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Renewables, driving the energy market in the Western Balkans

Energy prices keep rising. Winter months are right behind the corner. The fear of gas disruptions is becoming more real every day that passes. Countries all over Europe are looking for the best way to face any challenge that lies ahead. They are saving energy any way they can, they are reducing domestic gas demand, they are filling up storage facilities as fast as possible and they are looking at other countries for diversifying their supplies.

Also, a smaller region within Europe can play a significant role: the Western Balkans. These countries are appearing on the European energy map because of gas interconnectors, potential LNG terminals and new supply routes. However, although currently, energy security is in everybody’s mouth, we cannot forget that we also need to embark on an energy transition and these goals should not be forgotten.

The Western Balkan countries have all something in common: an enormous renewable energy potential which is not fully untapped yet.

Just to mention a few of the ongoing projects, two solar power plants (of 100 megawatts and 140 MW respectively) were awarded to a renewable energy developer in Albania in 2021; the Government of North Macedonia has given the green light to a German wind developer for the 415 MW Virovi wind farm, while Chinese investors are planning to start the construction of the 84 MW Ivonik wind farm in Bosnia and Herzegovina; furthermore, the region has the largest remaining unexploited hydropower potential in Europe.

How the current crisis has affected energy investments in the region: new opportunities arise

Magnus Johansen, Executive Vice President of Offtake at Scandinavian renewables developer EMERGY agrees that the tremendous increase in market prices and the view that these higher prices are here to stay with us long-term, has obviously triggered big changes. However, they are quite positive for the renewable energy market.

“On one side the demand for new renewables capacity has increased even more, while the higher price environment has made renewables cheaper than conventional,” he tells CEENERGYNEWS, ahead of the Energy Week Western Balkans 2022 that will take place in Montenegro on 6-8 September.

“The high-energy consuming industry is struggling and is trying to adapt fast, while several governments fear periods of load shedding and cold apartments/office buildings during the coming winter(s),” he continues. “Overall, for a renewables developer, we see more positive drivers in our region compared to just one year ago.”

Also, Montenegro, which doesn’t rely on gas too much has been spared the worse consequences of the crisis and businesses were encouraged to further boost their investments in renewables. Mladen Grgić, Director of the Montenegrin Investment Agency mentions two of the largest investments in renewables in the country, the wind farms Mozura and Krnovo that have confirmed their importance and significantly contribute to the stability of the country’s energy sector.

western balkans
Krnovo wind farm. Source: BEMAX.

“They showed their full potential in the first quarter when on 17 April produced 45 per cent of Montenegrin energy consumption, placing us on the first place in Europe for the wind energy production,” he highlights. “We understand that such glory can last more than a day if we further invest in wind and solar energy sources. Indeed, there are several large projects being prepared as we speak.”

Furthermore, in Montenegro, Mr Grgić explains that the consequences of the energy crisis have been contained through regulated electricity prices for households, companies and larger consumers.

“According to the decision of the Montenegrin Regulatory Agency for Energy and Regulated Utilities, the price of electricity for households and small customers who do not belong to that category cannot increase by more than six per cent in the next two years,” he tells CEENERGYNEWS. “Yet, the Law on Energy stipulates that if there is a disruption in the market, caused by an unexpected lack of energy or a crisis situation, the Government can introduce additional measures.”

On the other hand, North Macedonia is an energy-dependent country that imports a significant amount of electricity, especially for the industry sector.

“In the past, this was not a problem because of the low electricity price on the power exchanges in Europe and in the region,” recalls Viktor Andonov, Energy Adviser to the Prime Minister of North Macedonia, another speaker of the Energy Week Western Balkans 2022. “It was even an excellent opportunity for the companies to go on the liberalised market and to save money because previously they were part of the old tariff system where they were paying more than the households.”

“On the other hand,” he continues, “Macedonian generation facilities are old and inefficient, the biggest part of our domestic generation is from old thermal power plants based on coal/lignite and with time the quality of the lignite is lower and lower and the thermal plants are more and more inefficient. […] Now the liquidity of the energy sector in North Macedonia and in the region is disrupted and it is expected that mainly State investments in the energy sector will be realised with some delays.”

However, there is still a huge interest from the companies to invest in PV plants and medium and large-scale projects.

“Of course,” he tells us, “the biggest interest at this moment is to invest PV plants on the rooftops of the industry sector mainly to reduce their dependence on the price on the volatile markets. It is positive that nobody is talking about new coal plants and everybody is thinking about investments in renewable energy projects and energy efficiency.”

From wind to solar, to hydropower: the most significant renewable energy projects in the region

Other than solar, one of the most important projects for the energy transition of North Macedonia is the construction of a pump storage hydropower plant Cebren. Also, Mr Andonov mentions the first energy transition of a coal plant to renewable energy that is happening right now in the Thermal Power Plant of Oslomej in Kicevo.

western balkans
Thermal Power Plant of Oslomej. Source: ESM.

“To replace the old coal mines, there is already in operation one 10 MW solar plant constructed by State company ESM and, in addition to this projects, we awarded two projects each with an installed capacity of 50 MW to the Turkish company Fortis and Bulgarian Solarpro, with the concept of PPP and by the end of the year the State company ESM will start with the construction of additional 10 MW solar plant” he reveals. “I believe that by the end of 2023 on the site of the old thermal power plant we will have a 120 MW solar plant in operation.”

Montenegro is currently betting on wind energy. The already mentioned Krnovo and Možura wind farms will soon be joined by the Gvozd wind farm, with an estimated installed capacity of 54 MW, while the Braići wind farm of 100 MW is also planned, as shared by the head of the Investment Agency.

Also, foreign investors Emergy is working on wind energy, especially in Serbia.

“In our portfolio right now the most mature project is the 168 MW Alibunar wind farm in Serbia,” Mr Johansen says. “In addition to this project, we have around 2 GW of projects at various stages of development in the region, while we are also exploring adding a few more projects to our development portfolio.”

Indeed, the potential for investors is enormous and while recognising that, countries are getting ready, introducing attractive measures and auctions and easing the burden of what were identified as current challenges.

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