Sustainable energy development in the SEE region

According to a report by the International Renewable Energy Agency (IRENA) the energy sector landscape of SEE consists of heterogeneous national contexts, strongly shaped by the availability of natural resources and the region’s history. Total primary energy supply (TPES) in most SEE countries has remained stable or declined over the past two decades. 

The deep recession of the early 1990s caused a reduction in TPES, as almost all energy intensive industries closed. The poorly maintained energy system was also characterised by high inefficiencies which were however increasingly addressed after 2000. In addition, as a consequence of the financial crisis in 2008 and the implementation of energy efficiency measures, the four EU members – Bulgaria, Croatia, Slovenia and Romania – experienced a considerable decline in TPES. The energy mix of the TPES has not changed significantly over the last decade, with fossil fuel providing the bulk of the energy supply. Oil represents the largest share in TPES (28%), followed by solid fossil fuels (27%; mainly locally supplied lignite), natural gas (20%) and biomass (11%), IRENA’s report states. Mainly due to the varying availability of domestic energy sources at a regional level, however, the energy mix strongly diverges between SEE economies.

A slight increase in the region’s electricity demand has been registered since the early 2000s, which can be explained by the electrification of the industrial sector. This has offset the reduction in demand caused by energy efficiency measures. Energy strategies also predict a stable or slightly increasing energy demand in all the economies of the region. Hydropower is the most deployed technology in terms of installed capacity, with a share of 35%, followed by solid fossil fuels (hard coal and lignite) with 32%, nuclear with 12%, and onshore wind with 8%.

Nuclear power plants, which accounted for 15% of SEE’s total generation in 2016, are operational in Bulgaria, Romania and Slovenia, with the latter operating a plant jointly with Croatia. Bulgaria and Romania are planning to install additional nuclear generation capacity. In the region, renewable energy accounts for 44% of the installed capacity (2018) and around 29% of the generation (2017). The shares of total generation for variable renewable energy (VRE) sources, however, are still very low, with 1,7% for solar photovoltaic (PV) and 4,9% for wind, concentrated in the EU area. VRE’s low share has slowed the adoption of system flexibility measures.

IRENA’s experts think that the coming years could prove to be pivotal for the energy sector in SEE. The region possesses considerable renewable energy potential. With renewable energy reaching cost-competitiveness with conventional sources, the business case for renewable energy investment is experiencing increasing traction.

Bosnia & Herzegovina

The perceptions of Bosnia and Herzegovina’s energy leaders on energy issues suggest a strong attention to economic growth, regional integration as well as the rebalancing of the energy mix as issues of crucial relevance, states a report by the World Energy Council. The action priority section is led by energy efficiency and trade efforts to support economic growth.

Recent years have seen higher GDP growth and the International Monetary Fund (IMF) expects further growth in coming years. At the same time, the country is challenged by a fiscal deficit and inflation. There has been a strong focus on developing building infrastructure as well as increasing the quality of funds for small and medium-sized enterprises in order to enhance productivity and create jobs.

It is estimated that 60% of BiH’s electricity mix relies on coal-fired generation. While coal generation helps to ensure affordability of power supply, it also exacerbates the urgency of tackling high pollution levels.

Market design is perceived with moderate uncertainty and impact, reflecting the attention to the renewables target for the 2020-2030 period, currently subject to negotiations with the Energy Union. This approach feeds into BiH’s efforts to align with the EU energy model requiring the adaptation of current laws to enable renewable sector development. Mandated changes include the incorporation of auctions to award large projects and feed-in tariffs to support smaller ones.

Bulgaria

To diversify the country’s natural gas sources and routes, the government has taken measures, which include building interconnections with neighbouring countries and seeking alternative sources of nuclear fuel. It is expected that real diversification and security of gas supply will be ensured by the Greece-Bulgaria gas pipeline and the Alexandroupolis LNG terminal. In addition, the modernization of the existing national gas transmission network, the expansion of the Chiren underground gas storage facility and the liberalisation of the gas market will contribute significantly to the implementation of the Balkan gas distribution centre on Bulgarian territory.

Nuclear energy plays an important role in ensuring national and regional energy security while providing affordable energy and that is why it is a key element in the country’s transition to a low carbon economy. As part of Bulgaria’s effort to expand the use of nuclear energy, the government is planning to build a new nuclear power plant at Belene.
The country is also actively working to enhance energy cooperation within the framework of international and bilateral initiatives and regional projects in order to build the necessary infrastructure to guarantee energy security and market integration.

Croatia

Although Croatia has great renewables potential, investments have been stalled for some time, concludes the World Energy Issues Monitor report. An increase of the renewables share is expected thanks to revised investment plans, but the risks associated with projects have not been addressed. Similar to other EU countries, Croatia is working to design business models for renewable sources better suited to its market. These models will need to be incorporated into common energy-climate EU policy and the new Green Deal is expected to accelerate this process.

As the Croatian electricity system is connected to both EU and non-EU power networks, where different market rules apply, finding regulations that are both attractive and appropriate is a challenging task. It is expected that the EU and Croatia’s energy market activities will be aligned in the future.

In order to enhance energy efficiency, the state has taken steps to retrofit buildings. The results so far have been good, however, more work is still needed to achieve the goal of retrofitting 3% of buildings annually, which is the EU and Croatian target.

Romania

When comparing 2019 and 2020 results, the World Energy Council finds that the concerns of Romania’s energy leaders regarding energy prices follow increased uncertainty around supranational issues such as EU cohesion and climate framework. Following an emergency ordinance issued in December 2018 imposing a price cap on natural gas sales from domestic production to eligible suppliers and final consumers, commodity prices are perceived as highly uncertain. A 2% turnover tax was also imposed on all licence holders by the law. Uncertainty revolves around the risk of delayed offshore gas projects due to less favourable business conditions. The consequent decline in production could lead to increased import dependence, with Russia being the sole supplier. There are ongoing discussions to amend the law and reduce price risks.

Climate framework is also perceived as an issue of higher uncertainty. In order to comply with the EU long-term decarbonisation goals and the Paris Agreement, Romania must reduce its greenhouse gas emissions until 2050. Currently, the country’s biggest challenge is the transport sector, which is the largest GHG emitter. As the new government and the opposition are struggling to agree on a strategy to tackle transport emissions, there is uncertainty around the possibility of progress on this issue.

Achieving efficiency targets requires stabilising the country’s regulatory framework and enforcing compliance towards energy performance standards. Recent initiatives in the field include the National Program for thermal rehabilitation of residential buildings and energy efficiency measures that apply to industrial companies and public entities.

Serbia

Over the last year Serbia’s focus in the field of energy has shifted from digitalisation and decarbonisation to market design and related geopolitical issues including Russia, China and Middle East dynamics. Action priorities remain consistent with 2019 results, with strong attention to energy technologies. Interestingly, according to the World Energy Issues Monitor report, regional integration is perceived with much less uncertainty, moving from critical uncertainty to action priority.

Serbia retains close ties with Russia, which is the country’s sole provider of natural gas via Ukraine. Ensuring gas supply to an ever-growing number of consumers in Serbia is currently considered a challenge, because of uncertainties about the extension of the Russia-Ukraine agreement on gas transport to Europe and the fate of the Turkish Stream gas pipeline.

Official data shows that electricity produced from domestic lignite accounts for about 70% of overall electricity production. This is being tackled both by EU environmental protection standards and by new proposals of the law on climate change and of the Strategy and Action Plan on the decarbonisation of the Serbian economy.
Serbia has adopted a legal framework to encourage the use of renewables and highly efficient cogeneration by subsidising the price of electricity, attracting considerable private investments. It has also created a fund to subsidise energy efficiency measures.

Slovenia

In Slovenia, digital solutions are being supported to allow for renewables integration and efficiency improvement targets. Among numerous advanced smart grids, a pilot smart grid project was started in October 2018 and will run until March 2021 aiming to prevent power outages, enhance grid performance and improve grid management.

The draft of the country’s Energy Concept from March 2018 sets goals for greater energy efficiency, including a gradual reduction of energy consumption, the development and commercialisation of renewable technologies and the growth of energy storage. The strategy has been redefined as Slovenia’s Climate & Clean Energy programme.

Turkey

Turkey’s priorities for 2020 are in line with the global trend toward renewable energies and energy efficiency. Critical uncertainties are Russia, EU cohesion and Middle East dynamics. The country’s 2018 National Energy Efficiency Action Plan outlined a road for efficiency improvements in industry, construction and other sectors. In late 2019, the Ministry of Energy announced public and private investment commitments of USD 10 billion in energy efficiency over the next 10 years. These are expected to generate USD 30 billion savings until 2033.

Renewable energies’ positive outlook is based on the achievement of 46% electricity generated from renewable resources during the first 10 months of 2019, reaching the country’s objective of producing two-thirds of electricity from local and renewable resources. The Ministry of Energy has set more ambitious targets for the years to come and private sector engagement is seen as a key enabler of this change.