Media centre / Press releases / SLOVENIA MUST FOCUS ALL ITS EFFORTS ON ESTABLISHING A SELF-SUFFICIENT AND LOW-CARBON ELECTRICITY SYSTEM

SLOVENIA MUST FOCUS ALL ITS EFFORTS ON ESTABLISHING A SELF-SUFFICIENT AND LOW-CARBON ELECTRICITY SYSTEM

Aleksander Mervar, MSc., CEO of ELES, Dr Tomaž Štokelj, Managing Director or HSE, and Dr Dejan Paravan, CEO of GEN energija, are unanimous: The measures taken by the government and energy companies to deal with the energy crisis worked and the situation is under control, but the challenging situation is by no means over. We must continue with the measures, as well as the efficient use of energy, together at all levels. But not only that: in the long term Slovenia urgently needs investments in new low-carbon production units and renewable energy sources, as the excess of 30% average import dependency that marked the year 2022 is unacceptable.

At today’s meeting, the managements of key energy companies operating in the MOPE crisis group, appointed by the decision of the Government of the Republic of Slovenia on July 14, 2022 – ELES, HSE and GEN energija, shed light on the circumstances affecting current developments in the Slovenian energy market. The fact is that in 2022 we were hit by an energy crisis that we have never experienced before. The energy industry was marked by strong fluctuations in the prices of energy products, which were the result of several factors: from Russia’s invasion of the Ukraine, which, by reducing gas supplies, triggered a high energy price throughout the whole of Europe, which is heavily dependent on the import of this fossil energy product, to the simultaneous confrontation with a long-term drought and the resulting low production of hydro power plants.

Practically all EU countries, including Slovenia, have adopted measures to protect consumers and mechanisms to ensure the liquidity of energy companies. At the outset, the speakers agreed that the laws and implementing regulation passed by the government in the last six months were keys to managing the electricity situation. The Slovenian energy companies have also responded with a series of measures and, despite the emergency situation, constantly provide an uninterrupted supply of electricity at acceptable and guaranteed prices.

The measures taken by the government and the energy companies worked and the situation is under control

 

  1. The electricity supply is reliable

In crisis situations, Slovenian energy companies have always ensured a reliable supply of electricity despite the outage of their own hydro production due to a record drought, despite the demanding overhaul of the Krško Nuclear Power Plant (NEK) and the saving of coal in the Šoštanj Thermal Power Plant (TEŠ). When NEK and TEŠ 6 were not operational in October, there were no problems with the supply of electricity in the short term, even though Slovenia was then more than 56% dependent on its import. This means that the Slovenian electricity system is robust. However, since we are dependent on neighbouring countries with such large imports, we cannot rely on the fact that the supply will be uninterrupted, even in similar future situations.

 

  1. Production has been stabilised

At the level of electricity production, the implementation of the measures enabled the stable and reliable operation of NEK, which received permission to extend operation until 2043, the successful recovery of the conditions at the Velenje Coal Mine and the increased use of biomass, which enable the uninterrupted operation of TEŠ, upgrading the Brestanica Thermal Power Plant (TEB) to replace the natural gas that powers it with petroleum products. With all of the above measures, energy companies also continued to invest in renewable energy sources.

 

  1. Electricity consumption is reduced by 6.6 percent

Electricity consumption was mainly reduced by business customers – by a total of 10.9 per cent, among them the largest number of large customers connected to the transmission network. The total growth of consumption, by 4.4 per cent, was recorded only among household customers and public institutions. Compared to the pre-coronavirus year 2019, the total consumption was 6.6 per cent lower. That it is possible to achieve a reduction in consumption in this segment as well, with appropriate engagement, was demonstrated in GEN-I, where they urged household customers to save with the campaign “With less to more”. From the beginning of October to the end of December 2022, GEN-I household customers reduced their consumption of electricity by 3 per cent and natural gas by 22 per cent, compared to the same period in 2021. GEN-I gave them a total discount of approximately one million euros for the energy saved on their bills during the month of February.

 

  1. Prices are affordable and comparable to other EU countries

Final electricity prices for household customers in Slovenia in 2022 were the second lowest compared to neighbouring countries, right after Hungary. The same applies to business customers, where final prices were lower only in Croatia. In 2021, for the 100 largest consumers of electricity in Slovenia, the cost of electricity accounted for 1.7 per cent of the total operating revenue. For 2022, according to Mr Mervar’s estimate, this share will not exceed 2.1 per cent.

 

  1. The liquidity of key energy companies in the country is stable and loans are being repaid

In order to ensure the liquidity of energy companies, the state adopted a guarantee act in September, within the framework of which HSE took out a short-term loan for 185 million euros, which is no longer being used. In addition, in the coming months it will start repaying the first 200 of the 492 million euros from the subsequent repayment of capital, which it received from the state in December 2022 to bridge the extraordinary liquidity situation. GEN also took out short-term loans with a state guarantee in the total amount of 100 million euros in order to bridge liquidity burdens related to the purchase of replacement electricity during the overhaul of NEK. The last instalment of the loan, EUR 10 million, was repaid by GEN in the beginning of March.

 

Market situation and prospects for the coming year

Energy companies are looking forward to the future period with optimism, although according to Dr Paravan, the energy crisis is not over yet. That is why we must continue to implement the measures to deal with the crisis, including those for the efficient use of energy, which took effect last year. “Electricity prices are currently lower than the regulated prices in practically all consumption segments, which is primarily a reflection of the drop in prices on the wholesale market from the beginning of the year until today. But the situation on the energy market remains tight. There is still a shortage of the gas supply in Europe of around 20 per cent, so there is still a potential gas shortage in 2024 and 2025, which will keep pressure on energy prices. We therefore urge business customers to take advantage of the current situation to carry out a partial purchase of energy several years in advance. The recommendation is at least 25 per cent for the next three years, 2024, 2025 and 2026,” emphasized Dr Paravan.

Mr Mervar, MSc, also emphasized that in the energy industry they are preparing for the coming winter: “We were very lucky this winter because of the high average temperatures. The situation could have been completely different if we had low average temperatures, wholesale prices would now be higher”. According to Mr Mervar’s assessment, Slovenia is exceptionally exposed in the field of reliable electricity supply in the case of crisis situations, the relatively favourable development of events in recent months does not allow for complacency. Without new investments, this exposure will only increase, not only in the area of supply, but also in the area of prices.

 

Decisive measures are necessary to ensure a long-term self-sufficient and low-carbon electricity system

The energy crisis exposed Slovenia’s high dependence on imported electricity, which reached an average of 32.6 per cent in 2022, we imported electricity during 98.3 per cent of all hours of the year. Similarly, in the first two months of this year, the average import dependency was 31 per cent. This is unacceptable from the point of view of the national security of energy supply and the sovereignty of the state. We in the energy industry have been warning about this problem for a long time and we are united in the opinion that a serious industrially developed country like Slovenia cannot afford such a large import dependency.

In the coming years, without the start of an intensive investment cycle, a large gap between the consumption and production of electricity will only increase. Therefore, Slovenia must focus all its efforts on establishing a self-sufficient and low-carbon electricity system, which means urgent investments in new production units. “Without the necessary investments, we are in danger of being between 40 and 50 per cent dependent on imports by 2030 on average. The higher the import dependency, the more the wholesale prices of electricity will be correlated with the prices on the European stock exchanges, additionally increased for the costs of cross-border capacities, the greater the risk of Slovenia will be in terms of sufficient supply of electricity in the event of crisis situations in the EU and Europe!” illustrated Mr Mervar, MSc.

Dr Štokelj described the situation on the wholesale markets and emphasized that investments in carbon-free and low-carbon technologies are necessary to ensure reliable and price-variable supply of Slovenian customers. Both energy pillars are intensively preparing for accelerated investments in renewable energy sources. HSE and GEN emphasize that it is time for a green transformation, development and investment in environmentally-friendly technologies; opportunities are also offered in the field of offering flexibility and energy storages. The HSE Group is already the largest producer of electricity from renewable sources in Slovenia, and it is preparing for the decarbonisation and the construction of alternative and additional carbon-free production sources. “We have set ourselves an ambitious investment programme that includes both large solar and wind power plants as well as the renovation of existing hydro power plants and the construction of hydro power plants on the middle Sava River. The HSE Group intends to realise its vision of becoming the carrier of the green transition in Slovenia also by exploiting geothermal energy, biomass and investing in hydrogen technologies,” emphasizes Dr Tomaž Štokelj, Managing Director of HSE.

In the GEN Group, where electricity production is already 99% low-carbon, the central development project of national importance will be the construction of a second nuclear power plant (JEK2). “We will do everything in our power to make the project progress as quickly as possible, thus responding to the need for energy independence and the expected lack of electricity in the next decade,” concluded Dr Paravan.

The system operator is preparing to modernise the transmission and especially the distribution system.