BEF 2023: Infrastructure, technology, and financing for carbon neutrality by 2050: Chances and challenges for the Western Balkan region

Infrastructure, availability of technology, and financing are the key preconditions for transforming energy systems in the region into modern, low-carbon systems. Up to now, these preconditions have been met only partially. The speed of the energy transition will largely depend on the efficiency of the construction of the infrastructure, commercialization of innovative technologies, and providing financial support for the process of decarbonization.

Elektromreža Srbije, EMS, a state-owned company in charge of operating Serbia’s national transmission system, has ambitious plans for transmission network development, Aleksandar Kragović, director of the Directorate for Investments in EMS, said on the Belgrade energy forum 2023. “EMS plans to invest around EUR 1 billion in the next 10 years, from which around half of the amount should be invested from our funds, and the rest from loans”, Kragović said.

The most important projects in the EMS’s plans, which will allow easier integration of renewable energy sources (RES) and improve transit of electricity and functioning of the electricity market, include Trans-Balkan Electricity Corridor (already under construction), North Corridor and Pannonian corridor. These projects will also connect Serbia’s transmission system with its neighbors from the north, west, and east and improve the connections between the areas where electricity is produced and those where there is a large consumption of energy.

“By 2035, we expect to have seven more interconnections on 400 kV. This will strengthen the transmission system, increase the flexibility and reliability of electricity supply and the functioning of the electricity market”, Kragović said. The transmission system should be ready for the energy transition when we speak about the network capacity, Kragović said, adding that further work would probably be required regarding the energy system flexibility by providing balancing regulation.

Renewable energy is the answer to global challenges

Mona Ben Salem, General Secretary & Dep. COO Central Europe (Assets) at Akuo Energy, believes there is no doubt that renewable energy is the answer to global challenges such as the climate crisis and the volatility of energy prices.

She insisted that it’s possible to harmonize the development of the RES sector with the specificities of the region, such as the great importance of agriculture, as it had been done in projects where agricultural production is combined with the use of solar energy (Agrivoltaics). “I believe that this concept makes sense in the Western Balkans and that we will see more such projects in the region,” she said.

The electrification of the industry also plays an important role in pursuing carbon neutrality by 2050. Petar Šainović, Managing Director at Siemens Energy Belgrade, noted that with existing technologies in commercial use, around 50 percent of the consumption of fossil fuels in the industry could be switched to electricity. The possibility for electrification for other processes (requiring temperatures above a certain level) is still in research and these solutions are not yet commercially available.

With existing technologies in commercial use, around 50 percent of the consumption of fossil fuels in the industry could be switched to electricity

“We recognize there is a huge market potential for electrification and we expect that this market will increase rapidly. We have the ambition to develop a competence center for electrification of industry in Belgrade, as we already have more than 50 engineers working for the European, African, and Middle East markets exactly for these projects”, Šainović said.

Energy storage: Sodium-ion batteries

Increasing the share of RES in energy production and the electrification of traffic requires adequate solutions for energy storage. Recently, there is more interest in Sodium-ion batteries, which are based on a material that is available and cheaper than lithium, but they are not as competitive in terms of performance.

“If you develop Lithium-based storage systems today, with their efficiency, cost and performance level, you can calculate a very positive return on investment”, Wasim Sarwar Dilov, Rimac Energy’s director. Rimac Energy, new brand of Rimac Technology, at the Belgrade Energy Forum 2023 presented its innovative solutions for stationary energy storage systems which are getting ready for the market.

Sodium-ion systems are going to be substantially cheaper but performance will remain a step behind

“Today Sodium-ion systems are more expensive than Lithium Iron Phosphates and their performance is worse. We anticipate that within next the three to five years Sodium-ion systems are going to be substantially cheaper than Lithium Iron Phosphate systems. The performance will remain a step behind, however, it will be an option for those wanting a lower cost system and who perhaps afford some extra space (since they come with a lower energy density than lithium batteries)”, Sarwar Dilov said.

However, more widespread use of this type of technology requires the development of the supply chain and using the economies of scale, required for reduction of prices.

“Europe is focused on the development of a high performance battery chemistries, which are more applicable in the automotive sector, while China is focused not only on the technology development for sodium-ion cells but also on supporting the supply chain. Even if we are going to have a European sodium-ion cell producer in the near future, a broader discussion is needed on the supply chain that needs to be built,” Sarwar Dilov said.

Investing in carbon neutrality

Pavle Milekić, Principal Banker, Energy EMEA team, at the EBRD, said that this financial institution typically invests around EUR 1.3 billion a year in the Western Balkans (of which around 600 million to Serbia alone), across all technologies and offers various financial instruments.

Among other activities, EBRD supports wind farm projects in the region and assists governments in developing a regulatory framework for renewable energy auctions. EBRD also looks to support early pre-feasibility analysis for topics that would take off years down the road. This includes helping to finance studies for hydrogen projects aimed at assessing the demand, supply, and regulatory analysis and potential markets across the Western Balkans economies. “If someone has a hydrogen project, we would be quite keen to finance it once it achieves ready-to-build status”, Milekić said.

The bank is also looking at the potential for battery integration in these markets, developing electric vehicle charging infrastructure, modernization of the distribution network (smart grid), as well as other innovative technologies. “We still offer conventional financing, but we do look forward to engaging with developers and authorities to help us accelerate the green transition and also be more innovative in terms of financial structures,” he said.

Natural gas also has its plays in contributing to green transition, especially given that under the EU taxonomy, gas-fired plants are recognized as a transitional energy source when they are used to replace oil and coal fuels. Vugar Veysalov, Head of External Affairs & SEI, Trans Adriatic Pipeline AG, said that TAP, a transport system operator of the pipeline transporting natural gas from Azerbaijan to Europe, takes the energy transition seriously and is exploring the ways to support the energy transition. For this purpose, they also established an energy transition task force.

TAP have the potential to transport natural gas in blend with hydrogen

“Initial studies indicated that we have the potential to transport natural gas in blend with hydrogen and that’s the plan to move forward in the future. We are also looking into the electrification of our compressive stations with high voltage electricity. TAP is an ideal partner for energy transition, as we are providing a “highway” for all the molecules to travel using the pipeline, hence we explore all these possibilities”, Veysalov said.