European Commission: Kosovo* continues to rely on lignite, some progress seen on renewables

Kosovo* has some level of preparation in the field of energy, but continues to rely on highly polluting lignite, according to the European Commission’s latest annual report, part of its annual assessment of the implementation of reforms in the Western Balkan partners.

Kosovo* made some progress in the area of energy, including the adoption of the 2018-2020 energy strategy implementation program and further implementation of the third energy package, especially alignment with acquis on energy efficiency, the European Commission said in the report.

In the coming year, Kosovo* should:

• prepare for the decommissioning of the Kosovo A power plant and the environmental upgrade of Kosovo B;
• make the Energy Efficiency Fund fully operational and increase energy efficiency incentives for the private sector and households;
• focus on renewable energy, including by introducing market-based support schemes and addressing investments barriers;
• adopt a plan that includes the gradual adjustment of energy tariffs reflecting expected increases in costs and mitigation measures for vulnerable consumers.

Kosovo* continues to rely nearly exclusively on lignite

Kosovo* continues to rely nearly exclusively on lignite as a source of energy and on two obsolete, highly polluting coal-fired power plants, according to the report. This adds significantly to its heavy air pollution problems.

No significant developments were noted on security of supply in the reporting period, although the reliability of the power transmission system continues to benefit from investment and maintenance.

No progress was made on the operation of the new transmission line to Albania which remains non-functional due to the longstanding energy dispute with Serbia and the lack of a connection agreement between the European Network of Transmission System Operators for Electricity (ENTSO-E) and the Kosovo* transmissions system operator, according to the report.

Distribution losses remain high and investment in and maintenance of the distribution network needs to be improved.

As regards the internal energy market, there was progress in the implementation of the third energy package and the certification of the transmission system operator has been completed.

However, the lack of regional integration and the longstanding dispute between the transmission system operators in Kosovo* and Serbia is limiting the scope for developing competition, the report reads.

Kosova e Re coal power plant may affect public finances, tariffs, environment

As regards the new Kosova e Re coal-based power plant project, the selection of a contractor for works is underway. Following the World Bank’s withdrawal from the partial loan guarantee, financing arrangements for the estimated EUR 1 billion plus project are still to be settled.

It may have a major impact on public finances, tariffs and the environment and this must be carefully assessed. The contractual framework for the construction of the new plant, which involves designating a single buyer of the electricity it produces, could negatively impact the opening of the market.

Environmental measures are urgently required at Kosovo B to reduce the level of gaseous emissions in the air and comply with emissions limit. The Kosovo Energy Corporation (KEK) needs to establish the timing of all works in view of the planned EU assistance for the refurbishment of Kosovo B to bring it into line with the provisions of the large combustion plants Directive on dust and NOx emissions.

Preparations also need to be made for the decommissioning of non-operating units at Kosovo A, including identifying land for the disposal of hazardous waste. The current legal framework is not in line with the large combustion plants and industrial emissions Directives. Kosovo* adopted an emission reduction plan in 2018.

Kosovo* has made some progress in phasing out cross-subsidies between different categories of customers, but tariffs for households do not yet reflect costs. In view of expected upward price pressure from the significant investments required in the electricity sector, Kosovo* needs to develop a program for protecting vulnerable customers in line with Energy Community requirements.

Some progress on renewables, none on biofuels

There was some progress on renewable energy sources. A new 32 MW wind farm and 2 solar projects with a capacity of 6 MW have been put into operation. The revision figures of biomass used for heating by household customers puts Kosovo on track to achieving its 25% target in 2020.

While the legislation is partially aligned with the acquis, the electricity market should be restructured so as to facilitate the integration of renewable energy generation. A market-based scheme for supporting independent producers should be introduced.

There was no progress in meeting the requirements for the use of biofuels in transport. The adoption of an administrative instruction on biofuels aimed at aligning with the relevant EU Directives, has been pending for over three years.