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Securing Energy, Reshaping Decarbonisation: Reconciling Mediterranean Energy Transitions with Energy Security and Regional Stability
Veronika Ertl
Yassine Zegzouti
November 20, 2023

The Mediterranean region is one of the major climate-change hotspots. Advancing the region’s transition to a low-carbon and renewable energy production system will be crucial to counter global warming and achieve the objectives outlined in the Paris Agreement. However, fossil fuels continue to dominate the region's energy mix, while renewable energy sources meet only a marginal share of the overall demand. The green-energy transition in Mediterranean countries, moreover, represents a significant opportunity to modernize the regional economy and foster growth, employment, technological progress, and social inclusion. However, despite these potential benefits, this transition faces various challenges. One of the challenges stems from the population increase in the region and its economic development, resulting in a substantial surge in primary energy consumption, particularly in North African and Middle Eastern countries. In addition, rising temperatures and the increasing frequency of extreme weather events amplify concerns about the resilience of current energy systems. For example, in Morocco, soaring temperatures have led to a surge in electricity demand for cooling, thus placing a strain on the power system1.

Additional challenges have arisen because of the ongoing Russian war in Ukraine, which has created geopolitical turbulence and has triggered an international energy crisis. The impacts of these developments can clearly be seen in the Mediterranean energy landscape, and are challenging previous dynamics and strategies for the countries’ energy transitions, including through changing trade and investment flows, and increased energy price volatility. Against the backdrop of this crisis, the top priority for most Mediterranean countries has become to secure affordable energy supplies for their populations and industries. Policymakers thus now face a more complex challenge, with the big question being how to reconcile the energy transition with energy security and regional stability, without compromising progress towards decarbonization targets.


One Region, Many Challenges and Much Potential

To address the intricate balance of security, affordability, and sustainability, governments in the Mediterranean region need urgently to analyze the impact of the current energy crisis, and implement strategies to mitigate its effects by exploring new or adapted energy transition pathways. This poses a complex challenge, since the impacts of the energy crisis vary significantly across the Mediterranean, with each country facing unique challenges.

Italy, for instance, has been severely affected by the surge in energy costs, primarily due to its heavy reliance on imports, which account for three-quarters of its power consumption. In response, Italy has temporarily shifted to coal because of high natural gas prices. This shift was reflected on the ground by an 82% increase in coal-fired electricity generation in the first nine months of 2022, compared to the same period in 20212.

In the Eastern Mediterranean, Greece has also been substantially impacted. In 2020, Greece’s imports from Russia made up 46.5% of its available energy, significantly higher than the EU average of 24.4%. To reduce its significant energy dependence, Greece has initiated a series of strategic measures. These include the expansion and intensification of operations at the Revithoussa natural gas storage facilities, resulting in a notable increase in liquefied natural gas (LNG) deliveries3.

Among the Southern Mediterranean countries, Morocco has likewise been hit by the energy crisis because of its heavy reliance on imported fossil fuels. However, the country’s growing capacity for renewable energy, accounting for approximately 37% of its electricity generation mix, presents opportunities to alleviate some of the costs associated with dependence on imported hydrocarbons4. In Lebanon, with high import reliance for energy and a failing economic and financial system, soaring energy prices have severely exacerbated existing challenges of energy availability and poverty.

On the other hand, countries including Algeria, Egypt, and Israel have discovered new opportunities from a rising demand for their energy exports. For example, the EU, Israel, and Egypt in June 2022 reached an agreement to increase sales of liquefied natural gas from Israel and Egypt to EU countries seeking to reduce their dependence on Russia, while Italy agreed with Algeria to receive higher volumes of natural gas than previously4,5. Such new opportunities have also increased the incentives for countries to go ahead with further energy exploration and production increases. As Europe seeks alternative energy sources, the geographical proximity, abundant resources, and existing energy infrastructure of countries in the Southern and Eastern Mediterranean make them an attractive choice for the EU's gas diversification efforts. For producer countries, the current high energy prices and increased demand from Europe present attractive economic opportunities, particularly given economic and political challenges in countries such as Algeria, Libya, and Egypt. These opportunities, however, should not distract from the necessity of investing in renewable and low-carbon technologies for the mid- to long-term future. This is especially important for countries such as Algeria and Libya, where there is currently limited emphasis on promoting renewable energy.

Key Aspects for a Resilient Energy Transition in the Mediterranean

Finding the right balance and sequencing in relation to short- to medium-term energy security concerns, and mid- to long-term energy transition strategies, will remain a challenge for all Mediterranean countries, regardless of their production capacities. Strategic and at the same time pragmatic decisions will have to be made on energy sources, infrastructure, and partnerships, to foster energy security and the transition. In the short- to medium-term, this requires exploring all available options, in terms of fossil, low-carbon, and renewable sources, and available technologies, while not crowding out efforts to encourage energy efficiency and sufficiency, or the acceleration of the transition to low-carbon and renewable energy production. With a long-term view to energy transition, policymakers must ensure that, through their strategic frameworks, the utilization of unabated carbon-intensive energy sources reduces as quickly as possible, and no unintended carbon lock-in is created, while still guaranteeing energy security for their countries. Currently, for example, to generate a stable electricity supply from renewable sources, there remains a need for an additional source of fossil energy (e.g. gas, oil), as green energy storage technologies have not yet matured.

Finance is another important aspect to enable the energy transitions in Mediterranean countries. In order to mobilize the necessary finance, countries need to create stable investment conditions. De-risking measures could help to reduce financing costs and stimulate investment. Governments also need to think about ways to phase out existing fossil-fuel subsidies, and to redeploy these resources to support the accelerated shift into renewables. Funds are available, but there is a need to mobilize them for the right projects.

Mediterranean countries must thus review carefully their strategies on reform of their energy systems, and redesign their decarbonization pathways in order to make their energy transitions more resilient against the backdrop of energy-security concerns, geopolitical uncertainties, and unexpected shocks. Embedding such resilience into the energy transition requires a holistic approach that encompasses societies and policies, energy systems and technologies, and finance.


A Window of Opportunity for Regional Cooperation Around Energy?

Another key aspect for resilient energy transitions in the Mediterranean is regional cooperation. In the electricity sector, with increasing rates of intermittent renewable energy coming into the grid and the necessity to balance fluctuating load factors, it is essential to upgrade grids into interconnected cross-border systems. This also includes aligning regulatory frameworks between Mediterranean countries as a necessary enabling condition. Experiences from the advanced European grid integration project can serve as useful lessons in this regard.

Diving further into possible collaboration avenues in the Mediterranean region requires a sound understanding of the region’s diversity. Many countries vary greatly in their economic development levels and their energy production and consumption patterns. This makes identifying and understanding the preconditions that shape the priorities of each country the necessary starting point for considerations on how to foster regional cooperation. For European countries in the Mediterranean, ambitious EU plans, such as REPowerEU, and extensive legal frameworks under the Fit-for-55 package, provide a strategic reference on the diversification of energy sources, the acceleration of their energy transitions, and energy-efficiency targets. On this basis, national energy and climate policy frameworks in most European Mediterranean countries are fairly advanced. Beyond diversification efforts for their short-term energy security, the strategic focus of European countries is on an accelerated move towards a renewable energy system. Given natural conditions in many European states, considerable shares of this renewable energy will have to come from imports.

Many countries in the Southern Neighborhood, including Morocco, are well placed to be key partners for the EU in this regard, given their excellent conditions for renewable energy production and their geographical proximity. For current hydrocarbon producers, such as Algeria, for which fossil resources constitute a primary source of income, existing energy and economic systems, paired with high fossil-fuel demand and prices, might justify a shorter-term view about hydrocarbon exports, as is visible in the comparatively slow development of renewable energy sources. Egypt, on the other hand, is actively pursuing a dual strategy, maintaining its hydrocarbons sector as an important economic motor, while capitalizing on the expected EU demand for renewable energy sources and carriers, particularly green hydrogen. Irrespective of these different approaches, however, the transition from fossil-fuel based to renewable energy systems presents a major challenge for hydrocarbon producing countries. They must navigate complex technical adjustments as well as far-reaching changes to their economic and political models, particularly in the case of current rentier states.

While potential new avenues for cooperation between the two shores of the Mediterranean are thus opening up, delivering on such cooperation remains challenging, given the diverging political and economic priorities of different countries. Moreover, aspects including significant differences in the structure of electricity markets, limited accessibility to funding for clean-energy projects, a lack of a supportive regulatory and policy environment, and a lack of instruments to minimize risks, render these collaborations challenging. We are nevertheless looking at a window of opportunity for energy cooperation in the Mediterranean region, which should be utilized.

Given the complex regional environment and set of challenges for a resilient energy transition in the Mediterranean, current efforts by governmental institutions, think tanks, and international organizations to draft and implement well-adapted energy policies and to overcome obstacles in the way of an interconnected region, are not yet sufficient. This is even more the case given that the one parameter that can potentially undermine all other efforts, and is difficult to predict or measure, is more pressing than ever: geopolitics. The ambition thus has to be to build resilient energy-transition pathways for the Mediterranean, which can protect the energy system against geopolitical turbulence and make energy a lever for cooperation, peace, and stability in the Mediterranean region.



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