Electricity

Analysis of EU’s Western Balkans decarbonization policy: decarbonization to remain disorderly if nothing changes

CHAOTIC fAKE DECARBONIZATION OF POWER SECTORS WESTERN BALKANS reset miljevic kusljugic

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November 24, 2023

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Published:

November 24, 2023

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Energy experts in the Western Balkans are united in their opinion that the European Union’s policies regarding the energy transition and meeting decarbonization targets until 2030 and 2050, adopted within the Energy Community, would not yield the expected results or secure a sustainable energy transition. Quite the opposite. They believe that the trend of disorderly decarbonization, where the countries merely provide lip service supporting decarbonization, will continue if the EU doesn’t adjust its policies. It is the key conclusion of the policy paper called Chaotic and fake decarbonization of power sectors in the Western Balkans. The research is based on a survey of more than 100 experts from Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia and Serbia.

The survey’s aim was to evaluate expert views of the effectiveness of the EU’s energy and climate policies in the Western Balkans and identify the challenges and bottlenecks in the decarbonization of the electricity sector.

The research was coordinated by RESET – Center for Sustainable Energy Transition from Sarajevo, BiH, within the REPower Western Balkans project. It was supported and funded by the European Climate Foundation.

The policy paper was authored by Professor Mirza Kušljugić from the Faculty of Electrical Engineering at the University of Tuzla – chairman of RESET’s managing board, Damir Miljević, an energy transition consultant and member of RESET, and Professor Nikola Rajaković from the Faculty of Electrical Engineering at the University of Belgrade, also the president of the Association of Energy Sector Specialists and Power Engineers of Serbia.

A new deal is a precondition for change

The energy experts don’t believe reaching climate neutrality in Europe by 2050 is possible without conducting the green transition everywhere in the continent, including in the Western Balkans. Given that the region is the least developed in Europe, it is necessary that the EU provides technical and financial aid for the decarbonization of the electricity sector.

The experts issued recommendations to modify and improve the EU’s energy and climate policy for the Western Balkans. They also said change is conditioned on dialogue.

“The main recommendation is a proposal to initiate a forward-looking dialogue between the EU’s representatives and main local stakeholders (governments, the expert community, and the representatives of the coal regions, local communities, and nongovernmental organizations) to define a comprehensive and feasible long-term strategy and an energy transition plan for the electricity sector in the Western Balkans power sectors within a wide scope of the process of stabilization and accession to the EU. Experts are proposing a name for such a program – REPowerWB (REPower Western Balkans),” Mirza Kušljugić told Balkan Green Energy News.

Five reasons why things are not going as they should

CHAOTIC fAKE DECARBONIZATION OF POWER SECTORS WESTERN BALKANS reset miljevic kusljugic rajakovic

The experts have revealed five reasons why things are not going according to plan: the Energy Community Treaty, carbon border adjustment mechanism (CBAM), energy policies of Western Balkan governments, EU policy, and the lack of financial aid.

1. The Energy Community Treaty isn’t suitable for the complexity of the energy transition 

According to the experts, the Energy Community Treaty was “the brightest moment in the recent history of the region’s energy sector,” but it isn’t suitable for the complexity of the energy transition.

The non-transparent, non-democratic, and non-inclusive mechanism established by the treaty doesn’t enable wide public support for the energy transition process in the Western Balkans, a necessary prerequisite for its sustainability and acceleration, the policy paper adds.

One example is that concentrating decision-making powers within the Ministerial Council, established by the treaty,  never meant to strip national parliaments and governments of their constitutional powers. However, in practice, the body made many decisions even before any consultation within the contracting parties.

This way the aspects of discrimination and a non-democratic decision-making practice concerning the citizens of the member states are multiplied as national parliaments are excluded, the experts said.

“This aspect becomes especially important when it is expected that the citizens and businesses of the EnC member states bear a major part of the burden of the accelerated energy transition,” stressed Damir Miljević, one of the authors of the analysis.

2. The introduction of CBAM won’t yield expected results

Decision makers in the EU are convinced that the application of the CBAM system will accelerate the decarbonization of the region’s power sector, according to the authors of the analysis. But they disagree and say it doesn’t stimulate the introduction of a CO2 pricing mechanism.

The main reason is that the countries in the region can still directly export hydropower to the EU, avoiding CBAM, and to continue covering demand from fossil-based generation locally.

Consequently, this likely pattern of the electricity trade with the EU in some countries (i.e. BiH) might increase the dependence of the local consumption on coal-based electricity production, thus slowing down the energy transition in the region, the analysis reads.

The experts criticize the proposal from the EU and the Energy Community Secretariat for the governments in the region to introduce carbon pricing mechanisms to comply with the EU ETS by 2030 without the possibility of free allocation of emission certificates over a longer period, like in the EU, and without financial support to mitigate the transition’s social impact.

“In the current situation, when almost all public utilities in the Western Balkans operate with a very low profit margin or financial losses, the burden of payment for the CO2 emissions would be transferred to final consumers through increased electricity prices, a scenario that the policymakers wouldn’t back,” Mirza Kušljugić said.

3. The energy policies of the governments in the region are wrong

The governments in the region have a wrong energy policy as they believe public power utilities will be the main pillars of the energy transition and lead the renewables sector development.

The governments focused only on state-owned power companies while forgetting citizens, domestic firms and investors

Governments in the region primarily base their energy policy on the position of the said companies in the decarbonized electricity market of the future while neglecting other aspects and opportunities for a sustainable energy transition. According to the analysis, it is the main reason that the electricity sector’s liberalization and decarbonization are slow, which is evident from the resistance in public power utilities to changes, as their management lacks the vision and competencies to drive the energy transition.

Many private investors are developing renewable energy projects but it is pretty uncertain how they will be implemented, while the governments underestimate the value of local participants – citizens, local communities, and businesses, and of citizen energy.

“The consequence of this chaotic energy transition process, mainly caused by the governments’ inertia and resistance to implement reforms, is that decarbonization is primarily market-driven, with outstanding pressure from the private developers to capture the available capacity of the transmission and distribution grids, which threatens to undermine the development of citizen energy and discourage serious investors from renewables, as well as to cause strong public opposition to the transition,” Damir Miljević stressed.

4. EU energy policy

The EU’s energy policy towards the region is also wrong, the experts said. While domestically it provides extensive technical and financial assistance to its coal regions for the energy transition, it demands the same in the Western Balkans even though the fundamental preconditions for the process have not been created.

The coal regions in the Western Balkans are not equally and adequately represented in planning the just transition programs. They are mainly treated as objects and not the subjects of the just transition.

It is therefore no surprise that local communities in coal-dependent regions are currently the main opponents of the energy transition, the analysis reads.

5. EU financial support

Coal regions need support because, the experts say, sustainable decarbonization of the electricity sector is impossible without access to public funding under favorable conditions for citizen energy, energy poverty mitigation, and socio-economic restructuring of coal-dependent regions.

“It will not be possible to implement a sustainable energy transition in the Western Balkans – economically the poorest European region, without substantial financial support from the EU and other developed countries, to which they committed within the Paris Climate Agreement,” Mirza Kušljugić stressed.

A sustainable energy transition is not possible without substantial financial support from the EU and other developed countries

He acknowledged that the EU has allocated EUR 9 billion in its Economic and Investment Plan for the Western Balkans to support the recovery economies of the region in the long term and their green and digital transformation, to foster regional integration and economic convergence with the EU. But Kušljugić pointed out that the details of the allocation of green transition funds weren’t provided and claimed the criteria for selecting projects are questionable and not transparent.

Due to ambiguity, a substantial portion of the grant funds was allocated to finance fossil fuel infrastructure, he stressed. In addition, renewable energy support funds were mainly transferred to the public utilities, the professor asserted.

How to find a way out

CHAOTIC fAKE DECARBONIZATION OF POWER SECTORS WESTERN BALKANS reset

The authors said that to overcome the shortcomings of the EU’s approach to the decarbonization of the power sector in the Western Balkans and especially to debunk the myths about renewables and prompt a sustainable, just, democratic, and locally driven energy transition, EU institutions should:

  1. Regularly evaluate the work and the results of the Energy Community based on reviews performed by independent evaluators;
  2. Initiate changes in the Energy Community Treaty to explicitly include national parliaments in the decision-making procedure;
  3. Facilitate the inclusion of non-governmental organizations and expert communities (professional organizations and think tanks) in policy-making, implementation, monitoring, and evaluation of energy transition policies;
  4. Plan a larger and long-term technical and financial assistance program for decentralizing the energy transition;
  5. Give dedicated support to improving professional capacities in the region to increase the adoption of new technologies and business models;
  6. Initiate the preparation of a plan for integrating the Western Balkans in the EU ETS and stop promoting the introduction of the regional ETS system.
  7. Provide long-term technical and financial assistance to energy poverty mitigation programs that will result in sustainable solutions instead of applying palliative short-term solutions;
  8. Establish a dedicated EU fund for co-financing technical assistance and socio-economic restructuring of the coal regions in transition, similar to the Just Transition Fund in the EU.
* This designation is without prejudice to positions on status and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.
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