The long-term renewable energy potential of the Western Balkans is significant and could reach up to €20bn for wind power alone, according to the fourth edition of the “Investing in Clean Energy in the Western Balkans” report released by the Western Balkans Investment Framework (WBIF).
The six Western Balkan countries – Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – still have to invest significantly in moving from coal-fired to renewable energy production, and have good potential to do that.
“The region’s long-term renewable energy potential for instance includes some €15bn in hydro investments or up to €20bn in wind investments. Energy Efficiency investment needs in the regions’ building sector alone are probably in excess of €3bn,” the report noted. It doesn't put a value on the potential for investment into solar or other types of renewables.
Currently, the six countries lag behind the rest of Europe significantly in the modernisation of their energy sectors, which are characterised by limited market mechanisms and private sector participation, insufficient and aging infrastructure, high reliance on fossil fuels, late adoption of renewables beyond hydropower and residential biomass, limited energy efficiency and energy productivity, and high rates of energy poverty despite usually high levels of direct and hidden energy subsidies.
The picture varies across the region. Three states, Montenegro, North Macedonia and Serbia, have improved their energy productivity at considerably more than the EU average over the last decade, while energy productivity has actually gone backwards in Bosnia.
At the same time, eight of Europe's ten most polluting coal-fired plants are located in the region and all 16 coal-fired plants perform poorly compared to the 250 such plains in the EU, being responsible for at least €1.2bn worth of health damages every year for the region alone.
“Problems are particularly acute in North Macedonia or Bosnia & Herzegovina, where Skopje, Tetovo or Tuzla usually rank among the worst cities in Europe for air quality,” the report noted.
It added that decarbonising the regional energy sector is the most important step that would reduce emissions and improve the air quality.
WBIF has identified 50 potential sustainable hydropower projects that are worth further analysis. Meanwhile, the International Renewable Energy Agency has estimated that capacities of 12.2 GW of wind and 4.4 GW of solar power could be cost competitive in the region. The Western Balkans’ current total generation capacity is 18.6 GW, including half coming from coal.
“However and unlike most EU countries, the Western Balkans have not committed to phase out coal yet but instead plan to add significant new coal power capacity by 2030, in contradiction with commitments under the Energy Community Treaty and increasing regulatory drift from the EU,” the report reads.
It added that, although the current power generation situation appears favourable, with hydropower accounting for approximately half of current capacity in the region, the rest of that capacity, almost exclusively coal-fired plants, delivers the bulk of the electricity produced due to its high capacity factor. The only exception is Albania, which is completely dependent on hydropower plants.
“In addition, the environmental credentials of several small hydro plants and projects are often challenged by residents and NGOs,” the report says.
The main non-hydro emerging resources are primarily in the form of wind parks, and they were identified particularly in Serbia and Montenegro where the first wind farms were launched in the past three years. In Bosnia, the first wind farm was launched in 2018 and two others are under construction, while in North Macedonia Bogdanci remains the only wind power plant.
The solar projects in the region are still at an early stage with construction scheduled to start in Montenegro in 2020 on a 250 MW installation. North Macedonia plans to award 200 MW solar PV capacity.
WBIF has identified several barriers to the development of renewable energy sources, including a perception of high cost of renewable energy power and need for subsidies; aging transmission and grid infrastructure that struggles to cope with large variable RES energy volumes; slow and unpredictable planning processes; regulatory uncertainty as most countries are transitioning towards competitive support schemes; underdeveloped day-ahead and intraday markets, limited regional market integration and a high cost of capital stemming from both the above; and, the lack of experience in and limited comfort with lending to the sector of the local banking sector.