Long Jeremy | May 5, 2016
Good morning and hello to my colleagues from the government, fellow panelists, and all of the esteemed guests here today. Thank you for inviting me to speak to you today about the importance of energy independence. In particular, I want to thank the Danas Conference Center for organizing this event.
Last night, as I was looking over the notes I prepared for today’s conversation and the questions posed by the organizers, I was struck by the realization of how intertwined all of these issues are. Questions about reliance on gas, energy independence, the efficiency or wisdom of district heating plants, affordability, and price stability. We often talk about these and other topics as if each was a completely separate concept. However, that is simply not the case. Each of these concepts works hand-in-glove with the other, and together they form the larger energy landscape. I think that if we look at the overall landscape, what is being done to change it, and the challenges that lie ahead, then many of the other questions about price stability, heating systems, and independence will be addressed.
When looking at the overall energy landscape it is worth remembering that Serbia was praised by the Energy Community for being the first to adopt the Third Energy Package. That was a significant step, and one that is praiseworthy. However, adoption is not enough and implementation of the Third Package, as well as ongoing implementation of the Second Package is challenging. I know that the government has been working diligently on these efforts, particularly the implementation of the energy law. I look forward to seeing the fruits of these labors soon.
Implementing both the Second and Third energy packages will help the government, and the people of Serbia, to build a modern, efficient, and robust energy landscape that will both serve the Serbian people and will also be in-line with European norms and standards. This transformation will also contribute to long-term price stability and security of supply. As the organizers of this conference have pointed out, the price of energy, and the ability of people to afford the energy they need is a critical issue. Improving the energy markets, conforming with the requirements of the Second and Third energy packages, and reforming the state owned enterprises that operate in the energy sector will be key elements in addressing these concerns. For example, as part of its commitment Serbia has pledged to increase its use of renewable energy to 27 percent of total consumption by 2020. I’m sure this is not news to most of you, but it is a good example of how all of these reforms are interrelated and form part of the broader effort to improve the energy sector. By increasing the use of renewable energy Serbia will also be increasing its energy diversity, and thereby the energy security of its citizens. Increasing diversity will also lead to a stronger, more competitive energy market, that will help the people of Serbia to have reliable access to energy at stable, and affordable prices.
Increasing the use of renewable energy has other benefits as well. Renewable energy sources reduce pollution, contribute to healthier lives, and reduce dependence on fossil fuels. They also reduce the emissions of greenhouse gasses, which is an essential part of the climate change agreement reached in Paris – an agreement that both of our countries pledged to follow. Renewable energy, as well as new technologies related to carbon capture and sequestration, will be key components of how our countries can meet those commitments. I congratulate Serbia for joining the Carbon Sequestration Leadership Forum, and I know that Serbia has expressed an interest in using related technologies in its domestic energy production. Given that lignite coal is plentiful in Serbia, and used to generate a significant portion electricity, carbon capture and sequestration technology could play a key role in allowing the country to continue using this resource in the future, while simultaneously living up to its climate and EU related commitments. I also know that that several U.S. companies are looking to invest in Serbia or to partner with the government in bringing green energy technologies – like wind farms and carbon capture – here. These are the kinds of partnerships that I know will bring benefits to both of our countries. The United States’ experience in prioritizing green energy programs has shown that these efforts bring real progress. We have seen that over the long-run it is possible to deliver renewable energy at affordable and stable prices while simultaneously creating thousands of good, permanent jobs – approximately 80,000 in the United States in 2013 alone. I look forward to seeing similar, positive results in Serbia in the future.
While increasing the use of renewable energy will contribute to a more diversified energy market in Serbia, it will not be enough. The World Energy Council’s D ranking for Serbia’s energy security is a striking commentary about the problems that a lack of energy diversity can cause. With 80 percent of gas imports coming from one supplier, through one route, it is no wonder that the Energy Community referred to the natural gas sector as “Serbia’s Achilles heel.” This is an issue that the government and energy operators in Serbia need to take seriously and address. Reliance on a single source of energy means that any disruption to that source – be it a natural disaster, crisis, or political decision – will cripple the energy sector. Similarly, using a single transportation route means that there is a single point of failure that can affect the entire network. Of course, the storage at Banatski Dvor can help mitigate disruptions in supply, but storage is not a lasting solution to provide for Serbia’s energy security. It is at best a stopgap. The only true solution is to invest in projects that will allow for a diversity of both suppliers and routes. The Serbia-Bulgaria interconnector is an excellent example of a project that provides this. It will add a new delivery route, and has the potential to be connected to multiple, new gas sources, significantly adding to Serbia’s energy diversity. Developing ways to connect to the planned Krk Island project in Croatia could also contribute to this effort. The United States has been a vocal advocate of the Krk Island project, the Southern Corridor, and the wide gammut of proposed regional interconnectors because we have learned from our own experience that energy diversity is important, and that you cannot build a reliable, stable, and predictable energy market without it. We’ve also seen that as diversity increases and monopolies are broken, markets become more competitive. This tends to drive prices down, ultimately benefiting all of the consumers. A more competitive market would also bring domestic energy prices in-line with global energy prices, and which would result in long-term savings for consumers.
At this point we’ve talked about reforming and implementing policies, increasing renewable energy, and increasing diversity of energy sources and routes, but as one of my colleagues was fond of saying, all of that is on the supply side of the equation. We can’t ignore the effect that energy demand, and policies related to it have on the overall energy landscape. Specifically, I would like to talk for a moment about energy efficiency. Currently Serbia consumes 2.7 times more energy per unit of output than the average OECD nation. This is an area where a lot of progress can be made. Factories can be made more efficient. District heating systems could be modernized using new, energy efficient technologies, and begin switching to biomass. The 37 percent of houses in Belgrade that have no insulation could be retrofitted and made more energy efficient. The electrical distribution system could be updated with modern equipment that reduces energy loss and smart metering would help the network and consumers to better understand patterns of energy consumption. These efforts will lead to reduced consumption, decreased demand, decreased prices, and could ultimately help Serbia to meet its 2020 goals – all without building any new power stations or large scale infrastructure. The best part about energy efficiency projects is that they tend to pay for themselves. By reducing wasted energy consumption factories lower their costs of production, by insulating homes residents lower their heating bills, and by increasing efficiency of heating district systems governments can keep costs at a level that is affordable to the consumer.
I’m sure that as I get toward the end of my speech, many of you are left wondering, ‘OK, that’s a lot of ideas, but where should Serbia really focus its efforts?’ The answer, as difficult as it may sound, is all of the above. I realize that resources are often limited and priorities need to be set, but each of these pieces contributes to the larger energy landscape, and to creating the kind of stable, reliable, and affordable energy matrix that the Serbian people need and want will require progress on many different fronts. U.S. officials often talk about an “all of the above strategy” when it comes to energy policy. This is because energy policy is complex, involves trade-offs, and more often than not, no one solution will accomplish all of our goals. I believe this applies not only to the United States, but to Serbia as well. Tackling each one of these issues will bring different benefits, but all of them in combination will lead Serbia to where it wants to be. Of course, this won’t be easy, and the path is not short, but it is worthwhile. For the foreseeable future energy policy will continue to be one of the main drivers of domestic policy, and a major component of economic policy, throughout the world. More importantly, it is impossible to have true economic security without energy security. Ultimately, this is why it is too dangerous for any country to rest on its laurels, to rely on any one supplier – regardless of who that supplier is, or to ignore ways to reduce energy consumption. I know that the Serbian government recognizes these important role that energy policy plays, and I have seen the effort it has put into addressing these key issues. The United States will continue to look for ways to encourage and support these efforts – after all they contribute to our ultimate goal here – supporting a successful Serbia that is integrated into the EU.