PAOLO Ruzzini believes that times of crisis should not be a reason to stop investments and kill ambitious projects for the future, especially not in the energy sector where many plans stretch through a quarter of a century and impact the energy strategies of the whole country. The general director and chairman of the board of Slovenské Elektrárne (SE) is also confident that Slovakia is well positioned to meet significant challenges that the energy sector is facing across Europe today, including the reduction of greenhouse gas emissions, increasing the share of renewable energy and trimming energy consumption.
The Slovak Spectator spoke to Paolo Ruzzini about how the global economic downturn is impacting the energy sector, the intensifying debate over nuclear power and one of the largest investments the energy sector is committed to: the completion of units 3 and 4 of the Mochovce nuclear power plant. Ruzzini also shared his thoughts about the bridges that should be built between the education sector and businesses, market regulation and the changes Slovenské Elektrárne has been through.
The Slovak Spectator (TSS): What are the most significant challenges that the energy sector faces not only in Slovakia but also in the European context?
Paolo Ruzzini (PR): Energy has made it to the top of the agenda of every government and has been intensively discussed by all the European Union leaders. The main challenges that we face in Europe have been articulated at the European Union level: to achieve by 2020 a 20 percent reduction in greenhouse gas emissions, a 20 percent share for renewable energy in final energy consumption, and a 20 percent increase in energy efficiency. This is pretty much the same line that the energy sector in Slovakia will have to keep in mind, along with securing sustainability, competitiveness and security of supply all over the country for all consumers.
The challenge is tough since we are experiencing an increasing demand for energy while striving to achieve and maintain independence in managing sources of energy while also finding a sustainable answer for the demand. We also have to respond continuously to climate changes and environmental pressures while aiming at sustainability of energy development.
The Union of the Electricity Industry or as we call it Eurelectric, which associates the main European electricity companies, has already assured the EU that the companies will strive to achieve a carbon-neutral power supply by 2050. This really means a commitment to work towards a low-emission economy and environment. It will require us to analyse all our possibilities and technologies as well as the responses of the European market. Indeed, it is a commitment that we are making for our children, the future generations.
Now, of course you have to somehow conjugate this scenario with the current economic crisis, which makes this issue no less important. On the contrary, the economic crisis makes issues of energy safety and efficiency, along with environmental challenges, even more urgent. I do believe that this is an opportunity to seriously look at a low emission economy and create leverage for that, especially in terms of investments we can make as an important contribution to restoring economic development.
TSS: How has the global economic downturn affected the energy sector in your opinion? Have the changing economic circumstances made your company change any of its investment plans?
PR: We have already experienced a significant impact on the energy sector. If you look at the trend of commodities you see important reductions of prices while the atmosphere of uncertainty has made some players either halt or reconsider their investment plans.
This is a crisis of trust and now a lot depends on how the players identify their directions for the future. There are, of course, two alternatives of action: one is when we do not have a vision and direction and we stop all the investments and wait to see how things will develop; the other is to confirm the investments knowing that it helps the whole business environment and that it is, indeed, an investment for the future. I personally think that if we push for our original plans we can activate a lot of investments that are beneficial for the whole economy. One of the most important aspects of the energy sector is that it requires systematic and long-term solutions and plans.
TSS: What are the specifics of the Slovak energy market in your opinion?
PR: Slovakia is one of the countries well-positioned to face the challenges I listed above. The market is very well integrated from an electrical point of view – well integrated to other countries of the region and also to Germany, for example. Secondly, the market is well positioned in terms of technologies as 86 percent of last year’s electricity production by Slovenské Elektrárne was ‘clean’ energy. Of course, we consider clean energy everything that comes without greenhouse gas emissions. Nuclear energy is an important part of this production.
TSS: The Slovak government moved towards greater state regulation of energy prices and handed the Regulatory Office for Network Industries (ÚRSO) more authority to cap prices in the energy market. How do you view these developments? What impacts could tougher regulation have on the market?
PR: The market simply cannot respond to the challenges that I was mentioning by pursuing one solution only. We have to go through and combine all the possible alternatives. First of all, we have to focus on energy savings, working towards a more integrated market, investing in transmission systems and intelligent grids - this involves electricity producers, distributors, system grid operators, etc. We also have to pursue all the generating technologies: renewable energy, clean coal and nuclear. Then we also have to make relevant investments and view Europe like a unified market: a market without barriers which is ready to integrate different countries.
The energy and electricity sector has always been a regulated business. We do need a strong, reliable, and independent regulatory authority. We need these independent regulatory authorities in each country but with more and more capability to speak with one voice.
At this time when we plan investments, very often with a 15- or 20-year period of return, we count on a stable environment, with clear and predictable rules. For example, we have decided to invest almost €3 billion but we will see the returns only over the next 25 years and we need the confidence that we are pouring the money into a stable and predictable environment. This is why we require the regulatory authority to guarantee all operators fair and equal conditions. We have been in continuous cooperation with the regulators: we understand perfectly their ambition to have fair electricity prices and to protect the weak sectors of economies, but I think the regulators also have to take into account the contributions we are making.
Also, we are worried whenever we see a tendency that any regulator starts applying too many exemptions or differences from the unified European market because it can potentially create discrepancies and distortions. Such a development makes it more difficult to operate in a unified market and jeopardizes the investments that we are making.
We are working with 27 regulators and 27 governments in the world so we have a good understanding of all the possibilities. It is really important that operators and governments share a common strategic vision. Only cooperation between the governments and the operators can produce the right strategies and solutions.
TSS: What are the most significant changes that SE has been through since Enel entered the company? What were the greatest challenges of restructuring a formerly state-owned energy monopoly like SE?
PR: We have been bringing the experience that we acquired from managing a former state-managed company in Italy and there we had to completely reshape the whole enterprise, the way it functioned. Changing the attitude of people was an immense amount of work. However, staying focused, defining internal principles and applying them consistently puts you in a better position to do the restructuring. The changes that SE has supported and managed during the last three years have been significant, all under changing conditions in the market. The company has changed not only within domestic conditions but also in international conditions.
But now when I look back at the transformation process, I have to say that it was easier than I had expected. I found a very open environment in Slovakia with good technical knowledge and experience, with people who knew how to do their jobs. Over the past three years we have completely reshaped the profile of the company with a sacrifice on the part of the employees, since we had to trim down the number of employees from 6,649 in 2006 to 5,432 in 2008. But some 1,050 of them stayed with the nuclear decommissioning and back fuel cycle managing state-run company JAVYS.
At that time there was a high demand for labour by other investors, so we also took the initiative to link our layoffs with the hiring process of other companies. We have applied a lot of tools to support the people who were leaving SE, both economically and in trying to find new opportunities for them in the labour market. Also, lots of our employees still work for Slovenské Elektrárne as seasonal workers through outsourced contracts. So we have preserved the know-how and increased efficiency.
TSS: During the time when Slovakia was cut off from Russian gas supplies, you were a member of the energy crisis committee. In your opinion what are the lessons that Slovakia or any country should learn from this situation when the economy came to a nearly complete halt due to stopped gas supplies?
PR: I must say I was impressed by the instant cooperation by different companies and organisations, not only from the gas but also the electricity sector, to give the right answers and confirm the reliability of the system to avoid uncertainties. One of the main lessons learned was that it is quite difficult to find individual solutions for each country. European countries increasingly face the challenge of working together and finding unified responses.
The gas crisis again showed the region’s energy dependency and it is important that Europe realizes that there is no unique answer – that there are different solutions which need to be combined. You cannot count only on gas; you have to find alternative solutions. But we also have to understand that Russia is a relevant energy partner and Europe has to deal and cooperate with Russia.
TSS: Energy experts and observers suggest that there is a visible change in energy policies of many European countries which are now making a shift towards nuclear power, even by countries which in the past were cautious and unfriendly. What has been the driver behind this change in your opinion?
PR: Countries have to restore much of their lost energy production capacities. Slovakia has to somehow replace the capacities that it lost after the shut down of the two units of the state–owned Jaslovské Bohunice V1 nuclear power plant. We have been very clear about our plans to create new capacities from the very beginning. The most important answer we are offering to the loss of capacity is the completion of units 3 and 4 of the Mochovce nuclear power plant.
Nuclear cannot be the sole solution but you cannot have solutions without nuclear. Slovakia, with its position on nuclear energy and its investments into Mochovce, is making a major contribution to the European debate. The Mochovce project, indeed, is also our contribution to solutions to the economic crisis. Along with our partners we are pouring an investment of more than €2.7 billion into the economy. Apart from being one of the most relevant energy investments in Europe it also is one of the effective levers against the economic crisis.
Indeed, the debate over nuclear power has been intensifying. Slovakia and the Czech Republic are two of the protagonists for building up and managing the European Nuclear Energy Forum. Bratislava and Prague have been jointly hosting this discussion forum every six months and the participating bodies understand that only an effective discussion can break the taboos about nuclear energy.
Yet, nuclear energy is peculiar: you will never lay a brick for a nuclear plant if you do not have the full awareness and positive acceptance of the local communities of the countries in which you are working. We have been working on building good relationships between our plants and the local communities while one of the fundamentals is to guarantee the safety and reliability of these technologies. In no way can you avoid explaining all the sensitive issues linked to nuclear power. We are all aware that there is the issue of radioactive waste and spent nuclear fuel and that we have to explain how it all is managed. But if you fully meet the safety requirements and you give full visibility and transparency, you gain the trust of the local community, because you bring benefit to the economy and the local environment of that community. In the vicinity of Mochovce the completion of the plant has 87 percent public acceptance.
TSS: Completion of the Mochovce project with a €2.7 billion price tag has been dubbed the most ambitious investment project in the country’s energy sector ever. In what stage is the project now? Has the economic downturn modified the completion schedule in any way? What are the most demanding stages of the project?
PR: The work started at the beginning of November. It is a very complex project, which at the peak of its activities will involve more than 3,500 people working on the site with more than 50 companies. We are now completing the main contracts and planning activities with the main suppliers so that we are able to confirm again the date for the operation of the first unit for 2012 and the second unit by 2013.
The crisis has not influenced our plans. We had to re-examine the overall market condition, but we are talking about an investment for the next 15-20 years. Fortunately, our company is in a good shape after the process of restructuring, which allows us to confirm the commitment while we help the country to overcome the crisis. Along with highway construction, this is really considered the biggest investment. Yet, in times of crisis we have to focus on the future and create better conditions.
TSS: Slovakia has taken on an obligation to increase the share of renewable energy resources in the total energy consumption in the country to 14 percent by 2020. How do you view this ambition? Is it realistic in your opinion? Can Slovenské Elektrárne contribute to achieving this goal?
PR: If Slovakia is to achieve 14 percent from its current 6.5 percent, the government must examine all the alternatives. As far as Slovenské Elektrárne is concerned we are making the contributions in terms of specific projects; right now it is the mix of biomass in coal plants, which started in Vojany and we are taking the opportunities in mini-hydro power plants on the rivers Hron and Váh. We already support countries with the know-how of the Enel Group since we are the leaders in geothermal and hydro-electrical and we are ready to support these technologies wherever we go.
TSS: The Slovak education sector has been criticised for not reflecting efficiently the needs of the labour market and for not building enough bridges with the business community. How do you assess the situation in the energy sector? What has been the experience of your company with the Slovak education sector? (SE and the Slovak University of Technology have a considerable history of cooperation. Could you share some details about these links?)
PR: When I look at high schools and universities, I actually look at my most strategic suppliers, because they are supplying me with the most important resource: brains. I am so far satisfied with the experience and the know-how that we have found here, as far as the technical universities and the technical schools are concerned. If there was a lack of communication, the fault was on both sides.
However, we have signed a memorandum of understanding that allows us to work on projects with professors who look at the profile of studies to give incentives to technical careers for young people.
We also identify research programs that we can pursue jointly at the university labs and at our labs and support prizes for the best performers in the research sector, for example the Aurel Stodola prize for the best bachelor, dissertation and diploma papers.
Working with young people and academia is also about preserving technical know-how and transferring it to the next generation.
I have found interest on the side of the academia, but barriers need to be broken on both sides. These are the most important investments that the company and the country must make.