North Macedonia considering change in renewable energy auction model

Prime Minister Dimitar Kovačevski’s Energy Advisor Viktor Andonov says the jump in electricity prices may prompt the Government of North Macedonia to change the auction model ahead of the next public call for solar power plant developers, planned for this year.

North Macedonia has achieved the biggest progress in the energy transition in the Western Balkans. It is conducting renewable energy auctions, replacing coal with solar power and gas at full speed and signing strategic investment deals for large wind parks and photovoltaic plants.

However, state-owned energy companies in the region are suffering from a lack of liquidity amid the energy crisis, Viktor Andonov warned in an interview with Balkan Green Energy News. The energy advisor of North Macedonia’s prime minister Dimitar Kovačevski estimated they would postpone investments but added that he expects private investors to accelerate the implementation of their projects to benefit from higher electricity prices.

When can the next renewable electricity auctions be expected in North Macedonia? What are the experiences from earlier bidding rounds?

The first procedures for awarding premium tariffs for the construction of photovoltaic plants were conducted in 2019 while the first agreements were signed in 2020 for a total installed capacity of about 55 MW. Many of the power plants are already operational and connected to the network.

I expect that by the end of September they will all be completed and put into operation. In 2021 and 2022 another procedure was conducted, based on which we signed agreements for the construction of photovoltaic plants with a total installed capacity of about 75 MW.

In most cases, the latest awarded premiums came in at just EUR 0.01 per MWh

Having in mind that during the tender procedures the competition was strong, the premium was exceedingly small in the end and in most cases it was EUR 0.01 per MWh. Our plan is to announce another call for awarding premiums for the construction of photovoltaic plants this year. However, at the moment we are considering changing the model, given the high prices of electricity on the market.

I must underline that the experiences were positive. Only in the last tender, although we published it for a total capacity of 80 MW, we had bids for about 200 MW. This shows that the procedures are transparent, clear, and competitive. This is a clear indicator that at the end of the procedure, we will have the best bids.

Additionally, the capacity was divided into several groups and in that way, individuals and smaller companies could participate.

Do you expect the worsening of the energy crisis to result in a reduction and delays in investments in energy?

The Western Balkans were struck by the energy crisis, which started a year ago. Massive funds were drained outside these countries, mostly due to the expensive electricity imports.

I see the reasons for this mostly in the years of not investing in new electricity production, as well as in inefficient electricity generation from old lignite-fired thermal power plants in the region.

Whenever a decision should be made for investments in a capital energy facility, it is postponed under the excuse that it will require a lot of money, budgets will be burdened, public debt will increase. However, if we look into how much we paid in this period to import energy, I am sure that if we had used that money to build serious energy facilities, today they would have significantly eased the issue with electricity supply.

The dependence on fossil fuels and high CO2 taxes are a motive to accelerate the energy transition

The liquidity of the energy sector in the region has been disrupted. I expect investments, mostly from national companies, to be postponed. When it comes to private investors, I do not think that they will postpone their investments, because it is in their interest for their projects to be built faster, so that they can benefit from higher electricity prices.

Yet again, we must be aware that the situation was caused exactly by fossil fuels, high CO2 taxes and high prices of natural gas as well as oil derivatives, and it should be a motive for us to accelerate the energy transition. We should create a shared plan, a regional one; the Open Balkan initiative is a wonderful opportunity.

We should ask European institutions for support to secure funds for the energy transition – and here I speak of grants that are at EU member states’ disposal.

What is the status of the projects for solar parks in the coal mining and thermal power plant complexes of Oslomej and Bitola?

The Government of the Republic of North Macedonia started the energy transition of REK Oslomej in cooperation with the European Bank for Reconstruction and Development. The site of the old mine should be used for the construction of four photovoltaic plants. Two of 10 MW each will belong to state-owned power utility Elektrani na Severna Makedonija – ESM, and the other two, both with a capacity of of 50 MW, will be owned by private investors through public-private partnership. ESM will receive 18.5% of the income from the electricity they sell, calculated by using the price at the HUPX market.

ESM’s first 10 MW power plant is already finished and in a trial phase. We expect a company will be selected by end of the year to build the second one, using the turnkey principle. These two power plants are financed with EBRD’s loans and a grant in the amount of 20% was secured from the Western Balkans Investment Framework (WBIF).

Following the same principle, in cooperation with the EBRD, we are working on technical and environmental impact studies for another 20 MW at the old mines in REK Bitola and I expect that by the end of this year or at the beginning of 2023 we will select the company that will build it using the turnkey principle.

Additionally, this concept has already been recognized by other development banks, such as the German KfW, with which we signed an agreement for a grant for the preparation of technical documents for an additional 160 MW in photovoltaic plants on the site of the old mine in REK Bitola. I expect that this process will be completed by the end of 2023, so that in 2024 we can select the contractors and build and commission the units.

North Macedonia recently declared several large green energy projects to be strategic investments. What is the procedure for them?

The Republic of North Macedonia has implemented several serious reforms in the past few years, especially regarding the energy sector, thus tracing its vision for building a reliable, efficient, environmentally friendly and competitive energy system that will support sustainable economic growth.

The legislation was harmonized with the third package of the European Union’s directives related to the internal market, as well as with EU directives related to energy efficiency.

At the end of 2019, the Energy Development Strategy until 2040 was adopted. It is based on the five dimensions of the Energy Union and was the first of its kind among the Energy Community contracting parties.

North Macedonia was the first contracting party that prepared and submitted its National Energy and Climate Plan (NECP) to the Energy Community Secretariat. The government officially adopted the document on June 1. These activities were clearly acknowledged and noted by the European Commission, as well as by the Energy Community Secretariat, and most important to us, by serious investors from the EU.

North Macedonia was the first Energy Community contracting party that produced the National Energy and Climate Plan

Through the Law on Foreign Investments adopted at the beginning of 2020 and the public call published every year in January and lasting throughout the year, several serious investors applied for a strategic project status, for investments mostly in the production of electricity from renewable sources such as large photovoltaic plants and large wind parks.

The most prominent ones are German wpd’s project for the construction of one of the biggest wind parks in the region, Virovi, with a capacity of 414 MW in the Kriva Palanka area, and French company Akuo Energy’s plan for the construction of one of the biggest photovoltaic plants, Stipion, with a capacity of 400 MW near Shtip.

The procedures pursuant to the Law on Strategic Investments require the preparation of an agreement and law on each strategic investment, to be adopted by the Assembly of the Republic of North Macedonia. I expect that several laws on strategic projects will be submitted to the Assembly and adopted this year.

The projects are compliant with the priorities of the European Commission published on May 18 with REPowerEU, with the purpose of making Europe independent from fossil fuels from Russia by 2030.

After the rulebook on rooftop photovoltaic systems was changed, what other amendments to legislation in the renewable energy sector are planned?

The amendments to the Rulebook on Renewable Energy Sources were signed by the Minister of Economy Kreshnik Bekteshi on June 15.

The allowed installed capacity per household is increasing from 4 kW to 6 kW whereas for the industry the installed capacity went up from 20 kW to 40 kW. Also, households will now be able to sell excess electricity to the universal supplier. So far, this was not allowed.

North Macedonia is drafting a law on the construction of photovoltaic plants on unusable agricultural land and rooftops

We believe that these amendments will significantly increase investments in photovoltaic plants on the roofs of households, as well as within industrial capacities. The potential of this type of power plants is particularly large, having in mind that the number of sunny days in North Macedonia is high compared to other countries. The installation of photovoltaic plants on roofs is a serious potential that should be taken into consideration in all energy plans to reduce the import of electricity and secure the independence of households and the industry from the impact of the changing prices of energy.

Furthermore, we should take the EU’s directions into consideration. Namely, on May 18, the EU communicated its solar strategy that determines the roof potential as a serious factor in securing the electricity needs. The expectations are that rooftop solar power plants can secure about 25% of electricity consumption in the European Union.

We are in the final phase of the preparation of a law on the construction of photovoltaic plants on unusable agricultural land and rooftops. Its purpose is to enable the utilization of unusable agricultural land for the construction of photovoltaic plants without the preparation of a spatial plan and repurposing of the land. It will save a lot of time, having in mind that these two procedures are the most time-consuming ones.

Additionally, we will simplify the procedure for installing photovoltaic power plants on rooftops, taking into consideration that in our country every municipality sets its own rules, adding delays and wasting precious time.