Energy Sovereignty

28 June 2016

Albert II Prince of Monaco and Burisma Group  in the forefront of the pan-European movement aimed at the formation of a new energy security model in Europe

Last week, the whole Europe was actively following the events in Monaco, where the Energy Security Forum took place.

And there is a good reason for this: at the very moment when the official diplomacy is treading water and Ukrainian issues are less likely to be on the international agenda, the forum sets the stage for the search of new solutions.

It’s hard to remember the last time when such high hopes were put on the energy development in Europe.

According to the participants, who gathered at the Royal Yacht Club of Monaco, agenda of the first Energy Security Forum was determined by “crumbling world order and rising geopolitical risks.”

Actually, the idea was not only to unite the progressive European politicians over the political aspect of the Munich Security Conference, but also to extend the pan-European challenges to the energy security level.

To set the tone of debate was Joschka Fischer, Vice Chancellor of Germany in 1998-2005. He admitted that there is an escalated need in the European Union “to start the process of disarmament to prevent the future use of energy resources as a weapon.” The dependence of the states – EU members on energy supplies has a serious impact on the national security.

As a result, the EU and NATO member states understand that they cannot continue to do business as before. Actions of Russia mean that it would be wise for consumers to take active steps in further diversification of gas supplies and the radical reduction of dependence on Russia.

Jean-Arnold Vinois, European Commission Representative for Energy, named five requirements for ensuring energy security in the future, suggesting a concept of five D: Diversification, Domestic resources, Democratization, Digitalization and Diplomacy. An integrated approach and compliance with the conditions have to contribute to a safer energy management in the next decades.

The topic of energy security and energy independence is painful for Ukraine, but at the same time it’s been always a relevant issue.

Europeans think that Ukraine often forgets about the possibilities of domestic resources development, giving priority to democratization and diplomacy. As a result, political dependence of the state grows, while political independence is highly needed today.

To reverse the current situation, Ukraine and Europe should unite over the idea of energy security. The basis of strong growth tendency is in the renewable energy development. Back in 2013, we have witnessed a decreased investment in traditional energy sources by global investment funds.

TJ Glautier, US Vice-Secretary of Energy 1999-2001 noted that the changes we are going to see in the next decade, will be greater than the changes we’ve seen in the last 50 years”.  Energy security plays an increasingly important role for all the leaders, and each of us is responsible to look for solutions”, – said Mr. Glautier at the Forum.

“We should pay more attention to the renewable energy sources that would enable getting cheap energy without polluting the environment, “- admitted the Prince of Monaco Albert II.

Forum speakers stated that the modern European energy model is being actively readjusted from traditional energy sources to alternative and renewable ones. “Energy security planning has to be done in a long-term perspective”.

Besides, to become the point of no return was the study of the International Renewable Energy Agency (IRENA), which reported that in 2013, for the first time the volume of electricity produced from renewable sources exceeded the volume of coal, oil and gas generation combined: 143 GW of electricity versus 141 “hydrocarbon”GW produced.

It has become cheaper to produce electricity from renewable sources compared to fossil fuels in some regions of the world. In the same year, the Bloomberg New Energy Finance agency noted that implementation progress of new energy generation based on renewable sources will be at the same “aggressive” level in terms of both installed capacity growth and investment attraction in the following years.

Thus, it is clear that the traditional way of the renewable energy generation is conceding, it is not considered a “rival” any more.

Now Ukraine is compelled to watch as the investment development focus shifts towards China, India, the USA, Latin America (Uruguay, Brazil and Chile) and Africa (Ethiopia and Kenya), where the so-called long-term auctions for electricity supply from alternative sources are actively conducted.

There either exist tax exemption in terms of renewable energy sources (for example, in Uruguay) or preferential credits are issued from state banks (like in Brazil). And there are investment tax credits and accelerated depreciation in the US.

Thanks to an active investment policy, an international consulting firm IHS predicts growth of geothermal energy market in the next five years to 177% (!).

According to the International Energy Agency, by 2050 renewable energy will have become the major resource to meet world’s energy needs. And it works! Investors from all over the world compete for such projects.

What can Ukraine offer investors? Our country needs not only reforms, but also a serious step forward, shifting towards renewable energy sources.

Moreover, it has to be done not through “fighting windmills” and mythical “deoligarchization”, but due to formation of new sectors, which will replace an old corrupted and energy non- efficient soviet economy model, with the help of the market approach.

For instance, since 2008, Uruguay has invested 3 % of GDP in changing the structure of their energy development under the conditions of public-private partnership. In ten years the country will be able to become fully self-sufficient in electricity generation.

But the most important, is that Uruguay already gets 84 % of electricity from alternative sources and it can be considered a world leader in this field.

Ukraine hasn’t managed to cross the point of no return yet, having offered its investors competitive conditions for electricity generation from alternative energy sources.

Andreas Piebalgs, European Commissioner for Energy in 2004 and 2009, mentioned at the Forum that the topic of energy security is very sensitive, and  in order to get positive results, it is required a well-coordinated work of all the participants of the process: of legislative and  executive powers from the one hand and businesses – from the other.