Winter Cold Exposes Soft Underbelly of EU Energy Union Goal

  • Power hoarding in southeast belies integration ambition
  • Bulgaria faces EU review of month-long power export halt

As freezing weather triggered energy shortages across southeast Europe at the start of the year, Bulgaria’s refusal to export power was typical in a region where everyone had to fend for themselves.

Nations from Greece to Hungary hoarded power last month in response to the coldest winter in a decade, exposing the weakness of the region’s power markets, which should enjoy unrestricted flows. Temperatures in the Balkans and surrounding countries are expected to drop below freezing again next week.

The reaction highlights the European Union’s struggle to break down national barriers for power and gas, integrate markets and bolster energy security as it tries to ease dependence on Russian fuel. While many southeast European countries are in the EU, they have been slow to modernize plants and cables in a region where assets per person for production and infrastructure are about a third of that in advanced Europe, according to the International Monetary Fund.

“What I see in the Balkans is clear evidence that everybody first secures its own consumption and only then, if they’re in a position to do so, they’ll help the others,’’ said Andras Totth, the deputy chief executive officer of strategy at Hungarian state-controlled utility MVM.

January’s cold snap crippled supplies in a region dominated by coal-fired generation and hydropower, cutting electricity to tens of thousands of homes and sending energy prices to record levels. Greece cut power exports for two days, while Romania restricted flows as rivers froze and one of its nuclear reactors was forced to halt after a blizzard damaged the high-voltage line connecting it to the grid.

Export Halt

Bulgaria, which normally exports more than 10 percent of its electricity, curtailed outflows for almost a month until Feb. 9. The disruption is being reviewed by the EU, which said it’s meeting with Bulgaria next week over whether the country broke any of the bloc’s rules.

Bulgaria fully complied with the nation’s energy laws and has “no concerns for now” about the EU’s review, Petyo Ivanov, the chief executive officer of state-owned Bulgarian Energy Holding, told reporters in Sofia on Wednesday. The country will respond to EU questions it receives officially, he said.

The EU has drafted a proposal that would oblige member countries to develop prevention plans for such energy security risks, according to Florian Ermacora, the European Commission’s representative for wholesale power markets. The members would then have to agree on the plans, which would bring transparency and force closer cooperation, he said.

While aging infrastructure is a concern, the main obstacle to integrating markets in the region is lingering political distrust between the countries, according to Julian Popov, a Fellow at the European Climate Foundation and a former environment minister of Bulgaria. Every time power or gas supplies get tight, the nations’ top politicians panic and order exports to stop, which hurts traders, he said.

“It creates a typical prisoner dilemma -- countries start thinking only of themselves,” Popov said.

Slow Progress

Getting cleaner power plants, gas links and storage built or upgraded in southeast Europe is an urgent priority in the EU’s energy union. Interconnections need to improve in countries such as Bulgaria and Hungary that still depend primarily on fuel from Russia, the EU said in an e-mailed statement.

Progress is slow. Bulgaria’s state-owned utility NEK, burdened by $1.9 billion of debt stemming from a failed nuclear project with Russia, is struggling to build new capacity and upgrade existing facilities. Serbia, which is seeking EU membership, is overhauling large plants, but must still decommission old thermal units. Natural gas pipeline links between Serbia, Bulgaria and Greece are still waiting to be built.

“The Balkan peninsula definitely has a problem with aging infrastructure,” said Otilia Dhand, a Brussels-based analyst at Teneo Intelligence, a political risk analysis company. “Energy projects need a lot of budget resources, but their long-term nature isn’t aligned with political cycles.”

— With assistance by Misha Savic, Slav Okov, and Weixin Zha

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE