SEE, Balkans: Countries of Western Balkans will become net importers of electricity by 2018-2023 says Pippa Gallop CEE Bankwatch coordinator

23. March 2015. / SEE Energy News

If no new capacity is built in the Western Balkans except that which is already under construction or near construction, and nothing is decommissioned except that which is already announced, then the region will become a net importer of electricity starting somewhere between 2018-2023, depending on demand levels. In the medium demand scenario, by 2020 the region will need to start importing electricity and by 2024 would import around 15%, says Pippa Gallop, Research Co ordinator from CEE Bankwatch Network in an interview for Serbia Energy magazine.

Ambitious of Balkan gov to work on new coal TPPs are projecting electricity exports, what are the risks and how realistic are the plans? Are the TSO capacities enough for all export oriented electricity?

Across the Western Balkans as a whole, by 2024, if all the planned electricity generation projects are implemented and demand growth is low, the region will have a 56% electricity surplus, led by Bosnia and Herzegovina and Serbia. The other countries have a much lower potential contribution to the regional surplus, but compared to their domestic demand, their export potential is substantial.

Since many other countries in the vicinity are projected to have surpluses, such as Romania, Bulgaria, the rest of the EU, and Ukraine, any electricity exported from the Western Balkans will have to be competitively priced if it is to find a market. This brings with it the danger that some of the plants will be uneconomic to run and will end up as so-called ‘stranded assets’.

For many decision-makers used to maximising supply on the national level rather than operating in a pan-European electricity market, the idea that plants could just sit there being an expensive liability may seem unlikely. But that is exactly what is happening right now in several European countries, including Italy. The country has a large generation capacity surplus with much of its power station fleet lying idle. This led Germany’s E.On to leave Italy earlier this year and sell its thermal power assets. ENEL has also announced it is to close around 13 GW of capacity in Italy. This does not mean that Italy will not import electricity, but rather that imports only when it is cheaper than generating its own.

Can the Balkans generate competitive enough electricity to export? When it comes to coal it seems questionable. Even the new-build lignite plant Sostanj 6 in Slovenia – the only coal plant to be completed anywhere near the region in recent years – has turned out to be an economic liability, and those existing and planned in the Western Balkans are generally much less efficient.

The question of whether the planned exports are realistic is much harder to answer. If no new capacity is built in the Western Balkans except that which is already under construction or near construction, and nothing is decommissioned except that which is already announced, then the region will become a net importer of electricity starting somewhere between 2018-2023, depending on demand levels. In the medium demand scenario, by 2020 the region will need to start importing electricity and by 2024 would import around 15%.

The reality is likely to be somewhere in between these two scenarios; some new projects will move ahead and others not. It’s very difficult to judge which will and won’t – there’s a lot of contradictory information about. Many of the projects seem stuck, but it would be unwise to ignore them, especially those which have strong political backing.

Demand levels will also play a crucial role in whether there are surpluses available for export or not. Across the region the difference between low and high demand in 2024 is more than 18 000 GWh – more than Bosnia and Herzegovina’s predicted demand in any scenario. A lot may be decided by the general economic situation and whether the region mobilises to reduce energy losses in transmission and distribution. Implementing other energy efficiency measures is also crucial: One example would be not using electric heaters for space heating but rather heat pumps or efficient biomass boilers in cases where sustainable locally-sourced biomass is available. Another way to reduce the need for dedicated generation capacity in each country is to increase regional co-operation to cover peak demand.

Whether the generation construction plans are unrealistic or undesirable or both, the implications are similar: Governments in the Western Balkans need to trim down their plans to a level that is affordable and environmentally sustainable. Instead of “We need to generate as much electricity as possible” the goal should be “We need to bring down demand to an efficient level” and new generation capacity tailored to this goal. The policy of keeping all generation projects on the table is leading nowhere and it’s time to be decisive about which ones stay and which ones go.

Montenegro export ambitious and its Italian partnership, right or wrong path?

Montenegro’s export ambitions to export electricity to Italy are part of a wider series of deals signed by Balkan governments with the Italian government and Italian companies.There is no official list of generation projects for export, but in Montenegro the controversial Moraca and Komarnica hydropower plants are likely candidates, along with the equally controversial planned second unit at the Pljevlja lignite power plant.

In Serbia, the government in 2009 signed a series of agreements with the Italian government and Seci Energia S.p.A. agreeing to jointly develop hydropower plants on the Ibar river in Serbia and Drina river on the Serbia-Bosnia and Herzegovina border. Ten hydroelectric plants are planned on the River Ibar, along with one on the River Sava at Kupinovo, 500 MW of wind power and an unspecified amount of small hydro and other renewables in unspecified locations. On the Middle Drina, three plants with about 321-265 MW installed capacity are planned..

In Bosnia and Herzegovina there is considerable confusion as to which plants might be mainly aimed at export to Italy as the Middle Drina plants were most often mentioned but a much longer list purporting to show plants aimed for exports was leaked to the media and names the highly controversial Gornji horizonti (Upper Horizons) development, Ulog on the River Neretva and nine small hydropower plants.]

When the deals were signed, the series of export projects were sold to the public as a win-win. Italy would get electricity to fulfil its renewables targets and the Balkan states would get some much needed income.

Yet serious questions remain, both on the overall export concept and on specific projects, and now, several years after the deals, they make less sense than ever.

The Italian side committed to buy the electricity from Ibar and Drina hydropower plants for EUR 155 per MWh, one of the highest tariffs in Europe, according to the Serbian Ministry of Infrastructure and Energy. It’s not clear why Italy has agreed to pay so much. It’s especially puzzling now that Italy has significant overcapacity in the power sector. It is doing better than expected with renewable energy, having exceeded its interim EU renewable energy target and already having around 30 percent share of renewables in electricity production (compared to its 26 percent target for 2020).

As for the impacts on Montenegro, the most obvious are the environmental impacts, asssuming that the export projects in question are the Moraca, Komarnica and Pljevlja II. Damming the Moraca would have serious impacts on the river itself but also on Lake Skadar, an enormously important bird area protected under the Ramsar Convention. The Komarnica too, while less well-known, is nominated as an Emerald Network site and has been proposed for inclusion in the Durmitor National Park. As for Pljevlja, the town has suffered enough from pollution already, and no matter if a new unit is less polluting than the old one, pollution is still deadly.

However there are serious strategic questions as well. The EU and any country joining has to count on decarbonising its energy sector completely by 2050. Although this implies better interconnectedness between countries in order to be able to easily transport electricity where it is needed, it is problematic when all the supply obligations are on one side. It’s quite unwise for Montenegro or any other country to sign away its rights to use some of its renewable potential without properly analysing how much renewable energy potential it will need to use in the future to meet domestic needs. In signing deals now, the countries could be leaving themselves short for the future Pippa Gallop, Research Co ordinator from CEE Bankwatch Network in an interview for Serbia Energy magazine.

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