PIPELINE GAS DIVERSIFICATION BECOMES REALITY

SPECIAL REPORT | DECEMBER 2020 https://eurac.tv/9R-H

With the support of PIPELINE GAS DIVERSIFICATION BECOMES REALITY

SPECIAL REPORT https://eurac.tv/9R-H

The Trans Adriatic Pipeline (TAP) is the European leg of the Southern Gas Corridor, a gateway project cross- ing Greece, Albania, the Adriatic Sea and Italy that will transport 10 billion cubic meters a year of gas supplies from Azerbaijan to multiple markets in Europe. Four and a half years after the inauguration of construction works, on 15 November TAP started delivering gas. Contents

Commission welcomes arrival of ‘Caspian gas’ to EU 4 countries

TAP pipeline meets 12% of Italy’s gas demand 6 Bulgaria’s gas dependence on the Kremlin slowly loosens 8 Greece becomes ‘most important hub for alternative gas’ in Southeast Europe 10 TAP pipeline is bringing EU energy policy to Azerbaijan 12 Why Southern Gas Corridor is a chance for energy efficiency? 14 4 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV Commission welcomes arrival of ‘Caspian gas’ to EU countries

By Georgi Gotev | EURACTIV.com

A valve at the Kipoi compressor station, linking TAP to TANAP. [TAP website]

he European Commission according to a communique by this and competition, improve energy welcomed on Friday (4 company, although the achievement security and diversify gas supply, TDecember) the start of the went largely unnoticed. particularly in Italy, Greece and operations of the Trans-Adriatic Bulgaria, as well as the South-East Pipeline (TAP), the last stretch of Asked to comment, Commission European region. TAP is a project of the Southern gas corridor, thanks to spokesperson Tim McPhie said the EU common interest and an important which gas pumped from the Shah EU executive “welcomes the start of part of the Southern gas corridor”, Deniz offshore gas field in Azerbaijan operation of the TAP, which connects McPhie said. started reaching Italy. Greece to Italy trough Albania, bringing Caspian gas to consumers in The idea of the TAP project goes As a key component of the 3,500 km the EU”. back more than 10 years, when it was Southern gas corridor, the TAP pipeline in competition with other pipeline became operational on 15 November, “The project will increase choice projects to carry gas from Azerbaijan,

Continued on Page 5 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 5

Continued from Page 4

that TAP would also hit full capacity.

TAP’s routing can facilitate gas supply to several South Eastern European countries. Bulgaria will link to TAP via the interconnector Greece-Bulgaria (IGB), which is in its final stages of construction, and import 1 bcm/y of Azeri gas, representing around one-third of its annual consumption. Until now Bulgaria was dependent on imports of Russian gas at almost 100%.

TAP’s shareholding is comprised of British Petroleum (20%), Azerbaijan’s SOCAR (20%), Italy’s Snam (20%), Belgium’s Fluxys (19%), Spain’s Enagás (16%) and Swiss- based Axpo (5%).

The Commission has for years promoted the policy of diversification of gas supply. According to experts, the most obvious result of this policy is precisely TAP, which for the first time brings pipeline gas from the East from a source different from Russia. Other sources of diversification are mainly in the form of LNG supply to various terminals in maritime EU countries.

The Commission has promised to present details of how its policy of decreasing the dependency on Russian gas translates in figures. such as the now-defunct Nabucco. Russia had for years nourished ambitions to build a Poseidon pipeline in the Adriatic Sea, mirroring TAP, to bring Russian gas to Italy instead, but the project never materialised.

The actual construction of TAP started four and a half years ago, but it encountered difficulties in its final stages, with activists in Italy opposing the removal of 211 olive trees.

With the trees replanted and the local authorities appeased, the pipeline was completed on 12 October and gas started flowing on 15 November. The 878 km long pipeline connects with the Trans Anatolian Pipeline (TANAP) at the Turkish-Greek border in Kipoi, crosses Greece and Albania, and the Adriatic Sea, before coming ashore in Southern Italy.

The pipeline has a capacity of 10 billion cubic meters a year (bcm/y) and is designed with the potential to double its throughput capacity to 20 bcm/y. Shah Deniz is expected to reach peak output in 2023, around the time 6 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV

INTERVIEW TAP pipeline meets 12% of Italy’s gas demand

By Antoinette Nikolova | EURACTIV Bulgaria

Piping at the Kipoi compressor station, on the Greek side of the Turkey- Greece border, October 2019. [TAP webiste]

efore the Trans-Adriatic industry before he was appointed TAP’s become reality. Can you sum up – what pipeline (TAP) was built, Italian head of external affairs in September is the benefit of TAP for Italy? Bbusinesses were paying a higher 2018. He holds an MBA from the Vlerick price for energy compared to their Leuven Gent Management School and As the European leg of the Southern European peers, says Vugar Veysalov, a BA Honours from the Azerbaijani Gas Corridor, TAP will bring natural head of external affairs at TAP. The University of Foreign Languages. gas to Europe from a new source and new pipeline, which will also supply through a new route, thus reinforcing Greece and Bulgaria, will bring greater He spoke to Antoinette Nikolova, the continent’s security and flexibility of prices, he told EURACTIV correspondent of EURACTIV Bulgaria, diversification of supplies. Volumes in an exclusive interview. in Italy. heading to Italy (approximately 8.5 bcm/y) will represent around 12% of Vugar Veysalov held several The TAP pipeline, bringing Azeri gas the national demand for gas; in South managerial positions in the oil and gas to Italy across Greece and Albania, has Eastern Europe, with volumes of lesser

Continued on Page 7 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 7

Continued from Page 6

magnitude, the gas flowing through to the market, as well as commercial uninterrupted energy supply to warm TAP will supply between the 20% and reverse flow capacity, according to the homes and feed businesses. the 30% of the yearly gas demand of ENTSOG Auction Calendar and the Greece and Bulgaria, respectively. TAP Network Code, coordinated with Talking about innovative Depending on market conditions the date for start of operations. technologies, hydrogen is an we are thoroughly and constantly important element in achieving assessing, TAP could double its That said, TAP has been designed a carbon neutral future and this capacity to 20 bcm/y with minor to expand to up to 20bcm/a, is something that TAP is actively modifications to the system. as and when our Market Test monitoring. We are in the process process concludes with binding of assessing the degree to which How will TAP possibly contribute for commitments from shippers for TAP can technically accommodate lower prices for end consumers? further long- term capacity. In line transporting a blend of natural gas with national (Italian, Albanian and and hydrogen. Especially in the case Natural gas flowing through TAP Greek) and EU regulation (TAP is an of an expansion (up to 20bcm/a), is priced without fixed link to the oil Independent Transmission Operator it would be important to take into price as is usually the case with ‘take- and complies with the Third Energy account potential future demand and or-pay’ contracts. In Italy for example, Directive), any shipper who wishes to requirements in the design of any this could bring greater flexibility take part in TAP’s open seasons may new equipment. and a faster response to changes in do so, as long as they comply with the market fundamentals with respect to requirements for participation. All current contracts feeding the Italian interested parties can bid for available gas system, thus enabling a quicker capacity in accordance with the rules recovery of businesses which still set out in these guidelines. pay a higher cost of energy than their European peers. How does TAP see the ‘Green Energy’ policies and how does it manage to Can the pipeline be used by other stay in line with these EU priorities? potential suppliers? Fighting climate change is the TAP’s initial capacity – most pressing challenge of our time approximately 10bcm/a – has that requires a well-coordinated already been allocated to the Shah response and inclusive approach that Deniz shippers, in line with the gas could utilize all available technologies transportation contracts signed in and solutions. TAP has a pivotal 2013 and under the provisions of the role to play in the energy transition, TPA (Third Party Access) exemption especially in the Western Balkans, granted by the relevant regulatory who are heavily reliant on coal and Authorities. lignite for power generation. Taking a broader look at the Europe energy TAP has set aside approximately landscape, where energy demand is 5% of the initial capacity for short- expected to recover after the COVID- term booking. This is in addition to 19 crisis, natural gas will continue to the already booked capacity. Short be a key-part of Europe’s energy mix in term capacity is set aside for the the years to come and, in partnership 25-year operating period. TAP will with renewables and innovative offer available short-term capacity technologies, TAP will guarantee an 8 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV Bulgaria’s gas dependence on the Kremlin slowly loosens

By Krassen Nikolov | EURACTIV Bulgaria

In red, the Interconnector Greece-Bulgaria (IGB), also known as the Stara Zagora-Komotini pipeline. The TAP pipeline is in yellow. [IGB website]

ith the implementation of But at the end of 2020, it turns out This has caused dissatisfaction in the IGB (Greece-Bulgaria) that the construction of the Gazprom- neighbouring Romania, but also in Winterconnector, Bulgaria favoured ‘Turkish Stream’ through Ukraine, which also hopes to obtain could reduce its dependence on Bulgaria is going much faster than the gas from sources other than Russia. imported Russian gas by 50%, but the interconnector with Greece, despite project, declared a priority more than the fact that Turkish is a Russian Ukraine has lost billions in transit ten years ago, continues to be delayed. project, while the latter brings the fees because Bulgaria began receiving EURACTIV Bulgaria reports. country real diversification of supplies Russian gas solely from the Turkish and, as a result, protection of national Stream route as soon as the pipeline Nearly two years ago, Bulgarian security. reached the Bulgarian border in 2019. Prime Minister Boyko Borissov announced that the launch of the In mid-November, TAP officially The Greece-Bulgaria gas Trans-Adriatic Pipeline (TAP) should began supplying Azeri gas through the interconnector, also known as Stara take place in “synergy” with the start Southern Gas Corridor, via Greece and Zagora-Komotini, would also allow of IGB, the interconnector Greece- Albania to Italy. Bulgaria’s connection US gas imports from LNG terminals Bulgaria, which would bring one to the pipeline is under construction, in Greece. But the future of the billion cubic meters of Azeri gas per but there is no official prediction of 182 kilometre pipeline, which was year to the country. when it will start operating. declared a priority by Bulgaria and

Continued on Page 9 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 9

Continued from Page 8

Greece in 2009, is still unclear. indexation according to generally have warned about is the overdue accepted criteria. liabilities of Sofia District Heating “The importance of TAP is for natural gas, which already exceed significant because it is directly “Unfortunately, the prices and BGN 148 million (€76 million). This related to the possibility of the formula for its indexation in puts at risk the payments for winter alternative supplies of natural gas this contract are kept secret. But supplies from Gazprom and the from Azerbaijan to Europe and in in general, today the prices of all issuance of a bank guarantee for the particular to Bulgaria through the contracts for the supply of natural start of natural gas imports from interconnector Bulgaria-Greece,” gas in Europe and in the world follow Azerbaijan for Bulgaria from 2021. Ivan Hinovski, a well-known energy the principle of monitoring the prices expert from the Bulgarian Energy of international gas exchanges,” The Azerbaijani side requires and Mining Forum, told EURACTIV explains Hinovski. a bank guarantee for its supplies, Bulgaria. according to the contract from 2013. “So personally, I do not expect And the banks set as a condition for The 1 billion cubic meters of gas any ‘surprisingly’ large deviations the guarantee to solve the problem per year which Bulgaria expects from from the prices of previous contracts with the debts of Sofia District TAP represents about 33% of the with Gazpromexport. But more Heating. country’s consumption. Separately, importantly, in this case we are through the interconnector, Bulgaria definitely talking about increasing With a stumbling block like could receive up to half a billion cubic the energy security of the country.” Sofia District Heating, which takes meters of gas from the LNG terminal natural gas from the state gas sector in Alexandroupoli. Thus, the country According to him, Bulgaria’s without paying, the implementation can reduce its gas dependence on relationship with TAP has been of a strategic project for Bulgaria is in Russia by up to 50%. delayed for too long, which was “the question. goal of certain geopolitical games But it does not seem in a hurry to in the region, despite the powerful EURACTIV Bulgaria is still waiting do so, says Hinovski. intervention of American policy.” for answers to questions posed to the country’s energy ministry. “Unfortunately, the Greece- Hinovski says that the pace of Bulgaria interconnector, which is construction of two gas pipelines key to these deliveries and which has currently being built in Bulgaria is become a field of heated geopolitical beyond compare. On the one hand, games, has been delayed too much, Turkish Stream is breaking records, for which Bulgaria has been criticized while on the other, IGB is advancing by the European Commission and at a snail’s pace. Romania in particular,” he says. “Turkish Stream is being built at a “For now, the expectations are record speed, which raises suspicions that it will be ready in the second half of reverence for Russia and protection of 2021, when natural gas supplies of a number of corporate interests from Azerbaijan can be expected to in Bulgaria and Russia against the start,” Hinovski commented. background of the forthcoming expiration in 2022 of the contract The price of the gas from TAP with Gazpromexport for natural gas will be negotiated on a market basis, supplies,” says Hinovski. but the contract with Azerbaijan will reflect the formula for price Another obstacle that experts 10 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV Greece becomes ‘most important hub for alternative gas’ in Southeast Europe

By Theodore Karaoulanis and Georgi Gotev | EURACTIV Greece and EURACTIV.com

Greek Prime Minister Kyriakos Mitsotakis (R) and Bulgarian Prime Minister Boyko Borisov (L) attend the signing event for the participation of Bulgartransgaz state-controlled company to the Alexandroupolis, north Greece, liquefied gas terminal project in Athens, Greece, 24 August 2020. [Orestis Panagiotou/EPA/EFE]

s the Trans-Adriatic Pipeline Azerbaijan by the end of the year. Alexandroupolis, Greece becomes the (TAP) became operational last most important transit hub for the Amonth, a Greek official stated “We look forward to the start of transportation of alternative natural that his country had become the most the delivery of commercial quantities gas sources in Southeastern Europe. important hub for gas from sources of gas to the Greek market and other than Russia in Southeastern specifically to DEPA under the existing Hatzidakis recalled that the Europe, also thanks to its LNG gas supply contract from the Shah choice of the Southern Corridor route terminals. Deniz field until the end of the year,” through Greece and TAP was made Hatzidakis said. by the Shah Deniz consortium in June Kostis Hatzidakis, Greece’s 2013 under the government of New minister of environment and energy, He further argued that with this Democracy led by Prime Minister hailed the start of TAP operations and pipeline, in combination with other Antonis Samaras. said that through DEPA, the natural projects such as the Greek-Bulgarian gas supply company of Greece, the natural gas pipeline IGB and the This statement can be interpreted country would start receiving gas from Liquefied Natural Gas terminal of as a compliment to his political party,

Continued on Page 11 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 11

Continued from Page 10

but it should be noted that during the Greek natural gas transmission the Samaras government, which was system is completed, allowing the under pressure to sell state assets, immediate supply and transfer of two major Greek gas companies additional quantities of gas to the offered for sale were acquisition Greek market to meet the growing targets for Russia, which ultimately domestic demand. failed to buy them But Greece banks on doubling the Greece then changed its TAP capacity. geostrategic course under the leftist Syriza government of Alexis In 2021, a market test will be Tsipras, against the background of carried out to double the transport rapprochement between Russia, capacity of the TAP pipeline to 20 a traditional Orthodox friend of billion cubic meters per year. This was Athens, and its arch-foe Turkey. announced by the managing director Both main political parties in Greece of TAP pipeline, Luca Schieppati, at finally made the choice to play the the Greek Economic Summit on 3 US card, which pushes strongly for December. energy sources and infrastructure diversification, away from Russian The event hosted notable interests. American speakers, with references to key issues that connect the two Coveted by Russia, DESFA, the sides of the Atlantic. Hellenic Gas Transmission system operator, was ultimately sold to a Schieppati said that with the European consortium, with the Greek 10bcm of gas that TAP will initially state keeping a minority stake. DEPA, carry, it can meet about a third of the main Greek public gas company, Bulgaria’s gas demand, as well as a is now split in two (a commercial quarter of Greek (1bcm) and about and an infrastructure company) and 12% of Italian gas demand (8bcm). is under bid for sale within the next months. He stressed that TAP will also support market integration in “This is a historic moment for both Southeastern Europe through the Greek and the regional energy interconnections with key energy market, as the National Gas System infrastructures, such as the IGB is interconnected with one of the (Interconnector Greece Bulgaria) or largest gas markets in Europe, that the IAP (Ionian Adriatic Pipeline), of Italy, also connected to Northern while actively contributing to its Europe through Switzerland and global goal of reducing carbon of Germany, upgrading the role of emissions as well as allows the the country in the regional energy introduction of a cleaner energy landscape,” DESFA said as TAP was source. launched.

The company confirmed that the connection of the TAP pipeline with 12 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV

OPINION

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network. TAP pipeline is bringing EU energy policy to Azerbaijan

By Danila Bochkarev

A gas platform in the Shah Deniz 2 field in the Caspian Sea, from where the gas for the Southern gas corridor is pumped. [Azernews]

he construction of the diversification of the sources of its TAP pipeline could set an The TAP is part of the Southern energy supplies. The decrease of Texample of what a project Gas Corridor, transporting natural gas indigenous production and increase developer’s role should be – to build to Europe from the Shah Deniz II field in consumption is leading to higher a commercial infrastructure project in Azerbaijan. Connecting with the demand for imported gas. while mitigating any potential Trans Anatolian Pipeline at the Greek- environmental and social challenges, Turkish border, TAP crosses Northern Every new source of energy writes Danila Bochkarev. Greece, Albania and the Adriatic Sea leads to more competition and before coming ashore in Italy. security of supply. There was also a Danila Bochkarev is Senior Fellow, more politicised angle of Europe’s EastWest Institute (Brussels). The The $4.5 billion pipeline has a diversification strategy – Brussels is opinions expressed in this article solely capacity of 10 bcm/year, potentially de facto practicing avoidance of new reflect the views of the author, not of his expandable to 20 bcm/year. It is Russian gas supplies and delivery organisation. planned that 8 bcm will be delivered to routes. Italy and 2 bcm to Bulgaria and Greece. On 15 November 2020, the Incidentally, avoiding dependence Trans Adriatic Pipeline (TAP) began The TAP pipeline project was on a particular supplier might commercial operations. favoured by the EU’s drive towards result in creation of new potentially

Continued on Page 13 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 13

Continued from Page 12 challenging dependencies. A transit foreign and domestic policies by the never rose to the level of a geopolitical through Turkey may – in certain cases EU member states or Brussels as in chessboard. – carry its own political challenges, the case of Russia. For example, when considering recent tensions between dealing with Russia, a significantly The “political waves” across the Ankara and Brussels. stronger energy player, Brussels has EU were surprisingly low, at least on tried to leverage its position as a the surface. The project developer Basically, all non-Russians routes market for its gas even in situations had mostly to deal with construction and sources of supply (such as the where gas played no role. and environmental issues and not to TAP pipeline) got a “green light” address political criticism and adverse from Brussels. For example, TAP was Chris Miller, assistant professor of regulatory changes, or respond to selected – among others – as a Project international history at the Fletcher unjustified accusations. of Common Interest (PCI) in 2013, School of Law and Diplomacy, 2015, 2017 and 2019 for its role in observed that German policy today For example, when the European opening up the Southern Gas Corridor, is “as tough on Russia as at any point Commission amended in 2018 the a major alternative route of supply for since the Cold War.” Gas Directive under the guise of Europe. harmonizing the rules (applicable to More specifically, Azerbaijan’s offshore gas import pipelines), the Being identified as a PCI four energy sector is likely to be impacted outcome was clearly meant to address times in a row signifies the EU’s solid by the key element of the EU energy only one single project (Nord Stream political support for the pipeline discourse. Discussions around 2), reflecting the EU’s geopolitical supplemented by significant funds decarbonisation, value chain preferences rather than any real need from the European and international emissions, methane leakage, etc., will to iron out market distortions. institutions. For example, the TAP be “exported” to Azerbaijan, and Baku pipeline received 1 billion euro in loans should be ready to provide a timely The TAP developers were able from the EBRD and 700 million from response to these developments. to realise a technically challenging the EIB Direct Facility. Washington project with pipeline crossing the also offered strong political support to Additionally, European carbon mountains and the Adriatic’s seabed, the Southern Gas Corridor. border adjustment mechanism, and successfully avoid major social commonly referred to as a carbon conflicts. Even though more ambitious border tax, will be applied to the (and more political) Nabucco did not Caspian gas exports to Europe in the The construction of the TAP take off, natural gas from Azerbaijan immediate future. Azerbaijan should pipeline could set an example of what has found its way to market in the not underestimate the importance a project developer’s role should be – framework of a more commercial and extent of this initiative and start to build a commercial infrastructure project promoted by the private energy developing its policy and regulatory project, while mitigating any potential companies. response to the EU’s “green” environmental and social challenges. instruments. The launch of TAP pipeline Unfortunately, there are enough is undoubtedly a significant It is worth noting that the TAP examples of European infrastructure achievement for Azerbaijan: TAP will pipeline was fortunate not to attract projects, where the developer has help Baku to diversify its supplies, any serious political attention in been made the canvas on which the find new customers and capitalize on Brussels or the EU capitals with a commercial reality of a market is its gas reserves. It will also intensify minor exception. The project had been being painted in broad strokes as a Baku’s economic and political links contested by the 5-Star Movement, one geopolitical rivalry. with the European Union. Increased of the parties in the ruling coalition. ties with Brussels might however come at a price. In June 2018, Italy’s environment minister Sergio Costa told Reuters the Strong economic ties do not project was “pointless”. The TAP has its preclude strong criticism of a country’s dose of adrenaline, but its challenges 14 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV

PROMOTED CONTENT

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network. Why Southern Gas Corridor is a chance for energy efficiency?

By Bilyana Chobanova and Oleksandr Antonenko | International Energy Charter

[tap-ag.com]

he construction of a $40 billion Project Manager at the International energy player over the last two project of the “Southern Gas Energy Charter. decades. TCorridor” is completed, a 25-year gas supply contracts with Oleksandr Antonenko is the Head The Southern Gas Corridor project European buyers are in force, and a of the Energy Efficiency Unit at the primarily targets the export of gas new energy efficiency law is ready International Energy Charter. from Stage 2 Shah Deniz field. The to be adopted by the Milli Majlis, new gas corridor can deliver six billion the Parliament of the Republic of Now, new opportunities arose cubic meters per annum (bcma) of gas Azerbaijan. for the energy-rich country that has to Turkey and further ten bcma to the evolved from a struggling newly EU market via the Southern Caucasus, Bilyana Chobanova is the EU4Energy independent state to a major regional Trans-Anatolian (TANAP) and Trans

Continued on Page 15 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV 15

Continued from Page 4

Source: British Petroleum in Azerbaijan, 2019

Adriatic (TAP) pipelines in a route of electricity generation plants efficiency policy instruments. Thus, known as the Southern Gas Corridor. should be exported through TAP and the Ministry has already mobilised its TANAP. Indeed the study identifies resources and asked the international The new pipeline and the 25-year that the potential energy savings in donor community to assist the contract will not only bring affordable the energy sector only can reach up country with the implementation of and competitive Caspian gas to the to two bcma or 20% of the planned the requirements of the new law. EU market but also diversify the natural gas export to the EU using existing energy routes and increase the new pipeline system. However, A broader analysis conducted the European energy security. But other sectors of the economy can by the Government of Azerbaijan why does energy efficiency become also provide substantial natural gas in cooperation with the EU-Funded so crucial for Azerbaijan, especially savings that can be exported using EU4Enetrgy project also identifies that for this historical moment of the Southern Gas Corridor after the gradual increase of energy efficiency commencing the operation of the adoption and the implementation of in all sectors of the economy during long-awaited pipeline? the new energy efficiency law. 2021-2025 can bring the following cumulative benefits for Azerbaijan: An in-depth review of the energy The new Law on Efficient Use efficiency policy conducted by the of Natural Resources and Energy • Savings of natural gas: 5-4.2 bcm; Energy Charter Secretariat in 2019 Efficiency of Azerbaijan has • Increased export revenue: $666- provides a straightforward answer already passed the inter-ministerial 787 mln; to this question – the natural gas consultation and is currently at • CO2 emissions reduction: 4-10 savings as a result of energy efficiency the final stage of adoption at the MtCO2; measures can be a reliable source for Parliament. After adopting the law, • Reduction of budget subsidies: gas export. the Ministry of Energy will have $491-981 mln; only six months to submit its first • New investments: $2,460-3,389 The “Strategic Road Map on Public National Energy Efficiency Action mln; Utilities”, adopted in December 2016, Plan (NEEAP) for the President’s • Creation of new jobs: 118-123 stipulates that natural gas saved approval and up to one year to develop thousand. as a result of increased efficiency and implement all envisaged energy

Continued on Page 16 16 SPECIAL REPORT | PIPELINE GAS DIVERSIFICATION BECOMES REALITY | EURACTIV

Continued from Page 15

The above benefits are neither the most efficient way. term. abstract nor hypothetical figures, but carefully calculated data as a part of In addition to the benefits The scope of this article neither the modelling and development of mentioned above, the proposed brings into consideration the increased the first NEEAP of the country for the NEEAP would contribute more than carbon-dioxide emissions as a result next five years. Luckily or not, the 50% of the remaining net annual of the increased upstream at Stage 2 NEEAP is not overambitious, and the emissions reduction (8.6 MtCO2) Shah Deniz field nor the reduction of international donor community have required to meet the official 2030 emissions as a result of fuel switching already expressed some concerns that INDC target of Azerbaijan. from coal to natural gas. The role of the proposed energy efficiency targets the natural gas for energy transition are not high enough. Indeed, in October 2016, the Milli has been a well-discussed topic in the Mejlis ratified the Paris Agreement international scientific community, For example, the NEEAP envisages with the country’s commitment to and the role of the Southern Gas that at least one year – 2021 – would reduce GHG emissions by 35% in Corridor for energy transition can be be necessary to develop, adopt 2030. Thus, the NEEAP can be the first another hot topic for future analysis. and implement supply-side policy national document that confirms the instruments, and at least two years highest cost-effectiveness of energy At the same time, the potential – 2021-2022 – to create and enforce efficiency measures for achieving export of saved energy using the demand-side policy instruments. As environmental and climate change new pipeline is a win-win situation a result, no significant savings can be goals and international commitments for all parties – the involved states, expected during the first two years of of Azerbaijan. companies and citizens, including the the Plan. The latter relates to the fact EU. Low energy prices on the national that the energy efficiency policies in For example, the NEEAP confirms market comparing with neighbouring Azerbaijan are at a very initial stage of that measures related to the adoption of countries have been long enough development, and the country requires new tariff policy, eco-design, labelling a stumbling point hindering the extra time, efforts and assistance to and other horizontal measures are implementation of energy efficiency build national capacity and implement the most cost-effective instruments. projects in Azerbaijan. new policy instruments. These measures can help the country to achieve energy savings at the lowest However, the launch of the The future will show what approach costs of $0.03-0.06 mln per 1 ktoe of Southern Gas Corridor provides is better for Azerbaijan – the realistic saved energy. the country with new momentum, and relatively easy to achieve EE target, decreases the payback period and especially during the implementation In the same manner, the NEEAP increases the profitability of potential of the first NEEAP, or setting more identifies cost-effective measures for energy efficiency projects. This can ambitious targets and streamlining energy supply, transport, industry and also be considered as an opportunity more state efforts and resources to agriculture sectors that can deliver for the EU that has officially adopted implement them. savings at $0.21 – 0.46 mln per 1 ktoe. the block’s target to become climate- In comparison, the thermal renovation neutral by 2050 and declared In the end, the European practice of old residential and public buildings decarbonisation to be one of its indicates that there is a direct may costs the Government as much as priorities. correlation between the potential $10.44 – 10.88 mln per 1 ktoe of saved energy savings and the efforts of energy. However, the latter policy The only question is how far the Member States. Everything instruments can create the largest the European Union is willing to is possible if there are the right number of new jobs comparing with promote its targets to the Union’s motivation and regulations at the other policy measures. Therefore, Neighbourhood Policy and to support top and implementation levels of the the NEEAP offers the Government the implementation of energy state. As for Azerbaijan, the country of Azerbaijan a useful tool on how efficiency policies by the Governments has a unique opportunity to boost its to achieve savings and provide a of energy-rich countries, like export using the saved energy while reliable source for the gas export while Azerbaijan. preserving precious natural resources prioritising the most cost-effective for future generations and fulfilling measures that can create new jobs and international climate change targets at boost the local economy in the short THE DUTCH BID FOR EMA

From London to... the Amsterdam Metropolitan Area

For information on EURACTIV Special Reports...

Contact us Teresa DOMINGUEZ EU Affairs Manager [email protected] tel. +32 (0) 47 601 78 26

Georgi GOTEV Senior Editor [email protected] www.netherlandsforema.eu tel. +32 (0) 4 99 528 725