Investments, Investments, Investments

With all the grim news about the fall in the global economy it is very nice to see that there are positive developments in the energy sector. We can summarize the final year news as 'clean energy'. This bodes well for the future development in the market.

First we have the news that Romania finally got its act together and brought the different project partners together, with RWE in the lead, to build Unit-3 and 4 of the Cernavoda nuclear power plant (missing the size and dates). Then we have the news from this week that Slovakia will be going ahead with CEZ to build more units at the Jaslovske Bohunice nuclear power plant to build around 1,000 MW and 1,600 MW of generation capacity by 2020 (platts).

In Bulgaria they have signed a deal with AES to build the Sveti Nikola wind power 'park' for EUR 270 M with 52 wind power generators, and a total production capacity of 156 MW (Novinite.com). Go back a few months and Romania announced its intention to build with CEZ Romania 347.5-megawatt Fintinel project in Tulcea. Throw in more wind power and gas plants in Hungary and there is a very robust power investment portfolio that is not slowing down.

Overall, there is a lot to be optimistic about in the region. Even if the projections for growing consumption in the region turn out to be slightly off, there is still a significant amount of capacity that does need to be replaced in the region. The government and companies know these projects are still years away from becoming operational, but what better way to stay busy in a slowing economy that to be working hard at a project that will come online just when the economies are revving up and environmental restrictions begin to tighten.

I don't know about you, but I'm going into the New Year in a positive mood.

Crunching the Credit to Make Power

One casualty according to this article in the FT, is the lack of finance credit for energy projects in the UK, particularly nuclear. The point is made, and we should reflect upon this for the wider CEE market place, that the withdrawal of generation impacts on the ability of countries to meet their climate change goals.

“Generating capacity equivalent to nearly a third of current electricity demand will be made redundant by 2020. It will need to be replaced. We believe that in the current economic climate there is a high risk that the energy companies will not be able to raise the finance necessary to build this.”

The CEE region, needs to build an equivalent amount of generation by 2020 to replace the outdated plants (if not a little higher). Thus the topic of credit availability becomes a central issue for the CEE region for the next year or two.

There are two outcomes of the tightening credit markets for the CEE power region. The first is that the plants that are on the drawing board are built. The building of the Emfesz new 1600 MW gas fired power plant is proceeding with the first 800 MW now being built. This is privately financed (although MVM may have a stake in it) initiative, which indicates that the market is still seen as requiring this much supply.

This leads us to the second point, the failure of some countries to build generation will open up export and extra revenue opportunities for those that are able to build. Thus, the projected demand will no doubt drop slightly from projected amounts (although I would say not by much if conservative estimates were earlier taken into account), but with the decommissioning of plants and emissions goals, then newer plants will have an advantage. Especially, if there are less plants built. Thus, building a power plant in the CEE region, can still be advantageous if these scenarios are taken into account. Also the lead time that is needed still means they won't come on line until the economy begins to recover.

A worse case scenario does need to be considered, and the only one that I can think of is that the economy continues to soar and demand drops for longer than expected - say up to five years. But regardless, climate change goals will still be implemented, thus cleaner plants (with CO2 storage possibilities) remain and profits will flow to those cleaner and newer plants.

For those study trips to CEE/SEE Nuclear Plants. Why sweat?

Regulation = Green Subsidies - Really?

The nationalization of banks, investment firms and the automotive companies in the US and elsewhere might lead one to think that the large scale energy industry might be next. Apparently, this is what David Victor thinks in his Newsweek article. Well, I've simplified his argument but essentially what he says, is the market based approaches that have been tried to encourage green energy are not working and only regulation and government subsidies will be able to do it.

Whereas the old view of green tech was based on many small, decentralized sources of power and a green economy that harnessed the power of the marketplace, the new version will rely more heavily on regulation and subsidies.

Really? What business leader (if they are not bankrupt) wants to accept government money to influence how they do business. Clear, long-term and an effective regulatory structure can serve business, society and the environment more than subsidies for the long-term deployment of generation and transmission technology. I won't argue the point about subsidies needed to prime the technological pump to get things going, like R&D, but the large scale deployment of any green technology will have to be self sustaining. Lest we forget that the world economy is structured around oil: modes of transport, troop deployment, urban planning, there are more elements that go into underpinning the success of an energy source than government money.

The transition towards a post-carbon world depends on the use of large scale electrical infrastructure. Nuclear power, solar farms in the desert and large transmission systems to move the electricity from high production areas to high demand areas are needed. Distributed generation sources like rooftop solar panels and local gas turbines will contribute, but will not be the only answer, Victor gets it right in the last part of his article by pointing this out. But not only does the regulatory bar have to be raised, but society and the wider economy must be transformed to meet and compliment the new energy infrastructure. Throwing taxpayer money continuously at 'green' projects does not build a sustainable future, economically viable green projects do.

Looking for the Greener/Dirtier Compromise

Getting to 20% by 2020 ain't no easy thing. The commitment by the EU to reduce its greenhouse gases by 20% is nearing some negotiation deadline which is this weekend (Dec. 13th). Poland and Germany are looking for solutions to uphold their right to continue on the coal fired power plant route. Their continued heavy reliance on coal and the lack of effective technologies to deal with the gases means they are set to be screwed when it comes to paying for Carbon Permits.

So what are the solutions. Well, they wouldn't mind a free allocation of permits for the coal industry too (along with the ones they've sought for their other industries). Poland is pressing for a money bank, which transfers more money from Rich to East (FT). Well, I think that is what the EU is already doing.

But let's think about this for a second. You have coal reliant countries with heavy industry trying to keep their power prices low to retain industry. Then you have the other countries who are more diversified in their energy mix and industry. But the thought that comes to my mind is many of these 'other' countries shifted their energy sources, not because it was the greener thing to do, but because of either a state strategy or the endowment of other energy sources. So while I do not want to defend the continued use of dirty coal - or more specifically, the ability to externalize, as compared to internalize, the cost of greenhouse gas pollution, there does need to be a clearly defined transition for these states.

The idea here is that these states have known about the schemes that will be implemented to control GHG emissions for many years, but have failed to act effectively -notably Poland.

What needs to be devised is a strict timetable connected to the allocation of 'free' permits, which are reduced over time. I don't know whether it should be fast or slow, but not beyond 5 to 10 years, the amount of time it would take to build new power plants and the ability to store carbon (ok, this is very optomistic on this last point). If you can get the German economic and scientific machine behind this, then the timetable is appropriate.

There is no doubt that this is a very tight timetable, but the idea is that there is a period of transition which gets the countries to agree now and moves their industry and economy towards a sustainable energy system. Punishment or a lack of agreement will only make future progress that much more difficult.

Rubbishing Clean Coal Research

I know it may take three times to make a trend, but when you speak to two informed individuals in the energy industry, then we almost get to three. So I'll take the two discussions I had with these two people and extrapolate to suggest that people are rubbishing the idea of investing any thought into seeing the future implications of carbon storage for coal.

For these two individuals the need to commit any resources into understanding the regulatory and infrastructure needs that will be required seemed a waste of time and money. I however, would have to argue the opposite. First there is no doubt that the technology still has be proven. But it is also undisputed that there is serious amounts of money, both from governments and from industry that are being put into the technology. Billions of Euros and Dollars. Some would say not enough, but regardless there is significant interest that is backed up by real money. Carbon Capture and Storage (CCS), offers a significant savings for companies and countries that are heavily reliant on coal, or have large deposits.

So the question that comes out is why actually invest any human thought, labor and money into exploring the regulatory and infrastructure challenges if the technology is not proven? Because there isn't much time. If you think about how long it took to create local, then national and then regional power systems, the infrastructure and regulatory framework that these operate within, it is apparent that the deployment of CCS infrastructure, if built along these historical time lines will not be realized until 2060 or beyond.

I make this time line calculation off the top of my head. Think about it, when did the FERC get control over interstate commerce of electricity? 1970s/80s? And not just administrative control but real control that is able to shape the direction of the infrastructure and its regulatory functioning, then it would be 1995. Then if you think about the infrastructure - transmission lines and how long it has taken to create interconnections between states and countries, then a further 10-20 year time frame (if not longer) is talked about.

Thus if as much planning as possible can go into finding out the locations for CCS, the pipeline routes that need to be built and the regulatory hurdles that need to be done, then does it really make sense to wait until the technology is proven to begin the process of fighting over infrastructure routes and regulatory power? If we need to have an established path towards 80% CO2 reduction by 2050, and even the deployment of clean coal technology in the next 10-15 years, does it make sense to wait? For me it doesn't.

Evidence for More Investment Spending

Well, predictions are not always right. Just yesterday I wrote questioning the FT article about the drop off in investments by energy companies - particularly generation. When what do my eyes upon opening the Wall Street Journal yesterday but RWE spending $1.25 billion this year (so far) on greenhouse-gas compliance. Up from Euro 175 million.

The article in the WSJ, (subscription only), outlines the need by generators, particularly RWE, E.On and Enel's need to spend money on reducing GHG because they need to buy additional permits above their free quota. After 2012 - these freebies will no longer exist. Thus RWE, which is heavily reliant on brown coal, is screwed if it doesn't invest in clean coal technologies. At around 29 euros per permit with a projected need of 200 million permits by 2012.

Thus, investments are happening. "We have to renew our power plants as fast as possible," RWE states in the article. The choice is modernize or replace power plants to reduce the GHG emissions.

Now the idea becomes one of job creation. No doubt the economic downturn in all countries and regions, including CEE has seen a huge drop in the number of construction jobs. So if we think about the looming deadline of the free Co2 allowances being taken away by 2012, there's a lot of construction that needs to occur. But rather than foster this job creation, we see the CEE countries complaining that they can't meet this target. They're lobbying Brussels to allow free quotas after 2012. As my father would say, 'get to work!'

And getting to work is right, because we just don't need to build new coal power plants that pump Co2 into the ground, but a range of energy sources need to be utilized. One company that keeps adding jobs in Hungary (and now Spain) is Genesis, which makes solar panels. In fact now, as the article states, RWE is giving away 700,000 energy efficient light bulbs in India in a carbon swap.

I believe Obama sees the economic downturn as a time to re-engineer the manufacturing base and construction base of America, I also believe this can be done for the CEE region. Poland, is 96% reliant on coal and the other countries also contain significant coal generation, but get to work - jobs need to be created.

Despite Financial Crisis Investments will Continue in CEE NMS

The financial crisis is impacting the infrastructure investments needed for electricity generation. This brief article in the FT, indicates that there is a perceptible impact that will affect the security of supply and could threaten future generation expansion. As the article predicts, if current trends continue then,

when the recovery came and energy demand picked up, the shortfall in investment would lead to renewed problems of tight supply because of shortages of capacity in areas such as electricity generation and gas import facilities.

This fall of investment may bad for the short term and long term in the CEE region, however it may not actually be fully true. If we consider the economic expansion in the region. In particular, we use the basic idea that all the new CEE Member States (excluding dismal Hungary) will avoid recession next year, then it is clear that demand will continue to grow.

The drop in share prices by around half for most utilities in the CEE region, that these companies will be borrowing less. E.ON for example will not be out there building new power plants, such as the proposed joint venture with Enel in Romania. Maybe more marginal or speculative investments will be cut. However, here is why I think there won't be a 'large' drop off in investments.

The article as I see it, fails to appreciate the need for investment in New Member States (NMS). The avoidance of a recession by CEE and SEE (BG and RO), will mean that these countries which Old Member States are already active in, will view the region as a source of growth for the companies. This is historically true, and with declining profits from Germany, with the gradual break up of their monopolistic position, it can be seen that greater resources can be placed into the generation sector of NMS.

Control is already established in the distribution sector for many of these companies, and if we consider that they therefore have available suppliers willing to buy their owned produced electricity - then the decision to build new generation is easier to make and to finance. Throw into the equation the aging power plants and the current and projected generation shortfall in the region, along with efforts and tighter market integration then it bodes well for the LONG term, if not short term investment prospects.

Now, here is my warning, investments in the CEE region also must contend with the heavy political involvement of political considerations in setting price, not just for suppliers, but for generators as well. Therefore, while it may be built, if current political practices of strong arming lower genertion pricing (e.g. Bulgaria and CEZ Varna), then these investments will not occur. However, this is not because of the credit crunch or demand for electricity, but by political stupidity.

In every consideration of the future we must consider the efforts to cut CO2 and other greenhouse gasses. The new generation of generators need to be built with a large amount of financing. As the article cites,

Capgemini, the French consultancy, argues that the European Union needs to invest about €1,000bn ($1,250bn) between now and 2030 to meet energy demand and hit targets for cutting greenhouse gas emissions, but in the downturn it will be harder to finance that investment, and harder for companies to make the case that it is needed.

Now let's see how the credit crunch hits the CEE region. But in either case, there are still important reasons why in the CEE NMS investments will continue. Let's just start separating our analysis from OMS and the dynamic and infrastructurally deteriorated CEE region.

Revenge in the electricity market

I like this story, Ukrenergy wants to get access to the EU through Hungary, but a few weeks ago, they limited how much the Hungarian company System Consulting, could import from the Ukraine on the cross-border capacities to 5 mw, down from 345 mw. Ukrenergy wants to import 450 mw into Hungary from the Ukraine, but MAVIR is only allowing 105 mw. I really like the '105 mw' that magic '5' on the number should really send a message.

Ukrenergy Trade Wants More EU Presence
Publication: Hungary Around the Clock
Provider: Access-Hungary Kft.

November 24, 2008 (09:00)
Ukrainian state-owned energy trading company Ukrenergy Trade (the former Energy trade capital), in which Vasyl Bechvarzh now only has a minority stake, held a presentation at the Corinthia Grand Hotel Royal in Budapest at the weekend. As Ukrenergy trade wanted to import 450MW electricity to Hungary this year but Mavir allowed only 105MW, Ukrenergy trade has now turned to the EU court, Bechvarzh said.

You know usually I believe in free trade, but if one company - and country wants to play dirty, then I really don't have a problem in this case if Mavir limits their capacity. Particularly if it ends in '5' mw. Besides it remains to be seen if the EU courts can do anything over this as the border with the Ukraine is not an EU border therefore Hungary and MAVIR have control over it.

Importing electricity free of CO2 standards

"Cheap electricity, want some cheap and dirty electricity." That's the possibility.

Over the past few days the same topic came up with a few people, importing electricity from outside the EU without a 'carbon tax.' The possibility exists that once Europe gets going on the European Emissions Trading System (ETS), that electricity produced further east could serve not only as a place to locate manufacturing (mentioned further below), but as a location to import cheap electricity from.

Importing electricity from Russia, the Ukraine, Belarus and from whoever else can manage to connect their power plants to the UCTE network, will offer the ability to undercut electricity producers in the EU. And more importantly, it will also undercut the very goal of reducing CO2 and other emissions to prevent the globe from really heating up (as compared to only slightly). Of course importing electricity into the union is dependent on the size of the interconnectors besides the use of existing ones, will we be seeing a huge building of newer interconnectors with the peripherial countries of the EU? Possibly, and here is why.

Poland is 96% dependent on coal and has not acted quickly enough to diversify. Now manufacturers and producers are freaking out about the looming implimentation of CO2 emmission quotas. There is a fear that manufacterers could easily pick up and move next door to the Eastern countries. However, wouldn't it be easier to build interconnectors to an external EU neighbor, which every country has the right to do, then ship this electricity into the country for manufacterers? While I would expect there are no big plans currently for this, particularly with Russia (excluding a merchant line from Russia to Sweden), the situation may arise if the price differential is great enough. Market forces of supply and demand may take over and make such projects feasible, even over current diplomatic relations.

Russia already has plans to not only build a nuclear power station in Kalingrad but to boosts its electricity producing capacity domestically to ship to the EU (as it already does to China). So the question that arises is 1) will the EU impliment a carbon tax on imports quickly, 2) accept imports for the short-term but not the long-term, 3) or do nothing in order not to sneak in some cheap electricity to help out those emerging economies that need a little support?

The last option is lame, and undermines the basis of EU actions, the second option may be the muddled policy response the EU puts together, however, just as there's been a history of EU opinion on the phasing out of long-term power purchase agreements, there also need to be excplicit statements that any infrastructure that is built is at risk for having a carbon tax imposed on imports. Thereby making it clear that power plants and transmission lines built must also be commericaly viable under a CO2 quota system. The first response could still happen quickly enough, but I think ambiguity will reign for a while.

Which ever way carbon taxing goes, it is clear that specific regional associations need to be linked by larger groupings which play by similar rules. But that is a topic for another day.

Strategic Reviews - We are not doing enough today

In my relative procrastination to get going and writing my blog this morning, I was flipping through the articles at CNN. When I came upon a review of a report, Trends 2025: A Transformed World. Basically, it lays out the scenario we are in for a rough ride. These are the usual things, that have been pointed out in the past, a rising multipolar world, booming population, pollution, and the effects of climate change. But it also addresses energy. While emphasizing the continued reliance on oil from unstable countries, it also calls for a shift in energy technology and infrastructure. And here is one of the conclusion:

However, all current technologies are inadequate for replacing the traditional energy architecture on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025. The pace of technological innovation will be key. Even with a favorable policy and funding environment for biofuels, clean coal, or hydrogen, the transition to new fuels will be slow. Major technologies historically have had an “adoption lag.” In the energy sector, a recent study found that it takes an average of 25 years for a new production technology to become widely adopted.

Think about that, "all current technologies are inadequate for replacing the traditional energy architecture." I think we have many quils to create a viable change in this time period, as pointed out by the EU Energy Strategic Review, but there is now doubt that despite building wind power on a massive scale fundamental change to the energy infrastructure takes a long lead time.

Let's scale down this analysis and think about the EU Strategic Review and the CEE/SEE region and what needs to be done. First, we have the EU being overly optimistic about the pace of its change in its own energy infrastructure. Ok, maybe there is enough 'waste' in the current energy system to get a 20% CO2 reduction by 2020. The reduction of this much can be seen to be accomplished with limited alterations to the EU's energy infrastructure. More nuclear, more wind, more busses and trains etc... even the plans laid out in the Strategic Energy Review rely on the existing infrastructure becoming larger and smarter, while some gaps are filled in with distributed generation. Is this actually enough to get even half way to a carbon free world by 2050?

I'll have to leave it there, but I'll delve into these reports over the weekend and more closely compare what they are saying. I think we may end up with the realist American perspective with the optomistic European visionary goals.

EU Strategic Energy Review II

Essential to back up a new energy strategy is the development of a fuller infrastructure which extends to the periphery and beyond the borders of the EU. What this means is that the EU must adjust it's energy policy and those of the Old Member States, must revise the energy strategy that was developed before the 2004 enlargement - and they must accept the concerns and development needs of those New Member States. (link to document)

The EU energy infrastructure was based on the role out of Ten- E Projects. The inadequacy of these throughout Europe have become apparent. One of the main problems is they were developed before what are now NMS joined the union. Not only have these projects been slow to be rolled out, while they are important projects themselves, they do not serve the purpose of today's energy requirements. In particular, they lack an effective vision for integrating the energy infrastructure of Central Eastern Europe and the Balkans into the rest of the EU.

The latest proposal includes a 'Baltic interconnection plan,' which is over due, particularly considering the historical orientation of these countries infrastructure towards Russia. What I like about this statement is "enabling solidarity" by creating this interconnection plan, i.e. you mess with the Baltics, Russia, you mess with the EU.

The second point looks at the development of a Southern Gas corridor - discussed before - this brings gas from the Middle East and the Caspian Basin.

LNG for all those countries dependent on Russia. I like this. What it means is that "we won't be sharing our North Sea/Antarctic gas with you former Russian satellites by building gas pipelines to send it to you. But if you would like, you can buy bottled gas for world market price + shipping and handling." Nothing like spreading that solidarity around - unless it will cost you money. The North -South gas pipeline actually refers to the NETS project for the Southeast of Europe+Hungary.

However, the next paragraph says that they can take the time and money to develop electricity and gas infrastructure with Mediterranean countries. Well, yeah, because that benefits OMS, nothing like have a gas link from Libya to Italy. I go along with the idea of importing the solar energy from Africa to Europe. As a grand project this one is sure to succeed. The only question is once the electricity arrives in Europe and everyone gets their cut, how much is electricity really going to cost. Will it be on par with nuclear energy? Large upfront infrastructure investment but diminishing costs as time goes on (although there is no waste storage). The question is there financing for such a project? [and just a note, there is nothing like buying energy from stable democratic North African countries]

I'll quickly skip over the idea of developing more infrastructure and regulatory capacity in Central and Southern Europe. I would like to return to the point tomorrow. Thus the third edition.

Finally, off shore wind farm infrastructure is mentioned. Great, fine. Just get the money and go for it.

Overall, when it comes to reorientating the infrastructure of the European Union, and particularly those NMS away from Russia and to build the infrastructure for renewable energy and any transition towards a post-carbon world then this is a good first step. But let's wait and see how these steps can be implimented. I think the best example can be drawn from the NETS project. This is a ground up initiative that seeks to lay the foundation before the EU can get too involved to interceed on how it develops. In addition it is a blocking strategy against Russia buying up the gas assets as it has done in all the countries to the north of Hungary. Therefore, it can serve as an example of how to collectively defend against Russian intrusion, work in the direction of the common good of countries and a region, and finally, unify small gas networks into a viable and more efficiently managed network.

EU Strategic Energy Review

The EU came out last week with its latest Strategic Action Plan. On a quick read of the highlights I think this goes in the right direction. And while I still must actually read what is planned, it on the surface appears headed in the right direction, particularly since it points to a goal of a "high-efficiency, low-carbon energy system" by 2050. I think it is best if we take this end point and work backwards in the memo issued.

The key points of the memo list the following broad strategic areas:

- Infrastructure needs and the diversification of energy supplies
- External energy relations
- Oil and gas stocks and crisis response mechanisms
- Energy efficiency
- Making the best use of the EU’s indigenous energy resources.

Let me approach the list in reverse.

Making the best use of the EU’s indigenous energy resources.
I was at a conference a few weeks ago, and there was a large collection of policy makers, academics, usual-sorts-of-people, with a nice mix of Russians and people scared of Russia (including Georgians). After the first day I was convinced that a) the Nabucco was a pipe dream if the EU didn't step up to the plate and push the project like the Russian government has pushed South Stream. b) Everyone, but the Russians, were constantly whining about the Russians and how they can use gas as a weapon. Well, I thought, 'if Russian gas is such a problem then don't buy it.' As simple as that. Whatever the statistic say, I can imagine that the EU countries can come up with an energy solution that does not rely on Russian gas. There are other options.

While the Energy Plan describes a new push for Nabucco, it may be addressing my idea of put-up or shut-up. That is, boosting EU indigenous energy sources with energy efficiency these can play a large role in mitigating gas dependence. But the main thing is to move the former Soviet satellites away from their gas depedency, as they are the most dependent on their former ruler. There are other issues in this category, but I won't go into these at this time.

A new impetus on energy efficiency

This is it! I've never been more convinced about the need to put into place EE projects. This must be elevated at even a higher level than building generation and other big infrastructure projects. Why? Because these big infrastructure projects will certainly command the attention of politicians and those that are already are well placed to influence policy making and the where investment money goes. The hardest part is implimented policies and monitoring the progress on the smaller EE projects that need to be done. This is the largest challenge of the future, and how the EU tackles this and not only makes these requirements for governments to follow, but it is having the right programs that promote EE and ensuring governments tackle this in a constructive and the least wasteful way.

Improved oil and gas stocks and crisis response mechanisms

Not much to say on this topic. Fairly routine and boring, but just hope you are not a Baltic country which relies/relied on oil from Russia.

A greater focus on energy in the EU's international relations

Ah, this is it.

The EU needs to intensify its efforts in developing an effective external energy policy; speaking with one voice, identifying infrastructure of major importance to its energy security and then ensuring its construction, and acting coherently to deepen its partnerships with key energy suppliers, transit countries and consumers.

Acting together, like the EU should on external issues. I just read that Szarkozy was complaining that he was the one that had to take the lead on the Georgia conflict and also the financial crisis. Well, while I'm sure the leadership role works for him, apparently, he has become more convinced about the need for a full time EU President. I say this because it brings up the issue of coherency in the EU and not just a common energy policy, which everyone agrees with the broad and even some detail provisions. But there will need to be a common stance on Russia. This should be a possibility, since by the time that this document is adopted PM Gyurcsany will be out of power, allowing a stronger stance against Russia - at least for Hungary.

Coherency in policy and a strong driver for a specific Caspian Sea pipeline (i.e. Nabucco) can only be accomplished if the EU acts jointly and like Russia. In fact, the EU will have to work harder than Russia to get Russia's friends - the 'Stan countries' to commit to supply Europe with Gas. Of course they would prefer the higher prices paid by the Europeans than Russia but culturally and historically and geographically it is easier to do business with the Russians. So the EU must overcome this surmountable obsticals and put some money up and drive the companies forward through and dipolomatic channels.

I'll save the final point: Promoting infrastructure essential to the EU's energy needs
For the next blog post, as this is a great area to really talk indepth about.

Overall, the new impetus must be coming from both the ground up and from the top-out. That is the Member States must be conviced of the role that energy efficiency can play in their energy mix and boosting security of supply and the EU leadership itself must work coherently internatinoally to bring the energy resources to the whole union. Greater weight needs to be lent to Eastern European issues which still must restructure the historical infrastructural network with Russia.

communicate, communicate, communicate

I guess MAVIR needs all the help it could get with electricity prices going up. But do they really need a company communicating on their behalf? Will they be telling everyone about the restricted capacity at the borders? It would be interesting to see if other TSOs also have a communications company working for them. After all, everyone is interested in transmission?

On the other hand, maybe their communication strategy is about the need to stay vertically integrated into MVM and all the benefits it brings to consumers in Hungary and beyond.

It also sounds like the tender was conducted on the Serbian and Bulgarian cross border auctions. Restricted bidding and you don't know who took part.

Bulgaria's proposed 'regional' energy behemoth

Bulgaria has proposed (and will probably) be merging five of its energy companies into one. Part of this plan is is to make it a regional force that can expand beyond Bulgaria. We can now add this government owned company to the list of state owned companies trying to emulate CEZ. Hungary's MVM, is also trying to position and justify its dominate market position in Hungary by rolling out this regional strategy. Let's not buy into it.

This regional strategy may have worked for CEZ but, for a variety of factors, doesn't mean that it will work for others as well. One thing to consider, just as in the case of German energy giants RWE and E.ON, it is the protection from within their home markets that give them the stability and subsidies to expand outward. Therefore, we can expect that both the Hungarian and the Bulgarian energy markets will remain in-transparent and closed under the justification that their 'national champions' are going to be regional champions. As is usually the case with 'national champions' if you have no competitors and you make up the rules as you go along then it is easy to call yourself a national champ.