Montenegro, The consequences of the energy crisis have not yet been fully felt

, SEE Energy News

The consequences of the energy crisis have not yet been fully felt in Montenegro, said electricity trader Pavle Grbovic, adding that the situation could drastically worsen if the hydrological situation in the fourth quarter is not favorable for Elektroprivreda (EPCG).

In an interview with the Mina-business agency, Grbović said that the consequences of the energy crisis have not been felt in full so far due to the regulated electricity prices for households, as well as for companies and larger consumers.

In addition, as he stated, the favorable hydrological and weather situation during the first quarter of this year is the main reason why the situation in Montenegro is currently stable.

However, as the period of the second quarter was accompanied by significantly lower precipitation than expected, it can be stated that Montenegro, ie EPCG, will be in a large deficit of electricity throughout the second and third quarters, and perhaps during October, depending on the beginning rainy period “, Grbović explained.

According to him, it is necessary to be very careful, because in the case of unfavorable hydrology, ie cold and dry autumn / winter, the impact on the economy of Montenegro would be extremely large.

Grbović also assessed that the model according to which EPCG operates is not sustainable for a long period of time.

“The price at which electricity is sold is around 40 EUR per megawatt hour (MWh), while in the period of the second and third quarters EPCG will buy large quantities of energy at market prices of over 220 EUR per MWh. If the chirdo situation in the fourth quarter is not favorable for Montenegro and EPCG, the situation would drastically worsen “, claims Grbović.

According to him, in order for the electric power system to be sustainable, it is necessary to separate natural and legal persons, ie households from large consumers such as restaurants, hotels, business premises, factories and various industrial plants.

In other words, it is necessary to introduce total liberalization of the electricity market.

“The market has been open since 2015, but total liberalization has not yet taken place. That is exactly one of the main reasons why no supplier has yet appeared on the Montenegrin market, “said Grbović.

When it comes to the liberalization of the electricity market, he added that Montenegro is late in relation to the countries in the region, such as Serbia and Croatia.

In Serbia, the tariff system is adapted to citizens, especially the socially vulnerable population with very low consumption. Electricity prices depend on total consumption and high and low tariffs.

The green zone is intended for very small consumers up to 350 kilowatt hours (kWh) per month, the blue zone covers a large number of households and total consumption from 351 kWh to 1.6 thousand kWh, while the red zone is designed for larger consumers with consumption over 1.6 thousand kWh.

“The biggest difference in relation to the Montenegrin system is that night energy, ie low tariff, is four to five times cheaper than day energy, ie high tariff,” said Grbović.

Low tariff prices range from 1.3 cents to four cents per kWh, while in the high tariff prices range from 5.4 cents to 16.36 cents per kWh depending on total consumption.

“Such a system would simultaneously protect the interests of both small consumers and EPCG, because it would stimulate energy savings, ie consumption in the period of low load,” said Grbović.

He emphasized that the prices of electricity in Montenegro and in the region are far from market and that is why such a system is not sustainable for a long time.

For example, in the Czech Republic, ie Prague, households pay around 22 cents kWh.

It should also be emphasized that Montenegro has not adopted a law on value added tax (VAT) on the wholesale electricity market for years, which significantly reduces the interest of foreign companies, ie poses a greater risk for doing business within Montenegro for all companies”, Said Grbović.

According to him, if the laws and legal legislation were harmonized with the European ones and at the same time there was a total liberalization of the electricity market, the interest of foreign companies – suppliers would be incomparably greater.

During the first four months of this year, Montenegro exported 100m euros worth of electricity. Excess electricity is the result of a favorable hydrological and meteorological situation as well as the closure of the Aluminum Plant (KAP).

Grbović believes that Montenegro has a huge untapped energy potential and that it could be market-competitive in that branch of industry.

“Due to the good position of the energy system itself, on the corridor to Greece and Italy, Montenegro has the possibility of placing surplus electricity to different markets at different times of the year, depending on the needs of the systems themselves. For example, Greece is known as a big importer in the summer, while Italy is a big importer in the winter,”Grbović added.

Montenegro produces electricity from large hydropower plants, from the Thermal Power Plant (TPP) in Pljevlja and one part from wind farms. EPCG has started the ecological reconstruction of TPP Pljevlja and which will reduce its harmful emissions, in order to be in line with European Union standards and extend the life of the Thermal Power Plant.

The importance of this power plant for Montenegro is great because with a power of 225MW it provides 40 percent of domestic electricity production.

However, according to Grbović, it is very important to point out that if Montenegro wants to become recognized as a country that exports electricity, significant investments are needed in the construction of new sources of electricity that do not depend on fossil fuels.

“Montenegro should base its energy strategy on its resources – sun, wind and water, and market prices justify every type of investment in electricity production. This way of investing and investing smartly in the electricity system would lead to portfolio diversification, ie Montenegro would become an exporter of electricity in the first, second and fourth quarters, while the deficit would be significantly reduced in the third quarter,”Grbovic said.

According to him, it should be especially emphasized that it is more difficult to manage the energy system in which the dominant production would be from wind and solar power plants.

“That is why parallel investment is needed in hydroelectric power plants, especially accumulation ones.” They enable better optimization of the system and better management, ie storage of a certain amount of energy in case of major disturbances that are frequent in the summer and winter period, “said Grbović.

Summarizing the trends in the energy market in the last few years, Grbović explained that the price of electricity has been constantly rising since the first quarter of last year, primarily due to rising prices for carbon dioxide (CO2) emissions, and then due to a sharp rise in NCG gas prices (German gas).

“The very beginning of the war and sanctions against Russia additionally affected the energy situation, so the prices of electricity during the fourth quarter of last year and the first of this year were very high,” Grbović added.

He also emphasized the fact that the previous winter was very mild and that the wind in Germany, precipitation in the Balkans and temperatures during the period December-March were above average, which had a significant impact on falling prices during the first quarter of this year.

Grbović believes that it can be concluded that the beginning of the war and sanctions against Russia affected the jump in prices, but that during the first quarter of this year, the effects were significantly smaller due to favorable weather conditions.

“If we take into account all these factors, we should be careful when predicting the upcoming winter, considering that two mild and windy winters in a row are not common. The upcoming winter carries great risks, which is best proven by the prices in France, where the fourth quarter of this year and the first quarter of next year are trading at around 500 EUR per MWh “, said Grbović.

According to Grbović, it can be stated that in no sector has the crisis so clearly shown structural problems as in the energy sector, but not only in the Balkan countries but also in the countries of Western Europe.

High prices of electricity and gas have led to the suspension of work in a large number of companies.

“One of the examples is the Slovak company Duslo, which is known as the largest producer of AD BLUE liquids in Europe. “Its cessation of work first caused a jump in prices and a shortage of AD BLUE liquids, and then major problems in the transport industry across Europe”, Grbović said.

Bohemia Energy from the Czech Republic is another illustrative example.

The company declared bankruptcy, and was responsible for the supply of electricity and gas to about a million households, ie it covered about a third of the Czech market.

“Due to the bankruptcy, these households had to find a new supplier of electricity and gas at the most unfavorable moment, in October last year. This resulted in three times higher prices of electricity and gas. “Some households and end consumers had to set aside up to EUR 800 per month for electricity and gas”, Grbović emphasized.

Speaking about future events on the energy market, Grbović said that the situation in the rest of the year will largely depend on the war in Ukraine, but also on the weather conditions.

“The entire electricity system in Europe has become very sensitive to slight changes in both consumption and production, so we are increasingly witnessing days in which, due to changes in the weather forecast, there is a change in electricity prices of +/- 30 EUR per MWh”, said Grbovic.

He concluded that at this moment it is ungrateful and very difficult to give an accurate and long-term forecast, but that it is also not realistic to expect that the crisis in the field of energy will pass in the near future, writes Mina News.