“For the first time ever, LNG [Liquified Natural Gas] will be part of our national energy mix from next year onwards [when], as of the 1 January, the LNG port in Krk, Croatia, will be operational,” he said to illustrate his point.

Hungarian companies have contracted to take an annual one billion cubic meters (bcm) of pipeline capacity, constituting the “first ever non-Russian, long-term, gas-supply contract, this time with Shell,” he said, adding, “We are certain that this 1 bcm of LNG gas will contribute a lot to our energy security.”

In addition, work has started on the construction of a 15 km-long pipeline to Serbia in order to link up with “the southern gas corridor through which gas from Azerbaijan and central Asia, and LNG gas from Greece can be added to our energy mix,” Szijjártó noted.

In the electricity sector, preparatory work for Hungary’s second nuclear power plant, at Paks, an hour’s drive south of Budapest, has been “going on pretty well.”

“We consider nuclear as a safe, clean and effective way of generating energy. We do not accept the position which puts nuclear in a negatively discriminated position. We think that level-playing fields should be ensured for nuclear energy as well,” he reasoned.

Impossible Task

Moreover, he argued that without nuclear power it will be “absolutely impossible” to meet the targets regarding the reduction of CO2 emissions, to which Hungary is “definitely committed.”

Subsequent speakers largely backed the minister’s arguments. William Magwood, director-general of the OECD’s Nuclear Energy Agency, while welcoming the growth of what he termed “variable renewable energy”, warned that the performance characteristics of both wind and solar mean that expensive generating equipment still has to be ready to make up for any unexpected shortfalls in power.

This has costs which are often overlooked and not properly accounted for against the renewable assets, he said, in effect, biasing the case for renewables. He noted Hungary accounts for these costs, which could in part explain the case for the expansion of Paks.

Dmitry Khandoga, head of the International Business Department at Gazprom, the Russian energy company, termed Hungary as “one of the key energy markets of east-central Europe which determines the energy well-being of the whole region” with a “promising outlook” for energy cooperation.

Gazprom, as a long-term, reliable partner, had agreed with Hungary on “a road map focused on the development of Hungary’s gas transmission system,” he said, including a non-binding capacity-demand assessment for the Serbia-Hungary pipeline currently under construction.

“The development of this project will diversify transmission routes, and increase the security of gas supply first of all in Hungary, and in the whole region,” Khandoga said.

Reservations

Some had reservations, however. Despite being generally optimistic about the future for savvy players, Gergely Szabó, regional chairman of MET Central Europe, a Swiss-based energy group with Hungarian roots, cautioned that the investment required to meet carbon-neutral goals had not been fully thought through.

“We are not just talking about new solutions here, we are talking about a fundamentally changed industry of the future that needs a lot of investment, capex and effort from our side. I believe, we believe that we are constantly under-estimating the cost of this,” he said.

Kurt Donnelly, of the U.S. State Department’s Bureau of Energy Resources had an even starker warning regarding the risks to energy security posed by the region’s largest supplier of natural gas.

“Often times people, and speakers, even here today, have talked about how reliable the supply of Gazprom has been through the years, but I think you wouldn’t find that same response from the people of Ukraine, where Gazprom has shut off the gas supply for political reasons, in 2006, 2009 and again in 2014 and 2018,” he said.

Indeed, for Donnelly, the public relations talk from the Moscow-based energy group is dangerously deceptive.

“This is not a reliable energy supplier, this is a company that responds to the political imperatives from the Kremlin, and uses energy to try to enforce this, and we see that still as an enormous vulnerability to energy security for our partners in Europe,” he argued.

European Union Will not let Pandemic Derail Carbon-Neutral Schedule

The COVID-19 pandemic cannot be allowed to hinder the European Union’s plans for a carbon-neutral continent by 2050; indeed, it makes the target an even more important priority in order to protect both jobs and environment and maintain competitiveness within the Union, Kadri Simson, European Commissioner for Energy, reminded the summit in the second presentation of the day.

“If some thought that the global pandemic might distract us from addressing the climate challenge or to put it into question, this has not happened, not in the Commission nor outside it. Quite the contrary: it has made us focus even harder,” Estonia’s former economy minister told attendees.

Noting that it was almost exactly one year since European Commission President Ursula von der Leyen had presented the “bold and ambitious” decarbonization goals, she praised Hungary for showing “remarkable foresight and conviction” by being the first country in the Union to ratify the Paris agreement and for passing legislation quickly to bring the country in line to meet the climate targets.

Since the energy sector accounts for 75% of the EU’s greenhouse gas emissions, the European Union understands that without fundamental changes to how states produce, transport and use energy, getting to a net-zero position “is impossible”, she said. Furthermore, many of the technologies needed to meet the goals still require further development.

Clearly, such a broad transformation of the sector needs massive investments, which the EU has put “at the heart” of both the next EU budget and the EUR 750 billion recovery package, thereby creating the “biggest EU budget in history geared to modernize our economy through a digital and green transformation,” she said.

In practice, this means that 30% of all EU funds should go to climate-related investment, including some EUR 250 bln from the recovery fund.

The EU’s energy strategy seeks to develop greater circularity to increase energy efficiency, to kick-start a massive increase in electrification, primarily based on renewables, and to promote the use of renewable and low-carbon gases like hydrogen in areas where electrification is too costly.

By investing thus, EU states will boost jobs, increase competitiveness and create cleaner, sustainable and better living conditions for their citizens, she said.

The commissioner concluded by emphasizing one major element often ignored in combatting climate change: the renovation of buildings, which are responsible for 40% of the EU’s energy use.

This article was first published in the Budapest Business Journal print issue of December 11, 2020.