh

Fossil fuels Nuclear power Water power Renewable energy

Percentage Percentage in Finland in Europe 21.2% 48.9% 33.7%

7.6%

23.6%

24.1%

21.5%

15.7%

0.0%

3.8%

100.0%

1000%

per capita in Finland 5,226.4 kWh 8,784.63 kWh 6,151.85 kWh 5,604.44 kWh 0.00 kWh 26,067.16 kWh

per capita in Europe 8,014.87 kWh 1,247.99 kWh 3,946.70 kWh 2,571.37 kWh 624.58 kWh 16,405.51 kWh

Fig. 7.9  Production capacities per energy source Source: Energy consumption in Finland, WorldData.info-a

e­ lectricity production rose by two percentage points to 47%. The production of hydro power dependent on the water situation fell by 7%, but it was compensated by wind power, whose production rose by 56%. The production of solar power rose even more – by as much as 128%. The share of hydro power in production was 22%, that of wind power 7% and that of solar power just 0.1%. Combined heat and power production covered 32% of production and condensing power only producing electricity 5%. The share of electricity produced with fossil fuels and peat in total production was in total 19%, down by 11%. The share of nuclear power in electricity production was again about one third” (OSFd). The energy sources discussed above, measured in units of labor, energy and heat (kWh) both nationally and in the European context, show the real, current energy potential of Finland (Fig. 7.9).

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It is worth noting that the third largest seller of energy in Finland is Vattenfall, which has customers throughout the country, both in the B2C and B2B sectors. This market is expected to grow in the coming years. In 2015 and 2016, according to the Sustainable Brand Index which reviewed sustainability and brand responsibility in Scandinavia, consumers assessed Vattenfall as the most responsible energy company. It generates hydropower at ten power plants in Finland, the largest of which is the Pamilo hydropower plant in Joensuu, North Karelia. The company produces 0.4 TWh of hydropower annually and employs more than 60 people. Between January and September 2018, Finland received various energy products worth EUR 7.9 billion, 23% more than a year before. Most of them came from Russia, making a 63% share of the import value. At the same time, energy products worth EUR 4 billion were exported (15% more than in the previous year). Most of them went to EU countries, accounting for 80% of the value of Finnish exports (OSFa). Net imports of electricity into Finland amounted to 20.4 TWh, which accounted for 24% of total electricity consumption. Compared to 2016, this meant an increase of 8%. Most electricity was imported from Sweden with 15.3 TWh and Russia with 5.8 TWh. Almost all electricity exports from Finland (1.7 TWh) were directed to Estonia. The share of renewable energy sources has steadily increased over the last 20 years. Since the opening of the market, due to the import from Nordic hydro and wind power, renewable energy has been the source of most of the electricity consumed in Finland (OSFe). Furthermore, thanks to the joint production of electricity and heat, the energy value of fuels is used extremely efficiently. However, all this is not sufficient and the Finns are trying to achieve the highest growth rate in the development of bioenergy, which is expected to increase its share of renewable energy to 85%.5 Measures are also needed to increase the use of waste for energy production or to increase the use of biofuels in road transport from 2% (in 2009) to 5.75%. Such a vision (by 2025) would mean at least doubling the use of renewable energy compared to the amount consumed in the first and second decade.

7.2  Activities Aimed at Ensuring Finland’s Energy Security Since 2016, detailed reviews of national policies carried out by the International Energy Agency (IEA) have focused on key challenges related to energy security in rapidly changing global energy markets, as well as on the transition to clean energy systems.6 This latest update of Finland’s energy policy therefore offers an insight  According to 2008 estimates, this was possible with a fourfold increase in consumption of forest fuel, sixfold increase in consumption of biogas, sixfold increase in consumption of biofuels, 16-fold increase in consumption of wind energy and the same amount of solar energy; data from: www.energy-enviro.fi 6  Since 2016, the International Energy Agency’s (IEA) in-depth country policy reviews focus on key energy security challenges in fast changing global energy markets as well as on the transition to clean-energy systems. 5

7.2  Activities Aimed at Ensuring Finland’s Energy Security

155

into three areas of particular interest: bioenergy, transport and combined heat and power (CHP). With its rich forest resources, Finland is a world leader in the development of second-generation biofuels. The Report (IEA-b 2018) analyzes the impact of increased biofuel consumption on sustainability and carbon sequestration in Finland and offers perspectives for Finland’s innovation in heavy transport, aviation and maritime transport. It is important to emphasize that Finland today is a country with clearly defined energy policy objectives, and consistently pursues them. The priorities of this policy are to secure energy supplies at competitive prices (Finland is a world leader in terms of energy consumption per capita), energy independence and environmental protection, notably by reducing greenhouse gas emissions. Nuclear energy has a leading role to play in this strategy.7 Four reactors operating in the Finnish power system were put into operation in the years 1977–1980. Twelve largest workers’ organizations, headed by the Confederation of Finnish Trade Unions (SAK), demanded that the construction of new nuclear reactors be included in the government’s program for the coming years. According to SAK, the sixth reactor would be the only realistic way to reduce greenhouse gas emissions, although its energy would meet only half of the growing demand. This position was also shared by the Confederation of Finnish Industry and the Federation of Energy Industries – ET.8 Unlike the German government (which wants to close down all nuclear power plants operating on its territory by 2020), the Finnish government has been for years taking steps to further develop nuclear power. This is about supplementing the current Loviisa and Olkiluoto reactors with Olkiluoto 3 and 4 nuclear units and the reactor at the planned Pyhajoki power plant, which should ensure Finland’s energy self-sufficiency in 2020. It is also worth noting that Finland has a unique system for financing nuclear energy. While the Loviisa power plant belongs entirely to the state-controlled energy concern Fortum (which also has a large share in two nuclear power plants in Sweden), the operator Olkiluoto – TVO company9 has several dozen shareholders. Fortum has a 25% share in it, while the rest belongs primarily to companies from energy-intensive industries, but also to local governments. The shareholders, proportionally to their contribution, receive electricity at production costs. Fennovoima, which is constructing a nuclear power unit in Pyhajoki, has a similar structure. According to the Finnish Ministry of Labour and Economy, the target share of the atom in electricity generation is to reach 60%. It is also not without significance that no other industry than nuclear power is able to offer so many jobs and for such a long period of time. “In Finland, we are faced with a choice: either we build nuclear power plants or import electricity from Russia. Historical experience shows

 See: Tolonen 2003, pp. 1–4.  See Taloussanomat 2007. 9  The total value of the investment is estimated at 5.5 billion EUR, http://nuclear.pl/wiadomosci,ne ws,18031402,0,0.0.html 7 8

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7  The Republic of Finland: Dynamic Modernization of the Energy Sector

that it would be better for us that we, not the Russians, decide on our standard of living.”10 In this context, it should be stressed that Finland’s nuclear sector can be regarded as exemplary in many respects. Atom has enjoyed the support of the majority of the population for years, who see it as a clean, environmentally friendly source of energy at a competitive price. The operation of the power plant also has the support of local communities. In Finland, the municipality concerned has the right to veto the construction of a nuclear power plant on its territory, but this tool has never been used. The STUK Nuclear Supervisory Authority is considered one of the most restrictive in the world and enjoys a very high level of public trust. In addition, Finland will be one of the first countries in the world to solve the problem of spent fuel from nuclear power plants by placing it in the final geological repository, according to the latest EU guidelines. The above comments pertain to ensuring the best possible energy security for the country. However, we cannot ignore the need to find other useful means by which to strive for better use of energy and greater energy savings. The intention of the authorities is to halt the increase in energy consumption without hindering the development of the country. According to the Energy Services Directive, energy demand had to be reduced by 9% in 2016, which meant savings of 17.8 TWh. This goal was to be achieved in stages, the first important determinant being the year 2010, when the savings were to reach 5.9  TWh (Regeringens strategidokument 2007, p.  57). The government believed that the growing demand for energy could be controlled by conscious action and efforts to stop the growing consumption of energy. Taking into account climate risks and environmental commitments, the government’s energy policy aimed at “ensuring secure energy supplies and reasonable prices as well as increasing energy self-sufficiency” (Regeringens strategidokument 2007, p. 54). The demand for industrial heat necessary for heating is largely met by biofuels and electricity. At the same time, Finland’s energy sector is investing in new nuclear power, based on long-term industry contracts. However, coal and peat still play an important role in combined heat and power (CHP) and related heating and cooling (DHC), placing Finland in the 7th place in terms of IEA coal supply intensity. If we recall that the government’s objective is to phase out coal within the Powering Past Coal Alliance, it is clear that the district heating sector needs to move towards biomass-based CHP plants with technologies that support thermal flexibility, including heat storage and smart metering, while promoting energy efficiency in buildings. By aligning energy taxation with the carbon content of fuel, Finland can encourage a shift towards low carbon fuels in urban heating and cooling. In order to improve its energy security, Finland is taking a number of measures to increase the share of its own energy sources in the energy balance, including the acquisition of energy resources from countries other than Russia and increasing

 This is the statement made by Harri Hiitio, Mayor of the municipality of Eurajoki, where the Olkiluoto power plant is located; https://www.money.pl/gospodarka/wiadomosci/ 10

7.3  Energy – Climate: Practical Actions

157

Russia’s credibility as a supplier of primary energy sources and electricity. The implementation of projects aimed at increasing the share of renewable energy sources and nuclear energy in the national energy balance has a particularly important place in these activities. Furthermore, integration in the Nordic and Baltic electricity markets is being deepened on the basis of new interconnections, as well as work on a common gas market with the Baltic countries.

7.3  Energy – Climate: Practical Actions As an Arctic country, Finland is facing violent climate change, which can have a potential impact on, inter alia, forest growth and the occurrence and strength of winter storms. Much of the land area is in the subarctic and Arctic zone and long winters make the country consume huge amounts of electricity to heat homes.11 In 2014, the latest National Climate Change Adaptation Plan in Finland was accepted, including a series of measures to strengthen the resilience of electricity distribution networks, which mainly means an increase in the use of biofuels and renewable sources, such as residual products from the forest industry and wind energy. It should be stressed that in Finland’s long-term development strategy, climate and energy have been inextricably linked. Already in the first decade of the twenty-­ first century, the government’s strategy even stated that: “As part of the preparation of the climate and energy strategy, a tight energy program must be implemented. It is the government’s intention that the climate and energy strategy should be ready in 2008, after which it will be forwarded to the Parliament” (Regeringens strategidokument 2007, p.  55). It was also assumed that after the expiry in 2012 of the Climate and Energy Strategy of the Kyoto Protocol, the EU will tighten its greenhouse gas emission standards, which will mean that obsolete coal-fired power plants that have been decommissioned will have to be quickly replaced by clean coal-fired power plants. In practice, coal combustion in Finland will become extremely limited or even virtually impossible due to the EU’s high greenhouse gas emission limits. With its rich forest resources, Finland is a world leader in the development of second-generation biofuels. Forest industry by-products and wood residues are used as fuel for energy and heat generation or converted into second-generation biofuels, in particular biodiesel, which is a leading industry in Finland worldwide. Since 2007, the supply of biofuels and waste has increased by 30%, while the supply of oil has decreased by 9% and the supply of coal, natural gas and peat has decreased by almost 50%. Finland’s global demand for forest products is growing, and so is its supply of wood-based energy sources.

 The EU has obliged member states to reduce emissions from residential buildings, transport and agriculture by 39% by the year 2030. 11

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7  The Republic of Finland: Dynamic Modernization of the Energy Sector

In June 2013, the government of Prime Minister Jyrki Katainen appointed the Parliamentary Committee on Energy and Climate Issues with the task of preparing an energy and climate roadmap for Finland up to 2050. Representatives of all political parties represented in Parliament were invited to participate in its work.12 In the published Report (Energy and Climate Roadmap 2050), we read, among others: “Finland’s long-term objective is to be a carbon-neutral society. This challenge is particularly great in the energy sector. Approximately 80% of all greenhouse gas emissions in Finland come from energy production and consumption, when energy used for transport is included” (Energy and Climate Roadmap 2050). According to it, the government in its program set ambitious targets for renewable energy, according to which Finland is committed to EU’s 2030 energy and climate targets and will continue adding use of renewable energy and improving energy efficiency even though no national binding targets are set after 2020. It focused mainly on the promotion of bioenergy, especially advanced biofuels in transport. By the end of 2016, a new energy and climate strategy was prepared and launched, involving all relevant ministries, major industrial sectors and the widest possible range of citizens in the country. It sets out how to achieve the ambitious energy targets in the government’s program. The energy and climate strategy is also a part of the work that is done for preparing Energy Union’s National Energy and Climate plan and it indicates how Finland is going to reach the EU’s 2030 targets for renewable energy, energy efficiency and also for EU effort sharing targets. These objectives can be summarized as follows: –– The use of emission-free, renewable energy will be increased in a sustainable way so that its share will rise to more than 50% by the end of 2020s and the self-­ sufficiency to more than 55%, also including peat; –– Coal will no longer be used in energy production and the use of imported oil for the domestic needs will be cut by half by the end of 2020s; –– The share of renewable transport fuels will be raised to 40% by 2030; –– Finland will create new support programs for renewable energy. Aid will be based on technology neutrality and ranking of economic priorities. In order to reduce greenhouse gas emissions, in 2016 Finland announced plans to phase out coal within 14 years, halve oil imports and significantly increase the number of electric cars on the roads – partly in order to meet the targets set by the European Union. The government has set out plans in its “Energy and Climate Strategy 2030 and beyond” which aims to make Nordic energy production carbon-neutral by 2050 and replace traditional energy sources with biofuels and renewable energy. “Utilizing the potential of Finnish renewable energy to produce electricity at an industrial level is one of the central questions in achieving long-term energy and climate goals,” said Economic Affairs Minister Oli Rehn. “The national climate and energy strategy

 Report of the Parliamentary Committee titled Energy and Climate Roadmap 2050 was released on October 16, 2014. 12

7.3  Energy – Climate: Practical Actions

159

decided today in the Cabinet meets the tough targets from a Finnish standpoint” (Huuhtanen 2016). Renewable energy sources serving this target last year accounted for 40% of total energy consumption and are estimated to reach 47% by 2030 with the proposed measures – close to the government’s target of 50%. Minister of Transport and Communications Anne Berner defined the transport sector’s emission targets as “demanding,” which will be partially met by increasing the number of electric cars on Finnish roads to 250,000 by 2030 – from the current some 1000 – partly with subsidies. In addition, the biogas car group will be increased to 50,000 cars (Huuhtanen 2016). Imported oils, including crude oil, diesel, fuel oil and others, will be halved in 2020 compared to 2005 levels. Although the government wants to liquidate coal, which produces 8% of the country’s electricity, it will soon continue to promote peat combustion, mainly because it is produced in the country. Finland not only intends, but is even determined to meet the objectives of the EU climate and energy policy for 2020, i.e. to reduce emissions by 20%, increase energy efficiency by 20% and achieve at least 20% of energy from renewable sources. However, the government’s strategic goal is to eliminate emissions from the energy sector and limit the import of electricity, primarily from Russia.13 To achieve this, 60% of the energy produced in the country is to be produced from the atom; the remaining part is to come almost entirely from renewable sources, primarily from waste from the wood industry – one of the main branches of industry in Finland. The government wants to keep energy prices at a low level, as the competitiveness of energy-intensive Finnish industries depends on it. It is worth noting that the Finns are giving up coal-fired power plants first,14 especially as their country has been operating four reactors in two nuclear power plants since the end of the 1970s: Loviisa and Olkiluoto. In the latter power plant, the construction of the fifth reactor, the latest French EPR design, is underway. With the political agreement of the government, parliament and local authorities, the plans are to build a fourth reactor at Olkiluoto and at least one at the new Pyhajoki power plant. After 2020, Finland is to have 7 reactors in operation, producing 3/5 of the electricity needed by the country and ensuring energy independence. The Onkalo (Jama) geological repository built on the island of Olkiluoto will also be operational after 2020. In 100 years, it will contain all the spent fuel from the entire lifetime of the Olkiluoto and Loviisa reactors.15 As the EU’s renewable energy targets are calculated in relation to final energy consumption, today we can conclude that the share of renewable energy sources in  The need to increase the country’s energy self-sufficiency is based on the experiences of 2006, when Russia stopped exporting electricity to Finland for a few weeks. They also indicate a positive attitude of politicians and society towards nuclear energy. 14  After the expiration of the Kyoto Protocol in 2012 and the tightening of the EU’s greenhouse gas emission standards, it became necessary to replace the obsolete coal-fired power plants with clean power plants that are ecologically decommissioned. 15  More on the subject in Strategia energetyczna Finlandii. 13

160

7  The Republic of Finland: Dynamic Modernization of the Energy Sector

Finland calculated in this way rose to more than 40% in 2017. According to preliminary statistics, Finland’s target for the share of energy from renewable sources will be 38% of final energy consumption in 2020, and this share was reached for the first time in 2014 (Statistics Finland). The share of renewable energy in Finland’s final consumption is the second highest in the EU. Research and development expenditure has also improved and, according to the statistics, amounted to EUR 6.2 billion in 2017, i.e. the expenditure increased by EUR 247 million compared to the previous year (https://www.stat.fi/til/ene_en. html). The increase occurred in all sectors: in enterprises it was 3%, in the government sector 8% and in higher education 5% compared to 2016.16 R&D expenditure is expected to increase by around €140 million in 2018 and the share of GDP is estimated at 2.70%.17 Finland was also a leader among the IEA countries in public and private spending on energy research, development and demonstration. A long-­ term policy framework for 2050 will be crucial to guide investment in clean energy technology innovation, which is a key factor in achieving decarbonization goals. Diversification of the structure of energy sources in Finland allows to increase the country’s energy security. A high degree of diversification is the result of conscious efforts to make the country independent from imports of energy resources. An important feature of the energy sector is a significant share in the structure of primary energy sources of fuels, the use of which has no negative impact on the state of the environment. This contributes to the reduction of climate change caused by the activities of energy companies and to the implementation of the concept of sustainable development supported by Finnish society.

Bibliography Czarny RM (2008) Państwa regionu nordyckiego wobec problemu bezpieczeństwa energetycznego. In: Cziomer E (ed) Międzynarodowe Bezpieczeństwo Energetyczne w XXI Wieku. Kraków, Krakowskie Towarzystwo Edukacyjne – Oficyna Wydawnicza AFM Czarny RM (2009) Dylematy energetyczne państw regionu nordyckiego. Scandinavium, Kielce Eesti Paevaleht (2007, March 09) Energy Accounts (2018) Retrieved October 25, 2018 from https://www.stat.fi/til/entp/ index_en.html Energy and Climate Roadmap 2050: Report of the Parliamentary Committee on Energy and Climate Issues on 16 October 2014 (2014) Ministry of Employment and the Economy, Helsinki. Retrieved December 13, 2018 from http://www.tem.fi/en/energy/energy_and_climate_roadmap_2050 Fingrid-lehti: Huge changes in Finland’s electricity market (2017, September 11). Retrieved January 10, 2019 from https://www.fingridlehti.fi/en/huge-changes-finlands-electricity-market/ Finnish Energy Production, Energiateollisuus Energy Year 2005. www.tvo.fi; updated 2.2.2008 Frączek P (2013) Doświadczenia Finlandii w modernizacji sektora energii. Nierówności Społeczne a Wzrost Gospodarczy, 2013(31). Retrieved from https://docplayer.pl/6259246-Doswiadczenia-finlandii-w-modernizacji-sektora-energii.html

16 17

 Nevertheless, this is a real decrease in research spending, with the last increase in 2011.  See IEA-a.

Bibliography

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Huuhtanen M (2016, November 24) Finland plans to phase out coal by 2030 (Update). Retrieved February 02, 2018 from https://phys.org/news/2016-11-finland-phase-coal.html#jCp IEA-a. Global Engagement: Finland. Retrieved November 4, 2018 from https://www.iea.org/ countries/Finland/ IEA-b (2018) Energy policies of IEA countries: Finland 2018. International Energy Agency, Paris. Retrieved February 17, 2019 from https://webstore.iea.org/download/summary/2372 OSFa  – Official Statistics of Finland: Consumption of hard coal, Consumption of hard coal decreased by 3 per cent in 2018. Published: 31 January 2019. Retrieved February 15, 2019 from https://www.stat.fi/til/kivih/2018/12/kivih_2018_12_2019-01-31_tie_001_en.html OSFb  – Official Statistics of Finland: Energy supply and consumption, Carbon dioxide emissions in the energy sector went up by 4 per cent in January to September. Published: 20 December 2018. Retrieved February 15, 2019 from https://www.stat.fi/til/ehk/2018/03/ ehk_2018_03_2018-12-20_tie_001_en.html OSFc  – Official Statistics of Finland: Energy supply and consumption, Share of total energy consumption. Retrieved October 30, 2018 from https://www.stat.fi/til/ehk/2016/04/ ehk_2016_04_2017-03-23_kuv_007_en.html OSFd – Official Statistics of Finland: Energy supply and consumption, Use of renewable energy continued growing in 2017. Published: 11 December 2018. Retrieved February 13, 2019 from https://www.stat.fi/til/ehk/2017/ehk_2017_2018-12-11_tie_001_en.html OSFe – Official Statistics of Finland: Production of electricity and heat, Use of renewable energy sources grew in electricity and heat production in 2017. Published: 1 November 2018. https:// www.stat.fi/til/salatuo/2017/salatuo_2017_2018-11-01_tie_001_en.html OSFf – Official Statistics of Finland: Consumption of hard coal. Retrieved December 2, 2018 from https://www.stat.fi/til/kivih/index_en.html Puka L (2011, December 22) Więcej niż bezpieczeństwo dostaw. Polityka energetyczna Finlandii – wnioski dla Polski, [More than security of supply: Finland’s energy policy and lessons for Poland]. PISM Bulletin, 116/333 Regeringens strategidokument 2007, Statsrådets kanslispublikationsserie, Helsinki, 19/2007 Statistics Finland. Retrieved October 30, 2018 from https://www.stat.fi/til/ehk/2017/04/ ehk_2017_04_2018-03-28_tie_001_en.html Strategia energetyczna Finlandii. Retrieved from http://poznajatom.pl/poznaj_atom/ strategia_energetyczna_finland,413/ Taloussanomat (2007, January 4) Tolonen J (2003) Rola energetyki jądrowej w polityce energetycznej Finlandii. Conference proceedings from EPS, Warszawa, 2003. Retrieved November 03, 2014 from https://www.yumpu. com/pl/document/view/18218742/rola-energetyki-jadrowej-w-polityce-energetycznej-manhaz WorldData.info-a, Energy Consumption in Finland. Retrieved January 10, 2019 from https://www. worlddata.info/europe/finland/energy-consumption.php WorldData.info-b, Finland. Retrieved February 14, 2019 from https://www.worlddata.info/europe/ finland/index.php https://www.iea.org/countries/Finland/ http://www.iea.org/statistics/statisticssearch/report/?country=Iceland&product=balances https:// www.eia.gov/beta/international/country.php?iso=FIN https://www.google.pl/search?tbm=isch&q=energy+in+finland+2017&chips=q:energy+in+finl and+2017,online_chips:energy+consumption&sa=X&ved=0ahUKEwiV0Inv2K7eAhVltIsK HcTYBC4Q4lYILygG&biw=1366&bih=626&dpr=1#imgrc=V9cWW52IfrCjtM. Retrieved October 30, 2018 http://nuclear.pl/wiadomosci,news,18031402,0,0.html https://www.money.pl/gospodarka/wiadomosci/artykul/elektrownie;atomowe;w;finlandii;buduja; kolejne;bloki,66,0,1161282.html. Retrieved February 23, 2019 https://www.stat.fi/til/ene_en.html. Retrieved October 30, 2018 www.energy-enviro.fi. Retrieved February 2, 2009

Chapter 8

The Republic of Iceland: Ambitious Energy Plans

Abstract  Iceland is a leading example of the energy transformation. It has extensive positive experience with such transformations, as the transition from oil to geothermal heating is a good illustration of a very successful national energy transformation with a strong positive economic impact and environmental benefits. Keywords  Energy transformation · Geothermal energy · Renewable energy sources · Hydropower

Until the beginning of the twentieth century, Iceland was one of the poorest countries in Europe. It was only in the last century that enormous changes took place and the outdated model of economy dependent on peat, imported coal and other fossil fuels came to an end. Today, it is a country with a high standard of living, where virtually all stationary energy comes from renewable sources.1 Despite the fact that Iceland’s economy is the smallest among OECD countries and has a small number of inhabitants – 335.03 thousand (Global Innovation Index), the government of this country was able to ensure a high increase in the national income per capita at a level that places Iceland in the Very High Human Development group (Fig. 8.1). In 2005, according to The World Competitiveness Scoreboard, the Icelandic economy was recognized as the most competitive in the world. In 2012, Iceland fell in the ranking, taking 24th place among the 30 highest ranked countries in the world in 2015, and improving by one position compared to 2014.2 In 2018, with the 24th

 In 2014, about 85% of primary energy consumption in this island state came from indigenous renewable resources, 66% of which came from geothermal energy. 2  On the basis of http://www.imd.org/uupload/imd.website/wcc/scoreboard.pdf. It should also be explained that the IMD World Competitiveness Scoreboard presents the 2018 overall rankings for the 63 economies covered by the WCY. The remaining places in the top 10 are occupied largely by Nordic countries: Denmark, Norway and Sweden rank 6th, 8th and 9th respectively. Finland occupies the 16th spot. https://www.imd.org/wcc/world-competitiveness-center-rankings/worldcompetitiveness-ranking-2018/ 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_8

163

164 Subject Descriptor

8  The Republic of Iceland: Ambitious Energy Plans Units

2017

2018

2019

2020

20.304

23.909

29.109

31.646

33.213

16.704

17.623

18.606

19.579

20.522

Units

60,392.54

70,332.2

84,675.4

91,014.7

94,420.4

Purchasing power parity; international dollars

Units

49,683.00

51,841.5

54,121.3

56,309.1

58,340.9

Persons

Millions

0.336

0.340

0.344

0.348

0.352

Scale

Gross domestic product, current prices

U.S. dollars

Billions

Gross domestic product, current prices

Purchasing power parity; international dollars

Billions

Gross domestic product per capita, current prices

U.S. dollars

Gross domestic product per capita, current prices

Population

2016

Fig. 8.1  Iceland, basic data Compiled by author on the basis of International Monetary Fund. The years 2018–2020 – the scale of estimated growth

place again, it was still higher than Japan (25th place), which is considered to be a very well developed country. The high position of the country is also illustrated by other data. Between 2007 and 2008, Iceland achieved the highest Human Development Index – HDI (http:// www.nationsonline.org). Despite the fact that in the following years Norway took the lead, the island country is still among the top 10 countries in the world occupying the 6th place (Human Development Reports 2018).

8.1  Energy Balance of Iceland This islandic State is young in the geological sense. It is positioned on one of the main fault lines of the Earth, the so-called Central Atlantic Ridge. This is the boundary between the North American and Eurasian tectonic plates, which propagate at a speed of about 2  cm per year. Iceland is an unusual part of the ridge, where the material from the deep mantle rises and creates a hot point with extremely high volcanic activity. This makes the country one of the few places on Earth where one can see the active ridge above sea level. Thanks to its location, the Republic of Iceland is one of the most tectonically active places in the world, with the presence of many volcanoes and hot springs. Earthquakes are frequent, but rarely cause severe damage. More than 200 volcanoes are located in an active volcanic zone stretching across the country from southwest to northeast, and at least 30 of them have erupted since the country became inhabited by people. There are also at least 20 high temperature areas in this volcanic zone, containing steam fields with temperatures up to 250 °C at a depth of 1000 m. These areas are directly linked to active volcanic systems.

8.1  Energy Balance of Iceland

Coal Production Imports Exports Total final consumption Industry Transport Others

0 98 0

165

Crude Oil Natural Hydro oil products gas 0 0 0 1106 0 714 0 0 0 0 0 0

Geoth, 4163 0 0

Biofuels/ Electricity Heat waste 2 0 0 3 0 0 0 0 0

Total 5271 814 0

98

0

42

0

0

98

3

1447

535

2718

0 0 0

0 0 0

42 272 212

0 0 0

0 0 0

11 0 86

0 3 0

1262 0 184

0 0 535

1414 276 1017

Fig. 8.2  Iceland’s energy balances 2013 (ktoe) Compiled by author on the basis of http://www.iea.org/statistics/

According to Orkustofnun (Energy Statistics-a), about 250 separate areas with a low temperature and a temperature not exceeding 150  °C at the highest point of 1000 m are located mainly in the areas surrounding the active zone. To date, more than 600 hot springs (temperature above 20 °C) have been located. It should also be added that a significant part of the precipitation in Iceland, stored in ice caps and groundwater, is dispersed by evaporation, groundwater flow and glacial flow. Combined with the large uplands, the whole has a huge energy potential of up to 220 TWh/year. All this and the increased volcanic activity allows the inhabitants of this unusual island to make use of geothermal energy3 as well as water energy resources harnessed into heating and electricity production. In 2014, 20% of primary energy in Iceland came from hydropower, with hydroelectric power stations accounting for 12.9  TWh of total electricity production, generating 72% of domestic electricity production (Energy Statistics-a). In this context, it is not surprising that already in 1983 Iceland was the world’s third largest consumer of electricity per capita, and only about 28% of energy consumed was imported – mainly diesel for the fishing fleet and petrol for cars (Fig. 8.2). Iceland is currently one of the few countries in Europe with a significant amount of under-exploited energy resources. The possibilities for obtaining electricity from rivers and geothermal sources are roughly but conservatively estimated at least at 50,000 GWh per year,4 20,000 GWh from geothermal sources5 and 30,000 GWh from hydropower.6 In 2014, only about 10% of potential energy resources were used, of which 65% by industry and 35% by the population.7 The whole Icelandic

 Geothermal energy is the energy of geothermal waters extracted from the earth’s surface.  Gigawatt hour (GWh) = 1000 KWh (Kilowatt hours). 5  For example, a combined heat and power plant operating in Keflavik with high-pressure water at 260 degrees Celsius. 6  Compare Kotowski and Fechner n.d. 7  The energy consumption indicator includes domestic sales and purchases for foreign ships and aviation. See http://www.nationmaster.com/country-info/profiles/Iceland/Energy 3 4

166 Fig. 8.3  Key statistics for Iceland, 1990–2016 Compiled by author on the basis of IEA Global Engagement derived from Browse all IEA statistics for Iceland

8  The Republic of Iceland: Ambitious Energy Plans 1990

2006

2016

Energy production - Mtoe

1.62

3.11

4.59

Net energy imports - Mtoe

.075

0.95

1.06

Total primary energy supply Mtoe

2.27

3.87

5.29

Electricity consumption - TWh

4.12

9.52

18.06

CO 2 emissions Mt of CO2

1.90

2.27

2.06

.24

.0.19

CO 2 emissions/GDP kg CO2/2010 USD

1.3 kg CO2/2010 USD

population has had access to electricity, and since 1982 about 80% of households have been heated by geothermal energy.8 Geothermal fluid is composed of steam, water and the various gases present in the steam, and is extracted from the geothermal system at a depth of 2000 m during the utilization process. Energy is generated by utilizing the steam. Most of the water is then re-injected into the geothermal system (deep re-injection) or released into surface water. The gases are released into the atmosphere. In 2017, approximately 6,415,000 tons of steam were used to generate 565 GWh of electricity in the Mývatn region (Krafla, Bjarnarflag and Þeistareykir). During the utilization process, 15,792 thousand tons of condensate were produced and water was separated. The amount of water in geothermal fluid increased in comparison with the previous year, which can be mostly attributed to the operation of the geothermal power plant Þeistareykir. Approximately 6,841,000 tons of separated water were reintroduced back into the geothermal reservoir (Geothermal resources 2016/2017) (Fig. 8.3). Iceland’s energy situation further improved in 2017, accounting for 103% of the country’s energy needs, as shown in the following Figs. 8.4 and 8.5. The share of own renewable resources in the national energy and fuel balance exceeds 70%. Electricity is obtained from natural sources: 10 hydroelectric power plants9 and 5 larger geothermal power plants10 (one of them derives its energy from the active Krafla volcano).11 In order to find the widest possible application for this type of energy, Icelanders have engaged a considerable research effort, which resulted in the following development of the utilization of geothermal energy already in 2013: Space heating – 45%; Electricity generation – 40%; Fish farming – 5%;  The functioning of geothermal heating systems explains Ingolfsson n.d. See also Walat 2007.  The first hydroelectric power station was built in Hafnarfjördur in 1904. 10  In 2010, they provided almost 27% of the national electricity production. 11  For more on the subject, see Geothermal resources. 8 9

8.2  Renewable Energy Resources

Electricity Own consumption Productiona

Total result 17.98 billion kWh 18.56 billion kWh

167

Calculated per capita 52,683.40 kWh 54,382.86 kWh

Compared to Europe per capita 5,402.93 kWh 5,811.08 kWh

Fig. 8.4  Energy balance in Iceland Source: https://www.worlddata.info/europe/iceland/energy-consumption.php a The stated electricity production capacity has a theoretical value that can only be obtained under ideal conditions. They measure the amount of energy that can be produced that would be achieved if all the capacities of all power plants were used consistently and at full capacity

Energy source

Total in Iceland

Fossil fuels

Percentage in Iceland

Percentage in Europe

Per capita in Iceland

1.02 billion kWh

4.2%

48.9%

2 988,34 kWh

Atomic energy

0,00 kWh

0.0%

7.2%

0.00 kWh

Water power

17.41 billion kWh

71.7%

23.4%

51,0151.31 kWh

Renewable energy

5.85 billion kWh

24.1%

16.2%

17,1477.49 kWh

Other energy sources

0,00 kWh

0.0%

4.3%

0,00 kWh

Total production capacity

24.28 billion kWh

100.0%

100.0%

71,151.06 kWh

Fig. 8.5  Production capacity (2017) in Europe by energy source Source: https://www.worlddata.info/europe/iceland/energy-consumption.php

Swimming pools: 4%; Snow melting – 4%; Greenhouses – 2% (IEA Global Engagement).

8.2  Renewable Energy Resources Iceland is well known as a world leader in the use of geothermal heat. The idea of geothermal heating was born in Iceland more than a century ago. In 1908, Stefan B. Jonsson used hot water to heat his farm. Shortly afterwards, other farmers started to develop their own systems for heating their farms. Before 1930, at least 10 farms in southern Iceland were heated in this way. At the same time the government started to organize public funds for the development of geothermal energy and started to

168

8  The Republic of Iceland: Ambitious Energy Plans

drill wells near Reykjavik with used equipment purchased from mining companies. The first public building heated in this way was the Austurbaejarskola primary school in Reykjavik. The hot water used to heat the school was pumped from Pvottalaugar through a 3  km-long pipe. Other buildings connected to the system were a state hospital and 60 private houses. After the oil price increases in 1973 and 1974, Icelanders had no doubt that the country’s energy future would belong to geothermal energy. The significant development of geothermal energy over the last 60  years has made it possible to reduce fuel imports and lower heating prices, particularly since 1970. Space heating is the largest component of the direct use of this energy source,12 and currently 9 out of 10 households are heated with geothermal energy. In addition, the proportion of the population using geothermal energy is still increasing and could rise to as much as 92% of the total in the long term. The heating costs in Reykjavik, where geothermal energy is mainly used, account for only 1/3 of the price of oil heating. This makes it cheaper to heat a house in Iceland than in other Nordic countries: Danes pay four times as much and Finns almost twice as much. It is estimated that a family living in Reykjavik saves on average NOK 80,000 (about EUR 585)13 per year on heating. These are also benefits for the whole country: even conservative estimates suggest that Iceland saved around $4.3 billion14 between 1940 and 2006 thanks to its access to geothermal heating. It is also estimated that without geothermal heating, CO2 emissions in Reykjavik would have been around 4 million tons per year. With hot water energy, emissions were reduced by 140 million tons between 1914 and 2014. Without geothermal energy, Iceland would have emitted more than three times more carbon dioxide. Geothermal energy is a renewable source of energy which, according to Icelanders, should be used in a sustainable way. Excessive production from the geothermal field can only be maintained for a relatively short period of time. After a long period of over-exploitation, the field operator is forced to reduce production to the level of maximum sustainable use. In this way, favorable conditions are created in the relationship between the investment time and the moment of generating revenue, which results in lower long-­ term production costs. The combination of the step-by-step approach with the concept of sustainable development of geothermal resources provides an attractive and economic way of utilizing geothermal energy resources. Still, Icelanders are constantly working on new ways of obtaining heat and energy from deeper and deeper parts of their volcanic island. They have come to the conclusion that if they find out about one of the volcanic tanks (the so-called magma tanks), they will gain access to a huge energy potential. They are implementing their  In 2013, the total geothermal energy use was 46.7 PJ, of which 45% was space heating.  The conversion dated to February 10, 2019. 14  Lower heating costs have contributed to an overall improvement in the standard of living; even the poorest residents of the capital city can live in warmer houses in winter. Since the 1930s, houses in Reykjavik have been heated to make society healthier: between 1937 and 1948, the incidence of flu and cold fell from 22% to 4%. Data after Chrońmy Klimat 2017. 12 13

8.2  Renewable Energy Resources

169

idea through the Iceland Deep Drilling Project (IDDP) divided into several periodic implementation phases. IDDP envisages drilling and testing a number of wells that penetrate the supercritical zones that are considered to be present under the three currently producing geothermal fields in Iceland. This will require drilling at a depth of approximately 5 km to reach hydrothermal fluids at temperatures between 450  °C and ~600  °C.  In short, if a typical 2.5  km-long geothermal borehole in Iceland has a power output of about 5 MWe, then assuming a similar volumetric velocity of steam inflow,15 one can expect the IDDP well tapping a supercritical reservoir at temperatures above 450 °C and at a pressure of 23–26 MPa, which may be expected to yield ~50 MWe.16 In this context, it is worth noting that until recently, geothermal energy was economically viable only in areas where thermal water or steam was located at depths of less than 3 km in limited volumes, similar to oil in commercial oil reservoirs. Although the use of ground based heat pumps has changed economic standards in many countries, due to the widespread availability of sufficiently cheap geothermal water, they have not been widely used for space heating in Iceland. Subsidies for electric and oil heating have also led to reluctance to invest in heat pumps. However, legislation has recently been established which allows users of subsidized electric heating to contribute to the improvement or replacement of their heating system. The contribution corresponds to grants for 8 years. Therefore, it is considered likely that heat pumps will become competitive in those areas of the country where no water at temperatures above 50 °C has been found. In these areas, heat pumps can be used to replace or reduce direct electric heating. Electricity generation using geothermal energy has increased significantly in recent years. The installed capacity of geothermal power plants was 665 MWe in 2013 and production reached 5545 GWh, or 29% of the total electricity production in the country.17 Landsvirkjun’s total geothermal power generation (2017) amounted to 565 GWh, compared to 496 GWh in 2016. In contrast, Orkusýn’s geothermal power plant Hellisheiði (located on the western slope of the Hengill volcano) provides 303 MW of electricity and 133 MW of heat in the form of hot water. The afore-mentioned company Landsvirkjun, which produces 75% of this electricity, is the largest producer of power. It has 14 hydropower plants, three geothermal plants and two wind turbines in five operating areas across Iceland. Landsvirkjun’s total hydropower generation in 2017 was approximately 13,459 GWh. There are six power plants in the Þjórsá area, a total of 18 generating units and several waterway structures. The area stretches from the Hofsjökull glacier to the Búrfell hydroelectric power plant. There are three power plants in the Sog  It is a supercritical steam heated to about 500 °C, in which the difference between the liquid and the gas phase disappears. 16  A power generating installation connected to such a well will be sufficient to supply 30–40 thousand Icelandic apartments with energy. The power plant is to be ready soon. See The Master Plan for Nature Protection and Energy Utilization. 17  For example, the capital city of Reykjavik has commissioned a 400 MW geothermal power plant in Nesjavellir. 15

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area with eight generating units and several water structures at Lake Þingvallavatn and Lake Úlfljótsvatn. The Laxá power plants are located in the Blanda area. There are three stations in the area: five turbines and the Blanda hydroelectric power station waterway stretch for 25 km from Reftjarnarbungu to the Gilsá River. The fourth operating area is the Fljótsdalur hydroelectric power plant, the largest hydroelectric power plant in the country with six generating units and extensive water structures, including 70 km of tunnels. The station generated 5000 GWh in 2017. Landsvirkjun also operates two wind turbines for research purposes in the Hafið area, just north of the Búrfell hydroelectric power plant. Each wind turbine has an installed capacity of 0.9 MW. The turbines generated 5.6 GWh in 2017, out of a total of 6 GWh of wind power. Thus, Landsvirkjun generated 13,898 GWh of electricity in 2017, which was then fed into Landsnet’s transmission grid, an increase of 4.6% compared to 2016.

8.3  Forms and Methods of Using the Energy Potential Based on this good performance in power generation, Icelanders started to look for ways to attract energy-intensive industry18 to make profit from the huge potential of hydroelectric power producing electricity. In 2017, electricity production clearly exceeded 14 Twh (https://annualreport2017.landsvirkjun.com). It is the reserves of cheap electricity that are currently attracting foreign investors with energy-intensive factories. This is how aluminum production plants were established in Iceland – some of the most modern in the world. The largest is the Rio Tinto Iceland Ltd. aluminum smelter located in the southern part of the Capital Region, in Straumsvik, which is one of the biggest industrial companies in Iceland. The company plays a big role in Iceland’s economy and produces about 23% of all the goods exported from Iceland (https://riotinto.is/?pageid=95). Recently, its production capacity has been increased to 212,000 tons per year. Other plants include the ironworks jointly owned by the Icelandic government, Elkem A/S from Norway, the Japanese company Sumitomo and Kisilidjan Ltd., and the diatomite plant19 using geothermal steam in its production process. The latter plant, located on Lake Mývatn, near the Námafjall high-temperature geothermal field, started operating in 1967, producing approximately 28,000 tons of diatomaceous earth filters for export annually. For environmental and marketing reasons, the plant was closed at the end of 2004 despite the fact that it employed about 50 people and was one of the world’s largest industrial users of geothermal steam. The raw material was diatomaceous earth at the bottom of Lake Mývatn. Each year the plant used about 230,000 tons of geothermal steam at a pressure of 10 bar (180 °C) – mainly for drying, which corresponded to an energy consumption of 444 TJ per year.  Electricity consumption shows that the aluminum industry in Iceland used up to 70% of its electricity production in 2013. 19  A diatomaceous rock for the production of filters. 18

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This group also includes the Alcoa Fjardaál aluminum smelter in Reydarfjördur on the Atlantic,20 which has been operating since 2007. For the production of this plant, electricity is supplied from the Kárahnjúkar hydroelectric plant (one of the largest in the world, with the highest dam in Europe) in eastern Iceland, whose power plant is located inside the Varfjöfssader mountain. Its six turbines (target 690 MW) use the power of water flow in the tunnel (144 m3 per second) from the largest glacier in Europe, Vatnajökull (Iceland News Briefs 2008). The electricity from the power plant is transported by two 400  kW lines to the northeast to Reydarfjördur. The new power plant has increased the amount of energy produced by Iceland by 60%, which in practice means a significant surplus of electricity and an additional environmental effect of reducing carbon dioxide emissions by about 1 million tons per year. In 2018, one of the most modern and environmentally friendly silicone metal plants in the world21 was put into operation in Húsavík (6 months late). As the production process is very energy-intensive, Iceland was chosen because of its rich geothermal and hydropower resources, which translate into relatively low electricity prices. In March 2014, PCC BakkiSilicon hf signed a Power Purchase Agreement (PPA) with Landsvirkjun, Iceland’s largest energy supplier. The contract guarantees favorable terms of purchase for 15 years and includes an option to extend the cooperation. In the first phase of operation (from 2018), the power supplied to the plant is 58 MW. For the whole new industrial zone, Landsvirkjun found a new geothermal source in the vicinity of Húsavík and built a 90 MW power plant there. The investments in the logistics of raw material supplies to Iceland and the transport of silico-­ metal by sea to customers are more than compensated, both economically and ecologically, by favorable conditions for the purchase of electricity. Industrial fish farming is also an important user of geothermal energy, all the more so when in the mid-1980s there was a significant increase in the number of fish farms. For some time, more than 100 fish farms operated, and after a period of decline, since 1992 production has been slowly growing, reaching in 2003 6200 tons in about 50 plants. The most important breeding species is salmon (accounting for about 70% of production), but also arctic char and trout. Experiments with halibut and cod are also promising. The total geothermal energy used in the Icelandic fish farming sector is estimated at 1600 TJ per year. Iceland’s fish-farming production is expected to increase in the future. This means increased geothermal utilization, especially in smolt production (trout and salmon).22  The American concern Alcoa INC.  PCC BakkiSilicon hf was the investor; https://www.pcc.eu/projekt-islandia/?lang=pl 22  The problem is that the growing Icelandic aquaculture sector has recently become the focus of media attention because of concerns about its environmental impact. As a result, the operating licenses for open sea cage salmon farms in Patreksfjörður and Tálknafjörður were withdrawn in October 2018 due to environmental shortcomings. Following their withdrawal, the Parliament adopted a law granting the Minister for Fisheries the power to issue temporary fish farming concessions. The temporary licenses were granted to the Arctic Fish and Arnarlax farms and are valid for 20 21

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For about 25 years, geothermal energy has also been used in Iceland for indoor drying of salted fish, cod heads, small fish, stockfish and other products. Until recently, cod heads were traditionally dried by hanging them on external racks. Nowadays, due to the changing weather conditions in Iceland, indoor drying is preferred. The process is as follows: hot air is blown onto the fish and moisture is removed from the raw material. About 20 small businesses dehydrate cod indoors. Most of them use hot geothermal water and one uses geothermal steam. The annual export of dried cod heads is around 15,000 tons. The product is mainly exported to Nigeria for human consumption.23 After space heating and electricity generation, the heating of swimming pools24 is an equally important application of geothermal energy. There are approximately 169 recreational swimming centers in Iceland, 138 of which use geothermal heat, not counting natural hot springs: the Blue Lagoon, the Mývatn Nature Baths, Fontana Nature Bath and Nauthólsvík geothermally heated beach. Out of geothermally heated pools about 108 are public, while about 30 are pools located in schools and other institutions. The total area of all such centers in Iceland is approximately 36,700  m2 (excluding shallow relaxation pools). Most public swimming pools are outdoor and are used all year round. They are not only for recreation, but also for swimming lessons, which are compulsory in schools. There are 17 public swimming pools in Reykjavik alone, the largest of which is Laugardalslaug with an area of 2750  m2 plus eight whirlpool baths with a water temperature of 35–42 °C. Other health applications for geothermal energy are Blue Lagoon and Health Facility in Hveragerdi, which include geothermal clay baths and water treatments. The latest development in the water health sector is the Bjarnarflag Bath which uses effluent geothermal water from wells. The total annual water consumption in geothermally heated swimming pools in Iceland is estimated at 6.9 million m3, which corresponds to an energy consumption of 1300 TJ per year. In the last two decades, geothermal water has been used in the melting of snow. Currently, most of the new car parks in the regions using geothermal heating are equipped with such systems. Geothermal water from space heating returns at about 35 °C and is commonly used for de-icing pavements and parking spaces,25 e.g. in the center of Reykjavik this pertains to 50,000  m2 of under-pavement space and a total of 4000 tons of salmon, which makes only a small part of the previous 17,500 tons. The license requires companies to be active in addressing the environmental shortcomings that led to the withdrawal of their concessions. https://icelandnews.is/wiadomosci/z-kraju/tymczasowekoncesje-na-dzialalnosc-dla-farm-lososi 23  It is worth noting that in 2017 the export of sea products fell by more than 15%. The value of sea products for export in 2017 amounted to ISK 197 billion (USD 1.8 billion / EUR 1.6 billion), which constitutes a decrease by 15.2% compared to the previous year. In the period of 12 months – from August 2017 to July 2018 – the total catch amounted to 1.286 million tons, which is an 11% decrease compared to the previous 12 months. Data after https://icelandnews.is/wiadomosci/gospodarka/zmniejszyl-sie-eksport-ryb-z-islandii 24  90% of swimming pools are heated by geothermal sources, 8% by electricity and 2% by oil and waste incineration. 25  Most systems have the ability to mix return water with hot water (80 °C).

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streets. This system is designed for a thermal power of 180 W per m2 of surface area. The total area of snow melting systems in Iceland in 2008 was approximately 920,000 m2, of which approximately 690,000 m2 were in Reykjavik. One third of the systems are in public spaces, one third in commercial spaces and one third in private homes. Annual energy consumption depends of course on weather conditions, but the average is estimated to be 430 kWh/m2. The total geothermal energy used for melting snow is estimated at 1420 TJ per year (IEA Global Engagement). About two thirds of the energy comes from return water from space heating systems. One of the oldest (since 1924) and most important ways to use geothermal energy, i.e. to heat a greenhouse, cannot be omitted. Greenhouse production is divided into different types of vegetables (tomatoes, cucumbers, peppers, etc.) and flowers for the domestic market (roses, potted plants, etc.). The total area under glass grew by 1.9% per year between 1990 and 2000. In 2007, it was about 194,000 m2 (with plastic tunnels), 50% of which is used for vegetables and strawberries, 26% for cut flowers and potted plants, and 24% for are nurseries for bedding and forest plants.26 Outdoors, plants are strengthened by heating the soil with geothermal water, especially in early spring. Soil heating allows growers to thaw the soil so that vegetables can be marketed more quickly. It is estimated that around 120,000 m2 of fields are heated in this way. The total geothermal energy used in the Icelandic greenhouse sector is estimated at 740 TJ per year. Geothermal water is also used in a number of other Icelandic projects. Thus, the seaweed manufacturer Thorverk, located at Reykhólar in West Iceland, uses geothermal heat directly in its production. The company collects seaweeds found in the waters of Breidafjördur in north-west Iceland, dries them using large quantities of clean, dry air heated to 85 °C by geothermal water in heat exchangers. The plant has been in operation since 1976, and produces between 2000 and 4000 tons of rockweed and kelp meal annually using 34 l/sec of 107 °C water for drying. The product has been certified as organic. The plant’s annual use of geothermal energy is about 150 TJ. Drying pet food is a new and growing industry in Iceland with an annual production of about 500 tons, and additional industrial uses of geothermal energy on a smaller scale include retreading car tires and wool washing in Hveragerdi, curing cement blocks at Mývatn, and baking bread with steam. Iceland came up with the idea of sending excess electricity via underwater cables to Western Europe. The first proposal to connect the Icelandic electricity grid with Scotland using submarine cables was presented more than 60 years ago. The feasibility of such a project has been regularly evaluated over the last 30 years and only a study carried out by Landsvirkjun in cooperation with Landsnet in 2009–2010 shed new light on the potential of such a project, stating that it may be in fact economically viable. The main reasons for this change were higher electricity prices in Europe and increased demand for renewable energy sources without greenhouse gas

 The total area of greenhouses has decreased despite an increase in total production. This is due to the increased use of artificial lighting and CO2 in the greenhouse sector. 26

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emissions. In order to further examine the technical and economic feasibility of the interconnection, Landsvirkjun, Landsnet and National Grid involved in the project partnership in 2013, and on the basis of a feasibility study carried out earlier, demonstrated the comprehensive benefits of the interconnection,27 which was called IceLink. At the end of 2015, the Prime Ministers of the UK and Iceland met and set up a task force to assess the project and advise on the next steps to be taken by the governments. The results of the Task Force were made public in July 2016, when both governments declared their interest in the possibility of interconnection between countries based on the expected socio-economic benefits.28 From the technical point of view, it is assumed that the Interconnector will be over 1000  km-long and 800–1200  MW HVDC transmission link will connect Iceland with Great Britain and offer bidirectional flows. It has the potential to reduce congestion management costs between the northern UK and major consumption centers further south, as power is directed to Iceland during overcapacity in wind power generation in the north, stored in reservoirs and returned during lower wind power. IceLink is expected to supply around 5 TWh of flexible renewable electricity per year, enough to supply 1.6 million homes and to link Iceland’s currently isolated renewable electricity system with the wider European system offering a cost-­ effective way to reduce Europe’s dependence on imported fossil fuels.29

8.4  Dynamics in the Development of Energy Security The share of heating oil continues to decline and is currently around 1%, while the use of electric heating is around 10%, of which one third is for district heating, where electricity is used to heat water in district heating systems. Fossil fuels, on the other hand, are mainly used for land, sea and air transport.30 The fuel consumption forecast for Iceland over the period 2008–205031 classifies it into domestic consumption and international transport, and concerns both several consumption groups and different types of fuels. All fossil fuels are imported and oil accounts for a deci The interconnection will allow Iceland to export surplus energy in a renewable water system which is not currently used due to economic and operational constraints. 28  Data after https://www.landsvirkjun.com/researchdevelopment/research/submarinecabletoeurope/ 29  See also some interesting projects concerning the North Atlantic Energy Network with the participation of Iceland, worked on jointly by Orkustofnun (OS)  – National Energy Authority of Iceland Norges Arktiske Universitet (UiT) – The Arctic University of Norway Energy Styrelsen – Danish Energy Agency Jarðfeingi  – Faroese Earth and Energy Directorate Shetland Islands Council – Economic Development Service Greenland Innovation Centre, https://orkustofnun.is/ gogn/Skyrslur/OS-2016/North-Atlantic-Energy-Network-Report.pdf 30  Regulation on the collection of data on the production, import, storage and sale of fuels and on the monitoring of the share of renewable fuels in total sales of land transport fuels, No 870/2013. 31  There are about 180,000 cars on Iceland’s roads. The fishing fleet is made up of 2500 trawlers – fishing accounts for two thirds of Iceland’s export earnings. See Prognoza zużycia paliwa. 27

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sively largest share of imports. It assumes the consumption of much smaller quantities of coal, oil and gas. It is based on currently available statistics and assumptions about population, economic growth, fisheries and national and international transport. All the forecast and implemented activities concerning the energy balance of the Republic of Iceland do not exclude the possibility of intensifying the search for possible hydrocarbon resources.32 In principle, this concerns two main potential areas. “Two areas on the Icelandic Continental Shelf are thought to have potential for commercial accumulations of oil and gas. They are Dreki east and northeast of Iceland and Gammur on the northern insular shelf of Iceland. Dreki includes the southern tip of the Jan Mayen microcontinent. A number of academic and governmental surveys and surveys by the industry have been made in the northern part of the Dreki Area, indicating the presence of thick continental crust there, that potentially include Jurassic and/or Cretaceous source rocks. The Jan Mayen Ridge is thought to have potential for hydrocarbon accumulations because of its geological similarity to hydrocarbon basins which were its next door neighbors prior to the opening of the northeast Atlantic Ocean basin” (Dreki n.d.). The Strategic Environmental Assessment (SEA) for the northern part of the Dreki Area has been completed,33 so it is possible to grant exploration and production licenses there (Hydrocarbon Potential). In turn, Gammur is a relatively young sediment basin of about 9 million years, with a 4 km-thick layer of sediments. There have been indications of gas escaping the sediments, but the type of gas has not been demonstrated, i.e. whether the gas is from a deep hydrocarbon source or from shallow low-temperature chemical or a biochemical processes. Surface pockmarks have been found in the area, further supporting possible gas expulsion from the sea floor. An SEA has not been made yet of the Gammur Area. One can access the latest report, which provides an overview of the hydrocarbon research in the Gammur region (Richter and Gunnarsson 2010). The situation regarding the granting of hydrocarbon exploration licenses seems to be extremely interesting. Permissions for oil exploration in the Dragon Zone were granted in 2013. The first license was suspended at the end of 2014, the second at the beginning of 2017. The third and last licenses were granted for a period of 12 years and covered a larger area than the first two, totaling 6300 square kilometers (2400 square miles) in the “Dragon Zone.” The geological conditions in this area were found to be completely different from the first two. The first phase of the planned work is now complete, and license holders were required to inform the government by January 23, 2018 whether they would continue the exploration or withdraw from the license. At the beginning of 2018, the positive negotiations to  Exploration and production licenses are exclusive and granted in licensing rounds in accordance with the Hydrocarbon Resources Act. See https://orkustofnun.is/gogn/os-onnur-rit/OS-IcelandOffshore-Exploration-2015-Feb.pdf 33  The northern part of the Dreki area refers to an ocean area in the Icelandic exclusive economic zone lying east of 11.5° W and north of 67° N and is demarcated to the east and north by Iceland’s 200-mile exclusive economic zone. 32

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date were disturbed by the quite unexpected resignation of the Chinese oil company CNOOC and the Norwegian oil company Petroro from the license to search for oil in this zone.34 It is also unknown whether the Icelandic company Eykon35 will continue its operations in the region. In my opinion, one should not think that this situation will change in any way the principles and legal framework previously set out for the development of energy security in the Republic of Iceland.36 As practice has shown, the low dependence on fossil liquid fuels is expected to change in the near future. An example can be provided by the US companies Daimler Chrysler, Ford and Shell, which have set up a consortium with Icelandic capital, Icelandic New Energy, and are testing fuel cells to use hydrogen to propel vehicles. The means of propulsion is ultimately the electric current in the fuel cell during the synthesis of hydrogen and oxygen. The program adopted by the Icelandic Parliament provides for the gradual increase in the use of hydrogen fuel cell electric motors in electric vehicles. These cells emit only water vapor during operation. The project to convert transport into these cells is sponsored by the EU. The electricity needed to produce hydrogen by electrolysis is to be supplied by existing hydroelectric power stations and geothermal sources. In the future, Iceland intends to export hydrogen to European countries. It should be stressed that the Icelandic authorities assume that starting in 2030 the country will obtain energy only from renewable sources,37 and that the power industry using hydrogen will be able to completely replace fossil fuels such as oil by the middle of this century. Despite these achievements, more and more ambitious plans are being made. A Sustainable Hydrogen Economy is to be implemented by 2050. The program also provides for large-scale use of cars and buses powered by hydrogen fuel cells. As a result, electricity demand would increase by 5 Twh/year38 (10% of total potential). It is estimated that the plan will take between 30 and 40 years to implement.39

 CNOOC has 60%, Petoro – 25%. Taking into account the available data on the geology of the area and other factors, such as survey costs, these two companies decided to resign from their share of the license. As a result, they have waived their rights to petroleum concessions in the area, as well as their obligations to continue exploration and development. January 23, 2018, https://icelandnews.is/wiadomosci/gospodarka/wstrzymano-poszukiwania-ropy-naftowej-nawodach-islandzkich 35  Eykon Energy ehf is a subsidiary of Eykon AS in Norway which holds a 15%-interest in 1/3 of the Icelandic license. 36  See Legal and Regulatory Framework on Fuels and Energy Transition. 37  Prof. B. Arnasson, a chemist from the University of Reykjavik, estimates that the transition to clean, eco-friendly propulsion systems will take about 30–40 years. See PAP 2007. 38  In industrial applications (e.g. for indicating the amount of energy produced annually by power plants), larger units are used: megawatt hour (MWh), gigawatt hour (GWh) and terawatt hour (TWh). 1 TWh = 1000 GWh, 1 GWh = 1000 MWh and 1 MWh = 1000 kWh. 39  It is also worth noting that in 2007 Althing made a globally innovative decision to abandon all fossil fuels. According to this plan, hydrogen is to be the main source of energy in 30–40 years. 34

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According to Island News (6 February 2019), at the end of August 2019 as part of the European project, the Icelandic energy company ON Power (Orka náttúrunnar) will start producing hydrogen (https://icelandnews.is/wiadomosci/z-kraju/ nowa-energia-w-islandii). The electrolyzer needed to produce hydrogen has already been purchased and is being installed by the Hellisheiði geothermal power plant in south-west Iceland. It has the capacity to produce enough hydrogen for all cars running on this fuel on the island. Two other Icelandic companies are involved in the project: Orkan, owned by Skeljungur hf., and Icelandic New Energy. The start-up cost of the project is financed by European grants, in addition to ISK 100 million (USD 949,000, EUR 810,000) from ON Power. Iceland thus appears to be an unrivalled pioneer in the field of renewable energy sources. According to the Landsvirkjuan Annual Report 2011,40 as much as 99% of the electricity in Iceland came from renewable energy sources. In 2014, total electricity generation amounted to 12,807  GWh, including: hydropower  – 12,316  GWh; geothermal  – 483.7  GWh and wind energy  – 6.7  GWh (Landsvirkjuan-b). Available data for 2017 indicate that in Iceland, practically 100% of the electricity produced and about 85% of the primary energy used comes from renewable sources. The remaining 15% of primary energy sources are fossil fuels, mainly used for transport and fisheries. This is confirmed by the Fig. 8.6. It is common knowledge that global energy consumption in transport, domestic and industrial heating or electricity generation is mainly based on fuel. This reality is different in Iceland, where the share of renewable energy is among the highest in the world, and most Icelanders are opposed to the transfer of sovereignty over the Icelandic energy sector to European institutions. This is shown by the results of the latest opinion poll conducted for Heimssýn, and they openly oppose any idea that Iceland should seek membership of the European Union. The results of the survey show that around 80.5% of Icelanders do not want European institutions such as EU administrative bodies or the European Free Trade Association (EFTA) to gain further powers to control Icelandic energy,41 while 8.3% are in favor. The results also show that the majority of the electorate of all parties represented in the local parliament, Alþinga, opposes the transfer of this power to the European institutions. Among them are also the voters of the parties that are in favor of Iceland’s membership of the EU. During a debate in parliament at the beginning of 2018, the Icelandic Minister of Finance and the leader of the Independence Party, Bjarni Benediktsson, expressed the opinion that the local energy sector should not be dependent on decisions in Brussels. In addition, in an interview with the Daily Telegraph in 2018, he stated  Landsvirkjuan Annual Report 2011, Annual Report 2017, National Power Company of Iceland (Icelandic: Landsvirkjuan), https://annualreport2017.landsvirkjun.com/ 41  The study by Maskína concerns an ongoing public debate on whether Iceland should adopt the so-called third energy package as part of its membership of the European Economic Area (EEA), May 19, 2018. See https://icelandnews.is/wiadomosci/gospodarka/islandczycy-nie-chca-przekazacwladzy-nad-swoim-sektorem-energetycznym-europejskim-instytucjom 40

178

Installed capacity in power plants

Hydro Geothermal Fuel Wind Total Electricity production Hydro Geothermal Fuel Wind Total Electricity consumpt ion General use Heavy industry Losses & use - power plants Distribution losses Transmission losses Total

8  The Republic of Iceland: Ambitious Energy Plans

2017 MW 1,984 708 72 3 2,767 2017 GWh 14,059 5,170 2 8 19,239 2017 GWh 3,397 14,870 375 223 373 19,239

% 71.7 25.6 2.6 0.1 100 % 73.1 26.9 0.01 0.04 100 % 17.7 77.3 2.0 1.2 1.9 100

2016 MW 1,984 663 81 3 2,732 2016 GWh 13,470 5,067 2 9 18,549 2016 GWh 3,242 14,443 427 185 361 18,549

% 72.7 24.3 2.9 0.1 100 % 72.6 27.3 0.01 0.05 100 % 17.5 77.3 2.3 1.0 1.9 100

2015 MW % 1.986 71.7 665 24.0 117 4.2 3 0.1 2.771 100 2015 GWh % 13.780 73.3 5.003 26.6 4 0.02 11 0.06 18.798 100 2015 GWh % 3.434 18.3 14.356 76.4 432 2.3 207 1.1 370 2.0 18.799 100

Fig. 8.6  Installed capacity, electricity production and consumption 2015–2017 Source: Energy Statistics-b

that the EU’s continued efforts to bring Iceland under the direct authority of Brussels within the EEA meant that the country “had to fight to maintain its independence even though it was not a Member State” (Rothwell 2018). Undoubtedly, Icelanders are also strengthened in this conviction by the Parliamentary Resolution on the Energy Transition Action Plan,42 which aims to ensure that this island country continues to be a leader in the use of renewable energy.43 All the conditions are favorable for Iceland as a leading example of energy transformation, and the country already has extensive positive experience of such a

 Parliamentary resolution on an action plan on energy transition, No. 18/146, 146. löggjafarþing 2016–2017. No. 18/146. Þingskjal 1002 — 146. mál., https://www.althingi.is/altext/146/s/1002. html 43  The aim of the energy transformation is to increase the share of renewable energy in land transport from 6% in 2016 to 10% by 2020 and to 40% by 2030. An additional target is to increase the share of renewable energy in the fisheries sector from 0.1% in 2016 to 10% by 2030. https://nea.is/ fuels/energy-transition/ 42

Bibliography

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transformation, because the transition from oil to geothermal heating is an example of a very successful national energy conversion with a great deal of positive economic and environmental impact. Iceland must and wants to use this experience and other available resources to reduce its greenhouse gas emissions and meet its national commitments under the Paris Climate Change Agreement.44

Bibliography Advanced silicon metal production plant in Iceland, PCC BakkiSilicon hf. Retrieved from https:// www.pcc.eu/projekt-islandia/?lang=pl Annual Report (2017) National Power Company of Iceland (is.Landsvirkjuan). Retrieved February 07. In: 2019 from. https://annualreport2017.landsvirkjun.com/ Chrońmy Klimat (2017, December 12). Islandia – światowy lider OZE. Retrieved April 22, 2018 from http://www.chronmyklimat.pl/wideo/energetyka/islandia-swiatowy-lider-oze Dreki – Strategic Environmental Assessment. Retrieved from https://nea.is/oil-and-gas-exploration/ the-exploration-area/dreki%2D%2D-sea/ Energy Statistics-a, Iceland National Energy Authority (is. Orkustofnun) Retrieved November 4, 2018. https://nea.is/the-national-energy-authority/energy-statistics/ Energy Statistics-b in Iceland 2017, published 2018. Retrieved February 02, 2019 from https:// orkustofnun.is/gogn/os-onnur-rit/Orkutolur-2017-enska-A4.pdf Geothermal resources, Water year 2016/2017. Retrieved February 07, 2019 from https://annualreport2017.landsvirkjun.com/the-company/natural-resources#Wateryear20162017 Global Innovation Index: Analysis, Explore Economy Reports from the GII 2018. Retrieved January 31, 2019 from https://www.globalinnovationindex.org/analysis-economy Human Development Reports 2018, Human Development Indicators. Retrieved February 03, 2019 from http://hdr.undp.org/en/countries/profiles/ISL Hydrocarbon potential  – conclusions. Retrieved from https://nea.is/oil-and-gas-exploration/ exploration-areas/dreki-hp/conclusions/ Iceland, WorldData.info. Retrieved November 03, 2018 from https://www.worlddata.info/europe/ iceland/energy-consumption.php Iceland News Briefs (2008, February 7) IEA Global Engagement, Statistics for Iceland. Retrieved November 4, 2018 from https://www. iea.org/countries/Iceland/ Ingolfsson A (n.d.) Energia z solanki. Biuletyn ISLANDIA, nr 1/2000. Retrieved February 10, 2008 from www.islandia.org.pl International Monetary Fund. Retrieved January 11, 2019 from https://www.imf.org/external/ pubs/ft/weo/2018/01/weodata/weorept.aspx?pr.x=67&pr.y=5&sy=2016&ey=2023&scsm=1& ssd=1&sort=country&ds=.&br=1&c=176&s=NGDPD,PPPGDP,NGDPDPC,PPPPC,LP&grp =0&a= Kotowski W, Fechner, W.  Rozwój energetyki światowej do roku 2050. Islandia stawia na wodór. Retrieved December 2, 2015 from http://www.ekoenergia.pl/index.php?id_ art=177&cms=73&plik=Rozwoj_energetyki_swiatowej_do_roku_2050.html Landsvirkjuan-a Annual Report 2011. Retrieved from http://annualreport2011.landsvirkjun.com/

 Regulation on the collection of data and transmission of information by government agencies in connection with the accounting of Iceland on the release of greenhouse gases and the uptake of carbon dioxide from the atmosphere, No. 520/2017 and Regulation pursuant to Act No. 70/2012 on Climate.

44

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Landsvirkjuan-b Annual Report 2014.. Retrieved December 02, 2015 from http://annualreport2014.landsvirkjun.com/ Landsvirkjuan-c Annual Report 2017. https://annualreport2017.landsvirkjun.com/the-company/ electricity-generation.Retrieved December 2, 2018 Legal and regulatory framework on fuels and energy transition, National Energy Authority, Iceland. Retrieved from https://nea.is/fuel/legal-and-regulatory-framework/ PAP (2007, December 29) Islandia chce zrezygnować z paliw i stawia na wodór. Retrieved January 25, 2007 from www.gazeta.pl Parliamentary resolution on an action plan on energy transition, No. 18/146, 146. löggjafarþing 2016–2017. Nr. 18/146. Þingskjal 1002  — 146. mál. Retrieved December 03, 2018 from https://www.althingi.is/altext/146/s/1002.html Prognoza zużycia paliwa. Retrieved December 17, 2018 from https://nea.is/fuel/forecast/nr/132 Regulation on basis ofAct No. 70/2012 on climate https://nea.is/fuel/legal-and-regulatory-framework/ Regulation on data acquisition and submission of information by government agencies due to the accounting of Iceland on the release of greenhouse gases and carbon sequestration from the atmosphere, No. 520/2017 https://nea.is/fuel/legal-and-regulatory-framework/ Richter B, Gunnarsson K (2010, January) Overview of hydrocarbon related research in Tjörnes, ÍSOR-2010/007. National Energy Authority, Iceland. Retrieved from https://orkustofnun.is/ gogn/Skyrslur/ISOR-2010/ISOR-2010-007.pdf Rothwell J  (2018, April 23) EU views our independence as a nuisance, Iceland warns. The Daily Telegraph. Retrieved December 12, 2018 from https://www.telegraph.co.uk/ politics/2018/04/23/eu-views-independence-nuisance-iceland-warns/ The master plan for nature protection and energy utilization. Retrieved February 2, 2019 from http://www.ramma.is/english Walat T (2007, September 6) Wyspa energią kipiąca. Polityka The World Competitiveness Scoreboard. Retrieved October 11, 2014 from http://www.imd.org/ uupload/imd.website/wcc/scoreboard.pdf http://www.imd.org/uupload/imd.website/wcc/scoreboard.pdf. Retrieved December 2, 2015 https://www.imd.org/wcc/world-competitiveness-center-rankings/world-competitiveness-ranking-2018/. Retrieved February 2, 2019 http://www.nationsonline.org/oneworld/human_development.htm. Retrieved November 10, 2012 http://www.iea.org/statistics/statisticssearch/report/?country=Iceland&product=balances. Retrieved November 20, 2015 http://www.nationmaster.com/country-info/profiles/Iceland/Energy. Retrieved November 22, 2015 https://www.worlddata.info/europe/iceland/energy-consumption.php. Retrieved November 3, 2018 https://riotinto.is/?pageid=95. Retrieved December 20, 2018 https://icelandnews.is/wiadomosci/z-kraju/tymczasowe-koncesje-na-dzialalnosc-dla-farm-lososi. Retrieved December 12, 2018 https://icelandnews.is/wiadomosci/gospodarka/zmniejszyl-sie-eksport-ryb-z-islandii. Retrieved December 12, 2018 https://www.landsvirkjun.com/researchdevelopment/research/submarinecabletoeurope/. Retrieved April 20, 2019 https://orkustofnun.is/gogn/Skyrslur/OS-2016/North-Atlantic-Energy-Network-Report.pdf. Retrieved December 17, 2018 https://orkustofnun.is/gogn/os-onnur-rit/OS-Iceland-Offshore-Exploration-2015-Feb.pdf https://icelandnews.is/wiadomosci/gospodarka/wstrzymano-poszukiwania-ropy-naftowej-nawodach-islandzkich. Retrieved March 14, 2018 https://icelandnews.is/wiadomosci/z-kraju/nowa-energia-w-islandii. Retrieved February 5, 2019 https://icelandnews.is/wiadomosci/gospodarka/islandczycy-nie-chca-przekazac-wladzy-nadswoim-sektorem-energetycznym-europejskim-instytucjom. Retrieved December 12, 2018 https://nea.is/fuels/energy-transition/. Retrieved December 17, 2018

Chapter 9

The Kingdom of Sweden: Transition to an Ecologically Sound Society

Abstract  Sweden can partly provide itself with self-produced energy. The total production of all electric energy producing facilities is 154 bn kWh, which is 123% of the countries own usage. Despite this, Sweden is trading Energy with foreign countries. Along with pure consumptions the production, imports and exports play an important role. Other energy sources such as natural gas or crude oil are also used. Keywords  Energy security · Electricity · Diversification of energy sources · Efficiency · Saving

The Kingdom of Sweden  – population: 10,068,000; population per km2: 22.5  – (WorldData.info-a) is a country with a significant energy potential, although in the early 1970s Sweden’s energy production was entirely based on fossil fuels. The oil crisis in October 1973 was a shock to everyone, including Sweden. It was even said that the country’s independence was at risk! At that time, the regulation of propellant raw materials, liquid and solid fuels and heat energy from combined heat and power plants was introduced. The high economic situation transformed into a deep and long-lasting downturn, which had to be decisively counteracted.1

9.1  Dynamics of Changes in Energy Policy In order for Sweden to continue to develop successfully as an industrial state with a high standard of living, a new energy policy and a completely new understanding of the term ‘fuel’ had to be introduced. People were made aware of the need to respect and save energy. New alternative sources of energy had to be found. The energy

 More on the subject in Czarny 2009.

1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_9

181

182

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

Fig. 9.1  Energy supply including a breakdown into sources of origin, Sweden 2006 Source: Energiläget i Siffror 2007, p. 6

TWh

PJ

201

724

Natural and industrial gas

11

40

Coal and coke

28

101

116

416

Heat pumps (submersible)

6

20

Hydroelectric power plants

62

222

194

698

Wind power plants

1

4

Import - export of electricity

6

22

624

2247

Crude oil and petroleum products

Biofuels, peat, waste, etc.

Nuclear power plants

Total:

situation at the beginning of this century is illustrated by the following figures (Fig. 9.1). The aim of the government’s energy policy was of course to secure the reliability of electricity and other energy sources at internationally competitive prices, both in the short and long term. Sweden decided that its energy policy should create both conditions for efficient and continuous use of energy and a cost-effective supply of Swedish energy with minimal impact on health, the environment and the climate. All this should also facilitate the transition to an ecologically shaped society, all the more so as electricity production was basically free of fossil fuels at the beginning of the twenty-first century. M. Olofsson, then Deputy Prime Minister and Minister of Economy, presented the Swedish energy policy priorities for the coming years in March 2008. Its aim was to make Sweden’s energy use more efficient. The government’s activities in this area focused on increasing the amount of energy coming from renewable sources.2 The Minister emphasized that at that time electricity was produced mainly in hydroelectric power plants and nuclear power plants. In her opinion, the amount of electricity produced by wind power and heat generation had to be increased. The government’s goal was to make the energy supplied from renewable reach 17 TWh in 2020. The aim was also to develop a long-term energy policy in consultation with

 On the 28th of June, 2008, in Stockholm, Swedish Deputy Prime Minister and Minister of Industry M.  Olofsson and U.S.  Under-Secretary of State for Energy Efficiency and Renewable Energy Sources A.  Karsner signed a cooperation agreement on renewable energy sources. According to the agreement, Volvo was to produce new ecological engines, the cost of which was to be covered by the Swedish and American governments from the research fund. In addition, the Swedish government allocated SEK 245 million over the following four years to finance research into more environmentally friendly vehicles. Of this total, approximately SEK 125 million was earmarked for Swedish-American projects. See Dagens Industri, June 29, 2008. 2

9.1  Dynamics of Changes in Energy Policy Fig. 9.2 Electricity production in Sweden 1997–2006, calculated in TWh Source: SCB och Energimyndigheten 2007, pp. 20–21

183

1997

2001

2006

68.2

78.4

61.2

0.2

0.5

1.0

66.9

69.2

65.0

CHP plants

5.6

5.6

7.2

Other

4.4

3.9

5.9

145.3

157.7

140.1

-2.7

-7.3

6.0

Hydroelectric power plants Wind power plants Nuclear power plants

Total net production Imports minus exports

all parties, the guidelines of which could be consistently implemented regardless of the changing governing structure (Svenska Dagbladet 2008) (Fig. 9.2).3 Electricity production in 2007 increased to 148.4 TWh. In 2008, it was expected to grow to 151.3 TWh and in 2009 even to 153.5 TWh. Hydroelectric power plants generated 61.2 TWh in 2006. In the years 2007–2009 their production stabilized at the level of 67.5 TWh annually. Nuclear power plants in 2006 produced 65 TWh of electricity and 65.3  TWh in 2007. In the years 2008–2009 their production was estimated at 67.5–67.6 TWh annually. Wind power plants generated 1 TWH, with the prospect of doubling (2.1 TWh in 2009). These indicators formed the basis for the assumption of a significant change in Sweden’s electricity market position: from a net importer of 6 TWh in 2006 to a net exporter of 3.8 TWh in 2009 (Energiförsörjningen i Sverige 2007). The development of Swedish oil and petroleum imports was also very interesting, as shown in the Fig. 9.3. This meant that despite an increase in industrial production, the share of oil in Sweden’s energy balance fell from 70% in 1970 to around 30% at the end of 2007. This was achieved through fuel diversification and highly efficient use of fuels (Energy Policy 2007). In the Swedish energy system, the share of energy from renewable sources has increased significantly in one decade: from 22% (total energy supply) in 1995 to 28% in 2008. This increase was due to the use of biomass. According to the Ministry of Industry, Energy and Communications, the share of bioenergy in Sweden’s energy mix increased from just over 10% (total energy supply) in the 1980s to about 16% (or 100 TWh) in 2004 (Energy Policy 2007). This increase is due to the use of this source for industrial and district heating purposes. Especially the latter, the large district heating sector, is typical of Sweden, accounting for almost 40% of the country’s heating market.

 See also the commentary on the future of nuclear energy in Sweden published in Dagens Nyheter on May 29, 2008. 3

184

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society 1972

1982

1991

1996

2001

2006

10.67

13.46

15.83

18.84

19.89

19.12

Saudi Arabia

0.21

1.70

0.26

2.01

1.15

0.00

Other Middle East countries

4.80

1.11

2.77

1.37

3.08

0.29

Miscellaneous OPEC countries

4.69

3.27

1.62

1.25

1.11

1.09

North Sea

0.00

6.23

9.98

12.92

13.35

10.58

Other countries

0.96

1.16

1.20

1.28

1.20

7.16

16.98

6.27

-1.54

-1.25

-3.93

-4.56

Total crude oil imports

Petroleum products (net imports)

Fig. 9.3  Swedish net imports of oil and petroleum products / source of origin (million tons), 1972–2006 Source: SCB, Blankett 401 och Energimyndigheten 2007, pp. 28–29

Residential and services

Industry

1983

0.3

4.0

Coke ovens Heat and power plants Total

11.8

6.4

22.5

1995

0.0

5.5

12.4

6.6

24.6

2006

0.0

7.4

14.9

4.2

26.4

2012

0.0

6.6

11.0

2.4

20.0

2017

0.0

6.7

11.3

1.6

19.6

Fig. 9.4  Use of coal by sector, from 1983, TWh Compiled by author on the basis of Swedish Energy Agency-d

In this area, there have also been huge changes in the use of fuels. These are mainly wood waste and derivatives, ethanol and others (e.g. in 1970 heating oil was the main fuel and already in 2008 its share of the heating market was only 5%). In 2012, the total primary energy supply in Sweden (TPES) consisted of oil (26%) and gas (2%). The Kingdom had the lowest share of fossil fuels in the energy mix among the International Energy Agency (IEA) Member States, also including coal, which accounts for 4% of TPES (Fig. 9.4). In practice, this is a significant difference compared to the mid-seventies, when fossil fuels accounted for three quarters of Sweden’s energy supply. Most importantly, however, it is the result of a coordinated effort to move away from oil towards nuclear and renewable energy. This is demonstrated, inter alia, by the following figure (Fig. 9.5). Sweden’s energy policy seeks to further increase its share of renewable energy sources and plans to provide half of all energy, and 10% of all transport needs by 2020. The authorities are of the opinion that the use of fossil fuels should be systematically limited, even completely eliminating their use for heating purposes by 2020. They are also taking action on the national car fleet, which should be “independent”

9.1  Dynamics of Changes in Energy Policy

185

Agriculture, Public Construction Industry Transport forestry, Commercial Households Total administration fishing 1983

34

69

6

3

11

4

33

159

1995

23

74

6

3

3

3

21

133

2006

17

86

6

3

1

2

5

120

2012

12

76

6

3

0

1

2

100

2017

10

66

5

4

0

1

1

87

Fig. 9.5  Final use of petroleum products, by sector, from 1983, TWh Compiled by author on the basis of Swedish Energy Agency-d

of fossil fuels by 2030. In line with this policy, the demand for oil and natural gas was/is expected to fall from around 310,000 barrels per day (kb/d) in 2012.4 It should be noted that demand for crude oil in Sweden averaged 330 kb/d in 2011. The vast majority of this fuel was used in transport (66%) and industry (21%). The overall use of oil had been decreasing annually by 1% since 2000 (IEA 2014). The decline in demand for oil was due to a trend towards the abandonment of this fuel, for example through the use of district heating networks and heat pumps instead of oil and gas fuel. The biggest drop in oil consumption was recorded in industry, which is moving towards greater use of electricity and biofuels. Total demand for oil is expected to continue to decline in the coming years, averaging around -0.4% per year. At the same time, demand for diesel will continue to grow, reaching more than 110 kb/d by 2020, compared to almost 80 kb/d in 2011. In 2012, Sweden imported 20.6  Mt of crude oil, i.e. approximately 416  kb/d on average, mainly from the Russian Federation (42%),5 Norway (25%) and Denmark (15%). In 2017, imports dropped to 19.9 Mt (Swedish Energy Agency-b 2019). Although Sweden is fully dependent on oil imports, it is also a net exporter of refined petroleum products (i.e. mutual trade in main products with Denmark, Norway and the United Kingdom), all in order to satisfy domestic demand for oil. In 2012, product exports averaged 275 kb/d, compared to 137 kb/d. In 2012, Swedish refineries processed approximately 20.6 million tons of crude oil, or approximately 413 kb/d, and their total product was 21.4 Mt or 434 kb/d (IEA 2014). Three companies operate refineries in Sweden, including Preem AB, which operates the two largest refineries in the country; together they account for approximately 80% of the total oil distillation capacity in the country. St1 operates the third largest refinery in Gothenburg, which was previously operated by Shell until it was taken over by St1 at the end of 2010. Nynas Refining also operates two smaller refineries specializing in bitumen and lubricants. In contrast, the Swedish retail oil market is dominated by four companies: Preem, Statoil, QK-Q8 and St1 (including

 See IEA 2014.  In 2017, the imports from Russia diminished to 35%.

4 5

186

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society Industry

Transport

Residential and services

Electricity, district heating etc.

Non-energy use

Total

1983

0.1

0.0

0.6

0.0

-

0.7

1995

2.9

0.0

1.8

3.7

-

8.3

2006

3.7

0.3

2.1

2.9

-

8.9

2009

3.4

0.2

1.7

6.5

1,2

13.1

2017

4.2

0.2

1.4

1.5

3.4

10.7

Fig. 9.6  Use of natural gas and gasworks, by sector, from 1983, TWh Compiled by author on the basis of Swedish Energy Agency-b

Shell branded stations), which together account for approximately three quarters of the market. Companies operating in this market are represented by the Swedish Petroleum and Biofuels Institute (SPBI). It should also be noted that Sweden has no local natural gas production and the domestic gas consumption in 2011 was about 1.3 bcm, compared to over 1.5 bcm in 2010, the peak consumption period. In 2011 43% of total gas consumption was consumed in the transformation sector and 37% in the industrial sector, which includes non-energy use. The residential and commercial construction sectors accounted for a further 6% and 10% respectively, while the rest of gas consumption was in the transport sector (4%) (Fig. 9.6). Natural gas therefore plays a minor role in Sweden’s energy supply; in 2012, it accounted for 2% of TPE and only 1% of total electricity production. However, the role of natural gas in energy supply in southern and western Sweden is much greater. In the 30 municipalities in Sweden that have access to natural gas supplies, natural gas accounts on average for about 20% of total energy consumption. Approximately 80% of total gas consumption is used by 30 large consumers (IEA 2014). This includes nine combined heat and power plants (cogeneration to district heating), which account for 55% of total gas consumption in the country. About 2% of gas is used by smaller consumers (i.e. households – this applies to about 33,000 consumers) who are considered protected customers. The annual gas consumption in Sweden is typically 6–7 million mcm daily in winter, compared to about 1.2 mcm in summer. Sweden has no domestic production of natural gas and is 100% dependent on imports. All its supplies come from Denmark via a single interconnector in the southwestern part of the country. As the Kingdom is at the end of the gas supply line from Denmark, there is no transit of natural gas through Sweden. The Swedegas Company is the owner and operator of the transmission and storage system and is responsible for maintaining the physical equilibrium of the system.6 There are five Distribution System Operators (DSOs) in Sweden, the largest of which is E.ON Gas Sverige. In 2013, energy balances were as follows (Figs. 9.7 and 9.8):  There are four balance-responsible parties for the Swedish market: E.ON Gashandel, DONG Energy, Göteborg Energi and Modity Energy Trading AB. 6

9.1  Dynamics of Changes in Energy Policy

Nuclear

Crude oil

Oil products

Natural gas

187

Hydro

Geoth,

Biofuels/ waste

Electr.

Heat

Total

17319

0

0

0

5277

861

11215

0

222

35080

Imports

0

17657

6693

955

0

0

359

1090

0

28599

Exports

0

-655

-9365

0

0

0

-46

-1950

0

Production

12034

Total final consumption Industry

0

0

9705

590

0

11

6022

10751

4455

32341

0

0

834

280

0

0

4173

4473

458

11005

Transport

0

0

6473

53

0

0

715

237

0

7477

Others

0

0

441

163

0

11

1134

6042

3997

11794

Fig. 9.7  Sweden’s energy balances 2013 (ktoe) It should also be added that the share of coal in the Swedish energy balance in 2013 was as follows: production: 186; import: 1845; export: -18; total final consumption: 806 (including industry: 786 and other: 6). http://www.iea.org/statistics/statisticssearch/report/?country Compiled by author on the basis of http://www.iea.org/statistics/statisticssearch/report/?country= Sweden&product=balances

Let the following figures illustrate the scale of change in energy policy in Sweden7 and provide an important summary of the evolution of energy policy in Sweden. Although they present data from 2017, they are still the most recent ones quoted in the official report by Energimyndigheten at the beginning of 2019 (Energy in Sweden 2019) (Fig. 9.9). As can be seen from the above figures, total final energy use, losses and non-­ energy use is 573  TWh, which is -8  TWh for the statistical difference between energy supply and use. The total final energy use in sectors is 378 TWh, which is reported in the following figures (Fig. 9.10). There is no doubt that Sweden’s energy policy is based on the rules adopted within the EU. Its aim, both in the short and long term, is to secure the reliability of the supply of electricity and other energy sources at internationally competitive prices. Sweden has decided that its energy policy should create both conditions for the efficient and uninterrupted use of energy and a cost-effective supply of energy with minimal impact on health, the environment and the climate. All this should also facilitate the transition to an ecologically shaped society. Electricity production is basically free of fossil fuels, as confirmed by Swedish Prime Minister Stefan Löfven in September 2015 when he announced at the United Nations General Assembly that his country is making every effort to be among the first countries in the world to become completely independent of fossil fuels. His words were confirmed by the Swedish Parliament, which set out its climate and energy objectives as follows: –– the proportion of renewable energy in 2020 shall be at least 50% of the total energy use;

 See also Czarny 2017, pp. 189–182.

7

188

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

Coala

Crude oil

ktoe

Production

ktoe

Oil products

Natural gas

Nuclear

ktoe

ktoe

ktoe

127

0

0

2 243

20 349

10 544

818

-19

-1 398

15 560

International c marine bunkers

0

0

International aviation bunkersd

0

0

Imports Exports

Stock changes TPES Transfers Statistical differences Electricity plants

0 16 442

Hydro

Geothermal, solar, etc.

ktoe

ktoe

Biofuels and waste

Electricity

ktoe

ktoe

Heat

Totalb

ktoe

ktoe

5 333

1 354

11 475

0

163

34 893

0

0

0

1 166

1 228

0

0

0

0

-253

-2 237

0

19 468

-1 984

0

0

0

0

0

0

0

-1 984

-822

0

0

0

0

0

0

0

-822

0 36 348

-300

90

473

0

0

0

0

-6

0

0

257

2 050

19 042

-7 348

818

16 442

5 333

1 354

12 381

-1 009

163

49 226

0

2 200

-2 002

0

0

0

0

0

0

0

198

-104

50

-264

0

0

0

0

122

0

0

-196

0 16 442 5 333

-1 343

0

12 104

0

11 020

0

0

-6

CHP plants

-405

0

-112

-246

0

0

0

-4 745

Heat plants

-34

0

-46

-7

0

0

0

-999

-205

1 191

-100

Gas works

7

0

0

-7

0

0

0

0

0

0

0

Oil refineries

0 20 663 21 292

0

0

0

0

0

0

0

-629

1 301 3 266

-941

Coal transformation

-644

0

0

0

0

0

0

0

0

0

-644

Liquefication plants

0

0

0

0

0

0

0

0

0

0

0

Other transformation

0

0

0

0

0

0

0

0

0

0

0

Energy industry own use

-100

0

-951

-6

0

0

0

-16

-572

0

-1 645

Losses

-58

0

0

0

0

0

0

0

-656

-190

-904

Total final consumption

712

0

9 934

552

0

0

11

6 744

Industry

693

0

817

290

0

0

0

4 269

4 324

501

10 894

Transport

0

0

6 590

33

0

0

0

1 318

229

0

8 170

Other

5

0

460

134

0

0

11

1 157

6 410 3 929

12 106

Residential

3

0

22

30

0

0

11

961

3 828 2 606

7 462

Commercial and public services

2

0

351

96

0

0

0

66

2 471 1 315

4 301

Agriculture / forestry

0

0

72

8

0

0

0

130

Fishing

0

0

14

0

0

0

0

Non-specified

0

0

0

0

0

0

0

14

0

2 068

96

0

0

0

0

0

1 554

96

0

0

0

Non-energy use -of which chemical/ petrochemical

Fig. 9.8  Sweden: Balances for 2016, ktoe Source: IEA World Energy Balances 2018 a The column of coal also includes peat and oil shale where relevant b Totals may not add up due to rounding c International marine bunkers are included in transport for world totals d International aviation bunkers are included in transport for world totals

10 963 4 430

33 347

111

7

329

0

0

0

14

0

0

0

0

0

0

0

2 178

0

0

0

1 650

9.1  Dynamics of Changes in Energy Policy Fig. 9.9  Energy supply and use in Sweden 2017, TWh Source: Energy in Sweden 2019 a Nuclear energy figures are reported gross, i.e. as supplied nuclear fuel energy in accordance with UNECE guidelines b Primary heat refers to large heat pumps in the energy sector

189 Domestic supply

TWh

Biomass Coal and coke Crude oil and oil products Natural gas, gasworks gas Other fuels Nuclear fuel a Primary heat b Hydropower Wind power Import-export of electricity Total

143 21 122 11 17 184 4 65 18 -19 565

Losses and non-energy use

TWh

Non-energy purposes

39

Transformation and distribution losses

28

Nuclear power losses Energy sector own use Total

Total final energy use, per energy carrier Biomass Coal and coke Oil products Natural gas, gasworks gas Other fuels District heating Electricity Total

118 10 195

TWh 89 14 87 6 6 50 126 378

–– the proportion of renewable energy in the transport sector shall be at least 10% in 2020; –– the energy consumption shall be 20% more efficient in 2020 compared to 2008 (a cross-sectoral goal of reduced energy intensity); –– the emissions of greenhouse gases in 2020 shall be 40% lower than in 1990 (this relates to activities not covered by the EU’s system for emissions trading). In addition, Sweden’s long-term ambition is to have a vehicle fleet that is independent of fossil fuels by 2030 (Energiläget 2015, p. 75). It seems that the latest data informing about the shape of production capacities per energy source, which is illustrated in the table below, confirm the validity of the above assumptions (Fig. 9.11). The above analysis clearly shows that Sweden has planned its own energy transformation process for several decades, starting with the construction of appropriate infrastructure. The 2016 budget allocates special funds for photovoltaic panels and wind turbines, as well as clean public transport, the development of smart grids and energy storage systems. The country’s authorities are also investing in research how

190

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

Fig. 9.10  Total final energy use, per sector Source: Energy in Sweden 2019

Total in Percentage Sweden in Sweden 6.3 % 21.89 bn Fossil fuels kWh 24.3 % 84.44 bn Nuclear power kWh 40.9 % 142.13 bn Water power kWh Renewable 104.25 bn 30.0 % energy kWh Total production 347.51 bn 100.0 % capacity kWh Energy source

Industry Biomass Coal and coke Oil products Natural gas, gasworks gas Other fuels District heating Electricity Total

TWh 56 14 10 4 6 3

Transports Biofuels Oil products Natural gas Electricity Total

TWh 19 66 0 3 88

Residential and services Biomass Coal and coke Oil products Natural gas, gasworks gas Other fuels District heating Electricity Total

TWh 14 0 11 1 0 46 73 146

Percentage Per capita in Europe in Sweden 48.9 % 2,174.58 kWh 7.6 % 8,387.65 kWh 24.1 % 14,117.49 kWh 10,355.13 15.7 % kWh 100.0 % 34,517.09 kWh

143

Per capita in Europe 8,014.87 kWh 1,247.99 kWh 3,946.70 kWh 2,571.37 kWh 16,405.51 kWh

Fig. 9.11  Production capacities per energy source Source: https://www.worlddata.info/europe/sweden/energy-consumption.php

to store electricity. The modernization of residential buildings to make them more energy efficient also plays an important role in the transformation.8 Although oil, petrol and diesel are still widely used in the transport sector, biogas further processed as CNG fuel is used as fuel for buses, refuse collection vehicles and other municipal vehicles.9 At the same time, biogas from biological fractions

 More on the subject at http://www.iea.org/statistics/statisticssearch/report/  In Helsingborg, with a population of approximately 90,000 inhabitants, all city buses are powered by refined biomethane produced from municipal waste in the city. The surplus is exported to the municipal gas grid. 8 9

9.2  Electricity as the Basis for Energy Balance

191

and food waste is directly used to produce electricity and heat, further reducing the cost of waste management. All this leads to the conclusion that Sweden has made progress in recent years towards a more secure and sustainable energy future. Society already enjoys an almost zero-emission electricity supply and the state is gradually phasing out the use of oil in the residential and energy sectors.

9.2  Electricity as the Basis for Energy Balance The warm year 2011 reduced the consumption of electricity mainly in the residential sector. At the same time, electricity generation was slightly higher than in 2010, resulting in a surplus of 7.2 TWh, which was exported net to other countries. This is indicated by preliminary statistics on electricity from the Swedish Energy Agency covering the whole of 2011. “It is once again wind power that increased most during the course of the year. Production amounted to 6.1 TWh, which is a continued substantial increase of 75% compared to the year before. Production during December was as much as 132% higher than in December 2010,” (High net export 2011) says Anna Andersson, analyst at the Swedish Energy Agency. Electricity production in 2011 amounted to 147.6  TWh, i.e. 1% more than in 2010, and it was broken down as follows: Hydropower: 66.6 Twh;10 Windpower: 6.1 TWh; Nuclear power: 58.0 TWh; CHP (industry): 5.8 TWh; CHP (district heating): 11 TWh (Net electricity production). Electricity use in the residential sector (including losses) was lower than normal at 139 TWh, a decrease of 5% compared to 2010.11 On the other hand, industrial energy consumption amounted to 53.1 TWh, i.e. 1% less than in the previous year. The reduction of electricity consumption combined with slightly higher production resulted in net exports amounting to 7.2 TWh. This can be compared with 2010, when net imports amounted to 2.1 TWh. In December 2011, net exports amounted to 1.5 TWh compared to December 2010, when net imports of electricity amounted to 1.8 TWh (Fig. 9.12). In 2016, electricity in Sweden was produced by: hydropower – 45%; nuclear – 39.7%; wind  – 10.1%; conventional heating  – 9.6%12 and solar  – 0.1% (Energimyndigheten 2018). Its production is growing rapidly, as can be seen in the Fig. 9.13. Sweden has one of the highest electricity consumption per capita in the world and its main electricity consumers are production and extraction, housing, private and public services (Fig. 9.14).  It was slightly lower than in the previous year, but it was the largest surplus of electricity in a year with 45% of total electricity production. 11  Since 1996, the Swedes have been able to choose their energy supplier. Approximately 140 companies sell electricity to Swedish consumers. See Energy use in Sweden. 12  See http://www.energimyndigheten.se/statistik/el-och-fjarrvarme/ 10

192

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society Supply Production within the country Hydroelectric power (incl. pumped storage power), net Wind power Nuclear power, net Conventional thermal power, net backpressure, industrial backpressure, combined heat and power condensing power gas turbine, etc. Gross transmission to Sweden (import) Total supply

2010 145 66.2 3.5 55.6 19.8 6.4 11.7 1.6 0.03 14.9 160.0

2011 146 65.8 6.1 58.0 16.6 5.9 9.7 1.0 0.01 12.5 158.9

Change % 1 -1 75 4 -16 -8 -17 -36 -60 -16 -1

Use Gross transmission from Sweden (export) Consumption within the country Mineral extraction and manufacture (SNI 05-33) Electricity, gas, heat and hydropower plants (SNI 35-36) Railways and light railways, bus traffic (SNI 49) Housing, service, etc. Housing, temperature-adjusted Losses Mains losses Other losses Total consumption Net export (+)/import(-)

2010 12.9 147.2 53.6 4.5 3.0 75.0 72.1 11.1 2.4 8.7 160.0 -2.1

2011 19.7 139.2 53.1 4.1 3.0 68.9 71.8 10.2 2.5 7.7 158.9 7.2

Change % 53 -5 -1 -8 0 -8 0 -8 4 -12 -1

Fig. 9.12  Electricity supply and consumption in Sweden, 2010 and 2011, TWh Source: High net export

Hydropower Windpower Nuclear power CHP (industry) CHP (district heating) Other thermal power Total

1970 40.9 0.0 3.1 2.4 12.7 59.1

Import minus export

4.3

1994 2000 58.2 77.8 0.1 0.5 70.1 54.8 3.8 4.2 5.9 4.7 0.1 0.3 138.4 142.0 0.3

4.7

2011 66.6 6.1 58.0 5.8 11.0 0.0 147.6

2017 64.6 17.6 63.0 6.0 9.0 0.0 160.2

-7.2

-19.0

Fig. 9.13  Net electricity production, from 1970, TWh Source: Swedish Energy Agency-d

Electricity consumption accounts for one third of the country’s total energy consumption. Power losses in the electricity grid amount to 11 TWh per year due to a number of factors such as water supply, air temperature and wind. Electricity consumption in Sweden is increasing and on average (around 16,500  kWh/year per capita) individual consumption is very high. In 2015, Sweden generated 162 TWh, of which 75 TWh (47%) came from hydropower and 56 TWh (35%) from nuclear power. The wind supplied 16 TWh, various fossil fuels 2 TWh, and biofuels and waste 12 TWh. Total production capacity at the end of 2015 was 40 GWe1. By law, the network operator Svenska Kraftnät has to provide about 2 000 MWe of winter reserve (Nuclear Power in Sweden 2018).

9.2  Electricity as the Basis for Energy Balance

193

Fig. 9.14 Electricity consumption in Sweden in 2016 Source: Energimyndigheten 2018

Manufacturing industry

30 %

Service

25 %

Housing

21 %

Export

16 %

Forluster (losses)

6%

Agriculture

2%

total

Sweden per capita

Compare to Europe per capita

Own consumption

125.40 bn kWh

12,455.62 kWh

5,437.14 kWh

Production

154.30 bn kWh

15,326.17 kWh

5,848.09 kWh

Import

14.29 bn kWh

1,419.38 kWh

729.45 kWh

Export

26.02 bn kWh

2,584.49 kWh

708.25 kWh

Electricity

Fig. 9.15  Energy balance Source: https://www.worlddata.info/europe/sweden/energy-consumption.php

It should be noted that, unfortunately, the above figures differ slightly from the figures provided by WorldData info, which are expressed in the statement: “The most important measure in the energy balance of Sweden is the total consumption of 125.40 billion kWh of electric energy per year. Per capita this is an average of 12,456 kWh (WorldData.info-b). Hence the energy balance of Sweden, according to the latest data, is shown in Fig. 9.15. In the Swedish energy system, and in particular in electricity generation, nuclear energy needs to be treated separately. Its origins can be traced back to the prototype Nuclear Power Plant, created in a rock cavern located in Stockholm. This power plant had been used for district heating. It functioned from 1964 until 1974.13 The first commercial power plant in history called Oskarshamn 1 was commissioned in 1972, followed by 11 other reactors in the area. These 12 units operated for 13 years until all of them were shut down in 1985. There are currently 3 nuclear power plants in Sweden with 10 reactors14 producing clean and cheap energy. Many reactors underwent the process of modification and the so-called “power uprate,” i.e. increasing the reactor power through, among other things, increasing the operating parameters such as the flow rate through the core or the modernization of the turbine. The net capacity of the existing power plants is currently 4.3%, 16.2% and 7.5% higher than the originally available capacity for Forsmark, Oskarshamn and Ringhals, respectively (Fig. 9.16).  See Hedberg and Holmberg 2010.  Six reactors entered commercial service in the 1970s and six in the 1980s. The 12 reactors were at four sites around the southern coast. One Barsebäck unit closed in 1999 and the other in May 2005. In 2015, it was decided for economic reasons not to complete upgrades to Oskarshamn 2 and to declare it permanently shut down. Sweden now has nine nuclear power reactors providing about 40% of its electricity from 8849 MWe of capacity. 13 14

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9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

Reactor

Operator

Type

MWe net

Oskarshamn 3 Ringhals 1 Ringhals 2 Ringhals 3 Ringhals 4 Forsmark 1 Forsmark 2 Forsmark 3

OKG Vattenfall Vattenfall Vattenfall Vattenfall Vattenfall Vattenfall Vattenfall

BWR BWR PWR PWR PWR BWR BWR BWR

1400 878 807 1062 938 984 1120 1187 8376

Total (8)

Commercial operation 1985 1976 1975 1981 1983 1980 1981 1985

Intended decommissioning 2035 or 2045 2020 2019 2041 2043 2040 2041 2045

Fig. 9.16  Sweden’s nuclear power reactors Source: Nuclear Power in Sweden

Nuclear power produced 77.5 billion kWh in 2004 (51% of total electricity production), 61.3 billion kWh (42%) in 2008, and 61.5 billion kWh (38%) in 2012. The percentage changes from year to year depending on hydro resources following winter precipitation. There are currently 10 nuclear reactors in operation in Sweden, including seven boiling water reactors (BWR) and three pressurized water reactors (PWR) with operating parameters of 155 bar(a) and 343 °C.15 Vattenfall is Sweden’s largest nuclear company. The company holds a majority stake in Forsmark, Ringhals and KSU, a company that provides training for nuclear reactor operators. In addition to Vattenfall, there is also the German Eon, which holds 54.4% of the shares in the Oskarshamn power plant, and the remaining shares in the power plant belong to the Finnish Fortum. In addition to commercial nuclear power plants, there are other large companies in the nuclear industry in Sweden. Västerås is home to the Westinghouse nuclear fuel plant, which produced a total of 670 tons of fuel in 2012. Of this total, 470 tons were destined for PWR reactors, 120 tons for BWR and 60 tons for the Russian equivalent of PWR, WWER. SKB AB, whose shareholders are Vattenfall, Forsmark, OKG and Eon, is responsible for nuclear waste management. The activities of SKB are financed partly by revenues from the sale of electricity from nuclear power plants. For each kWh sold, the power plant contributes approximately EUR 0,002 to the SKB fund. Short-term waste from Swedish nuclear installations is stored under special conditions at the CLAB Short-term Nuclear Waste Storage Facility, which is located near the Oskarshamn power plant. Since 1988, low-level radioactive waste has been stored at the Low and Medium Injective Waste (SFR) repository near the Forsmark power plant, which has a capacity of approximately 63,000 m3 (annual filling estimated at approximately 1000 m3). The Swedish nuclear industry is facing challenges including the reactor modernization process of the Forsmark and Ringhal units. The current and future upgrading

15

 See https://energetyka.wnp.pl/przeglad-szwedzkiego-przemyslu-jadrowego,282455_2_0_3.html

9.3  Environmental and Climate Protection Measures

195

will extend the lifetime of the three F1, F2, F3, R3 and R4 units to 60 years. The cost of upgrading the units is approximately SEK 16 billion (€1.87 billion), committed between 2013 and 2017. The Swedish government has also decided to build a new final underground high-level radiological disposal facility close to the Forsmark power plant to be operational by 2023. Up to 12,000 tons of burnt fuel can be stored at the landfill (SKB estimates that the landfill will be filled approximately 40  years after its opening).

9.3  Environmental and Climate Protection Measures Sweden is a country with a high focus on ecology, including the use of waste potential for renewable energy, with best practices in waste management and environmental protection. Its modern energy policy aims to develop a sustainable supply system with a long-term vision for the supply of all renewable energy sources. There is no doubt, however, that total independence from fossil fuels is a very difficult task, especially when we are dealing with a country of more than 10 million people, which is industrialized and developed. The transformation of the energy system towards RES requires careful preparation. This can be seen in the example of proper segregation of waste at source. Between 1990 and 2006, municipal waste was reported as 60% non-renewable and 40% renewable. In 2007, a re-analysis of waste showed that its content was 40% non-renewable and 60% renewable. Starting from 2016, subsequent analyses showed that the real division for municipal waste is as follows: 52% renewable and 48% non-renewable. In practice, this means that in Sweden as much as 45% of the waste produced is used for recycling. The rest of the waste is a good fuel that is burned in waste incineration plants.16 Of course, this is done in installations equipped with flue gas and wastewater treatment technology adapted to strict environmental standards. Only 4% of waste is deposited in landfill sites – mainly fly ash and bottom ash.17 Sweden’s municipal waste management is a leader in environmental protection and recycling. The aim is to maximize the recovery and processing of waste. In 2012, 2260 million tons of household waste was burned and converted into heat. The first incineration plant was built in 1904 in Stockholm. Currently, 32 Swedish plants produce heat for 810,000 households and electricity for 250,000 private  A good example is southern Stockholm which is heated entirely by the energy from the waste incineration plant in Högdalen. The 500,000 tons of municipal waste and 250,000 tons of industrial waste incinerated there produce 1700 GWh of heat and 450 GWh of electricity annually. In total, Sweden has 28 plants of this type. 17  Municipal waste incineration plants produce electricity and heat for urban and industrial housing. More than 10% of the heat energy in Sweden comes from waste incineration plants. The resulting heat energy is used for district heating. See http://www.swedenabroad.com/pl-PL/ E m b a s s i e s / Wa r s a w / O - S z w e c j i / O c h r o n a - r o d o w i s k a - i - e n e r g i a - o d n a w i a l n a / Gospodarka-odpadami-i-produkcja-energii-w-Szwecji/ 16

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9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

2000 2006 2011 2015 2017

Industry 4.0 4.4 4.1 3.9 3.4

Residential and services 37.3 42.0 42.9 44.7 46.3

Distribution losses 4.1 4.7 6.3 6.8 7.1

Total 45.5 51.2 53.3 55.5 56.7

Fig. 9.17  District heating consumption, TWh Source: Swedish Energy Agency-d

homes. Although Sweden emits three times as much waste, heavy metal emissions have been reduced by 99% since 1985. By 2020, Sweden wants to achieve a 50% share in the balance of energy production from renewable sources, including 227 biogas plants, 138 of which are at wastewater treatment plants, 3 industrial plants, 18 co-fermentation plants and 60 at landfill sites (Energia odnawialna 2018). This environmentally friendly country boasts an integrated municipal waste management system which is based on organizing all elements of the economy in such a way as to create a closed circuit. A conscious Swedish society educated in the field of waste segregation together with a deterrent system of financial penalties for environmental pollution or failure to comply with the emission of pollutants to the environment, stimulates the industry to develop technologies and search for new sources and methods of energy production. Generating energy from waste is economically viable, increases competitiveness and reduces energy production costs, which translates into low electricity prices for the Swedish population. The history of change in the Swedish energy sector – as already mentioned – was caused by the oil crisis of the 1970s, which at the same time stimulated diversification of fuel supply. The recovery of reusable materials, the separation of hazardous waste, the production of biogas from the biological fraction and the incineration of the rest of municipal waste with commercial use of the generated energy and its sale to the existing power and heat network seem to be the optimal solutions not only for Sweden, where the heat distribution network plays an important role and enables a secure, predictable and efficient distribution of heat and the management of different types of waste heat. The use of district heating represents 13% of the total energy consumption in the country and is an important part of the energy system. District heating produced by a combined heat and power plant is the most common method of heating multi-family houses and premises. In connection with the distribution of heat, there is a certain loss of heat, which depends, among other things, on the diameter of pipes, insulation and distance from the heating installation to the heated rooms (Fig. 9.17). The expansion of biofuels shown in the above figure has been linked to an ambitious renewable energy policy. Successive Swedish governments proved to be determined to continue this policy, as bioenergy is, in their view, the best way to secure uninterrupted energy supplies and create new jobs.18  For more on the subject of energy policy in the Swedish government declaration of October 06, 2006 see Energipolitik, Regeringskansliet, www.regeringen.se 18

9.3  Environmental and Climate Protection Measures

197

All this is happening in a situation where around 44% of the energy consumed in Sweden is already from alternative sources and not from fossil fuels. This is ­particularly true for thermal energy. The high efficiency of its production is achieved by using the heat in the flue gases by cooling and condensing them. Condensed fumes are treated and used in a district heating network instead of drinking water. Thanks to the revenues from the sale of the energy produced, the price of delivering the waste to the incineration plant and the costs of its storage are reduced. Heat is usually produced in cogeneration with electricity. More than 80% of the heat comes from renewable sources. Electricity, which is traded on the stock exchange, is produced not only by hydroelectric and nuclear power stations, but also by renewable fuels (IEA 2018). The Swedish experience shows that the system is environmentally friendly, efficient and economical. Thanks to its cost-effectiveness, many incinerators in Sweden import waste even from other countries. The biggest success of alternative energy development in Sweden is considered to be the use of waste, especially municipal waste and biomass (wood waste), i.e. raw materials treated in many countries as a necessary evil, ignored and wasted. These are, however, potential energy sources to generate energy and heat. For example, 1 ton of coal is less energy efficient than two tons of municipal waste using effective energy recovery technology from municipal waste. Biomass, agricultural waste, energy crops and municipal waste offer potential for use in the power industry. Initially, in Sweden, in order to reduce dependence on coal imports, biomass, i.e. forestry waste, was used for co-incineration. However, this caused corrosion and deterioration of technical parameters of coal-fired boilers, as well as decreased their efficiency. Later, the technology of flue gas liquefaction and combustion of raw biomass in boilers was introduced, which resulted in excellent economic effects. In Sweden, the process of using municipal waste starts with segregation at source, i.e. in a household where most products are recycled and those that are not suitable for this purpose are sent to three places: (1) to incineration plants, where they are ­incinerated and converted into electricity and heat, (2) to a landfill from which biogas can be recovered, (3) to a biogas plant, where waste is anaerobically fermented and converted into biogas and natural fertilizers, which after liming are returned to farms (Fig. 9.18).19 It is worth noting that there are such installations as composting plants, wood material recovery points used for obtaining wood chips for fuel in households or combined heat and power plants, or construction material recovery points near landfills. Recovered heat and energy is transferred to district heating networks.20

 On the basis of Åström 2012.  The district heating network, which is important for Swedish waste management, enables reliable, predictable and effective heat distribution and management of various types of waste heat. Therefore, biogas in Sweden is produced from municipal waste, agricultural waste, industrial waste and sewage sludge. 19 20

198

9  The Kingdom of Sweden: Transition to an Ecologically Sound Society Fuel category

2005

2010

2015

2017

Densified wood fuel

8424

12084

8285

8473

Undensified wood fuel

45532

53818

52438

55059

Black liquor

39474

40782

44277

44181

658

1349

1216

1134

1674

2333

1611

1146

97

2062

10523

16658

2735

3499

2533

2998

980

2253

710

740

0

277

280

286

413

1005

1334

1598

5228

8002

10582

10475

Other solid biofuels Bioethanol Biodisel Tall oil pitch Vegetable and animal oils Other bioliquids Biogas Municipal waste - bio

Fig. 9.18  Use of biomass, by fuel category, from 2005, GWh Compiled by author on the basis of Swedish Energy Agency-d

According to Józef Neterowicz:21 “System heating in Sweden is present in more than 570 places (there are 290 municipalities), gives local employment, local self-­ sufficiency: up to 100% heat and up to 60% electricity. The more system heat in cogeneration, the more electricity there is. The advantages also include lower demand for energy mains and lower transmission losses and domestic hot water” (Bartus 2017). Biogas – currently 14 TWh – has great energy potential (Gasums biogasanläggningar). In Sweden, it has been used in public transport since 2005, produced by anaerobic digestion from biomass. The result is methane, which is used to generate heat and electricity. The Swedish biogas production model is based on the fermentation of municipal waste, including sludge from treatment plants along with agricultural waste, and by-products from the food industry. Electricity, heat, biogas and biosynthesis are produced as end products (Fig. 9.19).22 Swedish Biogas International AB is the owner and operator of a biogas plant and offers a complete process and production solution for biogas. It consists of 9 biogas plants currently in operation (of which Biogas Plant in Västerås has two owners, 49% is owned by Arosbygden in Sweden AB and 51% by Swedish Biogas International AB). The company’s vision is to be a leader in process technology and biogas production in order to contribute to a sustainable society, both ecologically and economically. The Västerås biogas plant produces both biogas based on by-­ products from the region’s agricultural industry and a high-quality biofertilizer that returns to agriculture and closes the cycle without the need to buy any other enrichers. The biogas produced is sold by the company to filling stations in Vateras, which

 Józef Neterowicz, a graduate of the AGH University of Science and Technology in Kraków, has been co-creating the Swedish waste and energy revolution for over 40 years. 22  See https://www.gasum.com/sv/ 21

9.3  Environmental and Climate Protection Measures

199

Biogas plants

Methane

biofertilizer / biofuel

Reduction of CO2

Jordberga

11.7 M Nm3

110 000 tons/ biofertilizer

28 000 tons

Katrineholm

3 M Nm3

60 000 tons/ biofuel

13 000 tons

Lidköping

6 M Nm3

50 000 m3/ biofertilizer

14 000 tons

Örebro

5.5 M Nm3

60 000 m3/ biofertilizer

14 000 tons 13 000 tons

Västerås

3 M Nm3

80 000 tons

SBI Ekogas Gävle

800 000 Nm3

1900 tons

Vadsbo Biogas

1.5 M Nm3

55 000 tons

55 000 tons

Vårgårda- Herrjunga Biogas

2 M Nm3

60 000 tons

11 000 tons

Alvesta Biogas

1.6 M Nm3

4 000 tons

-

-

Fig. 9.19  Annual production of the largest biogas plants in Sweden Compiled by author on the basis of Gasums biogasanläggningar

are used by the bus depot and other filling stations in Västmanland. The production of biomethane and biocarbons is the result of 80,000 tons of manure, of which 10,000 tons are plant products (annually). Of this, 3 million m3 of biogas and 80,000 biocarbons per year can be produced, and 13,000 tons of CO2 can be reduced annually by replacing fuel gas and petrol, as well as through the manure management cycle. As methane is a very powerful greenhouse gas (25 times more powerful than carbon dioxide), the Swedes in their long-term environmental policy activities, in addition to collecting biomethane for local use, also burn biomethane with a gas burner called “gasfackla” in Swedish, which burns around the clock and reduces people’s impact on the environment. As a result, many local companies and enterprises are adapting their strategy to long-term environmental responsibility. August 21 is the national bioenergy day in Sweden, the first of its kind in all EU Member States. It is hardly surprising as the share of bioenergy in final energy consumption is 36% and keeps growing year by year, and it has been Sweden’s leading energy source since 2009. It should be remembered that renewable energy carriers, according to a broad definition of RES, are not only renewable energy sources and combustible waste including solid biomass, animal products, gases and liquid fuels derived from biomass, municipal combustible waste from the use of their biodegradable components, but also watercourse energy (hydro), geothermal energy, solar energy, wind energy and wave and tidal energy. In a normal year, hydropower generates 66.9 TWh of electricity, which corresponds to approximately 45% of Sweden’s electricity production. This makes hydroelectric power the largest single renewable source of electricity in Sweden.23

23

 See http://www.energimyndigheten.se/fornybart/vattenkraft/

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9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

With the transition to a fully renewable energy system in 2040, the share of renewable electricity production must increase in this system. This calls for stricter requirements for hydropower as a planned and controllable power source. At the same time, higher environmental requirements affect both power generation and regulatory efficiency, as hydropower plays a key role in maintaining the balance of the power system. Balancing takes place on an annual, weekly, daily and level two cycle basis. Further research and innovation in the hydropower sector is needed to ensure sustainable hydropower and development in electricity generation. Therefore, the Energy Agency (Swedish Energimyndigheten) supports research efforts to contribute to the transition to a sustainable and renewable energy system through research and development of hydroelectric technologies, systems and methods.24 If we realize that in 2 h the Earth receives as much energy from the sun as the world’s population consumes in a year, it is extremely important to find ways to use solar energy intelligently, both in Sweden and elsewhere. Different scenarios show that solar energy is an important part of a future sustainable energy system. Germany is currently the largest market, but in recent years the market has been growing, for example in Asia. The Swedish Energy Agency is supporting both research and markets to obtain more solar energy in Sweden. The Swedish solar cell market, although still limited, has started to develop thanks to the government support. In 2016, the total installed capacity was 230 MW. The Swedish Energy Agency invests in research into solar energy, solar photovoltaics  – PV (Swedish Energy Agency-a 2017) and solar fuels, and offers investment support to private, public and commercial entities. There is therefore great potential for business in this area and the opportunity to build a successful industry, even an export-profile industry in Sweden.25 Solar conditions are in many places as good as in northern Germany and with systematic cost-cutting there is great potential for solar cells in Sweden, also on existing roof surfaces. In October 2017, the Swedish energy regulator estimated that in order to reach the target of 100% renewable energy, the share of solar energy would have to increase from 5 to 10%.26 Although initially the importance of wind energy was relatively small for the energy balance (only 1% of electricity production),27 due to the actual potential, an important objective of the state’s energy policy was to create the conditions for wind energy production to increase from 0.5 to 17.5 TWh from 2000 to 201728 and even to 30 TWh by 2020.29

 See http://www.energimyndigheten.se/forskning-och-innovation/forskning/fornybar-el/vattenkraft/  See https://phys.org/news/2016-11-sweden-scrap-taxes-solar-energy.html#nRlv 26  See http://www.energimyndigheten.se/fornybart/solenergi/ 27  In 2011, wind energy already accounted for 4.2% of electricity production. 28  10 TWh in 2015; all data after Energy use in Sweden. 29  Swedish Energy Agency In New Report explains that the 10 TWh increase is due to plans to build off-shore wind power plants at sea. See: www.energimyndigheten.se 24

25

9.4  Sweden: Energy Security

201

Share of energy from Heating, cooling, Electricity Transports renewable sources industrial etc. 1990

33

-

-

-

2000

38

-

-

-

2005

41

52

51

6

2011

49

62

60

12

2017

55

69

66

39

Fig. 9.20  Share of renewables in energy use in Sweden, from 1990, percent Compiled by author on the basis of Swedish Energy Agency-d

The Swedish Energy Agency and the Swedish Environmental Protection Agency are also jointly developing a strategy for sustainable wind energy development (http://swedensustainability). The Wind 2018 conference presented a strategy that will focus, among other things, on how wind turbines are managed today and propose solutions that can be developed to enable sustainable expansion on a large scale (Energimyndigheten 2018). There are currently around 3600 wind turbines in Sweden, which produce around 11% of electricity (Energy use in Sweden) (Fig. 9.20). The above analysis shows that Sweden has a rich supply of water energy and biomass, which contributes to the country’s high share of renewable energy. Water energy and bioenergy are the best renewable sources in Sweden  – water energy mainly for electricity production while bioenergy for heating. Swedish share of energy from renewable sources in the gross final energy consumption (2017, %) is as follows: Non-RES- 45%; Bioenergy30  – 36%; Other RES  – 19% (Sweden’s Bioenergy Day 2017). By contrast, total Swedish renewable energy use was 55%31 in 2017, compared to 18% for the EU as a whole.32

9.4  Sweden: Energy Security The Swedish Energy Agency (SEA), under the Ministry of Enterprise, Energy and Communications, has primary responsibility for oil and gas emergency response policies. Sweden fulfils its oil stockholding requirements to both the IEA and the European Union by placing minimum stockholding obligations on industry and major consumers.

 Bioenergy value includes multiple counting on biofuel.  While the renewable share of total energy consumption in 1990 amounted to 33%, and in 2016 to 54%; after https://www.ieabioenergy.com/wp-content/uploads/2018/11/CountryReport2018_ Sweden_final2.pdf 32  Other EU Member States with a high share of bioenergy are Finland (33%), Latvia (31%), Estonia (27%), Denmark (25%), Lithuania (22%) and Austria and Romania (20% each). 30 31

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9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

In case of supply disruptions and as a contribution to the collective action of the IEA, the Swedish authorities would reduce the minimum obligation, thereby allowing operators to raise stocks below the minimum level. In the event of a natural gas crisis, supplies to protected customers (i.e. households) will be ensured, while the physical equilibrium of the gas system will be maintained by reducing or discontinuing supplies to customers not protected in a crisis situation. System operators are required to have contingency plans for emergency response, including strategies to limit supply to customers. It should be emphasized that Sweden’s natural gas emergency response policy is based on European Regulation No 994/2010. Natural Gas Act 2005 gives the balancing authorities the power to instruct the system operators to increase or decrease the amount of gas input or off-taken and to reduce or stop the transmission of natural gas to customers. This provides statutory rights to physically balance the national gas network in times of crisis. Natural Gas Regulation 2006 lays down obligations under the Natural Gas Act from 2013 onwards. The function of the balancing authority for the system was appointed to the TSO, the Swedegas Company. The Natural Gas Regulation also sets out the circumstances under which supplies to protected customers should be secured. This is defined in at least the following cases: partial interruption of supply up to 24  h; disruptions of supply during the winter period (lasting from the beginning of December to the end of February); and disruptions during periods when temperatures are 4–5 °C lower than normal winter temperatures (1–20 winters). Sweden defines protected customers as all households and small customers connected to a gas distribution network. Approximately 33,000 customers fall under this definition and together these consumers account for 2% of total natural gas consumption in Sweden. The Natural Gas Ordinance also sets the circumstances under which supplies to protected customers are to be safeguarded. This is defined as being in at least the following cases: a partial disruption of supplies for up to 24 h; disruption of supplies during the winter period (running from the beginning of December to the end of February); and disruption during periods when temperatures are 4–5 °C less than the normal winter temperatures (1 in 20 winters). Sweden defines protected customers as all households and small consumers connected to the gas distribution network. Approximately 33,000 customers fall under this definition and collectively these consumers account for 2% of total natural gas consumption in Sweden. Emergency response measures for responding in a crisis include the use of line pack, maximizing the input of biogas supplies into the network, and drawing on available volumes in storage. The Swedish authorities estimate that these measures could maintain supply to the whole Swedish gas market during a total cut-off of less than 24 h during high demand. However, the disconnection of large natural gas users remains the most important way to secure supplies to protected customers as a result of the gas crisis. In this case, protected supplies are estimated to be sustainable for one month in case of strong demand and for several months in case of low demand. In total, around 60 large natural gas customers could potentially be cut off from supply at a very fast rate, corresponding to almost 85% of Sweden’s total gas demand. Large CHPs, which account for almost half of the total gas demand in Sweden, have the capacity

9.4  Sweden: Energy Security

203

to quickly switch from natural gas to diesel. Large industries, representing the next quarter of total gas demand, are also able to switch to other fuels, primarily oil. Swedish authorities estimate that these measures could maintain supplies to the entire Swedish gas market during a total cut-off lasting less than 24 h during high demand. Still, disconnecting large users of natural gas remains the most important way of safeguarding supplies to protected customers in a gas crisis. In this case, supplies to protected customers are estimated to be maintainable for one month in the case of high demand, and for several months in the case of low demand. A total of about 60 large natural gas consumers can potentially be cut off from supplies very rapidly in an emergency, the equivalent of nearly 85% of total gas demand in Sweden. Large CHP units, which constitute almost half of all gas demand in Sweden, have the capacity to quickly switch from natural gas to gasoil. Large industries, representing another quarter of total gas demand, also have the capacity to switch to other fuels, primarily fuel oil. There are no requirements for gas users with fuel-switching capability to keep specific stocks of alternative fuels. The Minister of Enterprise, Energy, and Communications is responsible for oil and natural gas emergency policy in Sweden. The Swedish government states that its energy policy should be built on the same foundations as wider energy co-­ operation in the European Union, i.e. ecological sustainability, competitiveness and security of supply. It considers its key areas of work to be security of supply, improving the efficiency of energy use, promoting renewable energy and efficient energy technology. Sweden’s response to an oil supply crisis would be the lowering of the compulsory stockholding requirements set on industry. Specific demand restraint measures have not been prepared and would not be part of an initial response. However in a severe and long-lasting crisis, Swedish authorities would likely consider light-handed measures to supplement the use of compulsory industry stocks. The SEA, under the Ministry of Enterprise, Energy and Communications, has the main responsibility for emergency response. Within the agency, the Central Office of Security of Energy Supply team is the core of Sweden’s national emergency strategy organization (NESO). Regularly, 12–15 people work in the core NESO, but this can be expanded in times of crisis to include relevant expert staff from both inside and outside the SEA.  Close co-­ operation with industry is a key element in the Swedish NESO and the industry is represented in the regular work of the NESO by the SPBI. Other players, such as independent oil consultants and institute researchers, interact with the NESO team when appropriate. During a crisis, the NESO would analyze the situation and provide recommendations to the Ministry of Enterprise, Energy and Communications regarding possible response measures. In the case of an IEA collective action, ministry officials would consult with the energy minister and, based on the outcome, draft a formal decision to be adopted by the government at its weekly meeting, or potentially at an extraordinary meeting of ministers. Once approved, the SEA would be responsible for immediate implementation of the agreed response plan. Based on the above analysis, we can successfully conclude that the essence of the energy policy of the Kingdom of Sweden is to secure the reliability of electricity and other energy sources at internationally competitive prices, both in the short and

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9  The Kingdom of Sweden: Transition to an Ecologically Sound Society

long term. The national energy policy aims to create both conditions for efficient and uninterrupted use of energy and cost-effective Swedish energy supply with minimal impact on health, the environment and the climate. As the production of electricity was basically free from fossil energy sources at the beginning of the twenty-first century, the transition to an ecologically shaped society in line with previous assumptions becomes even easier to implement.

Bibliography Bartus Z (2017, February 10). Solaris na obierkach: jak bogaci Szwedzi stali się jeszcze bogatsi. Dziennik Polski. Retrieved from https://dziennikpolski24.pl/ solaris-na-obierkach-jak-bogaci-szwedzi-stali-sie-jeszcze-bogatsi/ar/11779799#magazyny Czarny RM (2009) Dylematy energetyczne państw regionu nordyckiego. Scandinavium, Kielce Czarny RM (2017) A Modern Nordic Saga: Politics, Economy and Society. Springer, Cham Dagens Industri (2008, June 29) Dagens Nyheter (2008, May 29) Energia odnawialna z odpadów komunalnych w Szwecji: Wzory dla Polski (2018, October 26) Energia Gigawat, 7-8/2018. Retrieved October 30, 2018 from https://www.cire.pl/ item,169304,2,0,0,0,0,0,energia-odnawialna-z-odpadow-komunalnych-w-szwecji-wzory-dlapolski.html Energiförsörjningen i Sverige: Kortsiktsprognos, Statens energimyndighet (2007, August 15) Retrieved February 1, 2008 from [email protected] Energiläget i Siffror 2007. Retrieved March 5, 2009 from https://www.google.com/search?q=Ene rgil%C3%A4get+i+Siffror+2007&oq=Energil%C3%A4get+i+Siffror+2007&aqs=chrome..69 i57.3871j0j8&sourceid=chrome&ie=UTF-8 Energiläget 2015. Retrieved January 15, 2016 from https://www.energimyndigheten.se/contentass ets/50a0c7046ce54aa88e0151796950ba0a/energilaget-2015_webb.pdf Energimyndigheten. Retrieved March 10, 2019 from http://www.energimyndigheten.se/fornybart/ Energimyndigheten (2018, October 24) Wspólna inicjatywa na rzecz zrównoważonego rozwoju energetyki wiatrowej. Retrieved October 31, 2018 from http://www.energimyndigheten.se/ fornybart/ Energipolitik, Regeringskansliet. Retrieved February 2, 2008 from https://www.regeringen.se/ Energy in Sweden 2019. Retrieved March 10, 2019 from http://www.energimyndigheten.se/en/ news/2019/energy-in-sweden%2D%2D-facts-and-figures-2019-available-now/ Gasums biogasanläggningar i Sverige. Retrieved March 15, 2019 from https://www.gasum.com/ sv/om-gas/biogas/vara-anlaggningar/ Energy Policy. Government Offices of Sweden, Ministry of Enterprise, Energy and Communications (2007) Updated September 25, 2007. Retrieved from https://www.government.se/ Energy use in Sweden. Retrieved October 31, 2018 from https://sweden.se/society/ energy-use-in-sweden/ Hedberg P, Holmberg S (2010) Swedish Nuclear Power Policy. SOM-institutet, University of Gothenberg High net export when energy use decreased during 2011, press release. (2015, March 03). Last updated 23 March, 2015. Retrieved April 03, 2017 from http://www.energimyndigheten.se/en/ news/2012/high-net-export-when-energy-use-decreased-during-2011/ IEA World Energy Balances 2018. Retrieved February 17, 2019. https://www.iea.org//statistics/? country=SWEDEN&year=2016&category=Key%20indicators&indicator=TPESbySource&m ode=chart&categoryBrowse=false&dataTable=BALANCES&showDataTable=true

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IEA, International Energy Agency (2014) Energy supply security 2014, Sweden. Retrieved October 21, 2016 from https://www.iea.org/media/freepublications/security/ EnergySupplySecurity2014_Sweden.pdf IEA, International Energy Agency (2018) World Energy Balances 2018 Edition, Database Documentation, Sweden. IEA.  Retrieved from http://wds.iea.org/wds/pdf/WORLDBAL_ Documentation.pdf Net electricity production, from 1970, TWh, Energy in Sweden  – Facts and Figures  2019. (2019, February 14). Retrieved March 10, 2019 from http://www.energimyndigheten.se/en/ news/2019/energy-in-sweden%2D%2D-facts-and-figures-2019-available-now/ Nuclear Power in Sweden. (2018, January). Updated January 2018. http://www.world-nuclear.org/ information-library/country-profiles/countries-o-s/sweden.aspx SCB, Blankett 401 och Energimyndigheten, Energiläget i Siffror 2007. Retrieved March 5, 2009 from https://www.google.com/search?q=Energil%C3%A4get+i+Siffror+2007&oq=Energil% C3%A4get+i+Siffror+2007&aqs=chrome..69i57.3871j0j8&sourceid=chrome&ie=UTF-8 SCB och Energimyndigheten, EN20 SM, Energiläget i Siffror 2007. Retrieved March 05, 2009 from https://www.google.com/search?q=Energil%C3%A4get+i+Siffror+2007&oq=Energil% C3%A4get+i+Siffror+2007&aqs=chrome..69i57.3871j0j8&sourceid=chrome&ie=UTF-8 Svenska Dagbladet (2008, March 21) Sweden’s Bioenergy Day: From August 21, Sweden relies on bioenergy, AEBIOM/Svebio’s calculations. (2017, August 21). Retrieved October 30, 2018 from https://bioenergyinternational. com/markets-finance/swedens-bioenergy-day-august-21-sweden-relies-bioenergy Swedish Energy Agency-a (2017) National Survey Report of PV Power Applications in Sweden 2016, Photovoltaic Power System. Retrieved January 21, 2019 from http://www.energimyndigheten.se/globalassets/fornybart/solenergi/national_survey_report_of_pv_power_applications_in_sweden_-_2016.pdf Swedish Energy Agency-b, Energy in Sweden  – Facts and Figures  2019. Retrieved March 10, 2019 from http://www.energimyndigheten.se/en/news/2019/ energy-in-sweden%2D%2D-facts-and-figures-2019-available-now/ Swedish Energy Agency-c In New Report. Retrieved February 02, 2008 from www.energimyndigheten.se Swedish Energy Agency-d and Statistic Sweden, Energy in Sweden  – Facts and Figures  2019. Retrieved March 10, 2019 from http://www.energimyndigheten.se/en/news/2019/ energy-in-sweden%2D%2D-facts-and-figures-2019-available-now/ WorldData.info-a. Retrieved February 10, 2019 from https://www.worlddata.info/europe/sweden/ index.php WorldData.info-b. Retrieved February 13, 2019 from https://www.worlddata.info/europe/sweden/ energy-consumption.php Åström J. Sustainable Business Hub, Project Manager Waste-to-Resources, Conference Newsletter Household Participation in Waste Management (HPWM), January 23rd 2012. Retrieved December 25, 2016 from http://egos.pl/images/konferencje/hpwm_02_2012/Jenny_Astrom.pdf http://www.iea.org/statistics/statisticssearch/report/?country. Retrieved November 20, 2015. http://www.iea.org/statistics/statisticssearch/report/?country=Sweden&product=balances. Retrieved November 20, 2015 https://www.worlddata.info/europe/sweden/energy-consumption.php. Retrieved February 13, 2019 http://www.iea.org/statistics/statisticssearch/report/. Retrieved December 17, 2015 http://www.energimyndigheten.se/statistik/el-och-fjarrvarme/ https://energetyka.wnp.pl/przeglad-szwedzkiego-przemyslu-jadrowego,282455_2_0_3.html http://www.swedenabroad.com/pl-PL/Embassies/Warsaw/O-Szwecji/Ochrona-rodowiskai-energia-odnawialna/Gospodarka-odpadami-i-produkcja-energii-w-Szwecji/. Retrieved January 19, 2016 https://www.gasum.com/sv/. Retrieved February 14, 2019

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http://www.energimyndigheten.se/fornybart/vattenkraft/ http://www.energimyndigheten.se/forskning-och-innovation/forskning/fornybar-el/vattenkraft/ https://phys.org/news/2016-11-sweden-scrap-taxes-solar-energy.html#nRlv http://www.energimyndigheten.se/fornybart/solenergi/ http://swedensustainability.yolasite.com/energy-sources.php. Retrieved October 30, 2018 https://www.ieabioenergy.com/wp-.content/uploads/2018/11/CountryReport2018_Sweden_ final2.pdf. Retrieved March 15, 2019

Chapter 10

The Kingdom of Norway: Standing in Energy

Abstract  Norway continues to manage its significant hydrocarbon resources and revenues in a sustainable way, and remains a reliable supplier of oil and gas. As one of the world’s largest energy exporters, Norway advances the energy security of consuming countries. And at the same time, as a global advocate for climate change mitigation, Norway is committed to environmental sustainability and climate policy. Keywords  Hydrocarbon resources · Electricity · Hydropower · Energy security · Environmental sustainability

In 1962, an American oil company Philips Petrol submitted an application concerning the search for crude oil in the Norwegian Continental shelf in the North Sea. The initial Norwegian government responses were negative since the opinions of national experts ruled out the presence of heavy hydrocarbon deposits in the region. In 1966, Esso carried out first test drillings and in 1970 Philips Petrol announced that a giant oil field has been discovered (Sowa and Konieczny 2007, p. 15). The start of deposits exploitation and subsequent increases in the prices of oil and gas1 led to a significant acceleration of the economic development of the country and the growing wealth of society. The Norwegian authorities decided not to allocate all the exploitation revenues to consumption only, but to invest a significant part to guarantee prosperity for the society as a whole as well as the future generations. Currently, the Kingdom of Norway – population: 5,282,000; population 13.71 per km2 (WorldData.info-a) is Europe’s largest petroleum liquids producer, one of the world’s top natural gas exporters, the largest holder of crude oil and natural gas

 Oil prices in 2007 were higher than expected by the Norwegian Ministry of Finance and this brought NOK 16 billion more in the form of taxes and levies to the State Treasury. Overall revenues from taxes and levies on petrochemical companies amounted to approximately NOK 210 billion in 2007, excluding revenues from State shares in StatoilHydro and other such companies. The Ministry of Finance estimates that total net receipts from the continental shelf should reach NOK 319 billion. See Aftenposten, December 03, 2007. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_10

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10  The Kingdom of Norway: Standing in Energy

reserves in Europe, and provides much of the petroleum liquids and natural gas consumed on the continent. The most important measure in the energy balance of Norway is the total consumption of 122.20 billion kWh of electric energy per year. Per capita this is an average of 23,134 kWh (WorldData.info-b).

10.1  Norway as a Producer of Oil and Gas The oil and gas from the Norwegian continental shelf (NCS) account for the biggest share of total exports in Norway. Since Norway does not use oil and gas to meet domestic energy needs, almost all these raw materials are exported placing Norway among top global oil exporters and gas producers. The production and export of oil and gas generate significant revenues for the economy and without it Norway’s trade balance (mainland economy) would have been negative. Interesting insight may be provided by the overview of Norwegian oil and gas sector over the years 1993–2013 (Fig. 10.1). In September 2007, according to the Oil Directorate, about 35% of hydrocarbon deposits were located in the Norwegian Sea and the remainder in the North Sea. According to the estimates, 30% of these deposits are located in the Barents Sea area which is no longer subject to the territorial dispute (Dagens Næringsliv 2007). As stated in the Norwegian Petroleum Directorate press release 5/2008 The Shelf in 2007 (Norwegian Petroleum Directorate-c. 2008), gas production increased in 2007 while as expected, oil production was somewhat lower than in the previous year. The number of exploration wells increased from 26 (2006) to 32  in 2007. There were twelve new discoveries made: 8 in the North Sea, 3 in the Norwegian Sea and 1 in the Barents Sea. The total resource growth from new discoveries has been estimated at 39–83 million Sm3 of recoverable oil and 15–23 billion Sm3 of recoverable gas. In the North Sea, most of the discoveries were made in the Sleipner/ Balder area. In 2007, it was estimated that oil production reached 128.5 million Sm3 (2.21 million barrels per day)2 compared with 136.6 million Sm3 (2.5 million bbls per day) in the previous year. It should be added that high activity level and growth in total investment costs are typical for this shelf. Substantial contributors to the high investment level in 2008 include the Gjøa, Skarv and Tyrihans field developments. In addition, new major investments were planned on Valhall, largely connected to new installations and wells. Other important recipients of investment included Ekofisk, Ormen Lange, Oseberg, Snorre, Statfjord and Troll II (Troll Oil). The expenditure (approx. NOK 100 billion in 2008) was earmarked to installation modifications, and partially to new seabed facilities, new exploration and development wells. According to Stavanger Aftonbladet, the investments in new platforms, drillings and water pumping technologies at Ekofisk, Norway’s first oil field have been increased to NOK 100 billion.

2  Crude oil conversion factors: 1  Sm3  =  6.29  barrels; 1  Sm3  =  0.84  tons; 1  barrel  =  159  liters; 1 ton = 7.49 barrels.

10.1  Norway as a Producer of Oil and Gas

209 1993

1995

2000

2010

2013

Employment (Numbers) Oil and natural gas production

17 338

16 498

14 434

21 930

27 206

Offshore

5 399

5 064

4 822

6 561

7 413

Onshore

11 939

11 434

9 612

4 173

4 437

7 743

Service activities

15 369 26 828

19 793 35 800

Gross Production value (NOK millions) Oil and gas production Service activities

136 051

144 257 367 625

5 303

6 151

15 883

572 367

666 264

99 843

135 157

Capital Investment (NOK millions) Oil and natural gas production

50 886

Service activities

-65

Pipeline transport of oil and gas

42 497 44

6 693

52 898 4 287

6 086

126 737 208 637 983

691

552

4 785 3 245

Crude Oil Production 1 000 Sm3 o.e.a

131 843 156 776 181 181 104 388

84 948

Natural Gas Production 1 000 Sm3 o.e.

24 804

27 814

49 790

114 917

143 003

167 485

24 804

27 814

48 521

107 250 108 746

Export Crude oil (1 000 Sm3 o.e.) Natural gas (1 000 Sm3 o.e.)

90 579

67 317

102 558 103 847

Fig. 10.1  Norwegian petroleum sector industry (basic data) Source: Statistics Norway (the Norwegian Statistics Bureau) and Norwegian Petroleum Directorate. http://www.ssb.no/en/oljev/andhttp://www.npd.no/en;afterhttp://www.ssb.no/en/befolkning/artikler-ogpublikasjoner/_attachment/225819?_ts=14d005d0a18 a Oil equivalents (o.e.) is used as a common unit of measurement when comparing or calculating resources of oil and gas. 1  Sm3 o.e. (1 standard cubic meter of oil equivalent)  =  1  Sm3 oil or 1000 Sm3 natural gas. Oil volumes are often stated in millions of Sm3 (standard cubic meters) and gas in billions Sm3, and for precise indication of volumes, the temperature and pressure at which they apply must also be stated. The standard ISO conditions are 15 °C and normal atmospheric pressure (1013.25 hPa). Thus: 1000 Sm3 gas = 1.0 Sm3 o.e. (oil equivalent), 1 Sm3 oil = 1.0 Sm3 o.e., 1 Sm3 NGL = 1.0 Sm3 o.e., 1 Sm3 condensate = 1.0 Sm3 o.e

Further plans discussed at ConocoPhilips included the extension of the life-cycle of the field by 22 years – from 2028 to 2050 (Stavanger Aftonbladet 2008). For comparison, until 2008, Ormen Lange cost 50 billion NOK and Snøhvit – 60 bln NOK (Aftonbladet 2008).3 It should be added that the increase in investment spending was partly caused by higher price for a “development unit” linked with investment price indices. From mid-2004 to the end of 2007, investment price index for the typical

 This figure does not include total exploration costs estimated at approx. NOK 25 billion in 2008.

3

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10  The Kingdom of Norway: Standing in Energy

equipment installations in use on the Norwegian continental shelf increased from USD 150,000 to USD 475,000 per day (Norwegian Petroleum Directorate-m). In Norway, a total of 237.8 million standard cubic meters (Sm3) oil equivalents (o.e.) were produced in 2007. This is 26.2 million Sm3 o.e. less than in the record year 2004. Total production of petroleum in 2008 was estimated to reach about 240 million Sm3 o.e. Production was then expected to rise weakly towards a peak of about 254 million Sm3 o.e. in 2011. Approximately 1275 million Sm3 o.e. were produced in the 5-year period of 2003–2007. The gas percentage of the total petroleum sales was estimated to increase from 38% in 2007 to 46% in 2012. About 89 billion Sm3 gas was sold in 2007. This marked an increase of 2.0 billion compared with 2006 (+2.3%). Gas sales exceeded 99 billion Sm3 in 2008. Oil was extracted from 52 fields, of which 40 were located offshore (Fig. 10.2). On the basis of the above data, the Norwegian Petroleum Directorate estimated fuel production for Norwegian Petroleum Directorate over five consecutive years (Fig. 10.3). Thirteen new companies were pre-qualified as licensees or operators on the Norwegian shelf. 4 Genesis, Concedo, Bayern Gas, Flying High, Skagen 44 and PGNiG pre-qualified as licensees in 2007. Seven companies pre-qualified as operators: Premier, E.ON Ruhrgas, Petrofac, Aker Exploration, Sagex, Discover and Rocksource.5 Additional fourteen companies were under consideration at year-end 2007: Oilexco, Pioneer, Canamens Energy, North Energy, Bow Valley Energy, Grupa Lotus, Perenco, Repsol, Dana Petroleum, Skeie Energy, Spring Energy, 4 Sea Energy, Dyas BV and Elexir Petroleum.6 In 2007, 32 exploration wells commenced operation (of which 20 were plugged and not explored), and 12 were appraisal wells. In the North Sea, most of the discoveries were made in the Sleipner/Balder area, whereas oil and gas was also found in the Barents Sea. Initial appraisal indicated that there were no significant changes in the overall estimate for petroleum resources on the Norwegian shelf as of December 31st 2007. The estimate was 13 billion Sm3 o.e. (Norwegian Petroleum Directorate-c) which shows good potential for growth of exploration activity and an increase in gross reserves. In 2007, the Norwegian Petroleum Directorate also ­collected 2617 km of seismic data in the Nordland VII and Troms II areas.7 In the 2007–2008 period, production commenced from 7 new fields: Blanc, Enoch, Ormen Lange, Snøhvit, Alvheim. Eight plans for development and operation (PDO) were approved for nine new deposits, and each of these plans involved large investments in new production facilities (Skarv, Gjøa and Valhall redevelopment).

 The preliminary qualification scheme was introduced as a consequence of the Norwegian authorities’ desire to introduce new, competent “players” to the Norwegian shelf. 5  From 2000 until the end of 2007, a total of 48 companies were pre-qualified as operators and licensees. 6  See Norwegian Petroleum Directorate-n. 7  This research continued in the summer of 2008. 4

10.1  Norway as a Producer of Oil and Gas a

Crude oil in million Sm3

211 Natural gasb in billion Sm3

NGL in million tons

Condensate Total in million million Sm3 Sm3 o. e

Resources in production

944

1371

96

0

2497

Reserves with approved PDO

131

931

27

49

1162

Total resources

1075

2302

123

49

3659

Resources in the planning phase

187

79

12

3

291

Potential resources to be used in the future

177

87

8

2

282

New discoveries approved for exploitation

12

1

0

0

13

Extraction-ready with the development of new technologies

140

130

-

-

270

Subtotal

1591

2599

143

53

4514

Undiscovered

1260

1875

-

265

3400

Overall extraction potential

6158

6040

263

442

13141

Sales

3155

1142

99

89

4573

Fig. 10.2  Discovered hydrocarbon resources on the Norwegian continental shelf as of December 31, 2006 Source: Norwegian Petroleum Directorate-m a Crude oil is a fluid that is a combination of different types of hydrocarbons. The composition varies from field to field, and the quality of the oil, including how light or heavy (viscous) the oil is, depends on the composition of the hydrocarbons as well as the contents of other substances, such as wax and sulphur b Rich gas, or crude natural gas, is a mixture of various gases. When necessary, the gas is separated from the oil before the rich gas is treated in a processing facility that separates the dry and wet gas components. Dry gas is often referred to as natural gas, and consists mainly of methane, but also a little ethane

2008

2009

2010

2011

2012

Oil (million Sm3)

117.9

115.3

114.3

112.9

110.3

NGL (million Sm3 o.e.)

18.8

19.6

17.8

18.8

19.1

Condensate (million Sm3 o. e) 140.7

139,8

137.3

137.8

136.0

Liquid ( million barrels o.e. per day))

2.4

2.4

2.4

2,4

2.3

Gas (billion Sm3 )

99.4

108.8

110.4

115.9

115.3

Fig. 10.3  Projected production of various fuels in Norway in the next 5 years Source: Norwegian Petroleum Directorate-m

212

10  The Kingdom of Norway: Standing in Energy

The StatoilHydro announcement of February 3, 2008 contained good news informing of rich gas deposits in the vicinity of Halten Bank in the Norwegian Sea found during exploration drilling at the Gamma site. According to preliminary calculations, the find was in the order of 2 to 3 GSm3 of recoverable gas. Gamma is located eight kilometers southeast of the Mikkel field on the Halten Bank and seemed to confirm the belief about the further potential of the area near the Midgard and Mikkel fields. On October 15th, 2008, the Norwegian Petroleum Directorate (Oljedirektoratet) announced finding significant gas reservoirs in the Norwegian Sea. The discovery made using the Transocean Leader deepwater exploration drilling rig was estimated to be between 8 and 14 billion standard cubic meters (Sm3) of recoverable gas. The gas find was located 280 km off the northern coast of Norway and the town of Sandnessjøn. The well was drilled to a vertical depth of 3356 m below the sea surface and water depth at the site was 1248 m. The new discovery is located in a region where two other gas reservoirs were found. All three finds promised to hold between 40 and 60 billion cubic meters of natural gas (Haykowski 2008). Norway’s then gas and oil production potential was best described by Helge Lund, the then StatoilHydro chief executive who in his speech during the Capital Markets Day in London (January 09, 2008) stated that the company was taking advantage of its competence and potential, and would use its combined capacity to continue growth and value creation. The company’s goal was to increase gas and oil production from 1.9  million barrels of oil equivalent per day (boe/d) in 2008 to 2.2 million boe/d in 2012.8 Lund added that “our roadmap to 2012 should be seen as part of a bigger journey; the transforming of StatoilHydro into a global energy player” (Aftenposten 2008a). StatoilHydro foresaw an increase both in Norwegian Continental Shelf (NCS) production levels and from its global investment portfolios. The production from the NCS was estimated at 1.5 million boe/d in the following ten years, reaching 1.55  boe/d in 2012. The international production and its production-­ sharing agreements were to grow to 0.65  million boe/d in 2012. Interestingly, already in 2008, the EU Energy Commissioner Andris Piebalgs announced that by 2020 Norway might overtake Russia as Europe's top gas supplier (Wyborcza 2008).9 Norway forecasted a rapid increase in extraction of their resources and supplies to the EU ranging from 125 to 140 billion m3 annually (Wyborcza 2008). As reported by agencies citing Kjell Varlo Larsen, spokesman for state-owned Norway pipeline operator Gassco, at the beginning of 2009 Norwegian gas exports10 reached a record high of 342 million cubic meters per day (Jag 2009) and the maximum capacity of Norwegian export gas pipelines was 350 million cubic meters per day.11

 Barrels of oil equivalent per day (BOE/D).  Currently, Norway accounts for 18% of the EU’s gas requirements and Russia for 23%. 10  The level of gas export is traditionally calculated on the basis of its flow through pipelines in 24-h periods starting at 6:00 a.m. Jag, PAP, www.gospodarka.gazeta.pl/gospodarka, January 08.2009. 11  The possibility that Norway could increase natural gas supplies without expanding the gas-pipeline transmission network was quite limited. 8 9

10.1  Norway as a Producer of Oil and Gas

213

The global decline in oil prices in the second half of 2014 became a major concern since the sales of energy resources accounted for more than half of the country’s export. The further fall in prices may have lead to deterioration in the economic situation, including a considerable rise in employment whose rates have remained stable at about 3.5%. In 2013, there was a noticeable slowdown in the economy which grew by just 0.6%. Based on economic outlook for 2014 and thereafter, a slightly higher GDP growth was projected. It should be noted that crude oil production from the Norwegian Continental Shelf (NCS) has been declining steadily in recent years while the natural gas output transmitted by subsea pipelines to Western Europe has increased. The above clearly indicated that the oil and gas sector has been a key driver for the economic growth in Norway. The petroleum sector accounts for 21.5% of Norwegian GDP and 30% of State revenues, and represents more than a half of Norway’s export value. The technologically advanced petroleum service industry plays an increasingly important role and Norwegian companies provide the next generation technologies to businesses all over the world, especially to the offshore industry.12 The preliminary production figures for December 2015 (Norwegian Petroleum Directorate-i) show an average daily production of 2,023,000 barrels of oil, NGL and condensate. This meant 37,000 barrels per day (about 2%) more than in November 2015. Total gas sales were about 11.2 billion Sm3, which is 0.6 GSm3 more than in the previous month. The total petroleum production in 2015 was about 230.1 million Sm3 oil equivalents (MSm3 o.e.), broken down as follows: about 90.8  MSm3 o.e. of oil, about 22.1 MSm3 o.e. of NGL and condensate and about 117.2 MSm3 o.e. of gas for sale. The total volume was 11.7 MSm3 o.e. higher than in 2014 (Norwegian Petroleum Directorate-i). The Norwegian Petroleum Directorate’s resource accounts estimated the total recoverable petroleum resources to be 14.1 billion standard cubic meters (Sm3) of oil equivalents (o.e.) and showed that the total recoverable petroleum resources had decreased by 21 million Sm3 o.e. (0.15%) since 2013. The reason for the decline was that 12 of the discoveries in the previous accounts had been reassessed and were now considered to have a low likelihood of development (Norwegian Petroleum Directorate-l). The reserve growth totaled 13  million Sm3 o.e., compared with 102  million Sm3o.e. in 2013. This growth can primarily be explained by the submission of one Plan for Development and Operation (PDO) in 2014, for the 34/10-53 S Rutil discovery in Gullfaks Sør (Norwegian Petroleum Directorate-l). It should be stated that petroleum activities have contributed significantly to the economic growth in Norway, and to the financing of the Norwegian welfare  According to Rystad Energy Report, prepared at the request of the Norwegian Ministry of Petroleum and Energy, in 2013, the exports of equipment and services by these companies stood at NOK 206 billion, mainly to Brazil, the UK, and South Korea. Some 150 thousand people were employed in the extractive industries and services. 12

214

10  The Kingdom of Norway: Standing in Energy

state. This all came about from the decision adopted by the Norwegian Parliament (the Storting) in 1990 by which a substantial part of the revenues from oil and gas exports would not be consumed but the foreign currency profits would be invested abroad by the National Petroleum Fund. In that way, the current consumption of Norway remains under control, the local currency strengthens, and the economy remains competitive. On January 1, 2006, the existing Petroleum Fund was replaced by the Government Pension Fund which consists of two parts: “The Government Pension Fund Global,” which is a continuation of the Petroleum Fund, and “The Government Pension Fund Norway,” which was previously known as the National Insurance Scheme Fund. The strategy for managing the Global Fund portfolio consists in investing the fund’s capital in foreign bonds and equities outside of Norway to maximize the return on the investment. At the end of 2006, the value of the Global Fund amounted to NOK 1  trillion 756  billion. Drafting the budget for Mainland Norway the government set the limit for the structural budget deficit at 4% of the Global Fund assets at the beginning of the budget year. This meant that the planned structural budget deficit would be covered by the revenues from oil and gas sectors.13 The year 2013 was considered a successful one for the Pension Fund Global (Statens pensjonsfond utland). The Fund is managed by the Norges Bank Investment Management (NBIM), the asset management unit of the Norwegian central bank (Norges Bank) and it has been tasked with investing the Fund’s capital outside of Norway, mainly in Europe and North America (45% and 35%, respectively). As of December 9th, 2014, the Fund’s market value was NOK 6140 billion and the portfolio looked as follows: 61.4% in equities, 37.3% in fixed income (bonds) and 1.3% in real estate. According to the fiscal policy guidelines existing since 2001, a maximum of 4% of the value of the Fund could be used to balance the State budget; for example, in 2014 the budget was endowed with NOK 141 billion (20 billion more than in 2013), which represented 2.8% of the value of the Fund, and in 2015 the contribution amounted to NOK 164 billion.14 The market value of the GPFG (Government Pension Fund Global) equaled 8251 billion Norwegian kroner at the end of 2018. Investments in equities, fixed-­ income and unlisted real estate corresponded to about 5500 billion, 2550 billion and 220 billion kroner, respectively, equivalent to a proportion of Fund assets of 66.3%, 30.7% and 3.0% (Government Pension Fund Global). According to the report to the Storting (white paper), in 2018, the market value of the GPFG was reduced by 232 billion kroner. The nominal return over the period accounted for minus 485 billion kroner, whilst changes in the Norwegian krone exchange rate entailed, when taken in isolation, an increase in the value of the Fund of about 224 billion kroner. In 2018, the state’s cash flows from the petroleum activities were 259 billion kroner. The non-oil deficit was 225 billion kroner in 2018. At the end of 2018, aggregate net  The general budget for 2007 estimated the structural, non-oil budget deficit at NOK 71 billion.  According to estimates by the Ministry of Finance, the Fund’s capital has already exceeded the value of oil and gas resources remaining on the Norwegian continental shelf, estimated at 4100 billion NOK. See Państwowy Fundusz Emerytalny Global. 13 14

10.1  Norway as a Producer of Oil and Gas

215

cash flow from petroleum activities since inception amounted to 5327  billion Norwegian kroner, whilst the aggregate non-oil deficit corresponded to 1962 billion kroner. Total gross return (before the deduction of asset management costs) equaled 3666 billion kroner. Because the Fund is invested in other currencies than Norwegian kroner, its value measured in kroner is influenced by exchange rate fluctuations. The Norwegian krone has depreciated relative to the currency basket of the Fund over the said period, resulting in an increase in the market value in kroner of 1263  billion. Changes in the Norwegian kroner exchange rate do not impact the development in the international purchasing power of the Fund. One must be prepared for exchange rates to fluctuate over time (Government Pension Fund Global). The Government Pension Fund of Norway was established in 1967 as something of a national insurance fund and it is smaller than the Oil Fund. It is managed separately and limited to domestic and Scandinavian investments (Government Pension Fund of Norway). As a result, it is a major shareholder of many consequential Norwegian companies via the Oslo Stock Exchange. The Government Pension Fund of Norway is managed under the guise of the Ministry of Finance, as laid out by the Act of Parliament and guidelines that include a set of supplementary provisions. The Norges Bank Investment Management (NBIM), which is part of the Norwegian Central Bank, manages the global fund on behalf of the Ministry of Finance. Since 2004, an ethical council has set the parameters for the fund’s investments. The council has the authority to exclude from the fund firms that take part in activities deemed objectionable. Investment manager Folketrygdfondet manages the domestic fund. The stated goal of the Government Pension Fund is to facilitate government savings to account for the rising costs of the public pension program. It also intends to support long-term considerations related to how the government spends Norway’s ignificant petroleum revenues (Meld. St. 20 – 2018–2019, The Government Pension Fund 2019). The petroleum income is also used by the Government of the Kingdom of Norway which wants to prepare Norway for an economy that is less dependent on oil revenues. “That’s a 20-year perspective, not a four-month perspective” (http:// norwegia1.pl/informacje-z-norwegii), said Norwegian Prime Minister Erna Solberg,15 who is pushing for a budget designed to avoid krone appreciation. This is a first step towards breaking the country’s dependence on crude oil. In practice, this will entail a process, spread over time, requiring a series of various actions. It can therefore be concluded that since production started on the Norwegian Continental Shelf in the early 1970s, petroleum activities have contributed to more than NOK 14,000 billion to Norway’s GDP. This does not include related service and supply industries. So far, only about 47% of the estimated recoverable resources on the Norwegian shelf have been produced and sold. The NPD’s (Norwegian  In 2013, the Conservative Party came to power after eight years of control by the Left. Admittedly, the latter won the election with 30% of the vote. However, given the much worse election results of the ruling socialist government, it was not enough to form new majority coalition. 15

216

10  The Kingdom of Norway: Standing in Energy Area Norwegian Sea North Sea Barents Sea

Oil 118.04 947.22 111.14

Condensate 5.73 0.00 16.22

NGL 60.63 104.04 10.62

Gas 360.19 1105.75 155.54

Sum. o.e. 544.59 2157.01 293.52

Fig. 10.4  Remaining reserves per area as of December 31, 2018 (Million Sm3 o.e.) Source: Norwegian Petroleum Directorate-j Oil and condensate are quoted in million standard cubic meters (Sm3). NGL is quoted in million tons, and gas is quoted in billion standard cubic meters. The conversion factor for NGL in tons to Sm3 is 1.9. Total oil equivalents are stated in million Sm3 o.e., 1000 Sm3 gas = 1 Sm3 o.e

Petroleum Directorate) forecasts show that oil and gas production is increasing from 2020 to 2023, following a slight decline in 2018/2019. The total production will then approach the record year of 2004.16 Many of the producing fields are ageing, but some of them still have substantial remaining reserves. Moreover, the resource base in these fields increases when small discoveries in the area are tied in to existing infrastructure. Original and remaining reserves are given in million standard cubic meters of oil equivalents (mill. Sm3 o.e.).17 At the end of 2018, a total of 39 exploration and production companies were active on the Norwegian shelf: 25 companies as operators and a further 14 as partners in production licenses. The diversity of companies of all sizes promotes competition and efficiency. It also ensures interest in different types of projects, and implementation of different kinds of new and cost-effective technologies.18 There are currently about 85 discoveries that could be, or are being, considered for development. Most of them are small and will be developed as satellites to existing fields. This will ensure that the infrastructure is used efficiently. Stand-alone development solutions are planned for the largest discoveries, but a number of smaller discoveries may also collaborate on building new infrastructure. Resource estimates are given in million Sm3 o.e.19 The remaining reserves per active field as of December 31, 2018 (Updated: April 15, 2019) stand at 299,512 million Sm3 o.e. (Norwegian Petroleum Directorate-j) (Fig. 10.4). The Norwegian Petroleum Directorate’s estimate for total proven and unproven petroleum resources20 on the Norwegian Continental Shelf is about 15.6  billion standard cubic meters of oil equivalents. This is 24 million more than on December

 See https://www.regjeringen.no/en/topics/energy/oil-and-gas/norways-oil-history-in-5-minutes/ id440538/ 17  See Norwegian Petroleum Directorate-g. 18  See Norwegian Petroleum Directorate-d. 19  For more information see Norwegian Petroleum Directorate-e. 20  Resources is a collective term for all oil and gas that can be recovered. The resources are classified according to their maturity, i.e. how far they have progressed in the planning process leading up to production. The main categories are reserves, contingent resources and unproven resources. 16

10.1  Norway as a Producer of Oil and Gas

217

31, 2017. Of this volume, 7.3 billion Sm3 o.e., or 47%, have been sold and delivered. The estimate for resources that have not yet been proven is 3.9  billion Sm3 o.e. (about 47% of the remaining resources have not yet been proven). This has been reduced by the added growth of resources from new discoveries in 2018, approximately 60 million Sm3 o.e. It is expected that 8.3 billion Sm3 o.e. remain to be produced. Of this, 4.4  billion Sm3 o.e. are proven resources (Norwegian Petroleum Directorate-k). Thus in 2018/2019, the total petroleum resources amounting to 15.6 billion Sm3 o.e include: sold and delivered  – 47%; reserves  – 19%; contingent resources in fields  – 5%; contingent resources in discoveries  – 4% and undiscovered resources – 25%. At year-end (2018), the reserves stood at 2996 million Sm3 o.e. 54% of this is gas. The gross reserves, or the estimate before production has been deducted, increased by 138 million Sm3 o.e. compared with the previous year. The reasons for this solid increase are reserve growth on several producing fields, submission of the PDO for Johan Sverdrup construction phase 2 and the Nova field. Production in 2018 amounted to 230 million Sm3 o.e. This entails a net reduction in reserves of 93 million Sm3 o.e., or about 3% (Norwegian Petroleum Directorate-k). At the same time, contingent resources amounted to 1367  million Sm3 o.e. Resources that have been assessed as not being commercially recoverable are not included in the accounts. In 2018, exploration activity yielded a resource growth estimated at 60 million Sm3 o.e. 27 wildcat wells were terminated, and 12 new discoveries were made; three in the Barents Sea, three in the Norwegian Sea and six in the North Sea. Evaluation of many of these discoveries has not been completed; and the estimates are therefore very uncertain. As regards five of the discoveries in 2018, development is considered not very likely, and the resources in these discoveries are not included in the accounts. Resources in discoveries have increased by 60 million Sm3 o.e. reaching 660 million Sm3 o.e. This increase can be attributed to resource growth from seven new discoveries in 2018. In addition, eight discoveries where development was previously deemed to be unlikely have now been considered for development. However, reduced resource estimates in discoveries and submission of the PDO for Nova resulted in the increase not being larger than 60 million Sm3 o.e. Contingent resources in fields amount to 708  million Sm3 o.e., or 16% of the remaining proven resources. In 2018, contingent resources in fields were reduced by 114  million Sm3 o.e. compared with the 2017 accounts ((Norwegian Petroleum Directorate-k). In addition, the unproven resources are estimated at 3940 million Sm3 o.e. This is a reduction of 60 million Sm3 o.e. compared with the resource accounts for 2017, and is approximately equal to the growth from new discoveries in 2018. Unproven resources account for about 47% of the total remaining resources on the Norwegian Shelf.

218

10  The Kingdom of Norway: Standing in Energy

In 2017, Norway produced about 1.98 million barrels per day (b/d) of petroleum and other liquids, 1.5% lower than in 2016, and the National Petroleum Directorate expects that petroleum production will continue its slow decline through 2019 and then grow again in 2020 as the Johan Sverdrup field ramps up production. The three largest producing crude and condensate fields in 2017 were Troll (125,000  b/d), Ekofisk (108,000 b/d), and Grane (100,000 b/d). All three fields are located in the Norwegian portion of the North Sea. As of August 2018, total investments in liquids exploration and production in 2019 are estimated to be more than 7% higher than investments in 2018. The higher levels of investment are the result of increased activity and costs (EIA-b). According to Statistics Norway, Norway exported an estimated 1.37 million b/d of crude oil in 2017, of which 95% went to European countries. The biggest recipients are as follows: the United Kingdom – 42%, the Netherlands – 17%; Germany – 10%; Sweden – 6%; Denmark – 5%; France – 4%; Ireland – 3%, North America – 5% and other Europe – 8% (EIA-b). Norway produced 4.5 Tcf of dry natural gas in 2017 and Norway’s largest producing natural gas field is Troll, which produced 1.3  Tcf in 2017, representing almost 30% of Norway’s total natural gas production that year. The four next largest producing fields in 2017 were Ormen Lange (0.57  Tcf), Åsgard (0.36  Tcf), Kvitebjørn (0.2  Tcf), and Gullfaks Sør (0.2  Tcf). These five fields accounted for 60% of Norway’s total dry natural gas production in 2017 (Norwegian Petroleum Directorate-f). Norway exported about 96% of its natural gas production in 2017, mostly to the EU countries via Norway’s extensive export pipeline infrastructure21 which delivers natural gas to European countries, including France, the United Kingdom, Belgium, and Germany. Gassco operates these pipelines. Some pipelines run directly from Norway’s major North Sea fields to processing facilities in the receiving country. Other pipelines connect Norway’s onshore processing facilities to European markets (Fig. 10.5). In 2018, Norway produced 226.7 million standard cubic meters of oil equivalents (Sm3 o.e.) of marketable petroleum. By way of comparison, total production was 236.1 million Sm3 o.e. in 2017 and 264.2 million Sm3 o.e. in 2004 (Fig. 10.6). In other words, production in 2018 was about 14% lower than in the record year 2004 and 4% lower than in 2017. Not all produced gas is sold. Some of the gas is used to generate power on the fields, and small amounts are flared for safety purposes. On some fields, gas is reinjected into the reservoirs. Reinjection is often used to maintain reservoir pressure and displace the oil. This results in efficient recovery of the oil, and the gas is stored for possible recovery in the future.

 Statoil, Norway’s Gas Transport System, Gassco, Pipelines and Platforms and Norwegian Petroleum, The oil and gas pipeline system. See https://www.norskpetroleum.no/en/productionand-exports/the-oil-and-gas-pipeline-system/ 21

10.1  Norway as a Producer of Oil and Gas

Facility Norpipe

Status operating

219

Capacity (trillion cubic feet per year)

Total length (miles)

0.6

280

Ekofisk area

Emden, Germany

started operation in 1977

Origin

Destination

Details

Zeepipe I

operating

0.5

500

Sleipner platform

Zeebrugge, Belgium

started operation in 1993

Europipe I

operating

0.6

390

Draupner platform

Dornum, Germany

started operation in 1995

Zeepipe IIA and IIB

operating

1.8

190

Kollsnes gas plant

Sleipner platform (IIA) and Draupner platform (IIB)

started operation in 1996 (IIA) and 1997 (IIB)

Franpipe

operating

0.7

520

Draupner platform

Dunkirk, France

started operation in 1998

Europipe II

operating

0.8

410

Kårstø gas plant

Dornum, Germany

started operation in 1999

Vesterled

operating

0.5

220

Heimdal field

St. Fergus, Scotland

started operation in 2001

Langeled

operating

0.9

720

Nyhamna gas plant

Easington, England

started operation in 2007, connects to the Sleipner platform

Fig. 10.5  Norway’s natural gas export pipelines Source: EIA-d

220

10  The Kingdom of Norway: Standing in Energy Capacity (trillion cubic feet per year)

Total length (miles)

Facility

Status

Tampen, Gjøa, and Knarr

operating

0.6

14 Statfjord, (Tampen), Gjøa, and 80 (Gjøa), Knarr fields and 65 (Knarr)

Utsirahøyden

operating

0.1

58

Origin

Destination

Details

connects to the FLAGS pipeline to St. Fergus, Scotland

started operation in 2007 (Tampen, 2010 (Gjøa), and 2015 (Knarr)

Edvard Connects to Grieg field the SAGE pipeline to St. Fergus, Scotland

started operation in 2015

Fig. 10.5 (continued) Area Barents Sea North Sea Norwegian Sea

Oil 9.20 3727.31 611.01

Condensate 8.47 74.71 35.89

NGLa 4.96 283.62 117.23

Gas 53.36 1854.82 530.27

Sum o.e. 75.98 5940.46 1294.40

Fig. 10.6  Total production per sea area at year-end 2018 (Million Sm3 o.e.) Source: Norwegian Petroleum Directorate-k a Wet gas, or NGL (Natural Gas Liquids), consists of a mixture of heavier gases (ethane, propane, butanes and naphtha). In addition, there are heavier condensates which some classify as a separate product. Naphtha and condensate are liquid at room temperature, while the lighter wet gas components can be made liquid either by cooling or adding pressure

10.2  Electricity as the Basis for Energy Balance In 2002 energy consumption per capita in Norway amounted to a total of 190 GJ including: energy derived from oil – 85 GJ, bioenergy (biomass) – 9 GJ, coal and coke – 94 GJ, CHP plants – 2 GJ (Fig. 10.7). It is worth mentioning that Norway as an energy producer and exporter on a global scale was at the same time an importer of electricity at national level as proven the data for 2004: production – 110.1 billion kWh, consumption – 121.5 billion kWh, import – 11.4 billion kWh (SSB 2006). This situation indicates that Norway’s problem is balancing of energy supply and demand nationally due to the heavy reliance of all economic sectors on one energy carrier, i.e. electricity. Since 1990 when the Storting passed the Energy Act (Energiloven) for nearly 15 years, until the winter of 2003/2004, the electricity production increased by only 4% whereas its consumption grew by 15%. The water deficit in the hydroelectric power plant reservoirs during “dry” years, i.e. with low

10.2  Electricity as the Basis for Energy Balance

221

Energy Carrier

Own Import Production

Export

Domestic market gross supplies

Energy processed or used by energy sector

Net domestic consump tion

Percentage of consumption of supplied energy

Coal and coke

1667

1415

1675

1691

238

1452

85,9

Wood, fuel oil, wastes in t o.e.

1262

21

0

1283

228

1055

82,2

Crude oil

126361

955

11391 9

13002

13002

0

100,0

Gasoline fuel Light fuel

12140

477

9808

2740

1155

1584

57.8

6950

583

2461

4660

1055

3739

80.02

Heavy fuel 1674

1706

1732

1325

999

327

24.6

Liquefied gases

7247

242

4485

2995

2820

175

6.0

Natural gas (in million Sm3)

89559

0

82803

6757

5476

276

0.1

1210

0

0

1210

903

308

25,5

138073

3649

15639

126083

13992

112091

88.9

Other gases o.e. Electric Energy (GWh)

t

Fig. 10.7  Balance of energy carriers, Norway 2005 Source: SSB 2006 Units other than individual designations are expressed in 1000 tons

precipitation (snowfalls in particular), commonly attributed to global warming, forced Norway to import electricity from some European countries (among others from Russia, Denmark, Poland). Electricity grid in Norway is owned by the State and managed through Statnett, the system operator of the electric power transmission and distribution system. Producers are power plants, mostly hydroelectric ones (99% of the electricity in Norway is generated this way) that are private economic entities receive “green certificates” from the State which means that the State is obliged to purchase from them the total amount of electricity produced at a fixed price. Norwegian decision makers are well aware that a sufficient supply of electricity is a fundamental prerequisite for the further economic growth in all parts of the country. Since the price of electricity is determined by the balance between domestic supply and demand rising energy, prices may put at stake the competitiveness of Norway’s industry (Fig. 10.8).

222

10  The Kingdom of Norway: Standing in Energy Coal

Crude oil

Production

1245

82051

Imports

2877

5164

Exports

-29

-6914

Oil products

Natural gas

Geoth, solar

Biofuels/ waste

0

95575

11049

163

7259

1203

0

1161

-6571

-1973

0

-22

Electricity

Heat

Total

985

4

18653

-892

0

16402

Total final consumption Industry

176

0

5240

1590

13

1355

2707

2549

13631

94

0

429

674

0

210

722

111

2240

Transport

0

0

3699

0

0

227

33

0

3959

Others

82

0

839

916

13

918

1952

2438

7158

Fig. 10.8  Norway’s energy balances, 2013 Compiled by author on the basis of https://www.ssb.no/en/energi-og-industri/statistikker/ energibalanse world rank Total Primary Energy Production

9.642 Quadrillion Btu

13

Total Primary Energy Consumption

1.946 Quadrillion Btu

38

Exports of Dry Natural Gas 2017

4,244 Billion Cubic Feet

3

Total Renewable Electricity Net Generation

146 Billion Kilowatthours

9

Exports of Crude Oil including Lease Condensate

1,395 Thousand Barrels Per Day

11

Fig. 10.9  Norway’s key energy statistics (2016) Source: EIA-a

Although Norway is Europe’s largest oil and gas producer after Russia, it is not hydrocarbons but electricity generated by hydropower plants that satisfies the electricity needs of an average Norwegian and meets more that 50% of the electricity demand in the industrial sector, accounting for about 98.5 percent of the country’s total electricity consumption (Fig. 10.9). Norway has been a major producer of hydroelectric power for more than a century and has the highest per capita electricity consumption in the world. In addition, this country is the world’s sixth largest hydropower producer. For decades, Norwegians have placed their trust in hydropower and consistently opposed the usage of nuclear energy. Even before oil, Norway had discovered their riches of water, glaciers and mountain streams, and with the advancement of technology this

10.2  Electricity as the Basis for Energy Balance

223

country has become a renewables-based energy empire.22 The Norwegian energy system is unique as virtually all electricity is generated through hydropower. Unlike other Nordic countries, Norway has electrified its energy system to a much greater extent, also for heating purposes. The first hydropower project to produce electricity for Oslo, and still in operation, the hydroelectric power station Hammeren exploits the waterfalls from Skjærsjøen to Maridalsvannet (a total height of 105 m) and generates 5 MW. At the time, it was so impressive that in 1900 the city authorities declared that “now the city would have the power for all time.”23 Norway has 1660 hydropower plants, which represents 96% of total installed capacity with annual production of 141 TWh (Energy Facts Norway). However, it should be kept in mind that among the world superpowers ranked higher (Canada, China, Brazil, the U.S. and Russia) Norway barely surpassing 5 million people is the smallest country in terms of population. Thus, electricity production in Norway is for the most part based on hydropower. The rest of electricity is obtained from fossil fuels and also renewable energy sources including wind and biomass. Europe’s largest generator of renewable energy is Statkraft, which is owned by the Norwegian state and is the main provider of hydropower. In Norway, Statnett is the state-owned transmission system operator responsible for the system efficiency and reliability as well as for maintaining constant balance between supply and demand for electricity. Statnett’s revenues are regulated by the Norwegian Water Resources and Energy Directorate under the Ministry of Petroleum and Energy. In the late 1990s, Norway, Sweden, Finland, and Denmark integrated their electricity markets into a single one for the Nordic region. In 2008, a 0.7 gigawatt capacity subsea power cable allowing electricity trade between Norway and the Netherlands began operating. In addition, subsea power cables that connect Norway to Germany and to the United Kingdom are currently under construction. Each international interconnector will have a capacity of 1.4 GW (Statnett, Brief History and Statnett, NORD.LINK). Norway also has a small interconnection with Russia in the far northern part of the country. In June 2012, government officials from Norway, Germany, and the United Kingdom confirmed their plans for subsea electric power connections between their countries to strengthen the northern European electricity grid and to increase supply security. Statnett will work with the United Kingdom’s National Grid to construct the Norway-United Kingdom cable connection, expected to be completed in 2021. Statnett will also cooperate with Germany to build the Norway-Germany cable, expected to be completed in 2019 (Statnett, Brief History and Statnett, NORD.LINK). Hydropower is still a pillar of the Norwegian electricity system and the resource base for production depends on precipitation in a given year. This is a significant difference for the rest of Europe, where security of supply is secured mainly by thermal power plants, with fuels available on the energy markets. One special feature of the Norwegian hydropower system is its high storage capacity. Norway has more than 1000 hydropower storage reservoirs with a total 22 23

 In Norway, the upsurge in hydropower development took place in the years 1970–1985.  Its current production meets the energy needs of just 800 residential houses.

224

10  The Kingdom of Norway: Standing in Energy

capacity of more than 86.5 TWh (i.e. half of Europe’s reservoir storage capacity). The 30 largest reservoirs provide about half the storage capacity.24 Total reservoir capacity corresponds to 70% of annual Norwegian electricity consumption. Most of the reservoirs were constructed before 1990. Upgrading and expansion of hydropower plants has made it possible to utilize the reservoirs more fully. Electricity generation in Norway in 2016 was 149 billion kilowatthours (BkWh), of which 143 BkWh came from hydropower. In turn, the total net consumption of electricity was 123 BkWh, about 2.8% higher than in 2015 (EIA-e). Data from this year also indicate that Norway imported almost 6 BkWh of electricity and exported 22 BkWh, and most of the imports and exports went to or came from Sweden. Trade with the Netherlands and Denmark accounted for most of the remaining imported and exported electricity, and only small amounts were traded with Finland and Russia. It should be pointed out that energy production can be rapidly increased and decreased as needed,25 at low cost. This is important because there must be a balance between production and consumption in the power system at all times. The growing share of intermittent production technologies, such as wind and solar, makes it even more vital that there is flexibility available in the rest of the system. Even today generating electric power from other sources like gas-fired power plants seems not an option, despite the on-site availability and low price of suitable raw material. The issues has been widely debated over the past 20 years, and so far, only three processing facilities at Kårstø, Mongstad and one at the giant Snøhvit oil field in the Barents’s Sea have been granted a license, provided that the carbon dioxide CO2 emitted during the energy production will be captured and injected into depleted oil reservoirs to prevent air pollution. In Norway, the worst air polluters by far are trucks which are the primary means of transport, and thousands of vessels plying along Norway’s very extensive coastline. It is the long coastline which has prompted an expansion of wind farms expected to generate just 7% of the total electricity production. The same amount is to be produced by installations capturing tidal and wave energy of the stormy North Sea. At the end of 2017, there were 33 wind farms in Norway, with an installed capacity of 1188  MW.  This corresponds to about 3.6  TWh in a normal year. Production from wind power plants fluctuates with weather conditions. Wind conditions can vary a great deal between days, weeks and months. Norway’s first wind farm has only been operating since 2002. Smøla wind farm originally had an installed capacity of 40 MW, but this was increased by 110 MW in 2005, after the second ­construction phase. Investment in wind power has increased substantially in recent years. At the end of 2017, almost 5.4  TWh was under construction (Energy Facts Norway).  Much of Norway’s reservoir capacity is concentrated in the mountains in the southern half of the country (in the counties Telemark, Rogaland). The largest reservoir, Blåsjø, has a capacity of 7.8 TWh and can hold three years’ normal inflow. However, when the hydropower plants are working at full capacity, the reservoir could be emptied in 7–8 months. 25  More than 75% of Norway’s production capacity is flexible. 24

10.2  Electricity as the Basis for Energy Balance Electricity

Total

Norway per capita

225 Compared to Europe per capita

Own consumption 122.20 bn kWh

23,134.20 kWh

5,514.17 kWh

Production

147.70 bn kWh

27,961.71 kWh

5,928.63 kWh

Import

5.74 bn kWh

1,086.85 kWh

730.35 kWh

Export

15.53 bn kWh

2,940.05 kWh

708.25 kWh

Crude Oil

Barrel

Production

Norway per capita

Compared to Europe per capita

1.62 m bbl

0.306 bbl

0.005 bbl

Import

36,550.00 bbl

0.007 bbl

0.020 bbl

Export

1.38 m bbl

0.262 bbl

0.004 bbl

Natural Gas Own consumption

Cubic meters

Norway per capita

Compared to Europe per capita

4.05 bn m³

766.53 m³

903.91 m³

123.90 bn m³

23,456.03 m³

456.86 m³

Import

5.66 m m³

1.07 m³

54.57 m³

Export

120.20 bn m³

22,755.57 m³

398.98 m³

Production

Fig. 10.10  Energy balance for Norway as of April 19, 2010 Source: WorldData.info-b

Norway’s thermal power plants accounted for about 2.2% of total production capacity in 2017. Many of them are located in large industrial installations that use the electricity generated by themselves. Production therefore often depends on the electricity needs of industry. These power plants use a variety of energy sources, including municipal waste, industrial waste, surplus heat, oil, natural gas and coal. There are 32 thermal power plants in Norway, with a total installed capacity of about 1108  MW, and for the past few years their production has been relatively stable at 3.4 TWh (Energy Facts Norway). There are wide variations from year to year, and the results have differed by about 25 TWh in the last five years alone. Generally, consumption fluctuates with temperature and production with water inflow and wind conditions. The given production capacities for electric energy have a theoretical value, which could only be obtained under ideal conditions. They are measuring the generatable amount of energy that would be reached under permanent and full use of all capacities of all power plants. Nonetheless, using data provided by WorlDdata. info would be useful to present Norway’s energy sources and production capacities compared to Europe (Fig. 10.11).

226 Energy source Fossil fuels Nuclear power Water power Renewable energy Total production capacity

10  The Kingdom of Norway: Standing in Energy Total in Norway

percentage percentage per capita in Norway in Europe in Norway

per capita in Europe

8.90 bn kWh

3,0 %

49,2 %

1,684.60 kWh

8,119.98 kWh

0.00 kWh 275.85 bn kWh

0,0 % 93,0 %

7,0 % 24,1 %

0.00 kWh 52,222.45 kWh

1,154.95 kWh 3,979.46 kWh

11.86 bn kWh

4,0 %

19,7 %

2,246.13 kWh

3,276.27 kWh

296.6bn kWh1 100,0%

100,0 %

56,153.18 kWh

16,499.23 kWh

Fig. 10.11  Production capacities per energy source Source: WorldData.info-b

10.3  Environmental and Climate Protection Measures The total primary energy supply of Norway in 2016 amounted to 1188 Petajoule (PJ) with an export surplus of electricity of 59 PJ (5% of Norwegian TPES). Fossil fuels include 340  PJ oil products, 232  PJ natural gas and 32  PJ coal products. Renewable energy sources have a share of 51.2% or 583 PJ – 5.4% bioenergy and 45.8% other renewable energy sources (IEA-a and OECD/IEA, 2018). Figure 10.12 illustrates the role and the increasing importance of bioenergy and renewable energy. The above again confirms that Norway has an extremely high share of renewable electricity (98% of it is related to hydropower), with a very small part through electricity from biomass. Compared to 5 years earlier (2011) the share of fossil fuels was relatively stable, with slight decreases in oil products and coal and a slight increase of natural gas. In the same period exported electricity increased from 1% to more than 5% of TPES. Energy supply of renewable energy increased from 504 to 583 PJ, with most growth in ‘other’ renewable energy forms (non-bioenergy). Almost 90% of the total primary energy supply of renewable energy sources is covered by hydropower (515 PJ), followed by bioenergy (61 PJ) and wind energy (8 PJ). The role of solar or geothermal energy is not significant (IEA-a and OECD/IEA 2018). Most bioenergy in Norway is from solid biomass (37 PJ), of which around 20 PJ is used in the residential sector. There are also significant volumes of biodiesel (13 PJ) and renewable MSW (8 PJ). Biogas, biogasoline and other liquid biofuels reach lower shares – around 1 PJ (IEA-a and OECD/IEA 2018). Bioenergy consumption in Norway fluctuated between 4 and 6% of TPES in the past decades. Between 2010 and 2014 there was a clear decreasing trend of solid biomass from over 50 PJ to 35 PJ. This is due to closures in the pulp and paper industry, and a reduction in the use of firewood used for heating in the private households due to mild winters. Solid biomass consumption stabilized in the last few years. Renewable MSW stabilized at 7–8 PJ since 2012. Liquid biofuels were introduced between 2005 and 2010, and stabilized between 2010 and 2015 around 5–6 PJ. In 2016, there was an upward step, with more than a doubling from 2015 to 2016 – to 15 PJ (IEA-a and OECD/IEA 2018).

10.3  Environmental and Climate Protection Measures

Sector Electricity production Transport Energy (final consumption) Overall fuel and heat consumption30

Share of bioenergy

227

Share of renewable energy

Overall production/ consumption

0.16 %

97.8 % (95.2% hydro)

7.2 %

8.9 %

201 PJ

26.5 %

153 PJ

Direct biomass: 20.9% Biobased heat: 5.6 %

149 TWh (535 PJ)

Fig. 10.12  Role of bioenergy and renewable energy in electricity production, transport energy consumption and fuel/heat consumption in 2016 Source: IEA-a This includes final consumption of fuels and heat in industry, the residential sector, commercial and public services and agriculture/forestry. Transport fuels are excluded. Energy used for transformation and for own use of energy producing industries is also excluded

Norway has an extremely high share of renewable electricity (98% of it is related to hydropower), with a very small part through electricity from biomass. The share of biofuels for transport was around 7% in 2016. It should be noted that there is also a considerable share of renewable electricity in the Norwegian transport system, predominantly through rail, but recently also through the introduction of electric cars. Overall, the direct share of biomass for heating in the different sectors is around 21%. In the residential sector biomass represents about 53% of fuel/heat consumption. Heat output generated and sold by CHP plants and heat plants represents around 13% of fuel/heat provided, of which on average 44% is produced from biomass. According to Eurostat (http://appsso.eurostat.ec.), the following renewable energy shares in gross final energy consumption were reached in Norway in 2016: –– –– –– ––

overall share: 69.4%; in heating and cooling: 31.7%; in electricity: 104.7%; in transport: 17.0% (8.8% in 2015).

Both the overall share and the individual sectors have exceeded the renewable energy targets for 2020.26 It is of utmost importance because Norway as a member country of the European Economic Area also implemented the EU Renewable Energy Directive 2009/28/EC and produced a National Renewable Action Plan (NREAP).27 Norway has ­committed itself to a target of 67.5% share of renewable energy in gross final energy consumption in 2020 as follows: heating and cooling 43%, electricity 114% and transport 10%, with the overshoot of renewable power production of 14% (IEA-c).  It should be noted that some of these figures can differ from the IEA derived data because of different accounting rules. This is particularly the case for transport biofuels, e.g. where cellulose or residue based biofuels are double-counted towards the target. 27  Available at https://ec.europa.eu/energy/sites/ener/files/documents/dir_2009_0028_action_ plan_norway_nreap.pdf 26

228 Fig. 10.13  Key stats for Norway, 1990–2016 Compiled by author on the basis of https://www.iea.org/ countries/Norway/. After Browse all IEA statistics for Norway

10  The Kingdom of Norway: Standing in Energy

1990

2006

2016

Energy production - Mtoe

19.48

215.64

208.00

Net energy imports - Mtoe

-95.70

Total primary energy supply -

-186.97 -179.86

Mtoe

21.07

27.19

27.24

Electricity consumption - TWh

99.06

112.32

124.05

CO2 emissions Mt of CO2

27.47

35.46

35.52

0.11

0.08

0.08

4.24

4.66

5.24

CO2 emissions/GDP kg CO2/2010 USD Population , million people

The merger of Statoil and Hydro28 into StatoilHydro Corporation has been a move in the right direction demonstrating a new approach to the climate change challenge along with new technological and industrial solutions. The synergy effect following the merger was estimated to be near NOK 6 billion gross. The group aims to establish a stronger position in the field of new energy targeting mainly energy efficiency, carbon dioxide capture and storage, as well as biofuels and offshore wind farms. The well drilling on the continental shelf concentrates on surveyed and documented fields, virgin areas and exploration activities have intensified in frontier areas of the Barents and Norwegian Seas.29 To meet the ambitious goals of reducing greenhouse gas emissions, Norway still needs to intensify its efforts despite the fact that already in 2008 during a press conference Åslaug Haga – Norwegian Minister of Petroleum and Energy – stated that in the course of the year she intended to present a White Paper on the oil and gas policy which would also include a report addressing environmental challenges. The main goal was “crystal purity of gas emission to the atmosphere” (Aftenposten 2008b). Figure 10.13 presents pertinent data for developments on the subject. The main incentive for the use of renewable energy is a quota system in terms of quota obligations and a certificate trading system. The Electricity Certificates Act obliges electricity suppliers and certain electricity consumers to annually acquire renewable energy certificates in due proportion to their electricity sales and their consumption by a set date. Furthermore, the act stipulates the conditions under which owners of renewable energy generation plants may acquire electricity certificates.30

 In 2006, Statoil and the oil and gas division of Hydro merged into Statoil Hydro.  The major production and/or development projects outside of Norway are in the U.S. Gulf of Mexico, Brazil, Nigeria and Azerbaijan. 30  See https://www.ieabioenergy.com/iea-publications/country-reports/2018-country-reports/ 28 29

10.3  Environmental and Climate Protection Measures

229

This obligation has been in operation since 2009, and the obligation has been stronger in recent years. The obligation in 2015 was 5.5%, and in 2017 this obligation was raised to 7%, and the result in 2017 was 16% (IEA-a). Enova SF,31 a public enterprise that is owned by the Ministry of Climate and Environment (from 2018), manages the Energy Fund in Norway. The purpose of Enova and the Energy Fund is to contribute to reduced greenhouse gas emissions and strengthened energy security of supply, as well as technology development that also contributes to reduced greenhouse gas emissions in the longer term. In this light, Enova offers support to technology development and reduced technology cost/increased performance, and market development. Enova has, for example, supported renewable heat production, both small heating plants and lager district heating plants, by investment aid. Enova also has a support program directed towards industrial production of biogas. In addition, Enova offers investment aid to households undertaking energy efficiency measures, measures aimed at decreasing energy consumption or conversion from heating sources based on fossil fuels or electricity to a renewable source.32 Bioenergy R&D and research on converting biomass and waste to fuels for transport and heating, has for the last years developed positively with more integration between disciplines and technologies (IEA-b). A positive example of this is established by the RCN (Research Council of Norway) ENERGIX-program providing funding for research on renewable energy, efficient use of energy, energy systems and energy policy. The program is a key instrument in the implementation of Norway’s national RD&D strategy, Energi21, as well as for achieving other energy policy objectives. The FME Scheme (Centres for Environment-friendly Energy Research – FME) is to establish time-limited research centers, and in 2016 FME Bio4Fuels was established. The level of R&D bioenergy financing from RCN Energy department was in 2016 approximately 10 million euros. It should be noted that in recent years, thanks to the interdisciplinary collaboration between universities and institutes in close connection with industry, the research and development work has been focused more on fuels for transport. Bio4Fuels, which started in 2017, is a key initiative to coordinate such a development. The overall aim for the R&D is to demonstrate lab- and pilot scale technology which can reduce processing costs and increase product yields, and to document overall value chain sustainability. In Norway, with rather cold winters, a well-­ functioning heating sector is important and R&D’s focus the last years has been on increasing profitability and sustainability in waste-to-energy (WtE) plants, and product development of small scale heating to reduce emissions and increase flexibility to serve both modern and traditional housings. Still there is potential to develop biogas from industrial organic waste. Deliveries of biomass from forests might be doubled in sustainable ways, and with decline in  Enova SF was established in 2001 in order to drive forward the changeover to more environmentally friendly consumption and generation of energy in Norway: http://www.enova.no/ 32  A detailed description of all fiscal and non-fiscal supports for bioenergy development is available at http://www.iea.org/policiesandmeasures/renewableenergy/?country=Norway 31

230

10  The Kingdom of Norway: Standing in Energy

paper industry, there is already biomass available to develop new biorefining for fuels and chemical markets. Research on sustainability and climate effects is going on to document profitable ways to do this (IEA-a). A shining example is provided by Oslo’s city government which created an ambitious “climate budget.” It aims to halve carbon emissions from 1990 levels by and become completely carbon neutral by 2030.33 Becoming carbon neutral means reducing or even eliminating fossil fuel use, reducing landfill waste and offsetting any remaining emissions. The strategies involve incorporating aspects of technology (such as renewable energy generation, powering the bus fleet with renewable energy), design (for instance, making cities more compact) and behavior (for example, shifting commuters from private to public modes of transport, limiting access for cars with new tolls and fewer parking spaces). In the case of Oslo, with the population of about 650,000 people, the city emits roughly 1.34 million tons of CO2 per year, with much of this energy expended to meet building and transportation needs. While the plan to reduce emissions to zero is very ambitious, it is worth keeping in mind that Norway already generates the majority of its electricity using hydropower. Yet the city will still need to overcome significant barriers, to become carbon neutral by 2030. In particular, it will need to offset any residual emissions through forestation, or by actively capturing CO2 at the source. The move comes at a time when cities are taking on a more important role in addressing the issue of climate change.34 Yet cities are also uniquely well-placed to address this issue; most cities have their own planning systems, which can be used to manage the local economy and the urban landscape (that is, land-cover and land-­ use), in order to regulate energy use. Until relatively recently, policies to measure and reduce greenhouse gas emissions were administered at a national level, to ensure compliance with international agreements, such as the Paris Agreement. Oslo is a very good example of this tendency as over the last decade, cities have started to play a bigger role in global efforts to tackle climate change.35

10.4  Norway: Basic Premises for Energy Security Norway could provide for itself completely with self-produced energy. The total production of all electric energy producing facilities is 148 bn kWh, which is 121% of the countries own usage. Despite this, Norway is trading energy with foreign  See https://phys.org/news/2016-10-opinion-oslo-ambitious-climate-bar.html#nRlv  Globally, cities are thought to be responsible for roughly 75% of human-sourced carbon dioxide (CO2) emissions, because urban populations still depend largely on fossil fuels to generate energy. Since CO2 is the chief greenhouse gas, cities are considered to be key drivers of global climate change. 35  Read more at https://phys.org/news/2016-10-opinion-oslo-ambitious-climate-bar.html#jCp 33 34

10.4  Norway: Basic Premises for Energy Security

231

countries. Along with pure consumptions the production, imports and exports play an important role. Other energy sources such as natural gas or crude oil are also used (WorldData.info-b). The power market in Norway was deregulated in 1991 (then only a few countries had market-based power systems) and since then it has constituted a fundamental element of the Norwegian power supply. Because electricity prices provide long-­ term investment signals, they also play an important part in short-term balancing of supply, demand and transmission. The representatives of the Confederation of Norwegian Enterprise (Näringslivets Hovedorganisation) and the Norwegian Electricity Industry Association (Energibedriftens Landsförening) warned politicians that in years 2008–2009 there might be an energy shortage in the region of Møre and Romsdal (central Norway) where heavy industry still exists and is developing. According to experts, in order to ensure an increase in electricity supply, that is to improve the national energy security, Norway must have an active policy which in their opinion means the following: –– continual modernization of existing hydroelectric power plants by enlarging the dams thus raising the water level and increasing the capacity; –– approval for the construction of gas-fired power plants; –– energy supplies from small local hydroelectric plants and wind farms; –– reducing electricity consumption inter alia by generating thermal energy from biomass for water heating; –– finding a solution to the problem with electricity transmission lines to avoid future energy crises similar to the one that threatened Central Norway at the beginning of this century. Since renewable power plants are generally located where there is access to resources, the production capacity is unequally distributed between different regions of Norway. A well-developed power grid is vital for transmitting electricity to consumers in all parts of the country. Enova SF, a state enterprise owned by the Ministry of Climate and Environment has been entrusted with finding solutions to these problems. In general, the Norwegian parliament and government has assigned to Enova the task of contributing to energy efficiency and the use of environmentally friendly energy from renewable sources and to stimulating the energy market by means of financial instruments and incentives to achieve national energy policy goals. Norway’s large potential for hydropower generation is an asset, as European electricity markets are integrating and variable renewable energy generation is set to increase. More cross-border interconnections are needed to realize the full potential of hydropower for balancing variations in demand and supply in the regional market. Increased interconnections would also improve electricity security in Norway in times of low hydropower availability. Gas-fired power plants should also be considered for use for the same purpose. The Norwegian power system is closely integrated with the other Nordic systems, both in physical terms and through market integration. In turn, the Nordic market is integrated with the rest of Europe through cross-border interconnectors to

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10  The Kingdom of Norway: Standing in Energy

the Netherlands, Germany, the Baltic States, Poland and Russia. Integration with other countries’ power systems, the well-developed power grid and the characteristics of hydropower production make Norway’s power supply system very flexible, reducing vulnerability to fluctuations in production between seasons and years. Norway’s Ministry of Petroleum and Energy (MPE) is responsible for overseeing the country’s energy resources. The Norwegian Petroleum Directorate (NPD) reports to the MPE as an advisor, administers exploration and production activities on the NCS, and collects and analyzes data. State-owned Petoro manages the commercial aspects of the government’s financial interests in petroleum operations and associated activities. Petoro acts as the licensee for production licenses and companies. The largest energy company operating in Norway is Equinor ASA, which was renamed from Statoil ASA in 2018. The company was created by the merger of Statoil and Norsk Hydro in October 2007. Norway’s government is the company’s largest shareholder, owning a majority stake of the company. In addition to its operations in Norway, Equinor is a major international company, and it has interests in more than 30 countries.36 In this context it has to be noted that several international oil companies have a sizable presence in Norway. The Norwegian government’s subsidy for oil and natural gas exploration, introduced in 2005, refunds 78% of the exploration cost to the companies. In addition, the Norwegian government reduced taxes on onshore oil activities and on liquefied natural gas (LNG) shipped overseas, which has attracted additional international investment.37 In an emergency, the formal decision arising from an IEA collective action will be made by the Minister of Foreign Affairs after consultations with the Minister of Petroleum and Energy (MPE). The other cabinet members will be informed in an appropriate way. Depending upon the actual situation, a decision on Norwegian participation might be made within 24 h after receipt of a proposal for an IEA collective action. Following the decision to participate in an IEA collective action, the MPE decides on the measures to be taken in an emergency. Under the new compulsory stocks regime, companies are required to release their stocks in an effective manner and immediately. The stockdraw process (release of industry stocks) will formally be headed by the MPE who will use the Oil Emergency Board (OEB) to administer the process; the OEB is made up of high-ranking representatives from Norwegian oil companies and chaired by the MPE. The operational stock release is undertaken by Statoil ASA or Esso Norway (the two refining companies). The administration indicates that, on request, Statoil ASA’s or Esso Norway’s stockholding commitments of petroleum products can be lowered progressively, in line with the stockdraw rate and the sales process; the sales process is organized as a tender process. “Despite being a net exporter, Norway held government stocks until 2006, based on laws established in 1956 (the Act of Supply and Contingency Measures, subsequently

36 37

 More on the subject in Renewable energy production in Norway.  See EIA-a.

10.4  Norway: Basic Premises for Energy Security

233

amended in 1975). In August 2006, Norway introduced new legislation with the Act of Petroleum Product Storing for Emergency Purposes, which imposed an obligation on companies to hold stocks of products equivalent to 20 days of their sales/imports in the domestic market, and also an obligation to implement stockdraw upon the government’s request, should a situation of supply deficit occur. The Act was provided with supplementary regulations, instituted in September 2006. As a consequence of this new legislation, the government stocks were sold in 2007. The new regulations give the government control of company stocks during peacetime in the event of a supply disruption. The new stocks legislation covers only petroleum products; however, in wartime the government can take control of all crude oil stocks as well as industryheld product stocks” (Energy supply security 2014, p. 354). As stipulated in the Royal Decree (par. 10), “Compulsory stockholders or anyone storing petroleum products on behalf of the compulsory stockholder are bound to provide the ministry with information about imports, sales and stocks, etc. on a specific scheme. The report must be submitted four times a year (i.e. before 15th January, 15th April, 15th July and 15th October). The new legislation includes provision for fines of up to EUR 1.25 million (NOK 10 million) per infringement of the obligation” (Energy supply security 2014, p. 355). “The Norwegian Water Resources and Energy Directorate is the national independent regulatory authority for the downstream natural gas market, and Norway has implemented the relevant EU directives. According to the Norwegian administration, security of supply is not an issue in the poorly developed Norwegian downstream gas market. Indeed, natural gas customers in Norway will always be connected to the electricity grid, thereby supplying them with energy for various needs. Unlike in many other IEA member countries, natural gas is not a key source of power generation. In fact, hydro alone consistently accounts for over 96% of electricity production. However, during the winter of 2002–03, Norway experienced a drought followed by a cold wave which severely depleted its hydro reserves and made electricity rates rise fourfold in a matter of weeks. In response, Norway’s first commercial onshore gas-fired power plant was built by Naturkraft at Kårstø. Interestingly, the 420 MW plant claims to have the lowest greenhouse gas emissions of any fossil fuel power plant in Europe, at a cost of around EUR 253 million (NOK 2 billion). The Kårstø plant uses gas resources from the NCS and started electricity production in the winter of 2007. The project can theoretically deliver up to around 3% of Norway’s total electricity production (equivalent to around 175,000 households). The plant can use up to 600 mcm of natural gas per year, or approximately 0.5% of Norway’s annual gas exports. However, owing to commercial considerations linked to gas and power prices, the production of power from Kårstø has been small over the past few years. Five gas turbines also provide power to Statoil’s LNG plant from gas sourced from the Snøhvit field” (Energy supply security 2014, p. 358). Overall, it can therefore be concluded that the Norwegian energy supply system consists of all parts of the domestic energy sector which produce, trade and distribute energy to consumers. The production of energy is by some distance the largest part of the Norwegian energy supply system. The key features of the Norwegian

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10  The Kingdom of Norway: Standing in Energy

energy supply can be listed as renewable, flexible, market based, integrated and secure.38 The Kingdom of Norway has abundant energy resources and largely energy self-sufficient. And this seems to be the main reason for not working out a specific, distinctive and particularly very own concept of the approach to the country’s energy security.

Bibliography Aftenposten (2007) December 12 Aftenposten (2008a) January 10 Aftenposten (2008b) January 15 Aftonbladet (2008) February 04 Dagens Nyheter (2008) January 15 Dagens Næringsliv (2007) September 24 EIA-a, U.S. Energy Information Administration, eiaBeta. Retrieved March 04, 2019 from https:// www.eia.gov/beta/international/analysis.php?iso=NOR EIA-b, U.S. Energy Information Administration, eiaBeta, Country Analysis Executive Summary: Norway, Last Updated: January 7, 2019. Retrieved February 21, 2019 from https://www.eia. gov/beta/international/analysis_includes/countries_long/Norway/pdf/norway_exe.pdf Energy Facts Norway. Retrieved March 21, 2019 from https://energifaktanorge.no/en/ norsk-energiforsyning/kraftproduksjon/ Energy supply security: Emergency response of IEA countries 2014 (2014) International Energy Agency, Paris. Retrieved October 11, 2016 from http://docplayer.net/5803373-Part-2-energysupply-security-2014.html Government Pension Fund Global (GPFG). RetrievedApril 12, 2019 from https://www.regjeringen.no/ en/topics/the-economy/the-government-pension-fund/government-pension-fund-global-gpfg/ market-value-and-capital-inflow/id696852/ Government Pension Fund of Norway. Updated June 7, 2018. Retrieved from https://www.investopedia.com/terms/g/government-pension-fund-norway.asp Haykowski M (2008) October 16. Newswire. PAP IEA-a, Bioenergy, Country Report: 09 2018, Norway – 2018 update, Bioenergy policies and status of implementation. Retrieved December 19, 2018 from https://www.ieabioenergy.com/wpcontent/uploads/2018/10/CountryReport2018_Norway_final.pdf IEA-b, Bioenergy Countries’ Report  – Update 2018, Bioenergy policies and status of implementation. Retrieved February 10, 2019 from https://www.ieabioenergy.com/wp-content/ uploads/2018/10/IEA-Bioenergy-Countries-Report-Update-2018-Bioenergy-policies-andstatus-of-implementation.pdf IEA-c, National Renewable Energy Action Plan of Norway (2012) 2. Retrieved from https://www. iea.org/policiesandmeasures/pams/norway/name-40161-en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI-SG9tZTwvYT4g JnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZWFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPjwvbmF2Pg EIA-d, U.S.  Energy Information Administration based on Equinor and Gassco, in Norwegian Petroleum Diretorate, The oil and gas pipeline system. Retrieved from https://www.norskpetroleum.no/en/production-and-exports/the-oil-and-gas-pipeline-system/

38

 See https://energifaktanorge.no/en/norsk-energiforsyning/

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EIA-e, U.S.  Energy Information Administration, Statistics Norway, Electricity, 2016, Table  3: Generation, imports, exports and consumption of electricity (November 24, 2017). Retrieved from https://www.eia.gov/beta/international/analysis.php?iso=NOR Gassco, Pipelines and Platforms. The Government Pension Fund 2019, Recommendations of the Ministry of Finance of 5 April 2019, approved by the Council of State on the same day (Government Solberg). Retrieved from https://www.regjeringen.no/contentassets/8996cca30e5741a788218d417762a52c/en-gb/ pdfs/stm201820190020000engpdfs.pdf Jag (2009) January 8. Newswire. PAP. Retrieved from www.gospodarka.gazeta.pl/gospodarka Meld. St. 20 (2018–2019) Report to the Storting (white paper). The Norwegian Ministry of Finance Norwegian Petroleum Directorate-a. Updated January 13, 2008. Retrieved from www.npd.no Norwegian Petroleum Directorate-b (2007). Retrieved from https://www.npd.no/en/facts/news/ general-news/2008/The-Shelf-in-2007-/The-shelf-in-2007%2D%2DInvestments-/ Norwegian Petroleum Directorate-c (2008) January 14. The Shelf In 2007. Press release 5/2008 Norwegian Petroleum Directorate-d, Companies – Production- Licences. Retrieved April 14, 2019 from www.norskpetroleum.no/en/facts/companies-production-licence/ Norwegian Petroleum Directorate-e, Discoveries. Retrieved April 14, 2019 from https://www.norskpetroleum.no/en/facts/discoveries/ Norwegian Petroleum Directorate-f, Fact Pages, Monthly Production – by field. Retrieved January 03, 2019 from https://www.npd.no/en/facts/news/Production-figures/ Norwegian Petroleum Directorate-g, Fields. Retrieved April 14, 2019 from www.norskpetroleum. no/en/facts/field/ Norwegian Petroleum Directorate-h, The oil and gas pipeline system. Retrieved from https://www. norskpetroleum.no/en/production-and-exports/the-oil-and-gas-pipeline-system/ Norwegian Petroleum Directorate-i, Production figures December 2015 (15.01.2016), Norway Oil & Gas. Retrieved January 30, 2016 from http://www.npd.no/en/news/Production-figures/2015/ December-2015/ Norwegian Petroleum Directorate-j, Remaining Reserves. Retrieved April 14, 2019 from www. norskpetroleum.no/en/facts/remaining-reserves/ Norwegian Petroleum Directorate-k, Resources Accounts. Retrieved April 14, 2019 from https:// www.norskpetroleum.no/en/petroleum-resources/resource-accounts/ Norwegian Petroleum Directorate-l, Resource accounts for the Norwegian continental shelf as of 31 December 2014 (02.03.2015), http://www.npd.no/en/Topics/ Resource-accounts-and%2D%2Danalysis/Temaartikler/Resource-accounts/2014/ Norwegian Petroleum Directorate-m, The Shelf in 2007  – Investments. Retrieved from https://www.npd.no/en/facts/news/general-news/2008/The-Shelf-in-2007-/ The-shelf-in-2007%2D%2DInvestments-/ Norwegian Petroleum Directorate-n, The Shelf in 2007  – New Players. Retrieved from https://www.npd.no/en/facts/news/general-news/2008/The-Shelf-in-2007-/ The-shelf-in-2007%2D%2D-New-players-/ OECD/IEA, World Energy Balances 2018. Retrieved April 14, 2019 from https://webstore.iea.org/ world-energy-balances-2018 Państwowy Fundusz Emerytalny Global. Retrieved November 17, 2015 from http://www.informatorekonomiczny.msz.gov.pl/pl/europa/norwegia/ Renewable energy production in Norway. Retrieved from https://www.regjeringen.no/en/topics/ energy/renewable-energy/renewable-energy-production-in-norway/id2343462/ Rystad Energy Report. Retrieved December 28, 2015 from http://www.rystadenergy.com/ Databases Sowa W, Konieczny K (2007) Norwegia. Pascal, Bielsko-Biała Statnett, Brief History, Cable to the UK. Retrieved from Brief History, Cable to the UK Statnett, NORD.LINK.  Retrieved from https://www.statnett.no/en/our-projects/interconnectors/ nordlink/ Statoil, Norway’s Gas Transport System.

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Stavanger Aftonbladet (2008) February 04 SSB, Statistisk sentralbyrå 2006. Retrieved from https://www.ssb.no/en WorldData.info-a. Retrieved February 22, 2019 from https://www.worlddata.info/europe/norway/ index.php WorldData.info-b. Retrieved April 19, 2019 from https://www.worlddata.info/europe/norway/ energy-consumption.php Wyborcza (2008) May 29. Retrieved from www.wyborcza.pl http://www.ssb.no/en/oljev/ http://www.npd.no/en http://www.ssb.no/en/befolkning/artikler-og-publikasjoner/_attachment/225819?_ts=14d005d0a18 http://norwegia1.pl/informacje-z-norwegii/15-premier-norwegii-chce-uniezaleznienia-od-ropy. html, https://www.regjeringen.no/en/topics/energy/oil-and-gas/norways-oil-history-in-5-minutes/id440538/. Retrieved November 17, 2015 http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nrg_ind_335a&lang=en. Retrieved October 27, 2018 https://ec.europa.eu/energy/sites/ener/files/documents/dir_2009_0028_action_plan_norway__ nreap.pdf https://www.norskpetroleum.no/en/petroleum-resources/resource-accounts/ https://www.ssb.no/en/energi-og-industri/statistikker/energibalanse https://www.iea.org/countries/Norway/. Retrieved November 04, 2018 https://www.ieabioenergy.com/iea-publications/country-reports/2018-country-reports/ http://www.enova.no/ http://www.iea.org/policiesandmeasures/renewableenergy/?country=Norway https://phys.org/news/2016-10-opinion-oslo-ambitious-climate-bar.html#nRlv https://phys.org/news/2016-10-opinion-oslo-ambitious-climate-bar.html#jCp. Retrieved November 24, 2018 https://energifaktanorge.no/en/norsk-energiforsyning/

Chapter 11

The Nordic Countries and the Current Challenges in Energy Security

Abstract The vision and practice of Nordic energy cooperation is to develop Scandinavian energy systems through strong, trust-based and flexible cooperation to secure the smartest, most integrated and intelligent green economy in the world with high competitiveness and security of supply. According to this vision, energy cooperation should ensure a stable and secure energy supply, a well-functioning energy market and sustainable growth and prosperity for the people of the Nordic region. Energy cooperation should also help to achieve ambitious national environmental and climate targets. Keywords  Climate · Ecology · RES · Energy cooperation · Research and development

11.1  E  nvironmental Protection, Climate Change and Energy Culture It has been known for some time that one of the global problems is the connection between global energy and the greenhouse effect. In the light of the data available so far, however, there is no final decision as to the extent to which gas emissions from the wider energy sector have a real impact on this effect and the phenomena associated with it. There is irrefutable geological evidence that in the past, when man was not yet on Earth, in the Earth’s climate there were warm and cold periods. Earth is a living planet, which is also affected by the Sun, hence the problem of climate change on our planet requires further research and analysis. However, there is no doubt that limiting the combustion of energy resources, especially coal, contributes to reducing greenhouse gas emissions, especially CO2, SO2 and CH4. This is particularly important for reducing low emissions and improving air quality in urban and industrial agglomerations. Thinking about the future of the energy sector forces us to address the inevitable challenges in the areas of climate change, security of energy supply, energy prices and a range of other problems to be solved. Many opinions call for state intervention, but the abundance of ideas makes it possible to choose from the plethora of methods and means of action. Stakeholders – energy market actors and policy m ­ akers – need © Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5_11

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to work together. In this context, the statement that it is necessary to replace fossil fuels with renewable resources (RES) seems to be a truism. Biomass may play a role in the future coverage of energy demand – also for heat. However, the problem of availability of these resources, prices, security of supply, sustainability, etc., remains and is much perplexing. Real renewable resources: geothermal, solar, wind, wave, sea and other resources are abundant, but they are expensive and some are difficult to predict. Nevertheless, it is now imperative to seek to replace fossil fuels. However, it is important to be aware that conversion from coal and hydrocarbon fuels to other energy carriers is not an easy process, and finding an alternative to using fossil fuels is a more serious challenge than at a time when energy supply has not yet been so critical. It is a vital necessity to give priority to immediate initiatives and technologies that have already proved their worth. The next steps are more advanced solutions and innovative technologies. Current experience leads us to the conclusion that this quite classic triad: reduce, recycle, replace,1 where “reduction” and “recycling”2 play the most prominent roles. In the Nordic countries (as regards waste management), the so-called 4Rs: reduction, reuse, recycling and recovery is increasingly replacing the traditional triad. This is a result of considerable knowledge, large financial outlays and, perhaps most importantly, it is based on the general acceptance and social maturity of the inhabitants of these countries. Such a development requires them to recognize and adapt to a new way of life, different from the traditional one, particularly characteristic of the industrial age. An ecological vision is not limited to a city, a region or a country, but must encompass a continental and global context (Wehle-Strzelecka and Korczyńska 2007). The environmental parameters there are well regulated by law, although no country achieves an ideal. The state is described in the reports published annually by the European Commission.3 We can therefore say that the countries of Norden have achieved a leading position in the field of environmental protection in the international arena. Since the mid-1980s, solutions have been implemented to integrate ecological requirements into urban and spatial planning. This is particularly true for material recycling, water recovery and minimizing energy consumption through the use of renewable

 Reduction, reuse and recycling are known in the industry as the 3Rs. “The Canadian government has interpreted the waste management hierarchy as follows: 1. Wherever possible, waste reduction is the preferable option; 2. If waste is produced, every effort should be made to reuse it if practicable; 3. Recycling is the third option in the waste management hierarchy. Although recycling does help to conserve resources and reduce wastes, it is important to remember that there are economic and environmental costs associated with waste collection and recycling. For this reason, recycling should only be considered for waste which cannot be reduced or reused; 4. Finally, it may be possible to recover materials or energy from waste which cannot be reduced, reused or recycled.” A Global Guide. 2  The benefits of implementing these two principles should be maximized before the third principle – ‘replace’ – is implemented. 3  See http://www.eea.europa.eu/ 1

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sources. This is the character of housing complexes in Copenhagen, built as part of experimental campaigns, looking for a model of sustainable urban space (1990–1996). Similarly, the objectives of urban ecology are pursued in Sweden. Examples include the BO 01 district in Malmö (2001) and Stockholm’s housing complexes (e.g. Hammarby Sjöstad district). The example of Hammarby Sjöstad shows how important it is for Swedes to think in terms of the ecological cycle. Treating waste from one process as an important part of other processes is important not only because of the immediate economic benefits, but also because of the challenge to the intellect and the way to build a new social system.4 Neither high grants for science nor practical exercises for sustainable development have come out of nowhere in Sweden. These are the effects of a long-term environmental policy resulting from a serious reflection on the current model of social and economic development. Its origins can be traced back to 1988, when the Swedish Parliament began a serious discussion on a new environmental policy, according to which ecology should become an important criterion for deciding on the shape of the economy and the entire social system. Finland also considers the implementation of sustainable development principles to be a priority for the country’s urban policy. An example is the decision on the development of Helsinki, where environmental measures are taken in many dimensions: cities, districts, housing estates and individual buildings. Climate 2050. The Road to 60–80 percent reductions in the emissions of greenhouse gases in the Nordic countries (2007, pp. 1–59) deserves careful attention. It assesses this problem from the point of view of the Nordic countries until 2050. The options and accompanying costs for reducing CO2 emissions in the Nordic energy and transport sector and for reducing non-carbon gases are based on known technologies and are estimated. For the analysis of the Nordic energy sector, the Markal-­ Nordic energy model is used, while emission reductions in other sectors are based on individual existing technologies and their associated costs. The analysis of Nordic emissions by 2050 assumes that they will be reduced to around 40% by 2050 compared to 1990. This is equivalent to 0.5–1% of BNP’s costs. In contrast, achieving 80% emission reductions in the Nordic energy sector is difficult due to various other sources of gas emissions, in particular agriculture and transport. As regards the transport sector, it is worth mentioning a document (Trafikafgifter 2009, pp. 132–4) prepared by the Nordic Council of Ministers in cooperation with The Ecological Council in Denmark, The Swedish Society for Nature Conservation and Friends of the Earth Norway, with the participation of The Finnish Association for Nature Conservation and Orkusetur and Umferdastofa from Iceland. This study shows the possibilities of reducing the so-called climate effect by controlling fees and taxes in private and commercial transport. For natural reasons, this applies less to Finland and Iceland than to Denmark, Sweden and Norway. The purchase price of a car, fuel taxes and the choice of a vehicle model seem to have the greatest  More on the subject in Czarny 2017, pp. 131–152.

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impact on the development of environmentally friendly tendencies. A positive example of such solutions was the introduction of the following: –– differentiated registration charges (resulting in the rapid introduction of catalytic converters) in Sweden in 1987; –– registration charges in Denmark and Norway (since 2007), differentiated according to CO2 emissions and combustion levels. Also, the significant replacement of the car fleet with a new and modern one in Finland, since January 2008, has resulted in a significant reduction of CO2 emissions. Nordic countries have traditionally been very strongly committed to environmental protection.5 They also have high ambitions to use their unique position to improve the environment not only in the region itself, but also in the neighboring areas, both at European and international level. Their cooperation in this area is based on the principle of “highest appropriate level of ambition” (Facts on Nordic Co-operation). This is a practical way to raise national, Nordic, European and international environmental standards. The Nordic Environment Action Plan 2013–2018 should be seen as one of many tools to enable the application of the Nordic Sustainable Development Strategy. It builds on the experience and achievements of the previous Nordic Environment Action Plan 2005–20086 and addresses the challenges ahead. This plan for 2013–2018 focused on both sectoral integration and cooperation between different environmental action groups, focusing on four main themes: 1. Green growth; 2. Climate change and air pollution; 3. Biodiversity, ecosystems and ocean acidification; 4. Health and environmentally hazardous chemicals. The aim was that Nordic cooperation for the development and implementation of EU/EEA legislation and international environmental conventions should also be a priority during the period covered by the above-mentioned Environmental Action Plan which in its final version demonstrates the practical introduction of environmental conditionality as the culmination of the strategy for sustainable development in the Nordic region and neighboring areas. The Sustainable Development Strategy focuses on areas where the Nordic countries are interested in joint participation, where particularly good opportunities for promoting sustainable development can be found and where Nordic cooperation generates synergy, adds value and meaning. The strategy is the main tool for implementing sustainable development in the mainstream of all work undertaken by the Nordic Council of Ministers.  More on the subject in Nordiska ministerrådet.  The Nordic Environment Action Plan 2005–2008 developed a framework for cooperation in the field of environmental protection in the Nordic region in conjunction with the Neighborhood Areas, the Arctic Region, the EU and other international actors. The Nordic Council of Ministers allocated DKK 40 million (i.e. 5% of its own budget) to environmental cooperation. See http:// www.diva-portal.se/smash/get/diva2:702131/FULLTEXT01.pdf 5 6

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The Nordic concept of sustainable development includes three interdependent dimensions: economic, social and ecological. The strategies, objectives and priority areas concerning climate and renewable energy, sustainable production and consumption, Nordic quality of life as a tool for sustainable development, education and research have been adapted to them. It was in this spirit that the Icelandic Presidency of the Nordic Council of Ministers launched a number of new initiatives in the bioeconomy and pointed to the need to strengthen the interaction between energy, environment and climate protection. Icelanders also wanted 2014 to become a year of special efforts to increase the ecological awareness of citizens and reduce the negative impact of humans on the environment, promote sustainable use of resources, support and strengthen the development of environmentally friendly production methods as well as encourage investment. As the authors of the report Makt och Vanmakt and klimatförhandlingarna. En rapport skriven på uppdrag av Föreningen Norden och Global Utmaning write, full coordination of the Nordic point of view began with environmental protection.7 EU issues are first agreed by the Nordic environment ministers, or even pre-empted by them in the form of a common position of the countries of the region. There are many indications that a similar model has been developed in other areas, i.e. research and innovation.8 Hence the significant popularity of the opinion that it is Norden, not only in the EU, but also in a much broader context, that can play a significant role in the areas of environment and climate, as well as research and innovation9 in the coming years. There is no doubt that over the past 40 years, the Nordic countries have been able to record significant achievements through working together on the environment, combining economic growth and social development with an ambitious environmental policy, as well as activities aimed at improving the environment both within and outside the Nordic region. Hence the promotion of sustainable production and consumption, environmentally friendly technologies and green economic growth (including the corporate sector and international organizations) are extremely important challenges, but also a great opportunity currently facing Nordic cooperation. In this situation, there is an irresistible need for a synthetic view of the above mentioned ways of treating the environment, forms and methods of approaching climate change as a social need, which with a large degree of generalization I will allow myself to call an original Nordic ecological culture. And when we translate its exorbitant (compared to other countries) standards into the practice of producing and using energy, it leads us to note a set of phenomena which, taken together, I would call a Nordic energy culture. In the literature, we can find a number of definitions of the concept of energy culture referring to the humanistic strategy of approach to energy issues both on the

 More on the subject in Jägerhorn, Valtersson (Eds.), 2008.  See Nordiska samarbetet. 9  See Knowledge Driver Growth 2007. 7 8

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part of energy producers and consumers,10 or focusing on a combination of all ­factors influencing the way energy policy is conducted by all stakeholders.11 These definitions indicate the broad meaning of this concept, which covers all aspects of the State’s energy policy. They also lead to the conclusion that knowledge of the essence and conditions of the energy culture of individual countries contributes to solving problems of the functioning of their energy sector, adjusting its functioning to the expectations of broad social groups and formal requirements (including legal acts resulting from international agreements ratified by these countries). Differences between the energy cultures of individual countries are caused by economic factors (such as the energy resources possessed in the country, the climate, the political instruments used, the level of economic development, technical qualifications and the specificity of the structure of industry and trade in the country) and social factors (e.g. historical conditions, culture, lifestyle, integration of society, the way of functioning of particular levels of government, the current political orientation of the authorities, the degree of interest of politicians and society in ecology and energy, involvement in energy issues). All this may not only make it easier to take actions aimed at implementation or aimed at changing the energy culture in individual countries, but also, in P. Frączek’s opinion (2014, p. 444), it may lead to a change of the energy culture in individual countries, which has led to the formation of six groups of countries with a similar energy culture. It should be emphasized that economically developed countries strive to base their energy balance on fuels, the use of which is not associated with environmental problems, and at the same time strive to use efficient sources. This approach makes it possible to use economically efficient solutions, which in turn makes it possible to obtain competitively priced energy. The economies of countries that have diversified the structure of their energy sources and promoted energy-saving technologies consume less energy per unit of GDP than the economies of countries that base the structure of energy sources solely on conventional fuels. The energy crisis of the 1970s and the associated sharp rise in oil prices were the main factors that forced this change. This increase, due to the fact that these countries’ energy balances were based on oil, meant that measures had to be taken to reduce their dependence on imports of energy raw materials. As has already been mentioned, this involved striving to diversify their structures in terms of primary energy sources and to reduce energy consumption. Another important factor was the increase in public awareness of the necessity of changes in the energy sector and the readiness of the society to bear the financial consequences of such actions supporting pro-ecological solutions. This trend has been particularly strongly observed in the Nordic countries since the late 1980s, especially after the publication of the report of the World Commission on Environment and Development, the so-called Brundtland Report (Brundtland 1987). These changes in individual Nordic coun-

 The strategy, according to Z. Łucki and W. Misiak, allows for solving social problems. See Łucki and Misiak 2010. 11  See Bevernage. 10

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tries took place with different intensity and concerned different directions of action, thanks to which there are different structures of primary and final energy sources, related to, among others, the shape of the land, the possession of energy resources, conscious choice of pro-ecological solutions and rejection of nuclear energy as too dangerous a source of energy by a part of society (e.g. in Denmark). These actions were based on long-term, consistently implemented plans for the country’s energy policy. The implementation of the assumed plans for changes in the energy sector allowed (until about the first half of the first decade of the twenty-first century) the Nordic countries to develop a wide variety of energy sources. In Denmark, due to the dominant share of crude oil, there was an oil culture. In addition, coal, natural gas and RES (BP Statistical Review of World Energy 2012) had a 15% share in each of these fuels. Despite the dominant share of conventional fuels in the energy balance, Denmark is considered to have the highest energy culture in the world.12 This is due to: –– one of the highest in the world and rapidly growing share of RES in electricity production; in the years 2000–2011 the consumption of RES for electricity production increased by 154.2% (Pettersson et al. 2010; DEA 2012); –– one of the lowest energy consumption indicators per unit of GDP in the world, resulting from the spread of cogeneration, which is a source of clean and cheap electricity (EU energy and transport in figures 2010); –– development of highly efficient and ecologically clean energy technologies and export of products of industry working for the “green economy.”13 Finland has developed a hybrid energy culture that allows for a high degree of diversification of the primary energy mix. Four types of fuels accounted for over 15% of the energy balance: oil, RES (mainly hydropower and biomass), nuclear energy and hard coal. At the same time, Finland is characterized by one of the highest electricity consumption in the world, which is related to the use of electricity for heating by individual consumers and the development of energy-intensive industries. In the upcoming years, the potential of Finnish nuclear power plants is expected to surge, which, thanks to the ecological properties of this fuel and competitive costs of electricity generation, will be an important factor in increasing the country’s energy security and improving the competitiveness of the economy.14 One of the key factors facilitating the development of the potential of nuclear power plants in Finland is the support for this source of energy from the public, state institutions and enterprises. This is due to the perception of nuclear energy as a cheap source of electricity, the dissemination of which may contribute to solving climate problems and increasing the energy security of the country. Cheap electricity from Finnish nuclear reactors is also seen as a factor facilitating the economic development of the  See Chap. 6.  Currently, about 1/3 of the wind turbines installed in the world are from Denmark (EREC 2009), and the sale of technologically advanced products from the Danish energy industry is the source of 11% of export revenues. The Danish Government 2011. 14  See Chap. 7. 12 13

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country, increasing the competitiveness of Finnish industry and employment security for Finnish workers. Norway has developed a sustainable energy culture related to the dominant share of hydroelectric power plants in the country’s energy mix. Apart from this source, Norway has a significant and stable share of crude oil, a growing share of natural gas, marginal importance of hard coal and RES other than hydropower and lack of nuclear power plants. It should be stressed that Norway, being a significant exporter of crude oil and natural gas, bases its energy balance on these fuels to a relatively small extent.15 This is related to a very high social awareness of the consequences of using conventional fuels for the natural environment and the desire to base the energy policy on fuels and technologies whose use allows obtaining competitive electricity prices. In Sweden, nuclear culture has been formed for many years as a result of the expansion of the capacity of nuclear power plants. Apart from this source, RES (mainly hydropower and b­ iomass) have a significant share in the energy balance, while coal and natural gas play a marginal role.16 It is worth noting that the analysis of the current energy policy and the situation of the Nordic countries’ energy balances17 compared to Fig. 11.1 shows how much the countries of Norden have changed over the last 5 years. These major changes and transformations in the share of renewable energy, with a drastic reduction in the share of fossil fuels in the energy culture, would today allow Sweden, Denmark and even Finland to be included in the group of sustainable energy culture countries. Although the structure of primary energy sources has been quite diverse (largely dependent on national capabilities) for many years in individual Nordic countries, the correct use of the term Nordic energy culture can be seen. The rationale for such an approach is, inter alia, the following: –– the existence of a common, fully liberal Nordic energy market, which thanks to the cooperation of Nordic countries and existing power system interconnections contributes to the energy security of these countries (Frączek 2012); –– long-term implementation of the vision of further increasing the significance of RES in the structure of primary energy sources, which was mainly related to the consistent application of tax instruments and which contributed to the reduction of the share of conventional fuels; –– systematic increase of the potential of nuclear energy, recognized in Sweden and Finland as a fully secure source of clean and cheap electricity18; –– further increase of the energy security of these countries by increasing the share of own energy sources (mainly RES and additionally nuclear energy);

 See Chap. 10.  See Chap. 9. 17  See Chaps. 6, 7, 8, 9, and 10. 18  In 1985 the Danish Parliament, in response to public expectations, introduced a ban on the construction of nuclear installations in Denmark. There is no nuclear reactor construction work in Norway because of its high hydropower potential and its rich oil and gas reserves. 15 16

11.1  Environmental Protection, Climate Change and Energy Culture

Type of energy

Characteristic of energy use

Country

Similar shares of crude oil,

Belgium, Bulgaria, Czech

natural gas and coal with a

Republic, Finland, Germany,

significant share of nuclear and

Slovakia, Slovenia, Japan, South

renewable energy

Korea, Canada, USA

245

culture

Mixed culture

Sustainable culture Nuclear energy culture

Dominant share of renewable energy in the total with almost

Iceland, Latvia, Norway

zero share of fossil fuels Nuclear energy domination

France, Sweden Austria, Denmark, Greece, Spain,

Oil culture

Crude oil domination

Ireland, Portugal, Switzerland, Italy, Saudi Arabia, Brazil, Spain Belarus, the Netherlands, Russia,

Natural gas culture

Natural gas domination

Romania, Ukraine, Hungary, Great Britain, Italy, Algeria, Iran, Pakistan, Argentina

Coal culture

Coal domination

Poland, China, South Africa, India, Australia

Fig. 11.1  Types of energy cultures in the world by dominant primary energy source Source: Łucki and Misiak 2010

–– improvement in the competitiveness of economies through the development of energy technologies and the use of competitively priced energy sources (McCormick and Neij 2009); –– very close cooperation of the Nordic countries in the implementation of energy policy and in the dissemination of innovative solutions contributing to the reduction of the impact of energy policy on the environment (Borup et al. 2008). As it has already been proven, the dissemination of highly efficient energy technologies, the expansion of the potential of nuclear power plants and the existence of a developed Nordic electricity market contribute to the reduction of electricity prices for end users. It should be stressed that the prices of this energy in the Nordic countries are among the lowest in the world, which, according to the analysis, also contributes to the increase in its average consumption. Available estimates indicate that thanks to changes in the energy policy, the Nordic countries with a safe margin of 18% will achieve the objectives of the energy and climate package concerning the reduction of greenhouse gas emissions (Eskeland et al. 2012). This is the result of

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an energy mix in these countries, in which conventional fuels have a relatively small share. The implementation of other investment projects aimed at expanding the potential of renewable energy sources and nuclear energy is also of great importance. These measures contribute to increasing the security of energy supply in these countries (Mideksa and Kallbekken 2010). The energy culture of the Nordic countries is a model for other countries seeking to change their energy source structures. Thanks to the consistent changes in the energy policy implemented in the Norden group of countries over the past 40 years, it has been possible to reduce the share of conventional fuels in favor of RES (mainly hydropower, biomass and wind energy) and nuclear energy. This made it possible to limit the negative consequences of the energy policy on the natural environment. What is equally important, a significant element of changes in their energy policy is the increase of public awareness of the ecological consequences of the energy economy and the importance of energy policy for the quality of life of the society and the competitiveness of the economy. The Nordic experience  – according to P. Frączek (2014, p. 449) – allows to indicate interesting opportunities for the energy policy of other countries, which should focus, among others, on the following: –– consistent implementation of the assumed plans for change in the sector; –– undertaking educational activities aimed at making the society aware of the ecological consequences of using particular types of fuels and energy technologies; –– Indication to broad social groups of the importance of obtaining energy at competitive prices in order to ensure jobs in the country; –– dissemination of tax solutions facilitating the dissemination of RES (mainly biomass); –– increasing the importance of the market mechanism in the shaping of the national energy policy, which will force competition between market participants and affect the reduction of energy prices for final consumers; –– continuing the development of gas infrastructure in Poland and increasing the efficiency of gas enterprises.19 It is the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – that can today provide answers to the question of how to effectively make the transition to a more energy-efficient society producing energy through renewable energy sources. Around 83% of Nordic electricity production is low carbon, 63% of which is entirely from renewable sources. They also facilitate low-carbon transitions between sectors, including heat, buildings, industry and transport.20 This obviously requires a certain amount of investment – the total estimated cost of the Nordic energy transition (i.e. the transition to renewable and low-carbon energy), according to researchers, will be around USD 357 billion, or less than 1%  Although the author refers these possibilities only to Poland, they are so universal that, in my opinion, they can be used by a number of other countries. 20  Of course, we can say that it is relatively easier for the Norden countries, as some of them have abundant fossil fuel resources that they can export, and the revenue generated from this can be used for domestic decarbonization processes. 19

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of total GDP over the period. However, almost all these costs will be offset by fuel savings (Nordic countries demonstrate 2017). Even the external costs associated with the impact of air pollution alone on health in the Nordic countries (around $9 to $14 billion per year) are approximately equal to the additional investment needed to achieve a carbon neutral scenario.21 Yet these countries have not yet said the last word, are not stopping research, exploration and have ambitious climate goals by 2050 (Sustainable Energy Systems 2050 2016). In order to achieve them, they must promote green economic growth, sustainable development and competitiveness in both the public and private sectors. NordForsk, Nordic Innovation and Nordic Energy Research, the main funding bodies for joint research and innovation in the Nordic countries, have jointly launched a research and innovation program covering, among other things, solar energy, wind energy, bio-refining, resource efficiency in food production, mining, a low-carbon approach to metallurgy, integrated production methods, innovative ways of using biomass resources for both materials and social change. The total budget of the program is 78 MNOK.22 Against this background, there is a need for summary reflection, or rather an attempt to assess the activity and achievements of the Nordic countries which are the regional pioneers, but I am also convinced that a consideration is needed for the global future of energy as well. And here, despite the problems of different nature, I believe that in Norden we are dealing with more than just an environmentally sensitive form of neoliberalism. There is a real social change going on there, redefining people’s relationship with the environment and with each other. The attitude to time, to the way goods are produced and used, to power: its distribution, technology and institutions, is changing. Science, though sometimes instrumentalized, offers a language through which people can try to communicate, to agree on the issues surrounding us and the ever-­ present nature. Ecology becomes political because it is taken into account by a wider spectrum of actors deciding about the future not only of individual countries, but also of the global system. At the moment, it is definitely more than just the beginnings. The Nordic “people’s home” is really becoming green. Although not all the goals have been achieved recently, it does not change the fact that ambitious undertakings are the next steps on the road to the green rebuilding of states, and their main, absolutely binding principle is no longer just economic rationality. The post-liberal state is to operate according to the principles of ecological rationality. However, in a situation where the old mixes with the new and sometimes economic interests still manage to win against the wider social and ecological interest, one should wait for the effects, believing not only in their rational but also in their positive effect.  Data after https://phys.org/news/2017-01-nordic-countries-energy-transition-worth.html  Discussion of several funded projects can be found at Nordic Energy Research, https://www. nordicenergy.org/programme/nordic-green-growth-research-and-innovation/, https://www.nordicenergy.org/article/press-release-baltic-mou/,https://www.nordicenergy.org/article/a-vision-for-nordicenergy-co-operation/, https://www.norden.org/en/organisation/nordic-energy-research 21 22

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A specific phenomenon of Norden is the takeover of the initiative by cities and municipalities, which have taken the lead as key actors to stimulate electricity, heat, energy efficiency, transport and industrial sectors in order to reduce emissions, especially considering the projected increase in the urbanization rate in the entire Nordic region. It will be the cities that will have to invest in new technological buildings, modernize existing ones, create charging infrastructure for electric vehicles and optimize district heating networks. Even in the Nordic countries, which are wealthy, relatively small, well-prepared and heavily engaged, all these elements of the energy transformation may take three to four decades to complete. The success of this transformation is based on many fascinating technological adventures or breakthroughs, each of which takes time. Several such breakthroughs could include, for example, further phase-out of nuclear power in some countries; the rapid expansion of onshore and offshore wind; the spectacular diffusion of electric vehicles; the massive increase in bioenergy production; and the commercialization of carbon capture and storage on an industrial scale. In addition, households and consumers must learn to adopt better energy management systems and industrial planners must introduce and install modern technics and technology.23 The whole process is unique to the Nordic social and technical environment. It also allows for a general statement that while this regional low-carbon transition has been successful in bringing the greatest benefits to society, during the transition period it has also generated a group of losers, including those who have lost their jobs, not least because of the reduction in fossil fuels. Another potential problem to be overcome is, and will probably be, the lack of agreement between some citizens on energy and climate issues. In this context, we must remember that in the first decade of the twenty-first century, the greatest challenge for the Nordic countries was to develop a strategy to maintain a balance between environmental protection and sustainability, security of energy supply and economic development and increased prosperity. Today, the vast majority of Norden’s inhabitants have no doubt that renewable energy should replace fossil fuels to enable them to become independent of their limited resources and reduce CO2 emissions into the atmosphere. This solution is to be supported by the current development of technological knowledge enabling the application of new ways of efficient use of energy. This approach, characterized by a high energy culture, in fact reflects one of the characteristics of the Nordic countries, namely the social awareness that innovative technologies and solutions relating to energy have an important role to play in breaking the existing negative links between development and environmental degradation. They should do this by providing sufficiently clean and secure energy, which demonstrates the sustainability of the political and economic objective of increasing energy efficiency. It will also provide incentives for the introduction of low-carbon technologies, which, combined with a stable market, will set the right course in line with changing behavior.

23

 Read more at: Nordic countries are bringing about an energy transition worth copying, 2017.

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In the future, the requirements and demand for clean, secure and sustainable energy supply solutions will grow particularly rapidly. This means additional opportunities for a competitive Nordic business. This in turn makes it necessary to put this issue at the centre of attention and advanced measures to create and disseminate knowledge about innovative energy technologies (Nordic Energy Innovation 2007; Midttun and Koefoed 2005).

11.2  C  ooperation in Energy Policy: Effective Remedy for the Contemporary Challenges in Energy Security The Nordic region has a wide diversity of primary energy sources, comprising petroleum, nuclear power, and renewable energy sources such as hydropower, biomass, wind power and geothermal energy. Norwegian oil and natural gas dominate the region’s primary energy supply. Renewable energy production in the Nordic countries is dominated by biomass and hydropower. Sweden is the leading producer of renewables, dominated by biomass and hydropower. Second is Norway with its abundant hydropower. Third is Finland, mainly dominated by biomass. Iceland has geothermal and hydropower, and last comes Denmark with wind power and biomass. Electricity production in the Scandinavian region exceeded 400 TWh already in 2010, of which 83% were carbon neutral and 63% came from renewable sources. Hydropower represented about half of the production: more than 50% of it came from Norway (118 TWh). It is noteworthy that the share of production from sources other than water has increased, e.g. in Denmark biomass, gas and wind as a source of energy replacing coal in power stations. The percentage of wind-generated energy grew from 12% in 2000 to 21% in 2011 (Jørgensen 2016). When electricity production in Finland was dominated by coal-fired power plants and nuclear power, Iceland produced 100% electricity from renewable sources: 74% from hydropower and 26% from geothermal energy. Norway has 95% hydropower, one gas-fired combined cycle power plant and a relatively small share of wind power. In Sweden, hydroelectric, nuclear and biomass power plants are the main sources of electricity. The end-use sectors, i.e. industry, households and transport, account for one third of total energy consumption. The largest increase in consumption was in the transport sector and in commercial buildings, each with a 30% increase over the last 20 years. Industry accounts for 40% of the region’s electricity consumption, which is related inter alia to the high electricity demand of the aluminum manufacturing industry (Iceland). If one adds the cold climate and related heating needs, the high electricity consumption in Iceland, Norway, Sweden and Finland in particular is not surprising. The Nordic region is a net exporter of energy, led by Norway’s oil and gas exports. In 2011, the primary energy production was close to the double that of final energy consumption. Norway’s exports account for 82% of Nordic exports, while

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oil and gas also account for the largest share of imports, primarily to meet the demand in the transport sector. In addition to electricity trade among its participating countries, Nord Pool spot trades with Russia, Germany, Estonia, Poland and the Netherlands. Finland has been a net importer, purchasing power from Russia and to a lesser extent from Estonia. Norway, Sweden and Denmark fluctuate, being net exporter for 1 year and net importer for another, depending on the climate. It is worth noting, however, that in the Nordic region, renewable energy sources have seen significant, quantitative and qualitative increases in potential and importance in recent years, thanks, among other things, to the Kyoto Protocol24 and the general desire to develop a green energy policy. The European Union is the first community in the ranking of renewable energy production and its objective is to achieve 20% of total energy consumption using clean energy by 2020 (http://ec. europa.eu/eurostat/data/database). Hydropower is the third source of electricity in the world, overtaken only by coal and gas. Although China, North America and Brazil are the three largest hydropower producers, this type of energy plays a key role in Europe: on this continent it accounts for 10% of electricity and 46% of renewable energy. Norway, Sweden, Finland and Iceland are the most developed countries in this field due to their favorable geography and avant-garde energy policy (http://www.energies-renouvelables.org). In Denmark, the use of renewable energy sources and fossil fuels is now evenly distributed. Unlike in other Scandinavian countries, hydropower production is almost non-existent there. The wind energy sector has dominated the share of renewable energy sources, covering 33.6% of the national electricity mix, and is still growing: the energy agreement adopted by the Parliament in March 2012 aims to cover 50% of the country’s electricity demand (using wind energy) by 2020. The biomass sector also plays an important role as it accounts for 13.8% of total production. In 2012, the pace of development of photovoltaic energy, which has been developing very rapidly since then, increased sharply. Finland is also on track to develop renewable energies. In 2012, clean energy became the first source of electricity in the country and overtook nuclear power, which then had a significant share in the national electricity system – 32.8% (Energy consumption in Finland) and fossil fuels – 26.8%. Currently, production capacities per energy source are as follows: nuclear power – 33.7%; water power – 23.6%; renewable energy – 21.5%. Thus, water power is the leading source of renewable energy and is essential for Finland’s energy mix; it accounts for 50% of renewable energy production. The potential of the biomass sector in Finland is huge, given that forests cover 85% of its land. Moreover, unlike other renewable sources, biomass can offer stable energy production over time. Due to its high consumption of primary energy, Finland stands out from its Nordic neighbors, and its energy policy is  During the first Kyoto Protocol period, clean energy production increased significantly; in 2013 it was 24.3% of total production, which meant that between 2003 and 2013 the increase was 84%, http://www.hidroproyectos.com/en?n=NORDIC-COUNTRIES-AND-RENEWABLEENERGIES 24

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constantly geared towards reducing dependence on fossil fuels and meeting its Kyoto commitments. Its main objective is to reduce greenhouse gas production to 80% by 2050. Iceland is one of the leading countries using renewable energy sources. In this country, 100% of the electricity comes from renewable energy sources: 71.7% comes from hydroelectric power plants and the remaining 30% from geothermal energy. However, its hydrological potential is far from being fully exploited and about 30 TWh of additional electricity can be used every year. In addition to the importance of hydroelectric power, Iceland has one of the largest geothermal energy potentials in the world, which enables it to satisfy 90% of its heating needs. The intensive use of renewable energy has allowed the country to reduce its greenhouse gas emissions. Norway, in turn, has developed a unique energy model in Europe. Almost all of its energy needs are powered by renewable energy due to its unique hydrological potential. The country is the first hydropower producer before Sweden and Austria. Norwegian hydropower capacity increased by 17% between 2011 and 2012, and at the beginning of 2019 represented 93% of domestic hydropower production and 24.1% of European hydropower production (WorldData.info). Although the country’s economic growth has been based on hydrocarbon exploitation since 1960, it is characterized by low carbon dioxide emissions. Norway acceded to the Kyoto Protocol in 2008 and reduced its emissions by 9% between 1990 and 2012. In addition, it plans to reduce emissions by a further 30% by 2050. Sweden is also, or perhaps above all, in favor of the development and use of renewable energies. In 2012, 58% of energy was produced using clean energy, which means achieving the target 8 years before the deadline (2020). Its total production capacity is 347.51 bn kWh (https://www.worlddata.info/europe/sweden/). Water is not the only resource suitable for use in this country; there is still a growing potential of biomass (with a 9.9% increase over the last 10 years) and wind power with an annual growth rate of 28%. More than half of the electricity consumed in the country comes from renewable sources. Although Sweden is an excellent energy consumer, its CO2 emissions per capita are the lowest in Europe, which is a great success in energy policy. As one can see, the renewable energy sector in the Scandinavian countries is increasingly important and the potential is growing. Currently, 67% of the energy in these countries comes from renewable sources and, at the same time, these States own 4.5% of the CO2 emissions in the European Union (http://www.actu-environnement.com). These figures are the result of the combination of a huge amount of natural resources, the important role nature plays in the minds and myths of the peoples of this region, flexible legislation, social support and social and political volunteering that helps to develop this type of policy. This success is also the result of many years of deepening cooperation between the Nordic countries. In short, these are the most important initial findings shaping the Nordic states’ capacity to address today’s energy challenges, which could only be addressed through a formula for the widest possible cooperation (initially in the oil and gas sector), responding to the political desire to develop the energy market. As Birte

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Holst Jøergensen rightly states (2016, p. 1): “A common interest in developing a reliable, sustainable and affordable energy system was the main driver for the Nordic energy policy cooperation since the creation of the Nordic Council of Ministers. The diversity of the energy systems in the Nordic countries facilitated this cooperation, not least in the power sector. Over the years, five focus areas have been addressed. Energy security of supply triggered the Nordic cooperation with the need to develop a long-term energy policy. This required decision-making support and energy systems analyses based on reliable and valid data, modelling and policy scenarios.” This Nordic cooperation in the field of energy policy dates back to the establishment of the Nordic Council of Ministers25 to become, over the years, an important area of cooperation with high political ambitions aimed at creating a well-­ functioning, sustainable, environmentally friendly and secure energy system within and above the borders. The cooperation has led to a number of significant successes, such as the liberalized Nordic electricity market and Nordic Energy Research, and has resulted in numerous reports, discussions and visions, some of which have never been implemented.26 We can divide Nordic cooperation on energy policy into four periods27: –– the first period: 1972–1988, which is a construction phase,28 characterized by parallel regional cooperation between Scandinavian countries and the European Economic Community (EEC), which Denmark joined with the United Kingdom in 1972, while Iceland, Norway and Sweden remained in the European Free Trade Association (EFTA). The oil crisis of the 1970s put energy policy high on the political agenda, which in turn meant that a robust national energy policy had to be developed for each of the Norden countries.29 At the regional level, Nordic

 When the Nordic Council of Ministers was established in 1972, a separate Nordic Council of Ministers and a Nordic committee of senior officials for industry and energy were set up, also supported by similar resort ministries in several member states. The Nordic Industrialisation Foundation issued grants and loans to technical and industrial research, Nordtest provided cooperation on materials research, and the Nordic Investment Bank (NIB) supplied important financial instruments to facilitate the cooperation, also in the energy sector. 26  A good example in this regard is the matter of cooperation between Swedes and Norwegians. Following the first oil crisis, the Swedish government in 1974 approached the Norwegian government to discuss Nordic cooperation on oil and gas. Norway had little interest in Nordic cooperation and continued to give concessions to multinational companies in the exploration phase and to favor its own industry during the production phase. Further 8 attempts to give preferred exploration access to Swedish Volvo Petroleum also failed. Although a bilateral agreement on energy cooperation between Norway and Sweden was concluded, but it never played a substantial role. 27  The division into the first three periods follows the analysis carried out by Birte Holst Jørgensen 2016. The added fourth period is a result of the author’s analyses and reflections. 28  The first meeting of the Nordic Energy Ministers in 1980, which outlined the scope of joint activities related to the planning and development of the Nordic energy sector, should be considered the formal start of Nordic cooperation in the field of energy policy. 29  At the end of this period nuclear power was seriously challenged following the US Three Mile Island accident in 1979 and the Russian Chernobyl accident in 1986. 25

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Energy Ministers agreed on a joint 4-year Action Plan for Energy Cooperation, which focused on energy efficiency, including: –– –– –– ––

energy research and new technologies; energy planning; oil, gas and coal; trade in electricity and infrastructure.

So the first period of Nordic cooperation in the field of energy policy began as an integral part of economic cooperation between the Nordic countries, and after the oil crisis, the countries of the region were ready to cooperate more closely in solving problems related to energy efficiency, research, planning and the very important oil, gas and coal sectors. Political attention was less focused on facilitating cross-border energy exchanges, which was mainly highlighted by the energy companies themselves and their advisory body, Nordel. In the research area there was a solid basis for strengthening cooperation, which led to the establishment of the Nordic Energy Research Programme (with direct national contributions) in 1985. –– the second period: 1989–2005, the time of breakthrough political and economic changes: the break-up of the Soviet Union in 1991, the reunification of Germany and the process of creating the European Union – Maastricht Treaty, 1992. These events had a strong impact on Nordic energy policy cooperation on energy markets, all the more so as in 1992 the European internal market became operational and the EEC and EFTA agreed to cooperate within the framework of the European Economic Agreement (EEA). Finland and Sweden became EU members in 1995, while Norway and Iceland remained in the EEA. The Nordic perspective on the perception of the neighboring countries and areas around the Baltic Sea changed, resulting in an openness to closer cooperation, especially with the three Baltic States that became EU members in 2004. Environmental and climate change issues were on the international agenda and the Kyoto Protocol was adopted in 1997 and entered into force in 2005. In the years 1989–1992 the first signs of the creation of a domestic energy market appeared. Previously, the Brundtland Commission Report “Our Common Future” (1987) and the need for sustainable use of energy sources were also noted, which meant in practice that Nordic cooperation could no longer take place independently of the development of other countries. The aim was to ensure a reliable energy supply, to increase energy savings and to take into account safety and environmental aspects through energy technologies. Against the backdrop of historical developments (in the Baltic States, Central and Eastern Europe and Russia) at the 1992 Nordic Council session, there was an urgent need to shape Nordic energy policy cooperation in such a way that priority could be given only to areas with high added value. These have proved to be electricity markets, climate issues and regional cooperation, where particular importance has been given to the following issues: –– Nordic energy market (oil and gas markets, electricity market); –– research and development;

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–– energy and environment; –– energy efficiency. Since mid-1995, political emphasis has shifted significantly towards Scandinavian electricity markets, all the more so when attention is drawn to ongoing EU action resulting in EU directives of 1996 and 1998 defining common rules for the internal market in electricity and natural gas and pressing for transmission generation and unbundling. Further developments followed the bilateral electricity market between Norway and Sweden, which created the Nord Pool common electricity market in 1996. They soon joined the market: Finland  – 1996 and Denmark  – Western Denmark in 1999 and Eastern Denmark in 2000 (Bredesen and Nilsen 2013). Nord Pool as a wholesale electricity market has become a role model for the development of cross-border electricity markets, implying supply reliability, competition and efficiency. Thus, the years 1989–2005 are a period of cooperation within the Nordic energy policy, characterized by the development of energy markets, care for the environment and geopolitical changes. Cooperation in gas infrastructure and markets remained at an exploratory stage. There is no doubt that the Nordic countries have sought common ground in their international activities around the Energy Charter Treaty. The liberalization of the Nordic electricity markets was agreed in 1995 and the decisive step was the transformation of the program into a Nordic institution in 1999. Thus, cooperation in the Nordic countries’ energy policies has become increasingly adapted to the environmental challenges of the energy system, in particular those related to sustainable energy sources and climate change. –– the third period: 2006–2017 was dominated by two main issues: security of energy supply and climate change. The first of these became increasingly important in Europe in January 2007 when, as a result of the Russian-Ukrainian conflict over gas supplies and related payments, gas supplies from Russia to Europe were effectively blocked.30 At the same time, international negotiations on the post-Kyoto regime focused on climate challenges at the global level. The EU responded to these challenges by launching ambitious 20-20-20 targets for 2020, which required Member States to increase the share of renewable energy in the energy system and to reduce greenhouse gas emissions and energy consumption. At the same time, the Third EU Energy Package31 paved the way for even greater integration of European energy markets. In 2008, the Nordic countries and the rest of the world were hit by the financial crisis, resulting in a change of approach

 More on the subject in Czarny 2009, pp. 28–42.  The first energy package in the late 1990s allowed the opening of the electricity and gas markets and a gradual introduction of competition. The second energy package in 2003/2004 focused on the concepts of unbundling and third-party access, and defined the need for independent regulatory authorities. The third energy package in 2007 established an unbundling regime and defined the duties of national regulatory authorities. It also improved consumer rights, and promoted regional solidarity and national emergency measures in times of severe disruption to the gas supply; see also http://fsr-encyclopedia.eui.eu/eu-energy-legislation-packages/ 30 31

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whereby energy security of supply and climate change took the form of economic concerns about job creation, growth and competitiveness. Despite the fall in oil prices in autumn 2014, energy security of supply, climate issues and competition remained high on the European agenda. In February 2015, the European Commission launched the European Energy Union package with five mutually enforcing and closely interlinked dimensions: energy security; a fully integrated European energy market; energy efficiency; a low-carbon economy; and research and innovation (European Commission 2015). At that time, cooperation in the field of energy policy of the Nordic countries, described in Action Plan for Nordic Energy Cooperation 2006–2009, corresponded to the vision of the Norden energy ministers of 2004 expressed in the following formula: “The Nordic Energy Cooperation will play a strong and active role in the development of Nordic and European energy policies (Jørgensen 2016). Its key areas were as follows: –– energy markets; –– development of sustainable energy systems (renewable energy, energy efficiency, climate and sustainable energy in sparsely populated areas); –– research and development of energy technologies; –– international cooperation (impact on the EU agenda and regional cooperation). It follows then that the overall objective of cooperation in energy markets was to provide the best possible framework for the development of Nordic markets, where the ambition was to create a borderless electricity market with effective external trade. According to the resolutions of the Norden energy ministers (in 2004 and 2005), the electricity market was to become a well-functioning regional market, characterized by many entities and a high level of security of supply, competition, sustainable development, transparency and flexibility of consumption (Action Plan 2005). The next step was undoubtedly the Action Programme for Nordic Co-operation on Energy Policy 2014–2017 (2014), in which, in addition to the wholesale market, Nordic energy ministers decided to create a common Nordic electricity market for end-users. As the Nordic electricity market was well advanced compared to the rest of the EU, the ambition was to jointly monitor the new regulatory framework of the third EU energy package and to ensure that it does not interfere with a well-­ functioning Nordic market. Due to the higher share of renewable energy sources in the system, much attention has been paid to the importance of storage, especially in isolated or sparsely populated areas away from central transmission networks. Within sustainable energy systems, renewable energy was considered an area where the Nordic countries were ahead of the EU, albeit with significant differences in resources, technologies, policies and mechanisms. The 2006–2009 Action Plan commissioned a number of studies, including a comparative analysis of the Nordic framework conditions for renewable energy, as well as an analysis of the expansion of the Swedish-Norwegian green certificates market into the Nordic green electricity market.

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In turn, the 2010–2013 Action Plan32 lists specific technologies, including wind and geothermal energy, as well as the prospects for developing more efficient transport solutions. These activities included: exploring possible cooperation on issues related to EU directives on renewable energy sources; promoting the integration of renewable energy into the system (largely related to Nordic competences); and cooperation in the field of wind energy and planning. The framework conditions for renewable energy were again highlighted, recognizing that each country should choose its support scheme according to its own conditions and policies (which may have an impact on new investments in the Nordic electricity sector).33 The Action Plan 2010–2013 did indeed address the implementation of the EU Energy Efficiency Directive adopted in 2012, including the Ecodesign Directive. It was also more specific for three end-use sectors (end-users): housing, transport and industry. The opportunities and prospects for influencing international negotiations on product labelling and standardization were also given particular importance. The above gives the opportunity to distinguish two successes in this period which undoubtedly are: the Nordic electricity market and cooperation in energy research. Most importantly, both have developed well beyond knowledge sharing, exchange of experiences, best practices and learning to become a model for regional energy cooperation. Wider regional cooperation has been strengthened in the context of the Baltic Sea and North Atlantic regions.34 Thus, cooperation on Nordic energy policy, while being part of the EU’s Northern Dimension in the EU-Russia dialogue, has become increasingly integral to the development of a European energy policy. It was at the forefront of the Europe 2020 strategy objectives of ambitious national policies, sharing knowledge on these policies (e.g. Support Mechanisms) and demonstrated achievements in the Scandinavian electricity market and research cooperation. In the light of the European response to climate challenges and security of energy supply, in the name of properly understood energy security, Nordic cooperation continued to prioritize those areas that brought added value to the energy sector. –– the fourth period: 2018–2021 has aimed to increase Nordic cooperation on energy issues as EU processes and energy policy initiatives affect all Nordic countries, whether they are Member States or part of the EEA. Despite national differences in energy resources and the way energy sectors are organized, there is a strong Nordic interest in working together to influence the ongoing Europeanisation and globalization of energy policy processes. The Nordic countries are in a stronger position to reconcile their positions on particular issues. This position is further strengthened when they inform each other of their views and

 See Danish Energy Regulatory Authority 2013.  Thus, the scope of Nordic cooperation was dependent on finding common ground. See Henning and Togeby 2006. 34  See Vetlesen. For comparison see A Toolbox for Regional Energy Cooperation. Regional Steps Towards an Energy Union. 32 33

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proposed solutions to energy policy problems at a national, regional, European and global level. In other words, the vision for Nordic energy cooperation is to develop the Nordic energy systems through strong, trust-based and flexible cooperation in order to secure the smartest, most integrated and intelligent green economy in the world with high competitiveness and security of supply. According to this vision, energy cooperation should ensure a stable and secure energy supply, a properly functioning energy market and sustainable growth and prosperity for the people of the Nordic region. Energy cooperation should also help to achieve ambitious national environmental and climate targets. In the period 2018–2021, Nordic energy cooperation will focus on the following areas in particular: –– –– –– –– –– –– –– –– –– ––

further development of the Nordic electricity market; renewable energy; energy efficiency; information exchange and dialogue on energy policy and the Nordic Strategy; energy research and innovation, through Nordic Energy Research; the Nordic region in Europe, including the implementation of the EU Energy Union; neighborhood countries, in particular the Baltic States; energy-related transport issues; Energy sector in the Faroe Islands, Greenland and Åland; other horizontal programs and projects, as well as international cooperation.

The Directive Concerning Measures to Safeguard Security of Electricity Supply and Infrastructure Investment will also be replaced by a new risk preparedness in the Electricity Sector Directive. It is important that negotiations on new legislation focus on the Nordic dimension to ensure that no legislation is adopted that could hinder a well-functioning, single Nordic electricity market. It is also important to ensure the right balance between decisions to be taken at the EU level and those that are national issues. As the Nordic electricity market is more advanced than the rest of the EU in several areas, the Nordic countries can make a significant contribution to the development of the single European market. Making sure this happens has been identified as a top priority in the Nordic energy cooperation. In the new programming period, work will therefore continue on the development of Nordic positions and communicating them to the relevant bodies (e.g. the European Commission, the European Parliament and the Member States), all the more so since, in line with the winter package (2016),35 the European Commission’s legislative program focuses on regional cooperation. Negotiations are currently underway on specific provisions to be implemented during the period covered by the program (2018–2021). It is important that the Nordic region, with its many years of experience in regional cooperation, brings knowledge and advice to this process. A more harmonized retail

35

 More on the subject in Hancher and Winters 2017.

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market, with more freedom of choice for consumers and stronger competition between suppliers, will make the electricity market more efficient. It is already clear today that an ambitious national policy has helped the Norden countries to achieve some of the highest percentages of renewable energy in Europe’s energy mix. This has been achieved through measures such as support mechanisms – for example, Sweden and Norway have a common certification system, Denmark has put offshore wind farms on the market and Finland has a renewable energy bonus system. Exchange of information on these support mechanisms for renewable energy will remain an area of interest, as will knowledge of how each country’s policies affect its neighbors, e.g. through the electricity market. Given the fact that the transport sector is absolutely crucial for the achievement of the primary national climate and energy policy objectives (especially as it is a sector that uses most fossil fuels), particular importance has been given to this energy-related area. In the new programming period, closer cooperation will be a priority, as an efficient transport system requires effective technical solutions and cross-border cooperation. Proposals for a strategic review of the common approach to transport and the use of the entire Nordic region as a testing ground for new technologies will be part of the work on strengthening energy cooperation in Scandinavia in the transport sector. Due to the complexity of the issue, closer energy cooperation in transport will primarily focus on parts of the sector that are considered to have the closest links to the energy sector, e.g. electrification and the use of biofuels (and biogas) for land, sea and air transport. Focus will be placed on issues of common interest such as standardization, infrastructure, information, instruments, business models, impact on the single Nordic electricity market, etc. Emphasis will be put on issues of common interest such as standardization, infrastructure, information, instruments, business models, impact on the single Nordic electricity market, etc. The implementation of the EU proposed revision of the Directive on the promotion of the use of energy from renewable sources (RES Directive), which covers the transport sector, could give additional impetus to closer Nordic cooperation in the field of energy in transport. The Nordic Energy Cooperation Programme 2018–2021 will coincide with the conclusion of negotiations on a broad range of EU legislation and the early stages of new legislation to implement the EU’s headline targets for 2030. Through intensive energy work, the Union has led to a significant modernization and improvement of legislation to achieve its climate targets by 2030.36 Contacts with the Baltic States (including within the EU) will continue in the new programming period, including through the Baltic Energy Market Interconnection Plan (BEMIP) as well as separate Nordic initiatives. Closer cooperation on energy technology with the Baltic Republics will also be assessed on the basis of the work of the NEF on Baltic Energy Technology Perspectives. This applies in particular to the EU/EEA forum and other

 In particular, the “winter package,” which consists of eight separate pieces of legislation, has the potential for Nordic energy cooperation. 36

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Nordic forums such as BEMIP, the Pentalateral Energy Forum, the Offshore Wind Initiative in the North Sea, the Baake Initiative. Thus, the new program continues to pursue a vision of close cooperation on electricity in the region with a strong emphasis on exchange of information on energy policy as we approach 2030 (Nordisk Ministerråd 2017). However, the main aim is to be able to influence the negotiation and implementation process in the EU/ EEA by working together. As stated by Terje Søviknes: “It is important that all Nordic networks and agencies exert influence where we have shared interests. We must learn from each other whenever we identify potential synergies in the implementation of EU policies and regulations” (Søviknes 2017). In other words, the continuation of close cooperation on European issues is not only one of the most important prerequisites for good cooperation between the Norden States in the field of energy, but also a prerequisite for a comprehensive and multi-faceted understanding of the energy security of the region and individual countries. I am convinced that it was the need for energy security that initiated Nordic cooperation on energy policy. Its aim was, among other things, to develop a long-­ term energy policy, and also to ensure the necessary building of the competences of national experts in this field. Links were established between governments and the energy sector advisory body on long-term planning. In the 1990s, the experience in the field of energy security was transferred to neighboring areas (the Baltic States and North-West Russia), which at that time also had to develop their energy policies in order to achieve a high level of security, diversity and efficiency. Recently it has become increasingly clear that Nordic energy policy is an integral part of EU energy cooperation. On the one hand, the EU is setting the overall agenda, but on the other hand, the Nordic countries are trying to adapt in such a way as to have an increasing influence on EU policies. There is also no doubt that, through state-of-the-art research and cross-border interconnections, the Nordic region is paving the way for future sustainable energy systems.

Bibliography A Global Guide. Business and Sustainable Development: IISD International Institute for Social Development. Retrieved May 13, 2019 from https://www.iisd.org/business/tools/bt_4r.aspx A Toolbox for Regional Energy Cooperation. Regional steps towards an energy union. (2016). Retrieved from http://www.benelux.int/files/2514/7688/2134/521-Toolbox-DEF.pdf Action Plan for Nordic Energy Cooperation 2006–2009 (2005) Copenhagen: Nordic Council of Ministers. Retrieved from http://norden.diva-portal.org/smash/record.jsf?pid=diva2%3A7014 49&dswid=-9251 Action Programme for Nordic Co-operation on Energy Policy 2014–2017 (2014) Nordic Council of Ministers, Copenhagen. Retrieved from https://www.norden.org/en/publication/ action-programme-nordic-co-operation-energy-policy-2014-2017 Bevernage E, Energy culture. Low hanging fruit for business? [PDF document]. Retrieved from www.stanford.edu Borup M, Andersen PD, Jacobsson S, Midttun A (2008) Nordic energy innovation systems – patterns of need integration and cooperation. Nordic Energy Research

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BP Statistical Review of World Energy 2012. Retrieved from https://www.laohamutuk.org/DVD/ docs/BPWER2012report.pdf Bredesen HA, Nilsen T (2013) Power to the people: the first 20 years of Nordic Power-Market Integration. Nord Pool Spot/Nasdaq OMX, Oslo Brundtland GH, World Commission on Environment and Development (1987). Report of the World Commission on environment and development: “Our common future”. United Nations, New  York. Retrieved from https://www.are.admin.ch/are/en/home/sustainabledevelopment/international-cooperation/2030agenda/un-_-milestones-in-sustainabledevelopment/1987%2D%2Dbrundtland-report.html Climate 2050: The road to 60–80 percent reductions in the emissions of greenhouse gases in the Nordic countries (2007) Nordic Council of Ministers, Copenhagen Czarny RM (2009) Energy Dilemmas of the Nordic Region Countries. Scandinavium, Kielce Czarny RM (2017) A Modern Nordic Saga: Politics, Economy and Society. Springer International Publishing, Cham Danish Energy Regulatory Authority (2013) 2013 National Report To the European Commission Denmark. Retrieved from http://forsyningstilsynet.dk/fileadmin/Filer/Information/Diverse_ publikationer_og_artikler/2013NationalreportC13_NR_Denmark-EN.pdf DEA [Danish Energy Agency] (2012) Energy policy in Denmark. Retrieved from www.ens.dk Ecodesign Directive. https://www.lot20.co.uk/ecodesign-directive Energy consumption in Finland, WorldData.info. Retrieved January 10, 2019 from https://www. worlddata.info/europe/finland/energy-consumption.php Eskeland GS, Rive NA, Mideksa TK (2012) Europe’s climate goals and the electricity sector. Energy Policy 41:200–211 EU energy and transport in figures. Statistical Pocketbook (2010) European Commission, Directorate-General for Energy and Transport. Office for Official Publications of the European Communities, Luxembourg Facts on Nordic Co-operation. Retrieved September 29, 2008 from www.norden.org/fakt Frączek P (2012) Wybrane aspekty zmiany polityki energetycznej Szwecji. Polityka Energetyczna – Energy Policy J, 15(3) Frączek P (2014) Kultura energetyczna krajów nordyckich. Nierówności Społeczne a Wzrost Gospodarczy, 3/2014(39). Retrieved from https://docplayer.pl/3543101-Kultura-energetycznakrajow-nordyckich.html Hancher L, Winters BM (2017) The EU winter package briefing paper. Allen & Overy, Amsterdam. Retrieved April 21, 2019 from http://fsr.eui.eu/wp-content/uploads/The-EU-Winter-Package. pdf Henning D, Togeby M (2006) Climate Change and the Future Nordic Energy System with focus on the electricity system [PDF document]. Retrieved from https://www.researchgate.net/publication/240626283_Climate_Change_and_the_Future_Nordic_Energy_System_-with_focus_ on_the_electricity_system Jägerhorn I, Valtersson K (eds) (2008) Makt och vanmakt i klimatförhandlingarna: [en rapport skriven av Inger Jägerhorn på uppdrag av Föreningen Norden och Global utmaning]. Norden, Stockholm Jørgensen BH (2016) Nordic Energy Policy Cooperation: forum paper. In: ASEAN Energy Market Integration (AEMI) forum: energy security and connectivity: the Nordic and European Union approaches ASEAN Energy Market Integration Knowledge driver growth: An initial report by the Globalisation Council (2007). Swedish Globalisation Council. (Publication No. Ds 2007:38). Stockholm: Swedish Government Łucki Z, Misiak W (2010) Energetyka a społeczeństwo: Aspekty socjologiczne. Wydawnictwo Naukowe PWN, Warszawa McCormick K, Neij L (2009) Experience of policy instruments for energy efficiency in buildings in the Nordic countries. International Institute for Industrial Environmental Economics (IIIEE), Lund University

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Mideksa TK, Kallbekken S (2010) The impact of climate change on the electricity market: a review. Energy Policy 38(7):3579–3585 Midttun A., Koefoed AL (2005, January 1) Green innovation in Nordic energy industry: systemic contexts and dynamic trajectories. Towards environmental innovation systems. Retrieved from https://www.researchgate.net/publication/302541859_Green_Innovation_in_Nordic_Energy_ Industry_Systemic_Contexts_and_Dynamic_Trajectories Nordic Energy Innovation, New trends in Nordic energy innovation, pre-seminar, 29 November 2007, Oulu – Finland, Norden, Nordic Energy Research. Retrieved from www.nordicinnovation.net Nordic Energy Research. Retrieved April 20, 2019 from https://www.nordicenergy.org/programme/ nordic-green-growth-research-and-innovation/ Nordic Energy Research and Nordic Innovation Joins Forces at the Nordic Clean Energy Week, Nordic Innovation (2018, May 21) Retrieved March 09, 2019 from http://nordicinnovation. org/no/nyheter/nordic-energy-research-and-nordic-innovation-joins-forces-at-the-nordicclean-energy-week/ Nordic countries demonstrate the potential of low-carbon energy policies (2017, August 10) European Commission. Science for Environmental Policy, 494. Retrieved December 05, 2018 from http://ec.europa.eu/environment/integration/research/newsalert/pdf/ nordic_countries_demonstrate_potential_of_low_carbon_energy_policies_494na4_en.pdf Nordic countries are bringing about an energy transition worth copying. University of Sussex (2017, January 27) ScienceDaily. Retrieved March 11, 2019 from https://phys.org/news/201701-nordic-countries-energy-transition-worth.html Nordisk Ministerråd (2017) Nordic programme for co-operation on energy policy 2018–2021. Nordic Council of Ministers Nordiska ministerrådet. Miljöavdelningen. Retrieved June 6, 2016 from http://www.norden.org/ sv/nordiska-ministerraadet/ministerraad/nordiska-ministerraadet-foer-miljoe-mr-m Nordiska samarbetet fortsätter att fördjupas, Regeringskansliet. Retrieved August 13, 2008 from www.regeringen.se/sb/d Pettersson M, Ek K, Söderholm K, Söderholm P (2010, December 1) Wind power planning and permitting: comparative perspectives from the Nordic countries. Renew Sust Energ Rev 14(9):3116–3123 Søviknes T (2017) Norwegian Presidency 2017. In: Nordic programme for co-operation on energy policy 2018–2021. Nordic Council of Ministers Sustainable Energy Systems 2050, Final Report. Nordic Energy Research. (2016, June). Nordic Council of Ministers. Retrieved April 20, 2019 from https://www.nordicenergy.org/wp-content/uploads/2016/09/SES-2050-1.pdf The Danish Government, 2011, Energy strategy 2050 – from coal, oil and gas to green energy. Retrieved from www.ens.dk The Nordic Environment Action Plan 2013–2018. Retrieved from http://norden.diva-portal.org/ smash/get/diva2:701437/FULLTEXT01.pdf Trafikafgifter og klimapåvirkning: Hvordan sænker vi bilernes CO2-udledning? (2009) Nordisk Ministerråd, Copenhagen Traktat o Unii Europejskiej. Retrieved from http://oide.sejm.gov.pl/oide/images/files/dokumenty/ traktaty/Traktat_z_Maastricht_PL_1.pdf Vetlesen J.  Current and future priorities for Nordic energy cooperation. Challenge for closer Nordic and Baltic cooperation [PDF document]. Retrieved November 17, 2018 from https:// www.norden.lv/Uploads/2017/09/11/1505122453_.pdf Wehle-Strzelecka S, Korczyńska A (2007, January 1). Ochrona środowiska w kształtowaniu współczesnej przestrzeni miejskiej w aspekcie idei ekologii miasta. Czasopismo Techniczne, 7-A/2007. Retrieved June 15, 2016 from http://suw.biblos.pk.edu.pl/resources/i5/i3/i9/r539/ WehleStrzeleckaS_OchronaSrodowiska.pdf WorldData.info. Retrieved April 19, 2019 from https://www.worlddata.info/europe/norway/ energy-consumption.php

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http://www.eea.europa.eu/ http://www.diva-portal.se/smash/get/diva2:702131/FULLTEXT01.pdf https://phys.org/news/2017-01-nordic-countries-energy-transition-worth.html https://www.nordicenergy.org/article/press-release-baltic-mou/, https://www.nordicenergy.org/ article/a-vision-for-nordic-energy-co-operation/, https://www.norden.org/en/organisation/ nordic-energy-research http://www.hidroproyectos.com/en?n=NORDIC-COUNTRIES-AND-RENEWABLE-ENERGIES http://ec.europa.eu/eurostat/data/database http://www.energies-renouvelables.org/observ-er/html/inventaire/Fr/sommaire.asp https://www.worlddata.info/europe/sweden/energy-consumption.php http://www.actu-environnement.com/ae/search/recherche.php4 http://fsr-encyclopedia.eui.eu/eu-energy-legislation-packages/

Conclusion

Of the 7.5 billion people on Earth, more than 55% live in cities today. By 2040 another 1.7 billion people will be added to the urban population,1 which in practice means a further increase in energy consumption.2 If we add to this the scale of the dynamic development of the so-called “new economic powers,” which means a rapid increase in energy demand, it is obvious that we need not only a deeper look, but above all a fully considered action to address the energy challenges in a rapidly changing world. There is an old African proverb that says: if you want to go fast, go alone, but if you want to go far, go together. The current situation in the energy world does not allow for a walking pace. There is no doubt that energy challenges are not only regional prospects, but also global problems that are increasingly demanding a response (climate, standardization, new technologies, prices). Even energy challenges at national or cross-border level are part of the wider energy landscape. Energy policy is at the heart of all public policies. All economists agree that public policies are necessary to provide cleaner and cheaper energy and to mitigate the transition from exclusive reliance on traditional energy sources. Acting in a market environment respecting fundamental freedoms, democratic governments develop and implement energy policies using a public policy toolkit that is similar across all public policy areas. It is useful to think about these tools in a broad sense, from mild to administratively difficult measures, and from financial to informative. Governments can provide information directly to consumers (and energy producers) to inform them of the consequences of their choices when they are not easily visible and understandable.

 The World Energy Outlook 2017 pictorially describes the situation saying that is it as if as the city of Shanghai was being added to world’s cities every 4 months. 2  Generally, as stressed by IEA, by 2040 global consumption of energy will be 30% higher than today. Higher income in cities adds to higher ownership of energy appliances and spurs demand for energy-intensive products – steel and cement for constructions, public transport and machinery, to name only some. 1

© Springer Nature Switzerland AG 2020 R. M. Czarny, The Nordic Dimension of Energy Security, https://doi.org/10.1007/978-3-030-37043-5

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There are many indications that worldwide policies will continue to support RES-based electricity (but more through competitive auctions than feed-in tariffs) and that the electricity transformation will be reinforced by millions of households, communities and businesses investing directly in distributed solar photovoltaic sources. RES growth will not be limited to the electricity sector only. Direct use of RES to provide heat and mobility worldwide is also doubling. In other words, energy has been and will continues to be the basis for civilizational development, and the need to preserve the environment and combat climate change forces rational management and adaptation of the way the energy sector functions to modern challenges. In particular, it is necessary to take into account the issue of energy security, which should be identified not only with the certainty of supplies of energy resources, but also, among others, with limiting the level of atmospheric pollution emissions, liberalizing the energy market, integrating this market, fulfilling the country's international obligations concerning the energy sector and minimizing the level of energy prices.3 As we have seen, the issue of energy security is a dynamic problem with a complex structure (which is confirmed by a number of previously quoted definitions). The essence of the division concerning the place of energy in contemporary politics is to distinguish the approach based on economics from the political-strategic (geopolitical) approach. Economists – treating markets as the main regulators – often believe that energy security is a kind of myth in which all potential threats are created by shortage/deficit of fuels or interruptions in their supply. On the other hand, foreign policy analysts claim that energy security is a factor of national security and should therefore be examined from both the political and economic point of view (Kaczmarski 2010, p. 13). However, the broad concept behind all definitions of energy security is that there is no or hardly any protection against or adaptation to risks caused or having an impact on the energy supply chain (Winzer 2012). The IEA defines energy security as the continued availability of energy sources at an affordable price. Continuous availability of energy sources is defined by several dozen elements, ranging from the identification of possible energy sources, through technology and production, to the transmission and distribution of final products. In addition, energy security somehow requires continued cooperation on solutions to respond effectively to emerging challenges in this field, such as the digitization of energy systems and their increased vulnerability to cyber-attacks, the growing share of developing countries in global oil consumption, the impact of climate change, security of supply problems and energy balance changes and the related need to adapt instruments to ensure continuity of energy supply to consumers.4 In this sense, it is therefore a contextual and dynamic category with an increasing practical focus on dimensions such as environmental sustainability and energy  See Żmijewski (2007), Łucki and Frączek (2012), pp. 177–215.  One of them is to ensure a harmonious transition to a low carbon economy – which is necessary to meet the international emission commitments made under the climate agreement adopted in Paris. 3 4

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e­ fficiency, in which global and regional trends as well as concrete actions in energy policy play an important role (Pronińska 2012, p. 55). After all, energy security is one of the main objectives of energy policy, although it is difficult to measure it as well as to balance it with other objectives which are also reflected in political action. It is all the more worth remembering that various instruments for protecting energy security have been developed continuously for decades, taking the form of both short- and long-term solutions. While the ability of the energy system to react quickly to sudden changes may rely on robust demand reduction measures for a short period of time, long-term tools require more structured supply-side investments in line with policies and socio-economic developments. Whatever the approach, energy security cannot function without one key player, i.e. the governments that are ultimately solely responsible for ensuring energy security for their citizens and applying a whole range of solutions, both at national and regional level, with an integrated level of markets. It is at these levels that a consistent policy of optimizing the use of domestic raw material resources and diversifying their supply is required. In this context, and without returning to disputes and discrepancies in interpretation both in the doctrine and practice of functioning,5 in a situation where energy has become one of the main topics of political strategic reflection and access to gas one of the most important prerequisites for economic competitiveness, we should agree that energy security is becoming synonymous with national security and, by the same token, economic security. Such an approach is a broad variant taking into account not only the aspect of EU policy, but also the economic needs of the state and social problems, where decisions taken at the government level create trends in the market. In view of the above, the energy security of the Nordic countries, the European Union, the whole of Europe and the world should be considered in close connection with the observed developments. It is hardly surprising if we are given evidence time and again that the near future is, to a large extent, the property of those who own energy resources. It should also be remembered that energy is a very dynamic market, where mobility means both security and higher profits. Pure interest in the safe and most beneficial energy raw material, manifested for some time on the margins of the diplomacy of most Nordic countries, has now found itself in its strategic center. If we analyze the possible rivals and risks in the efforts to secure energy supply and recognize the likelihood of conflicts over oil and gas, we have a new, extremely important division which I would call the Nordic countries' foreign energy policy. Its theses not only warn, but also cause some regrouping of national diplomacy, because it seems that, to a greater extent than before, the issues of energy problems determine their relations with countries  – exporters, transit countries and other energy users. Thinking about the future of the energy sector forces us to take up inevitable challenges in the area of climate change, security of energy supply, energy prices and a number of other problems to be solved. The Nordic concept of sustainable develop-

 See Chap. 1.

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Conclusion

ment has three interdependent, complementary dimensions: economic, social and environmental. Strategies, targets and priority areas for climate and renewable energy; sustainable production and consumption, Nordic quality of life as a tool for sustainable development, and education and research have been adapted to them. Over the last 40 years, the Nordic countries have been able to record significant achievements through working together on the environment, combining economic growth and social development with ambitious environmental policies, as well as activities aimed at improving the environment both within and outside the Nordic region. The vast majority of Norden's inhabitants have no doubt that renewable energy should replace fossil fuels to enable people to become independent of their limited resources and reduce CO2 emissions into the atmosphere. The current development of technical and technological knowledge is to enable the application of new ways of efficient use of energy. If, against this background, an attempt were made to capture the Nordic philosophy of energy security in a synthetic form, it would be as follows: promoting diversity, efficiency, flexibility and reliability for all fuels and energy sources, not forgetting economic development aimed at supporting open markets in order to boost economic growth and eliminate energy poverty. Environmental awareness, understood as the need to analyze policy options to balance the environmental impacts of energy production and use (in particular climate change and air pollution) and to work closely with associated countries and other partner countries (in particular major emerging economies) to find solutions to common energy and environmental problems, plays an important role in this respect. This approach must bear in practice a whole range of political and economic implications, both for the Scandinavian countries and for their cooperation with each other. Particular attention is paid to the full compliance and dependence of the state’s energy security with the so-called climate security. The countries of Northern Europe are world leaders in the use of renewable energy sources. As a whole, they represent a very broad spectrum of competences and techniques for the efficient use of various energy sources, ranging from bioenergy, solar and wind energy to geothermal energy.6 In other words, they cover practically the entire package of current possibilities in this area. This is also noted by the European Parliament, stating inter alia: “... offshore wind in the North Sea region has the potential to generate more than 8% of Europe’s energy needs by 2030; further notes that coordination of planning and construction of regional offshore grid infrastructure, market access and reserve sharing in the North Sea region by 2030 could save EUR 5-13 billion annually through a more integrated regional market” (Rezolucja Parlamentu Europejskiego 2015). The major and even complete transformation of Nordic energy systems towards renewable energy sources, which is only a matter of time, fits in perfectly with this formulation. Future energy systems are based on a comprehensive approach involving electricity, heating and cooling and energy efficiency, including

 See Czarny (2008).

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energy storage systems and modern smart grids. The prospect of replacing fossil fuels with renewable energy sources has never been so close. Sometimes the surplus electricity produced by Danish wind turbines is used by the neighboring countries Germany, Sweden and Norway. Iceland is also doing better and better with the production of electricity from RES, which thanks to investments in hydroelectric and geothermal power plants not only fully covers the country's demand, but has also joined the group of energy exporting countries. As a result of consistent actions, the Nordic energy market is considered to be one of the most developed in the world, which contributes to increasing the certainty of energy supplies to end users, minimizing the ecological consequences of energy management and increasing the competitiveness of the economy. The changes that have taken place in the past half-century in the energy policy of these countries were mainly related to the following issues: –– covering the growing demand for primary energy; –– reduction of dependence on oil imports; –– diversification of the structure of primary energy sources. These changes were possible thanks to consistent actions of state institutions and growing environmental awareness of the society, expecting the application of the concept of sustainable development in its energy policy. In the future, as everything seems to indicate, the energy balance of some of the Norden countries will continue to be based on hydropower, which already has enormous potential. At the same time, we should expect a relatively fast increase in the significance of other RES, which is related to the ongoing research and development work on new renewable sources and the techniques and technologies applied in this area. The dissemination of natural gas and wind turbines will also be of great importance for the future energy policy. The carried out considerations indicate that the basis for actions aimed at increasing the security of energy supply in the Nordic countries has become diversification of energy sources and support for the importance of fuels, the use of which does not pose problems of atmospheric pollution emissions, and at the same time increases independence from imports of energy resources. It has been important to create and transform the electricity market, resulting in increased security of supply and lower energy prices for end users. It should be stressed that the energy policy of the Norden countries is largely determined by the energy culture, which consists of an active and conscious attitude of decision-makers, social and political organizations and citizens themselves who are interested in maintaining low prices of clean energy that are beneficial to society and the economy. In my opinion, the Nordic experience can be an interesting model, an impetus for action that contributes to the modernization of the energy sector in other countries. In this respect, the following issues are of particular value:

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–– making the public aware of the importance of promoting cost-competitive energy sources in order to improve the situation of the national economy and to maintain and create jobs; –– obtaining the support of all the actors on the social, political and economic scene for taking action to change the structure of primary energy sources so that it is possible to bring about a rapid modernization of the energy sector aimed, among other things, at increasing the competitiveness of the economy and reducing the impact of the energy sector on the natural environment: –– changes in the perception of the country’s energy security, taking into account the full cost of using fossil fuels and the environmental consequences of burning them, which will prevent the country from fulfilling its international obligations resulting from the energy and climate change package. The Nordic countries have practically decided on the direction of changes in their energy systems. Although they have done so consistently for at least three decades, the fact that Denmark, Finland, Iceland, Norway and Sweden have announced ambitious targets for the decarbonization of their energy systems (Sustainable Energy Systems 2050) has created a new, irreversible situation and at the same time an opportunity to make a significant technical and technological leap towards a carbon-neutral energy system by 2050.7 Without doubt, the Nordic countries are front-runners in taking decisive action toward clear, long-term energy targets. In examining their approach, the Nordic Energy Technology Perspectives aims to provide objective analysis that will increase the Nordic region’s chances of success. The secondary – but ultimately more important – aim is to encourage other countries and regions to follow their example. It is therefore only natural that, in the search for modern solutions, world decision-­ makers are turning their attention towards the region. “Copenhagen Climate Solutions,” “Nordic Climate Solutions,” the time of the great United Nations climate conference in Copenhagen – all these elements and circumstances taken together created a special opportunity, an imperative for Nordic energy and climate cooperation. At the same time, they send out a clear signal that this is the time for those more capable, more advanced and better prepared for new challenges, both at regional, European and global level. A number of indications point out that this thesis can be successfully applied to the countries of the Nordic region, perhaps as it is assumed in Norden, namely: “the victorious region” (Swedish: vinnarregion). The analysis leads to the following conclusions: –– the Nordic countries appear to be unrivalled pioneers in the field of renewable energy sources, with knowledge, advanced research and innovation in support of climate and energy prevention (coordinated by NordForsk and Nordic Innovation Centre – NICe);  To achieve ambitious 2050 goal, Nordic Energy Technology Perspectives, the first regional edition of the series, details how countries can decarbonize power sector and electrify transport.). See Nordic Energy Technology Perspectives 2016. 7

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–– their energy policy is expressed in creating the conditions for efficient and continuous energy use and cost-effective supply with minimal impact on health, the environment and the climate; –– there is far-reaching unanimity among these countries on energy policy decisions. A great deal of knowledge and experience has been gained over the years, based on both positive and negative examples. Nordic solutions are environmentally friendly, economically efficient, carefully tried and tested and operate on an industrial scale; –– given the experience to date and the technical, organizational and technological achievements and opportunities, there is little doubt today that Norden has a special role to play in the area of climate and environmental problems on a global scale in the coming years. This approach, with its high energy culture, actually reflects one of the characteristics of the Nordic countries, namely the public awareness that innovative energy technologies and solutions have an important role to play in breaking the existing negative links between development and environmental degradation. They should do this by providing sufficiently clean and secure energy, which demonstrates the sustainability of the political and economic objective of increasing energy efficiency. It will also provide incentives for the introduction of low-carbon technologies, which, combined with a stable market, will set the right course in line with changing behavior. Finally, observing how Europe’s geopolitics is changing, Norden is right to recognize that it is worthwhile to engage in changes and challenges that are, after all, accompanied by new chances and possibilities. Whether and how these circumstances will be used and to what extent they will ensure the sphere of national security, including energy security, depends on the stakeholders themselves. Hence, the principle of teamwork (Nordic cooperation),8 openness rather than stubbornness, and being prudent and responsible, but not mentorly, has been adopted as an assumption. The same applies to the search for acceptable solutions, skills (strongly based on competences) for coming out of various difficult situations and problems, acquiring allies and friends for proposals, being flexible where necessary and anticipatory where necessary.

 See Chap. 11.

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270

Conclusion

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