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Why to change how we obtain energy

The purpose of the energy transition in the Western Balkans

Beyond arguments for energy transition that are underpinned by international obligations (Paris Agreement, Energy Community Treaty, etc.), climate change, accession to the EU and similar; there are additional critical reasons for the Balkans to embrace and accelerate this change:

There is not enough energy in the Western Balkans today to support economic development. Even if all the available generation capacity works as designed and gas, electricity, oil and coal imports are entirely secure; the energy system still fails to deliver the required volume of useful energy both now and within the existing planning vision. The volume of energy per person remains less than half that of the OECD average.

Technical failures are happening; and may happen again at a grand scale. The existing thermal power generation capacity in the region is outdated and fragile and there is no repair that may guarantee reliable operation. On December 12, 2021 the simultaneous failure of six large lignite fired power plants exposed the fragility of the regional electricity supply.

Fuel wood is a lifeline for the majority of the population. Whenever the supply of electricity or natural gas is at risk – fuel wood prices increase. It is the fuel of last resort. In 2022, prices increased well- over two times the historical average and much more in densely populated areas.

Weather sensitivity of energy demand diminishes the utilization rate of infrastructure. Spells of cold weather cause significant spikes in fuel wood prices followed by a switch to electricity and an exponential increase in network losses. More capacity is required to cover demand peaks during short periods of time at higher total cost that no one can afford to pay. That is a vicious circle.

Lost quality and density of forests. More than 30 years of degradation without any significant re-forestation effort is unprecedented in the modern history of the region. Never in the past have so many people relied on so diminished a forest resource for so long. Never in the past have forests been exposed to such intensive acid pollution from large lignite fired power plants. And, never in the past, has deforestation been accompanied with acidification to this scale.

Here is simple message for Governments and the energy ministries from Western Balkans:  Get together. Ask the EU for accession into EUETS with a grant of free allocations

Excessive flooding, erosion and land slides are a consequence of deforestation and acidification of soils. The Western Balkans receives the most precipitation in Europe. Huge amount of rain arrives from Mediterranean and fall here. If water conservation in forests is not sufficient, floods become devastative. Critical infrastructure: cities, power plants, lignite mines; are located in karst valleys across the Dinaric mountains. That is where floods are most likely. That is what happened in 2014 at a grand scale and may happen again. And again.

Hydropower is consumed to respond to technical failures or demand spikes and compromised with flooding and erosion.  As a consequence, the most comprehensive set of hydro power plants in Europe is not available to support European energy security. Having been a partner in European energy security decades ago, the Balkans has become irrelevant, transforming itself from an energy asset to a liability.

Poverty becomes fact of life. In these circumstances energy causes life threatening risks, pollution and illness while not providing development opportunities. It is also unaffordable. It costs more but delivers less economic opportunity. This is exactly the opposite of what Nikola Tesla envisaged in his work.

Problem exceeds governance capability. This was described in great detail twenty years ago.  The Energy Community Treaty between the Balkans and the European Union was signed to tackle this problem. At that time, it was difficult to diagnose the problem, but it was easy to solve. Floods and technical failures made the same problem more visible and more difficult. Now, the problem is visible to everybody but difficult and costly to solve – while solution is more urgently needed.

What could be done?

Do nothing and leave the problem to next administration is an option. It has worked well over so many years. However, there is an increasing probability that some sort of disaster will happen. Betting against growing probability of technical failures or war damages is not the best choice. A great deal of human suffering, opportunity cost and economic harm is attached to this option, as well.

Whatever is to be done, it will involve investments. But where will these investments come from? The following table provides context to some of the options:

Nature of fundsStrategic options
True partnership with the EUNegotiating with the EU
GrantsSome grants may be expected from the EU in the context of mutual interestGrants from third parties are only possible if these parties gain some form of strategic advantage against the EU. Negotiation with the EU from that position makes the Western Balkans hostage to the wider relations and intentions between the EU and these third parties
LoansVariety of commercial loans could be arranged based on comprehensive partnership with the EU, participation within the liquid EU energy market and EU grantsSmall Balkan markets are not liquid to underwrite the required loans. Loans become a form of strategic competition between EU financial institutions and third parties all of which are looking to lock in a strategic advantage against other side. The Western Balkans remains a playing field for other interests.

One ton of carbon dioxide emitted from Balkan power plants, produces only half a megawatt hour of electricity. The same ton emitted from an average European power system, produces roughly two  megawatt hours and more than three times economic value. A mechanism that restricts emissions of CO2 in the Balkans and allows further emission within EU makes sense. It also makes sense to grant funds to Balkan countries so they can invest into new and clean power plants. Luckily, such a scheme already exists – the EU Emissions Trading Scheme. The grant of a free allocations from the EUETS for the purpose of investments into decarbonization. Central Europe countries have been using these mechanisms for many years.

The difference is: Central European countries are partnering with the EU. They share the same energy security arrangement and they been collectively asking for this sort of assistance.

Here is simple message for Governments and the energy ministries from Western Balkans:  Get together. Ask the EU for accession into EUETS with a grant of free allocations. Provide those financial instruments to your national energy companies so that they can pursue advanced commercial investments into coal phase out in order to break out from the vicious circle of poverty, suffering and risks described hereby.   

Collectively, the Western Balkans can be a reliable partner in European energy security. Individually, each Balkan country is a challenge to European energy security.   That is why it makes sense to overcome all kind of differences and disputes, to get together and ask for a grant that is worth billions of Euros to improve energy security, reduce harmful emissions and lower the cost of energy in order to change the lives of people in the region – and Europe – for the better.

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