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Barometer of Sustainable Energy Transition – how prepared is Montenegro?

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Photo: Đorđije Vulikić

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March 23, 2022

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Published:

March 23, 2022

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Author: Đorđije Vulikić, climate change consultant

A clear vision, the responsibility of key actors, the NECP, sources of financing – each of these segments is equally important for Montenegro’s energy transition.

The term energy transition refers to the process leading to a full transformation of the global energy sector from one predominantly based on fossil fuels, with a markedly negative impact on the environment and human health, into the desired one, which would be based entirely on renewable energy sources, with the least possible adverse impact.

The main drivers of the energy transition are social demands for the protection of health and the environment, prompted primarily by the energy sector’s adverse impact on human health arising from emissions of harmful gases and pollutants, as well as the sector’s long-term climate impact arising from excessive greenhouse gas emissions.

Economic and security reasons, pertaining to most countries’ goal to achieve energy independence, are equally important. Unfortunately, this has been confirmed by Russia’s invasion of Ukraine, which, due to the reliance of EU member states on Russian oil and gas, has led to record energy prices and the consequent volatility of their economies.

It is necessary to identify, as soon as possible, key actors in the energy transition who would take responsibility for managing the process and initiate a public discussion that would engage both experts and the wider public.

The EU, one of the world’s leading economies, is the frontrunner in the transition towards a zero-emission energy sector and climate neutrality, while Montenegro, as a candidate to join the union, seeks to align its actions with that ultimate goal. Even though Montenegro has recognized, in principle, the imperative of the energy transition, numerous constraints are making the process slower than it is supposed to be.

To assess the progress of the energy transition in the region, including Montenegro, the Renewable Energy Policy Consensus 2 – REPCONS 2 project has conducted a survey and analyzed the views of relevant stakeholders, mainly experts in the field, providing a clearer picture of the pace and quality of the energy transition in Montenegro as well as obstacles standing in its way.

The specific purpose of national reporting within the REPCONS 2 project is to interpret the findings of the survey and formulate recommendations for more efficient management of Montenegro’s energy transition process. The national report aims to highlight the segments of the energy transition that are particularly relevant for Montenegro and is complementary to the Barometer of Sustainable Energy Transition report, which focuses on formulating recommendations for the region as a whole.

In order to present the key recommendations to all stakeholders in Montenegro, especially the decision makers, as precisely and clearly as possible, they need to be grouped into several key segments. Each of the following segments is equally important for the energy transition process in Montenegro:

A vision of Montenegro’s energy transition

Managing the energy transition successfully and efficiently requires, first and foremost, a clear vision of the direction in which the energy sector should develop in the period until 2030 and 2050. Without a clear vision of how to make the energy sector climate neutral, it will be difficult to plan and channel the activities and the technical, administrative, and financial resources needed to realize that vision.

Countries in the region have yet to recognize the urgency of energy decarbonization

Montenegro has not yet defined a vision that would contain answers to the challenges of today’s energy sector. The Barometer of Sustainable Energy Transition indicates that despite the general commitment to an energy sector development based on energy transition principles until 2030, countries in the region have yet to recognize the urgency of energy decarbonization.

This in practice means that Montenegro’s institutions acknowledge the challenges of the energy transition, but fail to see them as a priority, and for this reason the country lacks an adequate vision and a plan to manage the transition process. This is why the energy transition is being delayed, which poses a threat to all of society. Any further delays would make it necessary to carry out very complex reforms over a very short period of time, which would in turn make the process uncontrolled, chaotic, and hard to manage.

Averting such a scenario is vital for countries with weak economies, which will be faced with negative social impacts of the energy transition.

Key actors and participants in Montenegro’s energy transition

To manage the energy transition successfully and efficiently, it is necessary to identify its key actors and participants, and clearly define their duties and responsibilities. At the same time, ensuring a transparent and just energy transition requires the process to be fully inclusive.

Apart from the structural problems – the fact that the energy transition will undoubtedly begin without a defined vision and with no ownership of the decarbonization process – it is also evident that the countries covered by the survey are not adequately prepared to manage the complex transition process successfully.

State institutions are not equipped to manage the energy transition

It is particularly important to point out that the survey has found that state institutions are not adequately prepared for managing the transition process. According to those questioned, the institutional actors (governments and parliaments) are not equipped to be the drivers of the energy transition.

Respondents believe that institutions lack a bigger picture of the energy transition as a key element of “green growth”, that the institutional capacities are insufficient for managing complex, long-term transformative processes such as the energy transition, and that the decision-making process within state institutions in planning the energy transition is not transparent. All this prevents countries from reaching a broad consensus required for a successful energy transition.

It is not possible to reach a broad consensus required for a successful energy transition

Those who took part in the survey also believe that Montenegrin state power utility Elektroprivreda Crne Gore (EPCG), one of the key players in the country’s energy sector, is not equipped for a leading role in the energy transition, most of all because it lacks a long-term vision in line with the energy transition principles and because of its slow pace of investment in renewable energy capacities from own sources.

All in all, state institutions and power utilities in the region are identified as the biggest opponents of the reform processes and the main barriers to their implementation.

It is therefore essential to identify, as soon as possible, the key actors in the energy transition who would take responsibility for managing the process and initiate a public discussion that would engage both experts and the wider public.

Montenegro’s energy transition plan

Managing the energy transition successfully and efficiently requires a plan that would define individual priorities, goals, dynamics, and activities, whose implementation would enable the key actors and participants to achieve the objective of developing a climate-neutral energy sector.

Given that Montenegro has committed to developing an integrated National Energy and Climate Plan (NECP) as part of its EU accession process, the document must provide answers to all questions and complexities of the energy transition. The drafting of the NECP began in 2018, but its pace is not satisfactory. It is therefore important to accelerate the preparation and adoption of the NECP in order to enable the implementation of envisaged measures and activities.

The Government of Montenegro needs to adopt the NECP long before 2024 in order to ensure progress in the energy transition process

To achieve the goal, the NECP must not be drafted in the way important strategic documents were prepared in the past, when they were simply rolled over from one period to the next with minor, mainly cosmetic, changes. This time, the NECP must be free of approaches and projects that are not in line with the modern vision of the energy sector and the climate neutrality goal. Any further delays in the preparation and adoption of the NECP would further jeopardize the efficient implementation of the energy transition.

Adopting the NECP as soon as possible, and certainly long before 2024 as the Government of Montenegro currently plans, would be a crucial step that would enable progress in Montenegro’s energy transition.

Barriers to Montenegro’s energy transition

For successful and efficient management of the energy transition, it is necessary to recognize the existence of barriers on that path. Some of the key barriers identified by respondents in the survey need to be highlighted so that decision makers and all stakeholders can look for ways to overcome them.

The three biggest barriers to Montenegro’s energy transition by impact/importance are as follows:

  • Institutional resistance to the change of existing energy and climate policies which are based on a fossil-fuel economy and the status quo in the energy sector;
  • Inaction on the part of state power utility Elektroprivreda Crne Gore, which refuses to assume the role of the energy transition leader and seeks to maintain the status quo and its monopoly;
  • Delays in the preparation and implementation of a restructuring program for the mining sector that would ensure a just energy transition and socio-economic security for Montenegrin citizens.

The responsibility for finding solutions and overcoming the identified barriers lies on the relevant state institutions. It is therefore necessary for the institutions in charge of climate and energy policy to promptly start removing the barriers to a successful energy transition.

Sources of financing for Montenegro’s energy transition

Sources of financing needed to implement the ambitious plan for a speedy energy transition and achieve climate neutrality will have a critical influence on the success of these processes, all the more so given the expected structural shock and negative impacts of the energy transition on society and the economy.

The transition must be fair and it must protect the most vulnerable groups, while at the same time minimizing the expected negative impact on the economy. It is therefore critical to address the issue of financing the energy transition in economies with a low GDP per capita, such as Montenegro and other countries in the region.

International financial institutions and the EU are expected to help develop the necessary grid infrastructure for an energy system with a high share of intermittent renewable sources

Respondents in the survey expect renewables development to be financed mainly with private capital (including large-scale commercial projects and prosumers) and partly with soft loans drawn by governments. It is natural to expect that international financial institutions and EU funds will support the development of the necessary grid infrastructure for an energy system with a high share of intermittent renewable sources.

It should be kept in mind that the potential of hydropower plants in the region to provide flexibility services to national and regional electricity systems can only be exploited by building the necessary infrastructure and through regional coordination. International developmental funds, particularly those mobilized through the EU’s Economic and Investment Plan for the Western Balkans and the IPA III program, are expected to provide the decisive support to fair transition projects and the economic restructuring of coal regions, such as Pljevlja in Montenegro.

The preparation and implementation of energy transition projects should therefore be planned and initiated immediately, since it is certain that mining activities and the number of miners will decline and that the social and economic environment will become increasingly challenging.

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