With Laurent's segle And from London and Gerard Reed from Berlin. This is redefining energy.
Today, on redefining energy, we're going to talk about energy security and the case of Estoniap and how we can reach energy security through one bots.
Yeah, and larn I think that what's interesting is to talk about this whole Balkans area because what we don't realize is the extent of the growth you're seeing in these regions and renewables. I think I just looked at the statistics. Reason is, if you went back twenty twenty two, you know, the Balkans region had about eighteen nineteen gigawatts of renewable solar and wind and today you're at twenty four twenty five kigawatts. And that's that's just in the
last two years. And the reason this is happening is ultimately is because the economics of it really make a lot of sense, whether that's in Greece, Bulgaria, Romania. Simple as that low couse electricity, that's what you're getting by putnent solar, wind and in your energy mix.
Well, and look, we need to talk about Russia because they're on the front line. And I remember in two or nine, I went to Sofia, the capital of Bulgaria during the winter. Looks a super long story, so anyway, so I went there. I met the Minister of Energy and it was part of the three weeks where Russia had cut the gas for Bulgaria. It was minus fifteen c outside. They were playing hardball already because of guess what,
a financial disagreement with Ukraine. So that was two or nine and those poor Bulgarians that to cut the trees in their equivalent of Hyde Park or Central Park just not to freeze to death. So Russia using gas as a weapon, that is not new. This is their nature. So I understand that people start to learn their lessons. And now, even if Russian guys was dut cheap energy, security is more important than affordability. So we brought in one of the greatest developer of nables in the region.
And this is one of the co founders of CWP, a guy called Demeter n Chef. I've known him many many years and they have been incredibly active across the region and developing wind and solar very very very knowledgeable and great to have him on the show to actually have a talk about this about what's going on in Eastern Europe and in the Balkans, particularly in and around energy.
Let's bring Dimitar on the show.
Dibitar, it's really great to have you on the show.
Thank you, it's a pleasure to be here.
Lit Maybe just kick off because it's next at the end of the day. You've got huge expertise in the energy space in Eastern Europe. I'd be really great just to get a lie of the land overview of what's going on in energy across East Europe.
Eastern Europe is facing some of the same challenges and opportunities that the rest of Europe is facing. The region is still dominated by fossil fuels, especially coal and important natural gas. It used to be dependent on Russian pipe gas. Now it's more and more dependent on imported LNG. It's gradually shifting towards renewables. The markets of Eastern Europe and Southeast Europe are getting better integrated into the European market.
The markets are getting coupled. Grit modernization is ongoing, so you've got a lot of EO funds supporting interconnection, digitalization and preparing these markets for the energy transition. The transition to a renewables dominated grid. At the same time, the region is quite energy and efficient, so you do have a big scope for energy efficiency in Eastern Europe, and you do have a scope for modernization in gen right, for building a more modern energy system. There is a
growing renew bantagy sector. Solar is booming in Southeast Europe. You have a lot of potential for wind in certain markets, and this is important in the world of European context. The hydro sector it is quite robust, but with limited growth potential because all the sites have been built up.
And at the same time you have challenges because infrastructure is aging, You've got regulator uncertainty, you've got Russian interference, so Russian does not want the region to be energy independent and they're acting upon that and they're trying to sabotage efforts for diversification. So it's a picture of challenges and opportunities.
And of course if you look at Hungary, Romania, Bulgaria, Slovenia, I hope I don't forget any of them. You still have those also yet nuclear plants.
Yeah, you do have quite a bit of nuclear Some of the countries areluding new projects. But obviously we all know that that takes a very long time and it's expensive, so it's not a solution for the George to Median term problems.
Jim, can I just just take a step back just to talk about to explain what's happened since the Ukrainian crisis, because obviously we've had the Europraeinian crisis had a very big impact in Western Europe in the sense that certainly we've had to get LNG in and that's impacted industry, it's impacted retail prices. What's happened in Eastern Europe over this.
Period, well, other than making us all very scared and trying to avoid this spilling over the rest of the ear But from an energy point of view, Ukraine before the war has about fifty six gigaottes of electricity generation past it currently has about twelve operating, so it's gone from fifty six gigaottes of generation to twelve. It's gone from an export to a big importer. They don't have enough electricity even for they're now severely reduced industrial base,
so they're sucking power from the region. And Southeast Europe was short to begin with, so the region now has Europe's highest electricity prices, and this is why we think it's such a good place to invest in new generation and new renewable capacity. And we are of course active in Ukraine. We are active in all of the big countries in Southeast Europe, but we have big plans for Ukraine. We're trying to do as much as we can now
in terms of developing projects. We have a five gigabat pipeline in Ukraine and it's not easy to get stuff done, but you know, we're trying to do as much as we can so that we can hit the ground running when the war's over and Ukraine has to rebuild it our generation sector.
If I look at the region, Greece has in the past five years done a great development of what they used to import now they export, and of course there's the old balancing going on. Do you think it's a blueprint for what can be done in other countries.
Yeah, Greece in the last few years is a blueprint, not just in the energy sector, but broadly speaking. They've had a pretty sensible government and in the energy sector in particular, yes, they have been very successful and they're continuing to build more renewables, more storage, they're attracting data centers now, so yeah, I would say Greece is a good blueprint for the rest of the region.
And so you talked about price. If I want to know about prices in Europe, I go to the ex in Germany. Do you have regional markets? How are they connected and or correlated with the price formation you would see further west.
Yeah, you do have regional markets, and most of the Yew countries in the region, and actually most of the countries in the region are either coupled or about to be coupled to the broader European market. So Europe is very well interconnected. The region itself is also very well interconnected to the rest of Europe, so you can trade power pretty freely from Southeast Europe to the rest of Europe.
And maybe just to take a step back and kind of describe the situation from a broader perspective, the European power market is mostly driven by weather because it's fifty percent renewals these days, so you know, when the wind blows and when the sun is shining, you've got low prices and vice versa. Southeast Europe is generally short power, so the average power price is higher than the rest
of Europe. The region is probably the last bastion of coal in Europe, so you have quite a lot of lignite that's expensive to run, it's carbon intense if it's polluting, and at the same time you still have a lot of very good sites for grit capacity for building out renewables. So the region is a good opportunity both from an investment point of view, but in the broader European context. Europe as we know is energy poor. It imports fifty
five percent of its primary energy. That comes at the cost of five six hundred billion a year, so it's a drag on the economy. It's also putting us in a position of four independents, which you don't want to be in that position these days. And the only solution to this problem at scale is to build out renewables. Every local electron that you produce off sets at the margin and imported hydrocarbon. The issue is that parts of Europe have reached a point that I call commercial saturation.
If you look at Germany last year, five percent of the time you had negative prices. Ten percent of the time prices were very close to zero. In Spain that was closed to twenty percent of the time. The UK paid wind farm one point five billion pounds last year
not to produce because they could evacuate the power. So in this context, the cheapest way to decarbonize Europe and transition is grid to locally produced electricity is to build out as many different weather zones in Europe and connect them, and Southeast Europe East Europe in general is a big opportunity because you do have the grid, you do have
the sites, and you have a different weather profile. If you build a wind farm in Germany today, over the life of that wind farm on a levelized basis, if base load is one hundred, best you can hope to capture is fifty to fifty five. In all of our projects in the region. In Southeast Europe we get more than nineteen the capture eight over the life of the project.
If you take a look at the average wind farm in Bulgari last year, it captured one hundred and eighteen percent of German basedo because it produces at the right time when there is no wind in Germany and prices are high. There's wind in spinisterin Europe and vice versa. When there is no wind down here you may have
fantastic wind in northern Europe. So the point I'm trying to make is from the European context, building out the potential of the region is very important because this is the lowest cost option to transition the electricity grids for all of you.
Every developer in Western Europe always complain about permitting and connection. Is it the same nightmare or is it better? In Southeast Europe.
We focus on wind and storage mostly right, So storagezy wind is excruciatingly difficult anywhere in Europe. It's probably less so in Eastern Europe, but it's still very difficult. And on top of the usual problems that you've got, you've got other problems in Eastern Europe that I don't think you have elsewhere. So, for example, on one of our projects,
we had thro Russia groups. The same people who were protesting against providing support to Ukraine, they were protecting against our windfar There was a recent report that came out by the Center for Study of Democracy that analyzed Russian misinformation campaigns, whether it's on Ukraine or on any other topic,
and guess what they were. One of the main reasons that offshore wind was stopped in Bulgaria and generally they're spreading this information about wind and trying to disrupt the development. So this has been going on. It's probably not isolated to Eastern Europe. There are arguments to be made that this is going on across Europe. Eastern Europe is probably more susceptible, but Russia is actively trying to prevent Europe's
energy independence. It has been solved for many, many years, and I'm not sure Europe is aware of the situation and reacting according here. But bringing a knife to a gunfight.
Demitter, I think you're speaking to the converted when you talk about our need to step up and really work on energy independence. And I'd like to actually maybe follow on on that and say, look, if you look really from side, we've got huge energy security issues. And because you're if I may say, at the front line, you have operations in the ukrainte et cetera. Give me a sense of how we can make that energy system more secure going forward.
Sorry, I'm going to keep talking my own book, but I think that's the solution, right. The distributing energy generation is part of the solution. You can see what happens when you have a six gigattes nuclear plant. That's a single point of failure. If you replace that with sixty or six hundred smaller plants, it's a lot more difficult to take them out. So distributed renewable energy generation is
part of the solution, but at a broader level. Understanding what's going on and knowing that this is a major risk and that people are actively working against their energy independence and they're against our energy security first part of the process. Not quite sure where they'reet certainly not everywhere in Europe.
Thank you for being candid. We've said in previous podcast that the enemies of wind are the enemies of freedom. You bring a very very clear example here. So you talk about cables, you talk about interconnection. Do you want to talk a bit about flex and how to balance the intermittency? I guess you are looking into batteries in
the region. The question I always have is how well the market structure are prepared to accommodate those batteries and tracking them and providing a good remuneration to the battery investors.
You can look at these at different levels. If you look at it at the European level, the cheapest way to transition the energy system is to connect as many different weathers zones as possible and do that renewables and as many different weathersones as possible, because you need batteries. But batteries can help you throughout the day. They could time shift for a few hours, but it's really to
solve seasonal problem with batteries. When you have two weeks of low wind and no solar, you country land battery. That's going to be just prohibitably expensive. So the best way to solve that problem is to connect a different weather zone. Again, that point I made about Southeast Europe being one of those different weather zones, that's at the broader level. At the local level, you are absolutely right that some market lack the tramwork and the regulation to
take full advantage of batteries. We are getting there. Even in our markets. The system operators have realized that batteries are fundamentally important, so they're very accommodative. More and more the revenue stack for batteries is driven not by uncillary services but by time shifting. If you look at Southeast Europe, because the region is short power but it's long solar,
you have the biggest min max spreads in Europe. When it's sunning, you have oversupply, and when the sun sets you're short, so you've got very low prices mid day and very high prices in the evening. So the average spread in a place like Hungary last year was more than one hundred years. The three highest daily minmac spreads
in Europelus Tier were Bulgaria, Romanian, Hungary. So you don't need unculary services to justify battery more and more, with the cost of storage where it is today, the economics actually look fantastic even without the extra revenue you get from uncivere services.
Timeter, I'm saying off the same hymn sheet as you, and I think Luran as as well, because what I'm actually hearing also is what I would say a vision for the future or power system, which is you need to increase interconnection. You're doing this one because as you said, it's in particular wind, it's much easier to move wind from west to north or north to south or whatever.
But that's also really good for energy security. And the second thing is also the whole view around solar, which is solar is not about moving it's solar from east to west or north to south. It really is about storing it for a few hours, right, because it's really predictable, and by doing all of this you make the system
more secure. And actually what you're doing from a European perspective is we're all completely relying on each other, right like today you said earlier on Ukraine is relying on Southeast Europe for its power today, right, which you could think was unimaginable even four years ago. You would never think this. I want to thank you for your vision.
Yeah, just to out on top of that, there is a lot of europe bashing these days. It's very popular, especially across the Atlantic. But it's energy poor. You can't change that. We just don't have the hydrocarbons in the ground. But it is actually very well interconnected, so we could leverage that existing advantage. And the other thing that Europe has going for it, and the other way you can actually reduce your foreign dependence is by improving energy efficiency.
And if you look at the European economy, it's dramatically more energy efficient than the US. So that's two major advantages in Europe pass that we need to lean into. Broadly speaking, it's pretty obvious what the solution is the poor independence issue, to the climate issue, to the cost issue. You know, it's building out more renewables all over Europe.
Dimita, your developer of on Obles, can you give us a concrete example of a project you've been developing the past two years and what is Vanilla and any other developer would have done in any other country, And you know what was really specific about your approach.
Obviously, development is a long game, so you need to see around corners and you need to try to guess where the world's going to be five six seven years from now, because when you start the wind farm development, it's going to be commercialized in five six seven years, right. So what we did right in Southeast Europe with our current portfolio is that we saw where the market was going and we bet on the two technologies that we think are being validated by the market today and that
those are wind and storage. What we did different back when the company was started a big wind farm was fifty one hundred megwas our first ever project, was Europe's largest onshore wind farm. It was a six hundred megwats project we developed in Romania, so we were one of the pioneers in the region. We developed the largest in the biggest wind farms in Bulgaria and Romania in Serbia. I guess what we did differently and what we do
differently today is we realized that scale matters. The time and effort and money takes to develop a wind farm is all the same, whether it's one hundred or three hundred or five hundred megwats. So we started doing big projects early on. And the technology that we focused on, which is wind and storage, is also a part of our unique strategy, which is now being validated by the
market because this is the profile that the market needs. Specifically, in the last two three years, we develop a few hybrid projects or a combination of wind, solar and storage, where you're utilizing your grid connection better, you're producing a better profile and on a portfolio basis, this has a lot of value helping the grid as well by being less intermittent. I guess a lot of projects going forward they are going to be hybrids. I don't see a
lot of solar only getting built in the future. You always have to be paired with storage, and we've been doing that for a long time.
Jametter, maybe as a last question, give you a little bit of a view of how you see the future of energy in Eastern Europe.
I'm quite optimistic about the region. The region has a
very good basis on which it can build. Obviously, the power market is going to have to be largely renewables, bas we do have quite a lot of nuclear in the region, so that provides a good carbon free foundation, but anything on top of that will have to be renewables, and that's going to allow us to be energy independent, but also it's going to allow us to be economically competitive because the profile that we can generate in this region is going to be very valuable in the European context.
So we can not only decarbonize and transition are grids, we can actually benefit by helping the rest of Europe decarbonized and transition their grids, and that's quite valuable in the broader European context. So I'm quite excited about the opportunities in Eastern Europe. There are a lot of challenges, of course, but probably speaking un optimistic about the future.
Kivian Tel, thank you so much for coming on the show and shedding light on a different zone, which also mean that more cables and more integration and increasing the size of the grids. It's not only beneficial to you're part of Europe, but beneficial to Europe as a whole. So thank you very much for making that case. Also the Russians, the Russians are enemies.
Okay, thank you for having me. It's been a pleasure.
Thanks timitar No. It's been a good discussion and we wish you all the best in the future. So Ron, let me tell you my reflections on this podcast. My reflections really are all about the need for energy independence, particularly in the Eastern Europe. You know, when you're on the front line at Russia, you realize we do not want to be held to ransom by them again. And the best way to actually go and do that, and
the quickest way is you electrify and your nobilized. And this is what I take out of the podcast is that this is what's happening in the Balkan region in Eastern Europe. It's just incredibly strategic. It's not about the environment, it really is about energy security.
And look, the great things is in your we are sharing a lot with our eastern front. So it means that a lot of things that we've been able to develop in Western Europe get deployed much faster. Also in East on your rope, for instance, Timita is allied with Mercuria,
with a great energy training company. So we start seeing financial interest in developing those projects because guess what, they are probably more lucrative than the one that you would find in places like Spain or Germany where sometime we reach saturation.
Yeah, there was another thing that I wanted to bring up, Lauren, and it goes back to the energy security thing, and this is north Stream too. And obviously this in that pipeline was blown up, and let's talk about what do you do next with there's a view that you do
not matter, you just leave it the way it is. Well, what I found very interesting is that in the run up to the formation of the new German government, what you definitely saw was a significant amount of lobbying activity by America to allow American interest to actually buy Northestern too, and even crazily with a view I suppose that you would use it then as a bargaining chip with Russia in and around Ukraine. Now what ended up happening is it didn't really get into thankfully, it didn't get into
the Coalition agreement or anything like this. But it just struck me what a crazy world we're in when I, as I said, when you realize the politics of energy and what's going on there right when.
I look at the profile of those guys old KGB, Spies and the far right Texas all tycoons, really it's nefarious. But what I will say is we'll still get Russian gas in Europe. It's not going to come directly. We'll love Russian energy, or some will come through Turkey, or some will well swap with us a bad jan so the spices must flow, but it's going to be much more indirect on a short term basis than long term agreements. I don't see any new long term agreements with Russia for a generation.
I hope you're right, but be really clear that in particular we look at Germany, is that you've got fifty years of German interests being pretty close to Russia. And if I include East Germany, you know you've got seventy five years of interest being close to Russia.
Excuse me, you have more than a century. You look at the Treaty of Rapallo in nineteen twenty two, you look even at Catherine the Great, Yeah, Sue as a German princess. There's a kind of natural magnetism between Germany and Russia.
And let's say something very practical. You know, obviously, you know, I have a house in Brandenburg on the Polish border, and there are two houses in my village that have Russian flags. And by the way, they're not Russians, but they have Russian flags. And I just want to say that it's the complexity of the German relationship means that you never know what Germany's going to do. That's what I would just say. In the whole North Stream thing.
What I hope and the way forward should be is he just push for energy independence, and the only way to do that is to push towards electrification, right because at least with electrification you can generate your own electricity and you break the dependence on natural gas. But the concern I'd have is that's not the case. I see the new government. They want to build a whole pile of natural gas plans. By the way, they won't get built.
But they won't get built because by the way, if you order one today, you won't get it delivered until twenty thirty two. And actually the Kappax because of these CCG plans are three times what they were like five years ago. So the economics that don't make this heads. But anyway, where I'm coming from.
Is and they're gonna run five hundred that was a year.
Yeah, it's just it's sort of a anyway, it's just over there.
It's a generation of guys in the sixties and seventies and they just can't update their software period.
Goody put them, my friend.
It was great to have Dimita on the show. And freedom goes through.
Rulnerable absolutely totally. Witcher renewables bring feuredom.
I like that.
All right, my.
Friend, talk to you next week.
Bye, next week, look forward. Thank you for listening to Redefining Energy. Don't forget to read the show and subscribe on Apple, Podcast, Spotify, or the platform of your choice.