Watch the full event
Speakers
Matthew Baldwin
Deputy Director-General, Directorate General for Energy, European Commission
Sanja Bozinovska
Minister of Energy, Mining and Mineral Resources, North Macedonia
Ahmet Berat Çonkar
Deputy Minister of Energy and Natural Resources, Republic of Türkiye
George-Sergiu Niculescu
President, Romanian Energy Regulatory Authority
Moderator
Matthew Bryza
Managing Director, Straife; Former US Ambassador to Azerbaijan
Event transcript
Uncorrected transcript: Check against delivery
MATTHEW BRYZA: Thanks. Thanks so much. Thanks so much to you, Fred, to Defne, to Grady, to Alp, to Zeynep for this really amazing conference that has been rich with fresh ideas and really a new tone on energy security and clean energy.
It’s an honor to be up on the stage right after Assistant Secretary Pyatt and after Deputy Minister Ekinci. I want to—we’ll call up our panel right now, but just congratulate you, Berris, on your appointment as deputy minister. We’re going into our third decade of collaborating together to try to develop the type of infrastructure we’re going to talk about now, and especially natural gas as a transition fuel. Congratulations.
So, please, may our panel join me up here? We have together with us Matthew Baldwin, who’s deputy director-general of the Directorate General for Energy of the European Commission. Matthew, thank you. We have—we have the Honorable Sanja Bozinovska, who is minister of energy of North Macedonia; Deputy Minister of Energy for Turkey Ahmet Berat Çonkar; and George-Sergiu Niculescu, who’s president of the Romanian Energy Regulatory Authority. Thank you.
According to the European Council, the share of Russia’s pipeline gas in the—in the EU, as Assistant Secretary Pyatt was talking about, dropped from around 45 percent in 2021 to about maybe 8 percent in 2023. And for pipeline gas and LNG combined, Russia accounted for less than 15 percent of total EU imports. This drop was possible largely thanks to a sharp increase in LNG imports, especially from the United States, which were enabled by investments in regasification terminals especially in Germany, which I think surprised everybody by how quickly it was able to pivot and deploy commercially viable projects that were supported, of course, by the government and by the European Commission.
Also, we saw a reduction in natural gas consumption in the EU by, I guess, around 15 percent, with a target to continue reducing that consumption by another 15 percent this year. And before that—in the decades before, I think it’s fair to argue the European Union worked very hard, especially the Commission, to stimulate investment in pipeline interconnections that also Assistant Secretary Pyatt discussed, which allow natural gas molecules to reach the buyers, the consumers, according to market mechanisms—supply and demand—rather than monopolistic power. So these are really impressive achievements that a lot of people in this room have worked together on for decades.
However, Southeast Europe is now flooded by Russian natural gas. It’s coming in via the TurkSteam pipeline, via the Russia-Ukraine pipelines. And in recent weeks, in my own experience, natural gas traders and investors in regasification terminals, especially in Greece, have told me that the LNG import terminal at Revithoussa is operating at only 20 percent capacity. And as I mentioned yesterday, I’m on the board of advisors of the largest natural gas distribution company in Bulgaria, which has booked five slots, doesn’t know how we’re going to use them. And at this point, it’s very difficult to reach a commercially viable contract right now for LNG that can outcompete the pipeline gas.
So looking ahead also, the European Commission and Azerbaijan have agreed in their Strategic Energy Partnership of July 2022 to double by 2027 imports of natural gas into the EU via the Southern Corridor. However, as we discussed yesterday, that goal conflicts with the EU’s objective of phasing out all natural gas usage by 2035, so in eleven years.
So I’d like to turn to Deputy Director-General Baldwin first and maybe focus on that last issue. How can we reconcile the need for longer-term natural gas sales and purchase agreements to allow this expanded infrastructure for natural gas to be financed with the ambition to phase our natural gas within eleven years?
MATTHEW BALDWIN: Well, thank you, Matt. And let me join the raucous applause to the Atlantic Council for putting on such another great event. And indeed, as Ambassador Pyatt said, it’s wonderful it’s in Istanbul—I mean, a pivotal city for the region in all of the things we’re talking about.
Thanks for the question. A bit of context, of course, to remind us how we got here. We are committed to be the first climate-neutral continent by 2050. We’ve done a lot of the heavy lifting in terms of developing what we call the European Green Deal, commitments to reduce our greenhouse gas emissions by 55 percent by 2030. We’re also looking at additional work to focus on 2040, which I think is meaningful in terms of generating necessary investments, focusing on a reduction around 90 percent by 2040.
And let’s also remind ourselves it’s not just the plucky European Union. We’ve heard from deputy foreign minister that Turkey itself is driving strongly in this direction. And the last COP took a really quite momentous decision to phase out fossil fuels with, yes, some important guardrail language, but that’s the direction of travel.
And of course, that’s the context in which we’ve had to manage the crisis in the last couple of years. And it has been—it’s been severe and it’s been difficult. I’m sure we’ll come back onto the specific aspects in the region.
But to try to answer your question, we’ve never pretended even before the crisis, when we needed gas in the worst way in the shortest possible timeframe, we never said that gas is not a transition fuel. We’re going to need gas in our pipes all the way through 2049. When countries are getting out of coal and into gas power generation, that’s a plus.
MATTHEW BRYZA: Yes.
MATTHEW BALDWIN: We know we’re going to need that. And if we can deliver on the burgeoning CCUS framework, I think that also provides a perfectly plausible outlet for companies to be buying gas now with a view to use it even beyond 2050. And by the way, there will be a number of countries that aren’t meeting that timescale, and therefore, you know, to be—to be ruthless about it, these companies will still have a market for their gas.
We are sometimes asked, therefore, you know, against the twenty-five-year or whatever planning profile that FIDs need for triggering LNG projects in the—in the US, how does that all fit? And I think if you—if you look in that framework that we’re going to need a continued supply of gas, we are not, I would stress, in the Commission, in the long-term contract business. I don’t have terminals in my office. I’m not calling gas traders in the middle of the night. But we’re totally fine with our gas purchasing companies making such arrangements to provide those commitments. We on the record are saying that. And I think if you look at the trends in terms of long-term contracting—and you probably follow this as closely as I do—it’s the portfolio players who have actually taken up the biggest slack. And if you think of the logic in that with the turmoil in the European gas markets and elsewhere, it’s about acquiring these long-term contracts which I think have done—have been effective in triggering FID, and then parceling out smaller contracts often for gas purchasing companies.
But I really want to stress, if European gas purchasing companies want to do those long-term contracts, and if they think that contributes to the security of supply, that’s absolutely great. Not a magic solution. These are also indexed. A lot of people said, looking at our gas price spikes in 2022, oh, if only—if only we had long-term contracts and we weren’t just on the spot market—which we weren’t, by the way—then everything would be fine. But that’s not the case. And a lot of those contracts, of course, are indexed to the—to the TTF.
If I may just make one last point on this issue, because I think it’s relevant in terms of our move towards climate neutrality, and that’s methane. And you know, it’s probably overtalked about now, but the great coming LNG glut in the second half of this decade—we know it’s coming from the US and from Qatar—as that market starts to loosen, big gas-consuming places like the EU and like Japan and Southeast Asia increasingly will be able to choose a bit between. And I think we need to use the current work that’s going on, the work we’re doing with Brad Crabtree and the MMRV Group to find a really global way of homing in on measuring and monitoring of emissions; and the work to reduce methane-reduction pathways, which we’ll be announcing in the COP, to enable that sort of choice as to where we’re getting the gas in the future. And I think that’s a big new trend.
Last point—of course, and I’m sure we’ll come back to it—in all of this, the regional collaboration that Ambassador Pyatt mentioned that we were doing in Greece, and as we—and I’d like to come back to the Russian gas question in a moment—you know, it is going to be so pivotal in all of this work.
So thank you. Sorry to be a bit long.
MATTHEW BRYZA: No, thanks, Matthew. Beautifully comprehensive and thoughtful. Really important clarification about the Commission’s view on longer-term natural gas sales.
MATTHEW BALDWIN: Hopefully wasn’t new, but, yeah.
MATTHEW BRYZA: It just—it doesn’t—there’s a lot of static in the system and that message doesn’t always come through, especially in places like Baku, where they really are worried about not being able to fund their upstream investment, which we’ll come to.
But one of your underlying points, of course, is natural gas, as Deputy Minister Ekinci was saying, as a transition fuel. So I’d like to turn, then, to Minister Bozinovska about North Macedonia’s plans. I mean, my understanding is North Macedonia is still dependent on about—on lignite for about 55 percent of its primary energy, so to generate electricity. So what’s the status of your gas interconnection planning with Greece and with Bulgaria? And also, what are your plans to develop a domestic natural gas distribution network, if any? Thank you.
SANJA BOZINOVSKA: First of all, thank you for the invitation.
As you said North Macedonia is mostly dependent on coal. We are working on a program. We just submitted our growth plans to the European Union, so we are waiting for an answer in the next—in the following months. The estimation is it will cost around three billion, which for our country is a significant amount of money.
We also established a just transition. And it’s led—I’m in the steering committee together with the Ministry of Environment. And we are discussing with EBRD, with EIB, and with the World Bank regarding the financing.
Regarding the gas in North Macedonia, there is only at the moment one connection; it’s from Bulgaria. And we had one tender with Greece; unfortunately, it was—there were objections from the European Investment Bank, and now we are doing our best to re-tender. We have secured all the finance. It’s around 86 million. And EBRD clearly state it’s the last financing that they have, so it will be their last financing into gas connector. We hope in the next two weeks that we will have the tender ongoing, and by the end of the year or January this work should start.
We heard that Alexandroupoli started from the 1st of October. Some projection about the work is around two years, but we hope that it can be finished a year and a half so it will be another diversification of the gas so it can come from Greece to North Macedonia. On Monday, we signed with Serbia the memo of understanding for also the gas connection, because from North Macedonia it’s only twenty-five kilometers that needs to be built. So in the near future, we plan to have Greece, North Macedonia, Serbia, and then it can go to Southeast Europe since this is also an important region to be valued. So this is the exact situation.
And regarding the 55 percent, we are doing a new energy law and we plan also to have more renewables. We have around in the last three years built seven hundred megawatts of solar and we need financing regarding the green infrastructure. And we also plan to include battery storage, which is a hot topic now in this region. We plan to have also construct for differences in order to, let’s say, have more renewables. So we are working on this. We are a new ministry, just three months established. But I hope by end of the year we will have more things in the law.
And we are working also with the energy community in Vienna and, yeah, in Brussels. I’m going in December, so we will discuss which issues are still a challenge and what needs to be done.
MATTHEW BRYZA: Wow, quite impressive vision, and not just vision but implementation. It sounds like you’re doing specific, concrete investment planning; I mean, I know you are. And this is a really important strategic issue, as well, going back to the Vertical Corridor that Assistant Secretary Pyatt talked about. And I want to come back to that issue in the next round, if that’s OK. But you’re not just talking about, as my old boss President Bush would say, strategery—you’re talking about the practicality of how to make the investments work.
So then I’d like to move to Deputy Minister Çonkar on this issue of making practical investments work. And Turkey has been a driving force of the diversification of sources of natural gas supply into the EU thanks to the Southern Corridor, but thanks to the investments that, again, many of us all worked together on to make possible in the upstream in Azerbaijan decades ago. And I mentioned in my opening remarks the ambition to double the flow of natural gas from—well, through the Southern Corridor into the EU.
So, from your perspective and Turkey’s perspective, where are those supplies of gas going to come from? Azerbaijan, as I’ll talk about in the next round, is not getting enough upstream investment to have those molecules coming out of the ground in time, but there’s a possibility of swaps from Turkmenistan which would have to go across Iran. Or is it cross-Caspian infrastructure, maybe, that we’re looking at? What could be the sources of supply?
AHMET BERAT ÇONKAR: Thank you very much, Matthew. First of all, thank you very much for this opportunity.
First of all, I would like to give some information about our gas infrastructure. As mentioned, Türkiye is the fourth-largest gas market in Europe, with an annual consumption of approximately fifty billion cubic meters of natural gas. For many years, Türkiye was importing almost all of this gas, total number was imported. After the discovery of natural gas in the Black Sea in August 2020, we started production only in three years’ time. Within three years’ time, we were able to start production. As of today, we are producing 6.2 million cubic meters of natural gas from our Black Sea fields, and we have additional one million from other fields. So Türkiye right now produces about 7.5 million cubic meters of natural gas from its own sources.
This means that we are able to meet about 2.6 million households’ needs from our own resources, so this is an important development for us. We are hoping to increase this production to ten million cubic meters in the first quarter of 2025.
MATTHEW BRYZA: Sorry, ten billion—ten billion per year?
AHMET BERAT ÇONKAR: Ten million per day.
MATTHEW BRYZA: Oh, ten million per day.
AHMET BERAT ÇONKAR: Per day. And as Minister Bayraktar mentioned, our aim is to double this to twenty million per day, which comes to almost 7.5 billion cubic meters per year, by the end of 2026 with our new floating production unit that will be operational at the end of 2026.
So, also we have made infrastructure investments to receive gas both through pipelines and LNG. Beyond that, we have made a lot of storage investments as well. So, you know, one of these storage facilities is Silivri natural gas storage project, which is the first natural gas storage of Türkiye. And it has critical importance in the energy supply security of our country. And as a result of the capacity increase were carried out in this facility, a storage capacity of 4.6 billion cubic meters has already been reached in Silivri. With this capacity, Silivri natural gas storage facility is the largest marine storage facility in Europe and is of critical importance for providing uninterrupted energy to our country.
Also, another project I want to mention in this area is the Salt Lake natural gas storage project. By the end of 2021 the first phase of this project was completed, and expansion works are continuing here as well. As of now, 1.2 billion cubic meters operating gas capacity and forty million cubic meters daily back production capacity has been reached in this pursuit as well. Also, we have increased our regasification capacity by almost fivefold. So our whole supply portfolio is changing and transforming in gas. With these infrastructure investments, we offer more competitive solutions for the markets.
Türkiye plays a pivotal role in realizing the goal of Southern Gas Corridor. As you mentioned, it’s a very important project. However, alongside the opportunities that this presents for Türkiye and the wider region, there are significant challenges that must be overcome to ensure that the expansion of this corridor is successful, timely, and sustainable. Türkiye’s role in the Southern Gas Corridor strengthens its position as a regional energy hub, and enhances its leverage in diplomatic and trade negotiations with both supply and consumer countries. I think it’s very important for this conjuncture.
Expanding the capacity of the Southern Gas Corridor offers us substantial economic benefits. Increased natural gas flows will likely lead to additional transit revenues for us and bolstering our economy. Moreover, the project could drive foreign investment into our energy infrastructure and related industries, creating jobs and stimulating economic growth.
Despite these opportunities, there are several key challenges in this area, as I mentioned. One of the most imminent challenges is the infrastructure investment required to expand the capacity of the Southern Gas Corridor. Türkiye’s strategy focuses on maintaining a diverse supply base here, ensuring a balanced energy market that is both flexible and secure.
Additionally, we continue to support international cooperation in expanding our resource base. We have signed long-term LNG supply agreements with major global companies, as mentioned in the morning. We also want to increase our cooperation with the countries in the region on a win-win basis and add resources in this region to the system. Türkiye continues to serve as a key facilitator for the energy projects in our Caspian region, Central Asia, and the Middle Eastern region with its unique location. As you also mentioned, Turkmenistan’s gas and the Caspian resources, there are a lot of untapped potential in these areas, so we need to work hard in integrating this to the system. As mentioned, collaboration and cooperation are the unique tools we can use to strengthen our energy supply security.
Finally, the successful expansion of this Southern Gas Corridor will require close regulatory and political coordination among multiple countries and stakeholders. So we need a very, very close and coordinated work in order to achieve this objective.
MATTHEW BRYZA: Excellent. Thank you, Deputy Minister Çonkar.
Deputy Minister, that was an absolutely comprehensive vision you’ve outlined that is taking the idea that was for years rhetoric and turning into reality that Turkey is a natural gas hub. It already is, and it will be for trading soon. Eventually, there will be a Turkish benchmark, I guess, for trading. We’ll get back into the mix of molecules in a second, but it’s a remarkable set of achievements that—not only are they enhancing Turkey’s strategic importance and helping the EU diversify its sources of supply, but I think of the air in Ankara, how—when I first visited there in 1998 how dirty it was and brown from all the coal, the lignite being burned. And now it’s so clean because of this transition to natural gas as a primary fuel for power generation.
But you also mentioned at the—at the end the importance of cooperation and regulatory cooperation. So let’s hear from a regulator. I’d like to turn now to Mr. George-Sergiu Niculescu, who’s the president of the Romanian Energy Regulatory Authority.
Romania sits at a geoeconomic/geostrategic confluence of the European Union on the one hand, and Moldova and Ukraine on the other hand. But in addition to that place on the map, you also have interconnectivity on electricity into the EU, which is an important market incentive for investments in a range of power generation and transmission projects. And also, it is stimulus for investment in natural gas transit as well. So, from your regulatory perspective, how are you working to attract those investments, and how’s it going?
GEORGE-SERGIU NICULESCU: Thank you very much for the question. Good morning, everyone.
Romania is deploying a lot of efforts in order to boost investments in the energy sector, both in generating new capacities, transport, and distribution as well, because it is very important that these two goes head to head. We cannot have investments only in producing electricity; we also need to enforce and enhance the grids in order to take in this new energy and deliver it to the consumers.
As Assistant Secretary Pyatt said, a common letter from Romania, Bulgaria, and Greece have been submitted to the European Commission regarding the need of investments in more interconnecting the grids. We saw that we have a gap between this part of Europe’s markets regarding the price of electricity and the western countries, because not all the countries have made investments in interconnectors. So the energy should flow freely from where it’s produced to where it’s consumed without any bottlenecks, without any borders.
Let me tell you that Romania has a total interconnecting capacity of 3.3 gigawatts, and this is for a consumption of around eight gigawatts, so more than 30 percent we have interconnecting capacities. I believe that Romania did this job, investing in interconnected. We are interconnected with every neighboring countries, and still we are looking to develop this.
We stimulate investments in the grids by throwing in support schemes. Ministry of Energy has called for projects for 1.3 billion euro dedicated only to distribution companies that want to invest in enforcing the grid. So the money’s on the table; they just need to deploy projects and sign the contracts and cash in the money, and then develop the projects.
For our TSO, also the Ministry of Energy has a dedicated call for projects for half-a-billion euro. This is on top of the reinvestments programs, yes, so more or less two billion euros for grid enforcements. And our authority, ANRE, has in the middle of this summer proved the new methodology for the next five years, which means that the revenues are regulated by us, and we have signed the methodology that stimulates investments. We have a methodology that generated good work, in our opinion, a return which—average cost for investment, which is around 7 percent. And on top of that, we have placed some KPIs in order for them to be able to provide better service for the consumers. I’m talking about the distributors, the companies that distribute the electricity. So this—if they reach out to these targets, they can go around 8 percent, 8.5 percent per year… This is a generous way to stimulate them to throw in huge volumes of money in order to enforce the grids, because the transition already started in Romania. It is no turning back from these targets that we imposed. And the transition needs better grids.
On top of that, we are not overlooking our natural gas resources. Because you talked about natural gas, the Black Sea offers us a lot of potentials.
On top of hydrocarbons, natural gas, also a good wind opportunity. Romania is the first country in the Black Sea region that has developed an offshore wind law, so we are pioneers in this regard with the help of the Department of State and the Department of Interior in the US government. We have from June this year a law that regulates all the aspects regarding the offshore wind.
Natural gas, coming back, I believe—I strongly believe that in the first part of 2027 we will see the first molecules of natural gas extracted from the Neptun Deep that will go into our transport system. Transgaz, our TSO, is making huge investments in order to overtake this new volumes of natural gas, and we have plans to use the natural gas in Romania by increasing our gas-fired turbines instead of coal-fired turbines, replacing them. And one example is the 1.7 gigawatts installed capacity in Mintia that will generate electricity. So using the gas in Romania, mostly, and of course acting as a—as an exporter, original exporter, for additional volumes for Republic of Moldova, as well as Hungary and other countries.
So ambitious projects, keeping on our targets and ambitions regarding the transition, of course having in mind the resources that Black Sea and our country has in terms of natural gas. So it’s, as I like to say, a tailor-made solution for the Romanian energy system.
MATTHEW BRYZA: Yeah, wow, tailor made and really comprehensive in terms of you’ve got the entire value chain that you’re focusing on, not just generation. And we’ll come back to generation and SMRs, by the way, in the next round. But from generation to the grid, I think very often people overlook the critical need for investments in upgrading the grid and don’t include that in the levelized cost of energy, so sometimes you get a distorted vision that—one that I was talking about yesterday, how much more cost-effective onshore wind can be, but you have to take into account those grid investments. And you are, and you’ve got the investment incentives.
Yeah, Matthew?
MATTHEW BALDWIN: Just to throw in a figure, our estimation of the grid infrastructure investment needs in the coming period is something of the order of magnitude—I think it’s 580 billion euros is the figure we’re looking at.
MATTHEW BRYZA: Wow. Wow.
MATTHEW BALDWIN: And of course—
SANJA BOZINOVSKA: But for where? Which countries?
MATTHEW BALDWIN: Sorry?
SANJA BOZINOVSKA: Which region?
MATTHEW BRYZA: For the EU.
MATTHEW BALDWIN: For Europe as a whole.
SANJA BOZINOVSKA: Europe whole.
MATTHEW BALDWIN: For Europe as a whole. I mean, and that’s because of grid, grid integration. I mean, that’s the biggest thing. There’s almost more renewables than the grid can currently handle, and so this is—this is a huge challenge.
Broader investment in infrastructure and energy needs more than 600 billion a year for the coming period.
MATTHEW BRYZA: A year? Wow.
MATTHEW BALDWIN: So checkbooks out, please, ladies and gentlemen.
MATTHEW BRYZA: Wow. Well, let’s stick with you for a second, Matthew, if we may.
MATTHEW BALDWIN: Sorry, yeah. Mmm hmm.
MATTHEW BRYZA: Yeah. And go back just for a moment to natural gas, and the fact that I mentioned before that right now—right now—Southeast Europe is awash, if that’s not a mixed metaphor, with Russian molecules. 2027 is the ambition for the EU to cut out, as you were saying, all fossil fuels from Russia. And what’s happening, I think, often now is that Russian LNG is being landed in other parts of the region, in Europe, and being rebranded as Belgian or Spanish or whatever it is. How do you get at that problem? And will tackling that, the—sort of the identity of molecules, be part of this phasing out of Russian natural gas in 2027, or does it even matter? Does everything kind of work out in the end through some sort of financial transaction?
MATTHEW BALDWIN: Well, we think it matters. I mean, just—it was good of Ambassador Pyatt to be so strong in support of what we’re trying to achieve. It’s worth—I looked up the language the other day we used in the Versailles Declaration in the immediate aftermath of the war. It was very unequivocal. This is twenty-seven heads of state and government, calmly they’re saying the mess that was launched by the invasion—saying we must phase out our dependency on oil, and gas, and coal, as soon as possible. And it’s interesting to look back on what we’ve achieved because—I’ll come to gas in a moment—on coal, it’s over.
MATTHEW BRYZA: Yeah, Russian, specifically.
MATTHEW BALDWIN: Russian coal is over. And coal, by the way, on its way to being over. Oil is down to 3 percent European-wide. That’s concentrated heavily in three member states: Hungary, Slovakia, Czechia. And they are, you know, on the process of coming out. But the sanctions, again, have been—have been effective.
Gas, I think we’ve given the numbers—45 percent down to 15 percent, 8 percent pipeline—but going up again. There’s some particularly local reasons as to why that is. US production dropped off a little bit. There was the outage in Freeport. We saw higher spot market prices in Asia, which drove up demand. But we’re not hiding from the fact that this is stubborn and difficult.
Throw into the mix that we have the transit contract across Ukraine which comes to an end at the end of 2024. We’ve been working intensively with our member states and our partners in European Community countries as well to model the impact of this, and the good news is we think it’s manageable. We don’t see any reason for this to have security of supply or, indeed, price impacts. There’s a global situation, 550 billion cubic meters of LNG, not all necessarily to the region. But given this and our estimations for the forthcoming LNG supply in 2025 to 2028, we think it’s going to be OK.
So what—how do we manage this situation in the future? LNG imports are part of that increase. Year on year, we think it’ll be an additional 2 bcm of Russian LNG coming into the system. And you know, you talk about it being rebranded, but it’s Russian LNG and I don’t think anyone’s pretending otherwise. It’s coming into countries in Northern Europe. It’s coming into countries in Southern Europe. And I don’t know, I have no insight into Gazprom or Kremlin pricing strategies, but it does seem that things are being priced to disrupt investment in things like—to disrupt projects like the Vertical Corridor. It would seem to be the case.
And I—you know, we—encouraging for me as a bureaucrat who’s very committed to this area is what President von der Leyen said in July. You know, she’s had five years or three years battering away on this issue, and she has tied her colors to the mast once again for the next commission, and I quote: “We will ensure that the era of dependency on Russian fossil fuel imports is over once and for all.”
MATTHEW BRYZA: Wow.
MATTHEW BALDWIN: To tumultuous applause in the European Parliament. There’s no backing off of this target.
MATTHEW BRYZA: Yeah, no equivocation. Yeah.
MATTHEW BALDWIN: So we’ve done, if you like, the—some of the easy bits. The last mile will be difficult. We’ve been asked to look at options. Our new incoming commissioner, who’s going to go through his hearings next week, he’s also been charged with this in his so-called mission letter. So watch this space is my—is my cheeky conclusion.
It is very difficult. A molecule is a molecule, as implied in your question. But I’m not convinced, personally, that the traceability issues are going to be so serious. There seems to be less evidence of LNG being transferred in tankers. It’s a technically more complex business than we’ve seen on the oil side. So we are on this issue and we very much need to address it—and we need to address it, again, in partnership and cooperation with other countries in the region. A lot of the gas is coming in—and no blame attached—through Turkey, and we’re looking forward to considering that and discussing it.
MATTHEW BRYZA: Thank you very much. That’s unequivocal. And, yeah, we should in no way underestimate the dramatic progress the European Union has made in these—in these short few tragic years of Russia’s war on Ukraine.
And so, in that mood of geostategy, then, I’d like to turn again to Minister Bozinovska and ask how—now that the name issue is, thank goodness, finally resolved, the name of North Macedonia and that dispute with Greece that lingered way too long is gone—the Vertical Corridor provides a way to—to really to bind North Macedonia and Greece together. You talked about the interconnection that made a little bit of a blip in terms of the European Investment Bank. But from a—from a more geostrategic perspective, how are you envisioning that sort of cooperation with Greece and beyond in terms of the Vertical Corridor that Ambassador Pyatt talked about?
SANJA BOZINOVSKA: So regarding politics is one thing, and then the stability—
MATTHEW BRYZA: Exactly.
SANJA BOZINOVSKA:—and benefits of the citizens, it’s another thing. So we have excellent communication with the Greeks. I just was in—before going to Washington I was in Greece, and we had also very successful meetings with the Greek regulator. And we are also working on market coupling with Greece.
MATTHEW BRYZA: Oh, nice.
SANJA BOZINOVSKA: Yes.
So, regarding the electricity, one, since we are—we want to be in EU, we want—we need to be coupled with one EU member, so we chose Greece. So with energy, we are perfect neighbors, so we are working on the market coupling.
And regarding the infrastructure, it’s very important we are aware and we are—regarding electricity, we are not connected, unfortunately, with all the neighbors. We are missing Albania. So we want to be connected east-west. We have the Bulgaria and North Macedonia. And when we build the transmission line, it will be North Macedonia, Albania, Montenegro, and then there is the underwater cable with Italy. So we also want to be connected both northwest and—north-south, and east-west. So we are planning on this regarding the connectivity.
And regarding the vertical, yes, we are planning, as I said, also to continue with talks with Serbia. And we need just to work on the financing here, since this is just now—we just started. They have—I think they have other sources, but we need to work on the sources, because now gas is not anymore the perfect green solution. However, we need just to secure finance. It’s not a big deal. It’s only twenty-five kilometers. I think we will be successful. So the vertical integration, I think it’s good. And we have support from EU and also from the United States.
MATTHEW BRYZA: Thank you. It’s so refreshing to go from a geopolitical theoretical question right back to the practical, in how do you get it done? And in our time working together with Turkey and Georgia and Azerbaijan, way back when two and a half decades ago, to start talking about what became the southern corridor Baku-Tbilisi-Ceyhan oil pipeline, we always had it in our minds that nothing was going to happen if the projects weren’t commercially—not only commercially viable, but attractive, with the competitive pull on capital, right, for other investments. And that’s what you’re describing, so—
SANJA BOZINOVSKA: And, just not to forget, regarding the cooperation, in June there was one blackout. And it was Montenegro, Croatia, Bosnia, and Albania. So four countries were a couple of hours without electricity. And it is very important to cooperate also on a regional level. And the question is now in ENTSO, in Brussels. And they’re still investigating. It was in June. They said by December they will have the outcome. And we had once also a couple of years ago, and it was in Greece couple of hours. So we just need to be more connected, and we need to communicate more as countries on a regional level, so we prevent this from happening.
MATTHEW BRYZA: Yeah, imagine—
MATTHEW BALDWIN: Just briefly to come in, it’s amazing to hear a minister—we really pay tribute to all the great things you’re doing. But it’s part of a process that we took a decision to start on ages ago, called the enlargement of the European Union, and delighted that North Macedonia is one of the enlargement candidates. And we have a process through what’s called the Energy Community.
It sounds like a commonplace thing, but it’s actually a fairly amazing organization because it’s been working with member states—excuse me—states like soon-to-be member states, like North Macedonia, to go through the painful business of the necessary reforms to meet the acquis, but most importantly to develop this regional cooperation, which you described, which is absolutely central to how the energy single market works. And, for example, why we have an incredibly efficient electricity single market. But it is, as you say, so nice to move from the theory, you know, North Macedonia becoming part of the European Union, to the practical benefits it delivers on the ground. It’s fantastic.
SANJA BOZINOVSKA: There are political issues in this also.
MATTHEW BALDWIN: Oh, no kidding. Yeah.
SANJA BOZINOVSKA: But we try to do the energy—
MATTHEW BALDWIN: If it was easy, we would have already done it, right?
SANJA BOZINOVSKA: Yeah.
MATTHEW BRYZA: That’s right. Exactly. Well, sticking with that theme then, of practicality of investments to power, no pun intended, the energy transition, Deputy Minister Çonkar, as Minister Bayraktar told us yesterday, Turkey now ranks fifth in Europe in installed renewable generation capacity, eleventh in the world as well. Which is amazing, how quickly that’s happened. And these investments are accelerating, and in pursuit of net zero target at the six hundredth anniversary, I guess, of Mehmed Fatih in 2053. So can you—can you describe for us some of the frameworks for stimulating investment in this sector?
AHMET BERAT ÇONKAR: Yeah. As you mentioned, Türkiye ranks fifth in Europe and eleventh globally in terms of installed capacity in renewable energy. The achievement reflects a firm commitment to a cleaner and more sustainable energy future by Türkiye. But it also highlights the scale of the challenges we must overcome to reach net zero emissions. The deployment of renewable energy is one of the key areas of our long-term energy strategy. We have set ambitious targets to increase the share of clean energy in the national energy mix, while reducing the carbon emissions in Türkiye. Renewable energy accounts more than 56 percent of our total installed capacity as of today, and it’s increasing day by day with new renewable energy investments.
As Mr. Bayraktar mentioned yesterday, we aim to add an additional sixty gigawatts of solar and wind capacity within ten years’ time. So it’s a quite challenging objective. And also, we would like to do this in both smaller distributed gigawatt-scale projects. So this is also another challenge for us. For this purpose, we need to commission 3.5 gigawatts solar and 1.5 gigawatts of wind power each and every year. In addition, we aim to reach five gigawatts of offshore wind installed capacity in the coming period. In order to achieve this right now, we are working on some legislation to speed up the investment processes. And it will be soon in the parliament. We are working on it closely right now.
Of course, the transition will not be easy, as it will affect many sectors and will bring many challenges to all. Electricity is a very sensitive issue for all countries. And people are directly affected by the prices, as we think about the inflationary environment also. This is also another aspect. So since transition costs will be reflected in the pricing, all governments will be affected by this issue. So we need to do very good planning in this area. While changing the energy generation portfolio, we also need to change the transmission system. When we reach the maximum renewable capacity, the traditional transmission systems need to change as well.
Since renewable resources can be intermittent, renewable energy, capacity needs to be managed very diligently. There are additional needs, such as a smart grid, digitalization, better management of the demand, and also the storage capacity. Our transmission systems needs to be increased for renewable energy, as I mentioned. We are right now also continuing our discussions on the Mega Grid Project, so that we can increase the transmission capacity with neighboring countries. Another pillar of the electricity sector in terms of renewable energy transformation is the nuclear energy, as mentioned earlier. Türkiye has different nuclear energy projects right now. The first one is under construction in Akkuyu, and the other two are in the negotiation phase with different countries.
We need to add nuclear to energy—our energy mix to reduce the carbon emissions. Akkuyu Nuclear Power Plant will be commissioned next year. It will start commercial production and reach a total capacity of almost five gigawatts within three years’ time, when the four reactors start producing electricity. And afterwards, we would like to quickly start the other two nuclear projects, one in Sinop, one in Tekirdağ. We plan to reach nuclear energy capacity of about twenty gigawatts by the year 2053. We are also following closely SMRs, the small modular reactors, as baseload energy. We plan to add about five gigawatts of capacity, nuclear capacity, in this area to our energy portfolio as well. And also until 2035, we are also planning to invest in hydrogen storage, as I mentioned earlier. And also our Minister Bayraktar, mentioned the importance of the energy efficiency. So we have also a very ambitious plan to develop the energy efficiency in Türkiye.
MATTHEW BRYZA: Thank you. Just to put those numbers in perspective for a second, I mean, so to get up to twenty gigawatts of nuclear power generation, I mean, that’s a huge achievement, right? That’s gigantic. But renewables—I mean, wind and solar—as you said, you’re already at thirty gigawatts. And you’re going to increase by 200 percent before the end of the decade.
AHMET BERAT ÇONKAR: Yes. Sixty gigawatts is in our plans. And this year we are even exceeding this goal.
MATTHEW BRYZA: Wow.
AHMET BERAT ÇONKAR: It’s going to be over five gigawatts this year.
MATTHEW BRYZA: Amazing.
AHMET BERAT ÇONKAR: So hopefully it continues that way.
MATTHEW BRYZA: Really amazing stuff.
AHMET BERAT ÇONKAR: With the new legislation and with the acceleration of the investments, I think we can achieve this.
MATTHEW BRYZA: Yeah, similar, like Minister Bozinovska’s vision too, you’ve got everything, the entire value chain, all taken into account. In a way, I have to say that—having lived here for a while and worked on Turkish energy for, I don’t know, twenty-five years, I’ve never heard until around now such a comprehensive picture.
MATTHEW BALDWIN: It’s very, very impressive, really.
MATTHEW BRYZA: And with SMRs, part of it, let’s ask Mr. Niculescu then about the SMR project in Romania. We heard a bit about it yesterday. It’s such an innovative approach. You’re taking a moribund coal-fired plant, right, a brownfield project, and turning it into an SMR. So, to generate clean electricity. And also I know, because it’s, you know, NuScale you’re working with, an American company, the US Department of Energy is strongly supportive and looking at forming—or, we’ve already formed a strategic partnership between Romania and the US on energy with this NuScale SMR kind of as a centerpiece. So could you let us know the status of that project? And how significant is the SMR project in the overall mix of all those things you’re trying to make happen in Romania’s energy sector?
GEORGE-SERGIU NICULESCU: It’s not an easy job at all. It’s very provocative. It’s very complex. Because we assume the role of being, again, pioneers in this sector. First country in the—in Europe to deploy this type of technology.
MATTHEW BRYZA: And really, the first project in the world, really.
GEORGE-SERGIU NICULESCU: Yes, yes, yes, commercial project, yes. We strongly believe in this project. And I should give you a little bit of context. Romania has huge experience in operating nuclear power plants. We have two reactors in Cernavodă. Both have 1,400 megawatt installed power capacity. And we are planning to double up the size in Cernavodă by adding two more units. You should know the fact that Romania is the single country in the region that is not relying on a Russian, Soviet technology.
We have built these two reactors with Western technology CANDU from Canada. And we are following this tradition in looking into Western technology when deploying also small modular reactors. This is why NuScale was selected. So we have cut off any links with Soviet Union and Russia long time ago. I like to say that nowadays we have saw a divorce between Russian gas and EU economies. We started this nondomestic divorce with resources from Russia a long time ago. In natural gas we produce 85 percent of our needs, so just only 10-15 percent importing.
Coming back to small modular reactors, yes, we are deploying this technology on the land where it used to be a coal-fired power plant. So this is also one step ahead of the transition. The project is doing well. The company—the Romanian company involved in this project told me that engineers are on the site. We heard the extraordinary news from US Ex-Im Bank that they are—they approved finance of around $100 million, again for this project. Very optimistic about reaching the timeline and keeping the project into the timeline that was proposed. From a governmental point of view, huge political backup for this—for this project, in terms of regulator authority, of course, sustaining this project with all that it needs. Also, not only this project, but the full nuclear program that Romania has.
MATTHEW BRYZA: You know, impressive. You really are the pioneers globally on this project. Cosmin Ghita is an old friend of mine. I’ve been following this year, after year, after year. And you’re there. You’re on the edge of actually getting the investment. And just one more point to highlight that you made is how important it is to have the personnel who know how to operate nuclear generation, right?
GEORGE-SERGIU NICULESCU: Of course. Of course.
MATTHEW BRYZA: There’s not many countries that can do that. And those sorts of experts are in really short supply, so.
GEORGE-SERGIU NICULESCU: Yeah, well, we have good universities. We have people that were trained with skills. Of course, the workforce is essential in all the energy sector. And we are making a lot of efforts to stimulate students to follow up these career programs. Cosmin has a lot of programs in which he’s gathering students and guiding them towards this career. And he’s doing a good job.
MATTHEW BRYZA: Yeah. Great to hear. Great to hear. You mentioned timeline. We’re right on time. We have time for some questions, if there are some in the audience, and then there’ll be a coffee break for fifteen minutes, plus whatever time is left over from the questions. So I can’t see so well. Is any—oh, there’s one. Yeah. Is that John?
Q: It is indeed.
MATTHEW BRYZA: Hey, John. Good morning.
Q: Yeah, I know this problem. John Roberts, with the Atlantic Council and with the Institute of Energy in South-East Europe.
Question for Matthew Baldwin. I’ve just been in Azerbaijan several times researching a paper on Azerbaijan’s energy transition. And there’s one clear point that comes through from everybody, from the president down the ministry of energy, both foreign and domestic energy producing companies. Which is, they need investment to develop the gas required to meet the MOU of July 2022 for doubling Azerbaijani exports to the European Union. And, of course, to pay for the expansion of the Southern Gas Corridor that that entails.
And they say that needs long-term agreements which, in effect, means long-term contracts. But that all they get, as one corporate source put it, from the European Union was offers of three to five years, which is not enough to secure the kind of investment they need for the billions of dollars required for production and transportation expansion. Can you tell us what is the EU’s attitude to what is necessary to secure that kind of investment, and therefore the kind of imports that you would be looking to receive from Azerbaijan over the next three to five years?
MATTHEW BALDWIN: Well, again, you’re talking, John, I think about, here, what they’re hearing from companies in terms of commitments to contracts, right? Yeah. I mean, again, it’s one of the most jealously guarded commercial things. Companies do their contracts. I’m not party to them. Member states, governments, are not party to those contracts. So I can’t speak to that.
I would actually refer to the remarks of the Turkish deputy minister, that we need to work closely together, all partners, to secure this very important doubling of the expansion of the SGC. And I would just—you know, Matt, you felt I was making news, which slightly worries me. I don’t think I am making news. The European Union is not a barrier to companies taking longer-term contractual arrangements. Again, and I would observe that it is often the portfolio players, sometimes the big midstream companies, for a reason. They’re absorbing the big commercial risk in taking on—and this applies every bit as much to the Southern Gas Corridor as it is to US LNG projects and elsewhere.
It’s a difficult project. I think everyone’s always acknowledged that. We are working very hard with our partners in Azerbaijan. I know that the companies are working extremely hard too. And I’m encouraged here today to hear the strong commitments from the Turkish side, which it’s a no brainer, but I’m very glad that you’re also working hard on it. So I’m sorry that’s kind of a non-answer, John, to a good question. But that’s all I got.
MATTHEW BRYZA: No, it’s not a non-answer, actually. It’s a good answer, because you make the point that the big portfolio buyers of natural gas are able to balance out their portfolios, yeah. And my point was not that there’s any discouragement by the European institutions of LNG investment or natural gas investment, but it’s just that there’s a political fear that there would some change.
MATTHEW BALDWIN: There will be less gas over time, but there will still be considerable volumes under the—under all of our modeling. And someone was talking what’s the difference in a scenario, and a forecast, and a target? I’m not getting into that. But in all our scenario modeling, you know, there’s a lot of gas to be contracted and used in the European Union through 2049.
MATTHEW BRYZA: Great. Former Minister Palacio. And I think this will probably be the last question, because we’re just—
Q: I have two questions, one for the European Commission and one for the Romanian regulator. For the European commissioner, it’s a follow-up, in fact, to this question. We have had two great reports, one by former Prime Minister Letta, and one by former Prime Minister Draghi—the two Italians. There are other countries—
MATTHEW BALDWIN: They have a monopoly on reports, yeah.
Q: Yeah, on the report. Both of them highlight the need for the European Union to have the energy union. We have been—you have been speaking about just an electricity internal market. We are not there, and frankly we are far.
My question to the European Commission, the origin of that is not other that the treaty keeps the energy mix to each member state does with the energy mix whatever the member state wants. But on terms of environment, climate, this is the—this is—the European Commission decides. How are you going to overcome, convince? What are you going to do to have the member states coming together to have an energy mix? Because you speak about in the European Union gas. I mean, the European Union, gas, each one does whatever each member state wants, for the moment.
My question to you is linked to that. You have highlighted that you have looked successfully for some financing from the Export-Import Bank for your nuclear projects. Have you found any financing from the European Union Next Generation, from the European Investment Bank, or other European sources? And if not, tell us what was your—I mean, I’m giving the answer. Excuse me.
MATTHEW BRYZA: Thanks. We got a minute for each of you. Yeah, please.
MATTHEW BALDWIN: Oh, no question from Ana can we answered in a minute, but I’ll do my best. There’s a tendency now in Brussels, for every sentence to begin: As Mario Draghi says, comma. But he’s put his finger on a true point, as you’ve identified, which is the price of energy is elemental to the competitors of the European Union. It’s elemental in the short term, and, of course, it’s elemental in the long term, which is really one of the key things behind the famous energy trilemma.
We have—the incoming Commission has pledged itself to go further with the energy union—a true energy union is the phrase that’s been used. And part of that is about the governance. And this, I think, gets to your point. There’s going to be no competence grab, as we call it, in the European Union, where we say, right, member states, we will decide on your energy mix. That’s absolutely going to remain for them. But where this meets is in a bureaucratic thing called national energy and climate plans—I think North Macedonia, you’re doing this now—where you identify, each member state, how you’re going to meet the energy needs from energy security perspective and, of course, the mix that’s required to deliver on the ambitious decarbonization targets.
So, I mean, that’s not going to change. We have to work to deliver on this much more closely with every member state. These NECPs, as we call them, have to become investment plans. Back to my point, about the—yes, I’m sorry. But we also have to work with all levels of society—with regions, with cities—to deliver on this. Thank you. Sorry for eating up so much time.
MATTHEW BRYZA: Thank you. Perfect time. Mr. Niculescu—
GEORGE-SERGIU NICULESCU: Regarding financing the SMRs and the Doiceşti project, I’m well aware that—you know by now that this is a pioneer project. It needs a lot of backup, political, governmental backup. And I’m sure that after the project gets mature, a lot of financial institution, banks, international banks, will jump into this project and deliver finance. Until now, it is good that we have Ex-Im Bank on board with this project.
MATTHEW BRYZA: Great. Thank you. Thank you for your succinct, clear, and informative reply. So that’s the end of our panel. We now have a fifteen-minute coffee break before the next session, which is Disruption of Energy Security in Uncertain Times, moderated by our dear friend Mehmet Oğutçu. But before you go, I really want to thank these brilliant, strategic, clear, candid, and practical colleagues here on the panel for a discussion that, I think, enlightened everybody. Thank you very, very much.
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Image: At the Regional Conference on Clean and Secure Energy, officials from Eastern Europe discussed the infrastructure still needed to deliver secure energy across the region and to transition to renewable sources.