Izabela Surwillo
Senior Researcher
Danish Institute for International Studies
Denmark
The Russian invasion of Ukraine in 2022 led to an energy crisis, bringing the issue of energy security to the forefront of the EU’s policy agenda. The Baltic Sea Region (BSR)—which experienced tensions in relation to the construction of the Nord Stream 1 and 2 projects and later explosions along both pipelines that pointed to an act of sabotage—is no exception. The mounting concerns surrounding security of supply, skyrocketing energy prices, and the simultaneous challenge of low carbon energy transition, raise the question of what does the regional energy security currently entail, and how can energy insecurity be managed most effectively?
Energy security is a tricky concept, comprising of multiple dimensions, scales and frameworks. The literature on the subject provides over 45 different definitions of energy security, yet in practice different political and societal actors are continuously redefining it further. Diverse understandings of energy security typically focus on four key elements - availability, reliability, affordability and sustainability (Sovacool 2010). The ongoing war in Ukraine and impaired EU-Russia relations have put additional geopolitical strain on these dimensions.
To start with, availability refers to the physical endowment of producers (e.g., gas, oil, coal, and uranium resources), the ability of the producers to reach trade agreements with import countries, as well as adequate technological solutions (for production, transportation, conversion, storage and distribution). Currently, despite availability of Russian fossil fuels, the EU’s sanction packages mostly prevent energy trade (coal and oil) with Russia, while obtaining alternative energy sources is often complicated. For instance, the availability of liquified natural gas (LNG) on global spot market is limited. Moreover, although some countries in the BSR have significant domestic energy resources – e.g., coal in Poland, they might have largely depleted cost-effective reserves. The BSR has also a big potential for the renewable power generation, particularly from wind. However, there are often problems with siting new energy infrastructure due to variety of reasons, including NIMBY (‘not in my back yard’) syndrome. Increasing regional availability of energy sources also requires significant investments in new technologies and adequate legal and regulatory structures. Whereas the former is still in the early stages (e.g., investments in hydrogen production), the latter frequently proves problematic (e.g., long permitting periods for offshore wind farms).
Second, reliability dimension of energy security has become especially prominent over the last year. With Russia no longer considered a reliable nor desirable energy supplier, countries in the BSR had to consider alternatives. Yet, not for all of them a robust, diversified value chain was in place to lean on. Hence, sanctioning energy imports from Russia affected BSR countries differently, owing to their level of former dependence on Putin’s petrostate, domestic resources and national energy mix. Germany was hit particularly hard by the gas shortages and had to accelerate investments in new gas infrastructure (including liquified natural gas (LNG)), while some states in Central and Eastern Europe (CEE) fared better in this sector (notably Poland and Lithuania). The changed geopolitical context also highlighted the issue of adequate reserve capacity, especially for natural gas. While the relatively mild winter of 2022-23 and significant gas reserves (often of Russian origin) helped the BSR go through the past heating season, next year poses a bigger challenge. Moreover, recent attacks on the Nord Stream 1 and 2 pipelines raise an issue of hard security risks to energy infrastructure, such as intentional physical destruction. Therefore, apart from continuous efforts of energy diversification and investments in new technologies, the BSR countries will need to jointly tackle new security threats through increased surveillance and cooperation.
Third, as far as affordability is concerned, current energy crisis led to drastic increase in energy prices for households and businesses, triggering a cost-of-living crisis and plunging many economies into recession. In these unstable circumstances minimizing price volatility and ensuring equitable prices, as well as maintaining realistic expectations about future prices fluctuations are major challenges. Nonetheless, countries in the BSR adopted different mitigation policies, such as cash handouts to most vulnerable groups, a price cap on gas, tax cuts on electricity and petrol, financial incentives for saving energy or liquidity guarantees to the domestic energy sectors. While implementing mitigation policies, it is important for states in the region to consider that a lack of coordinated action (e.g., implementing energy subsidies in one country, which might stimulate consumption and result in higher wholesale prices across the region) could negatively impact customers in other states, hence common solutions are often needed.
Lastly, the BSR cannot lose sight of its sustainability goals. The current need for an accelerated energy transition is in line with the climate agenda of lowering greenhouse gas emissions and limiting environmental pollution. However, while cutting energy demand and improving energy-saving measures is the easiest and fastest short-term solution, mass scale-up of low-carbon energy technologies will require overcoming a number of obstacles in the coming years, including financial and regulatory barriers or societal acceptance. Regional cooperation, sharing of best practices and know-how, are the surest ways to facilitate this transition successfully.
Energy security is a tricky concept, comprising of multiple dimensions, scales and frameworks. The literature on the subject provides over 45 different definitions of energy security, yet in practice different political and societal actors are continuously redefining it further. Diverse understandings of energy security typically focus on four key elements - availability, reliability, affordability and sustainability (Sovacool 2010). The ongoing war in Ukraine and impaired EU-Russia relations have put additional geopolitical strain on these dimensions.
To start with, availability refers to the physical endowment of producers (e.g., gas, oil, coal, and uranium resources), the ability of the producers to reach trade agreements with import countries, as well as adequate technological solutions (for production, transportation, conversion, storage and distribution). Currently, despite availability of Russian fossil fuels, the EU’s sanction packages mostly prevent energy trade (coal and oil) with Russia, while obtaining alternative energy sources is often complicated. For instance, the availability of liquified natural gas (LNG) on global spot market is limited. Moreover, although some countries in the BSR have significant domestic energy resources – e.g., coal in Poland, they might have largely depleted cost-effective reserves. The BSR has also a big potential for the renewable power generation, particularly from wind. However, there are often problems with siting new energy infrastructure due to variety of reasons, including NIMBY (‘not in my back yard’) syndrome. Increasing regional availability of energy sources also requires significant investments in new technologies and adequate legal and regulatory structures. Whereas the former is still in the early stages (e.g., investments in hydrogen production), the latter frequently proves problematic (e.g., long permitting periods for offshore wind farms).
Second, reliability dimension of energy security has become especially prominent over the last year. With Russia no longer considered a reliable nor desirable energy supplier, countries in the BSR had to consider alternatives. Yet, not for all of them a robust, diversified value chain was in place to lean on. Hence, sanctioning energy imports from Russia affected BSR countries differently, owing to their level of former dependence on Putin’s petrostate, domestic resources and national energy mix. Germany was hit particularly hard by the gas shortages and had to accelerate investments in new gas infrastructure (including liquified natural gas (LNG)), while some states in Central and Eastern Europe (CEE) fared better in this sector (notably Poland and Lithuania). The changed geopolitical context also highlighted the issue of adequate reserve capacity, especially for natural gas. While the relatively mild winter of 2022-23 and significant gas reserves (often of Russian origin) helped the BSR go through the past heating season, next year poses a bigger challenge. Moreover, recent attacks on the Nord Stream 1 and 2 pipelines raise an issue of hard security risks to energy infrastructure, such as intentional physical destruction. Therefore, apart from continuous efforts of energy diversification and investments in new technologies, the BSR countries will need to jointly tackle new security threats through increased surveillance and cooperation.
Third, as far as affordability is concerned, current energy crisis led to drastic increase in energy prices for households and businesses, triggering a cost-of-living crisis and plunging many economies into recession. In these unstable circumstances minimizing price volatility and ensuring equitable prices, as well as maintaining realistic expectations about future prices fluctuations are major challenges. Nonetheless, countries in the BSR adopted different mitigation policies, such as cash handouts to most vulnerable groups, a price cap on gas, tax cuts on electricity and petrol, financial incentives for saving energy or liquidity guarantees to the domestic energy sectors. While implementing mitigation policies, it is important for states in the region to consider that a lack of coordinated action (e.g., implementing energy subsidies in one country, which might stimulate consumption and result in higher wholesale prices across the region) could negatively impact customers in other states, hence common solutions are often needed.
Lastly, the BSR cannot lose sight of its sustainability goals. The current need for an accelerated energy transition is in line with the climate agenda of lowering greenhouse gas emissions and limiting environmental pollution. However, while cutting energy demand and improving energy-saving measures is the easiest and fastest short-term solution, mass scale-up of low-carbon energy technologies will require overcoming a number of obstacles in the coming years, including financial and regulatory barriers or societal acceptance. Regional cooperation, sharing of best practices and know-how, are the surest ways to facilitate this transition successfully.