The way people think about energy consumption and savings changes more rapidly during a crisis. Energy utility companies and consumers must find new ways to act together, says Gérard Bourland, CEO of Hungarian energy provider Dalkia Energia Zrt.
Q: The crisis has bitten Hungary and the Hungarian economy hard. What would you point out as the single most challenging issue for energy markets and providers in these hard times?
A: What we see in Hungary is more or less true in all countries in Europe. Our main concern is the price of electricity, which is very low, or to be precise, the ratio between the prices of gas and electricity is very low.
Regarding the unique problems of Hungary, I’d mention the difficulties of cash-stripped municipalities. We must find and push innovative solutions for their solvency problems on one hand and find a sustainable long-term way to cooperate on the other. Fortunately, in ever more cases our customers come to us to initiate dialog and this is more frequent than in times of prosperity. Dalkia focuses very much on liquidity issues, as we want to avoid both the increase of exposure to debts and the stressing of consumers.
Municipalities with serious financial problems need to prioritize solving short-term problems, and short-term means cash in this case. For the middle term, in the majority of cases we can find a win-win situation for both parties. We have ideas about what to change in the “design” of contracts to make our cooperation more efficient – like building into the consumption scheme of schools the periods when there is nobody in the building during holidays.
Q: In your opinion, how has the Hungarian government handled the crisis in the energy sector?
A: I think globally the government took the right steps to handle the situation – but I speak only about the energy market that I know. These were tough but necessary measures. However, the results won’t be seen in the short-term, but maybe in two to three years.
Q: How has the role of energy utilities changed due to the impact of the crisis?
A: Some years ago public utilities didn’t think about the amount of energy sold to the costumers. “The more I sell, the more I gain,” was the motto. But that is over now. If the customer can’t pay, or pays for more energy than is needed, the cooperation won’t last long. So there is a task for our company to propose new solutions to consumers to change their behavior, whether it is a public building or households we are talking about. But also, consumers have to be open to new ideas about being more efficient. We propose new investments to reduce consumption and raise efficiency, but these are long-term investments with an impact of 10-15 years. So, in exchange, we offer customers a share of the profit gained with us, so this way, all participants win on the energy savings.
Q: Do you feel any protectionism on behalf of the central government in Hungary towards Hungarian businesses?
A: No, not at all. In the Hungarian energy market the main issue is the dependence on foreign fossil resources. So the protectionism of the government is manifested in support for the use of local fuels over foreign resources, whether it is biogas, biomass, coal, or anything else. In line with this effort of the government, Dalkia tries not just to use fuels from within Hungary in general, but from nearby resources. So in the Pécs plant we don’t use biomass from the eastern part of the country but from the vicinity, and so on.
Q: In the last few years, many small renewable or gas-fired plants started to provide energy to satisfy local demand in Hungary. Now, in time of crisis and without the government’s support, they are facing very difficult times. How do you see the prospects of the Hungarian energy market in the short- and medium-terms?
A: Efficiency is the name of the game. If the efficiency of the assets was not high enough through the time of recession, the business would fail. We were planning our projects very carefully, as we believe that projects should work in any kind of economic circumstances, so we don’t jump into any project where we can’t see the profitability.
And on top of that, financing became very difficult. Banks are very cautious about giving credit to partners. If a project cannot meet all the criteria, it won’t receive the necessary financing background; it is simple as that. In the energy market, one has to think in the long-term, so even if a partner is ready for the project and a bank is willing to invest, we say no if we don’t see the long-term prospects of the project.
Bourland has been in the energy industry since 1978. He spent several years with France’s EDF, specializing in the areas of nuclear energy and carbon, but also worked in HR and held various managerial positions. He has been living in Hungary since 2001. Before becoming CEO-chairman of Dalkia Energia, a subsidiary of Veolia Environnement, in 2008, he was CEO-chairman of the Budapest Power Plant Zrt for six years. Bourland was appointed CEO-chairman of Dalkia Energy this year. Married with two children, he is the captain of a rugby team in his spare time, and as a long-distance runner, he regularly takes part in amateur running races.
Q: What are the main priorities Hungary and the Hungarian government must support in order to achieve a more stable energy market?
A: First of all, the dependency on foreign supplies. It could be lowered through the better exploitation of local resources, but also through the reduction of energy demand. There is a huge potential in energy and cost savings to lower energy dependency. But it makes no difference how prepared the utilities are if the consumers don’t want to participate. Without the customer, you can do nothing. In the business sector, the change of behavior has already happened as the market has been opened. Now it’s time to see some change in the public sector. And the crisis helps achieve this goal, because the way people think about energy changes faster now than without the financial pressure of the crisis. We see that people are opening up to energy saving measures such as insulation and changing doors and windows, so we have to find ways to help finance and support these measures.
But even if we have consultants who know consumers’ problems and offer solutions to them, it is a very hard, step-by-step work to convince customers to change their behavior. Also it’s not enough to make decisions in offices in Budapest or Brussels, help needs to be much closer to the consumers. That’s where municipalities have a huge role: in informing and convincing customers about their opportunities. Sometimes the solution is very simple, people just don’t know about it. Be practical, be local.
Q: The European Union emphasizes a reduction in energy consumption by 20% compared to 1990 levels by 2020. Is this target achievable in Hungary?
A: The 20% target by 2020 sounds nice, but it’s a little bit far off. I prefer to think in the medium-term, for two to three years in advance. So I think the 20% reduction could be achieved much sooner than 2020. Because of the high gas prices and the impact of the crisis, a 5% energy saving could be reached annually in Hungary.