Mitigation potential in the Western Balkans: Investigating decarbonisation and RES in the region

29 August 2023, Category: All insights, News, Tags: climate change, climate finance, mitigation, western balkans

When it comes to the energy and mitigation in the Western Balkans (WB), there has been a decided move towards decarbonisation as these nations begin to decrease their reliance on fossil fuels. Overall, the region has a high renewable energy sources (RES) potential – for example, while the main portion of Albania’s energy mix is made up of oil use (53.4%), a significant portion comes from hydroelectric (23.3%) [1].

Like other economic areas, the energy sector of the Western Balkans is considered by many as an enabler of economic growth. In order to align themselves with environmental regulation and international environmental legislation (such as the EU’s aim of creating an integrated regional market for electricity and gas in the WB region, one compatible with their internal energy market), as well as achieve sustainable development, WB economies are focusing on renewable energy and mitigation measures going forward.

So what are the challenges to decarbonisation and renewable energy development in the Western Balkans? There are several main obstacles: A slow and, at times, unpredictable planning process, ambiguity and confusion within regulation, and low levels of transparency [2]. Does this impede upon the potential of legislation-compliant decarbonisation in the area? What is the Western Balkan mitigation potential? In this article, we’ll be answering these questions.

• Renewable energy potential in the Western Balkans
• Nationally Determined Contributions (NDC) and decarbonisation progress in the Western Balkans
• The Western Balkans and mitigation potential

Renewable energy potential in the Western Balkans

In a global context, due to the pressing issues of climate change, energy access, and inequality, there is a worldwide concern about changing our energy mix. This gives rise to multiple practical and regulatory challenges. For example, do current institutional frameworks and economic policies allow for the easy development of renewable energy projects? Across the globe, attitudes are manifested differently. In the UK, one could argue that this isn’t the case. A good example of this is the ban on onshore wind power, driven by political fears, which has been enforced for the last ten years. 

In the Western Balkans, fossil fuel reliance has been a theme for the last thirty years, and energy became a key talking point for development needs. Between 1995 and 2005, energy consumption increased by 53% in WB countries [3], with the fastest growing sector in terms of energy use being transport. Unfortunately, due to the inheritance of energy infrastructure from the Socialist Federal Republic of Yugoslavia, energy systems in those countries have to contend with outdated structure and inefficiency [4].

However, today the WB energy sector is in the process of a significant transition. It comes in two parts – the first is the introduction of renewable sources into the energy mix. This is a promising change when you consider the high RES potential in the region. 2019 analysis by the International Renewable Energy Agency (IRENA) found that capacities of 12.2GW of wind and 4.4GW of solar could be cost-competitive in the region, with total generating capacity in 2019 being 18.6GW [5]. The second part of the transition is the move towards ‘extensive liberalization’ [6], which is aiding the process of setting up a common regulatory framework within their energy systems, gradually complying with the requirements given by the European Single Market – helpful for the growing  number of voices calling for EU membership for WB states.

It’s not all plain sailing though. There are significant barriers to renewable energy development, including:

• As most countries in the Western Balkans are moving towards competitive support schemes, there has been the development of regulatory uncertainty;
• The fear of high costs for renewable energy projects;
• An ageing grid infrastructure that may struggle with the variable volumes of renewable energy;
• Limited regional market integration;
• Unpredictable and easily stalled planning processes.
• A reliance on energy imports – these imports account for 35% of total energy use in the region [7].

Today, great progress has already been made on the increase of RES penetration within the WB energy mix. While a large amount of renewable energy comes from hydropower and biomass, other key sources, such as wind and solar, only account for less than 1% of the total energy share, yet the overall renewable energy production is higher than the EU-27 average [8]. 

Ultimately, all of this points to a high degree of RES potential for the area. For example, the potential for using solar energy is on average 30% higher in the countries of the region than in Denmark, which is a real champion in using that type of energy. However the reality does not match the potential, and there is still much room for improvement, as the current share of renewable energy only represents around 6% of the total installed electricity generation capacity [9].

Nationally Determined Contributions (NDC) and decarbonisation progress in the Western Balkans

The energy mix of the Western Balkans is dominated by fossil fuel use. In 2020, 71.7%* of energy generated came from the use of coal, oil, and oil products [10]. This produces around 90 million tonnes of CO2 annually, with 45 million tonnes of that contributed by the burning of lignite in 2020 [11]. In the same year, the CO2 emissions from the electricity generated by fossil fuels increased by 7% on average. This, combined with the inefficiency within the WB energy grid and the dependence on fossil fuels, led to the carbon intensity associated with electricity three times higher than the average experienced in EU-27 countries in 2020. At the same time, while EU-27 carbon emissions fell by 14%, corresponding WB6 emissions increased by 4% [12]. 

It’s worthwhile consulting how these increases affect the NDC commitments of each WB country. The commitments of each country vary:

• Albania: In 2015, Albania submitted its first NDC with the commitment to reduce CO2 emissions by 11.5% by 2030. In 2022, a revised NDC was submitted, with a new reduction target of 20.9% by 2030. RES target for 2030 has been defined to be 42.5%. [13]
• Bosnia and Herzegovina: Bosnia and Herzegovina committed to reducing GHG emissions by 19% by 2030, in comparison to 1990 levels. Their 2021 revised NDC saw that target increase to 33.2% within the same timeframe. The goal of the RES share in the total gross final consumption of energy in 2030 is 43.6%. 
• Kosovo: Kosovo has not yet submitted an NDC as it is not a party to the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, meaning it is not required to submit, however there is a draft NDC in development which will ‘also include adaptation measures in the sectors of water, health, biodiversity and agriculture, forestry, and land use.’ [14]. The RES in the electricity sector consumption is set at a minimum of 35% [15]
• Montenegro: In its 2015 NDC, Montenegro pledged to reduce GHG emissions by 4% by 2030 compared to 2010 levels. In 2022, there was a significant increase pledged, with a reduction target of 17% by the same year.
• North Macedonia: North Macedonia’s commitment is one of the most impressive. In 2015, its first NDC was a 30% reduction in GHG emissions by 2030. In the 2021 revision, the target was increased to 82% by 2030. The sectoral targets stipulated a RES share of 38% in gross final energy consumption by 2030. [16]
• Serbia: Serbia’s 2015 NDC committed the country to reducing GHG emissions by 9.8% by 2030, compared with 1990 levels. The 2022 revision announced a reduction target of 33.3% by 2030. Similarly, Serbia’s target on RES share should be at least 33.6 % of gross final consumption by 2030. [17]

If these six countries are to meet their NDC commitments and be compliant with the legislation set out by the Paris Agreement, they must decarbonise – and we are seeing this. For example, in Serbia in 2022, a public call was issued for decarbonisation projects and 21 SMEs were selected to participate in a series of workshops on green transformation and just transition. 

Of these 21, proposals from eight SMEs were chosen to receive co-financing for decarbonisation projects. They received USD 600,000 from Japan (who provided financial support for the Initiative for a Just Green Transition and Decarbonization in Serbia) and USD 9.8 million from the private sector. Overall, the hope is that these decarbonisation efforts will mitigate the production of 12.563 tons of CO2 emissions annually over the next 20 years [18].

The Western Balkans and mitigation potential

The entirety of the Western Balkans is showing promising progress in the increase of renewable energy use. For example, hydropower represents around half of the current capacity in the area. In Serbia and Montenegro, wind energy is being capitalised upon as the main source of non-hydro renewable energy [19]. While this is promising, the infrastructure, energy systems, and energy policies of each country are at different stages, both in terms of efficiency, liberalisation, and how up-to-date they are with modern needs. However, regulatory and institutional frameworks are welcoming the advent of increased RES penetration in the market.

For example, in Bosnia and Herzegovina, reforms to renewable energy regulations are being made by the Federation of Bosnia and Herzegovina and the Republic of Srpska. The former brought in a new operator for renewables, and the latter adopted a new, more progressive law on renewable energy. Likewise, in Montenegro in 2016, the Energy Law was adopted, which helps support entities in the renewable energy sector. The government also guarantees the purchase of electricity at feed-in tariffs, provided it comes from eligible producers.

Ultimately, there is good progress being made and a lot of mitigation potential to be found in the Western Balkans. But there are also challenges. Less attention for decarbonising transport and heating and cooling has been received over power generation, and there are still gaps between NDC targets and NDC implementation.

One recommendation that’s been given is that WB governments must take a proactive stance on mitigation – in particular renewable energy market penetration and decarbonisation. The policies crafted and implemented must build investor confidence and tackle the infrastructural issues present within energy systems in the area. 

One idea that is holding weight and gaining popularity is the creation of a regional energy network that brings together the currently fragmented energy markets present in the region, helping to build economies of scale for the area and helping achieve the all-important just transition that is needed in any energy system.

What are your thoughts on the Western Balkans and mitigation efforts? Let us know in the comments below.

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References

1. IEA, 2023. Albania. Available online at: <https://www.iea.org/countries/albania>

2. Đurašković, J. et al., 2021. Renewable energy in the Western Balkans: Policies, developments and perspectives. Energy Reports, Volume 7. Available online at: <https://www.sciencedirect.com/science/article/pii/S2352484721005692>

3. EEA European Environment Agency, 2008. National emissions reported to the UNFCCC and to the EU greenhouse gas monitoring mechanism. Available online at: <https://www.eea.europa.eu/data-and-maps/data/national-emissions-reported-to-the-unfccc-and-to-the-eu-greenhouse-gas-monitoring-mechanism-14>

4. P. Sanfey, J. Milatovic, A. Kresic, 2016. How the Western Balkans Can Catch Up. EBRD Working Paper No. 185. Available online at: <https://deliverypdf.ssrn.com/delivery.php?ID=098115008081065092093120076102030090008027046078024071069079065124100102011120081118041001120035023028110102006080076018014065029091024062067121094102119071067067030055045081094096081121098088007007031126025123002069084114025001012026065022118005081021&EXT=pdf&INDEX=TRUE>

5. Western Balkans Investment Framework, 2019. Investing in Clean Energy in the Western Balkans. Available online at: <https://www.energy-community.org/dam/jcr:1a9ef6ac-a74e-458a-bb4b-4707051092ef/WBIF_clean_energy_WB.pdf>

6. Đurašković, J. et al., 2021. Renewable energy in the Western Balkans: Policies, developments and perspectives. Energy Reports, Volume 7. Available online at: <https://www.sciencedirect.com/science/article/pii/S2352484721005692>

7. Eurostat, 2018. Enlargement countries – energy statistics. Available online at: <https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Enlargement_countries_-_energy_statistics#Energy_consumption>

8. Milatovic, J., Sanfey, P., 2018. The Western Balkans in transition: diagnosing the constraints on the path to a sustainable market economy. Available online at: <https://www.semanticscholar.org/paper/The-Western-Balkans-in-transition%3A-diagnosing-the-a-Sanfey-Milatovi%C4%87/fed8945916b649460bc9875096d5beb8a3cf9ff4>

9. Đurašković, J. et al., 2021. Renewable energy in the Western Balkans: Policies, developments and perspectives. Energy Reports, Volume 7. Available online at: <https://www.sciencedirect.com/science/article/pii/S2352484721005692>

10. OECD, 2022. Clean energy transition in the Western Balkans. Available online at: <https://t4.oecd.org/south-east-europe/programme/OECD-BN-Clean-Energy-Transition-Oct2022.pdf>

11. Energy Community, 2021. WB6 Energy Transition Tracker. Available online at: <https://www.energy-community.org/dam/jcr:c7db8188-0b04-443b-9f41-728ee182fc90/EnC_WB6_ETT3_062021.pdf>

12. ibid.

13. Energy Community. BOSNIA AND HERZEGOVINA INTEGRATED ENERGY AND CLIMATE PLAN. Available online at: <https://www.energy-community.org/dam/jcr:fffa65bf-d137-454d-aad7-992eee783af6/NECP%20BiH%20v.7_ENG.pdf>

14. IMF, 2023. Republic of Kosovo: REQUEST FOR STAND-BY ARRANGEMENT AND AN ARRANGEMENT UNDER THE RESILIENCE AND SUSTAINABILITY FACILITY—WORLD BANK ASSESSMENT LETTER FOR THE RESILIENCE AND SUSTAINABILITY FACILITY. Available online at: <https://www.elibrary.imf.org/downloadpdf/journals/002/2023/200/article-A002-en.xml> 

15. Republic of Kosovo, 2022. Energy Strategy of the Republic of Kosovo 2022-2031. Available online at: <https://me.rks-gov.net/wp-content/uploads/2023/04/Energy-Strategy-of-the-Republic-of-Kosovo-2022-2031-1-1.pdf>

16. Ministry of Environment and Physical Planning, 2021. Enhanced Nationally Determined Contribution. Available online at: <https://unfccc.int/sites/default/files/NDC/2022-06/Macedonian%20enhanced%20NDC%20%28002%29.pdf>

17. Energy Community. Integrated National Energy and Climate Plan of the Republic of Serbia for the period 2030 with the projections up to 2050. Available online at: <https://www.energy-community.org/dam/jcr:01992fc5-4981-4ee3-84f8-f1f96830b4ba/INECP_Serbia_ENG_13.06.23%20.pdf>

18. UNDP, 2023. Why the Western Balkans are choosing decarbonization. Available online at: <https://climatepromise.undp.org/news-and-stories/why-western-balkans-are-choosing-decarbonization-serbia-bosnia-and-herzegovina#:~:text=In%202021%2C%20Bosnia%20and%20Herzegovina,sector%20and%20carbon%2Dintensive%20industries>

19. Đurašković, J. et al., 2021. Renewable energy in the Western Balkans: Policies, developments and perspectives. Energy Reports, Volume 7. Available online at: <https://www.sciencedirect.com/science/article/pii/S2352484721005692>