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Deepening energy crisis will spur renewables development

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Damir Miljević, Miroslav Vujnović nad Nikola Rajaković (photo: BGEN)

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March 29, 2022

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Published:

March 29, 2022

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Unprepared as they are for the green energy transition, Bosnia and Herzegovina, Montenegro, and Serbia will find it even more difficult to adapt to the ongoing energy crisis now that it has been deepened by the war in Ukraine. However, the latest turbulence in the energy sector will further facilitate the development of renewable sources, as well as energy efficiency, prosumers, and energy communities, according to Damir Miljević, Nikola Rajaković, and Miroslav Vujnović, authors of the Barometer of Sustainable Energy Transition report, titled Perfect Storm – an uncontrolled decarbonization of the Western Balkans’ power sector.

The Barometer of Sustainable Energy Transition provides an overview of the situation in BiH, Serbia, and Montenegro based on a survey of representatives of governments, state power utilities, private companies, the academic community, and non-governmental organizations. The survey was conducted during 2021 by think-tanks NERDA, ASOR, and CLEAR as part of REPCONS 2.0, an extension of the REPCONS project.

Energy transition will be similar to post-communist privatization

Damir Miljević, an energy transition consultant and member of the Regional center for sustainable energy transition (RESET), says the assessment that the three countries are not prepared for the energy transition is based on the lack of a clear vision in state institutions, especially in BiH, inadequate institutional capacities, and non-transparent management of the process.

On top of that, according to him, the three countries have different views on who should be the key actors of the energy transition. In Serbia, it is believed that the government will drive the transition process, while the prevailing opinion in Montenegro is that the key actor will be the state power utility, and in BiH, investors.

Unless the approach is fundamentally changed, the energy transition in these countries will be relatively uncontrolled and greatly influenced by short-term policies, market forces, and particular economic interest, he warns. It will be very similar to the post-communist privatization of socially-owned and state assets, with the same adverse impact on people and companies, according to him. At best, the cost of the transition will be far greater than it would be if the process were to be managed in a sustainable way, says Miljević.

Rajaković: long-term energy independence can only be achieved by relying on domestic renewable resources, such as hydropower, solar, and wind

Professor Nikola Rajaković of the Faculty of Electrical Engineering at Belgrade University says that countries in the region have not yet recognized the urgency of the energy sector decarbonization and that the process is still perceived by some groups as an imposed obligation rather than a development opportunity.

For this reason, he says, experts must engage in dialogue in order to identify a positive approach to the transition, since the only way to achieve optimal long-term energy independence and security is by relying on domestic renewable resources, such as hydropower, solar, and wind. Tapping on these resources, along with technological advancements, will also enable the storing of energy and the electrification of transportation, heating, and industry, according to Rajaković.

Such a positive approach to the energy transition, he says, will create opportunities for domestic industry and the IT sector as well as for engineering firms and contractors.

Determination to carry out the transition and promote its advantages is the primary task in the energy sector today, according to him.

Vujnović: respondents mainly recommend creating common markets in the region and establishing an emissions trading system

When it comes to the current situation in Serbia’s power sector, Miroslav Vujnović, a financial consultant from Serbia, says respondents in the survey believe that power utilities lack a vision of sustainable development and operational plans. Also, their financial performance is unsatisfactory, making them incapable of investing independently.

On the future of the country’s power sector, respondents agree only on the necessity to decarbonize, while other aspects are not mentioned, such as digitalization, demonopolization, democratization, and forms of ownership.

To improve regional cooperation, respondents mainly recommend creating common markets that would be closely linked with the EU as well as establishing an emissions trading system in the region, according to Vujnović.

The pace of coal phaseout, according to the survey, will depend on an emissions trading system, the energy market, political will, and external pressure.

Solutions to tackle the deepening energy crisis: green energy development, energy efficiency, energy savings…

As the energy crisis deepens due to the war in Ukraine, says Damir Miljević, self-sufficiency in energy supply and energy independence and security are becoming critical. In the short term, these factors will define energy policies, but they will also have long-term effects on the pace, direction, and priorities of the energy transition.

In this context, he says, it is to be expected that countries will give up on phasing out coal in the short term, if they have even planned such a move in the medium term. However, there will be some serious problems concerning the technical and operational capacities of the elderly thermal power plants and the unimpeded supply of coal of adequate quality given the current shape of the mines in Serbia and BiH. All this, in turn, will affect the security of energy supply, he adds.

Natural gas as a transitional fuel is now in question

Amid the latest developments, the use of natural gas as a transitional fuel has been brought into question, both with regard to prices and unimpeded long-term supply, especially in Serbia and Montenegro, whose transition plans rely significantly on gas.

The upside, according to him, is that investments in renewable energy will be accelerated and increased in all countries. Also, efforts will be stepped up to democratize and decentralize the energy sector through investment in prosumers and energy communities, while greater attention will have to be paid to energy efficiency.

Miljević believes that the latest developments and the energy crisis should not be seen only as a threat but also as a development opportunity for countries in the region.

Rajaković: the finish line of our energy decarbonization process is abandoning fossil fuels – coal, oil, and gas

The war in Ukraine, according to Nikola Rajaković, basically promotes renewable energy sources because it underscores the uncertainty of relying on imported oil and gas.

The Ukraine crisis, he says, provides an opportunity for opponents of the energy transition to step up the promotion of domestic lignite as an indispensable resource. At the same time, according to him, the other side is not mentioning the fact that there is still not enough renewable energy capacity to replace fossil fuels and that the technologies needed for energy systems with a high share of renewables are still being developed. Rajaković also noted that these technologies will be developed successfully.

“What emerges as a long-term goal is almost unquestionable: the finish line of our energy decarbonization process is abandoning fossil fuels – coal, oil, and gas – along with energy independence and energy security,” he says. “The Ukraine crisis has created a paradox in the energy sector: the forecast for 2040 is more certain than the forecast for next winter!”

Vujnović: it is necessary to draw up new energy policies

Miroslav Vujnović believes that changes that have taken place over the past two years have created the need to develop new energy policies, while the energy transition has taken on new meanings, with its substance and timelines changing.

On the one hand, the COVID-19 pandemic has disrupted the global movement of goods, and on the other, the war in Ukraine has made the energy crisis a global one. These two divergent developments have produced an urgent need to start relying more on domestic energy sources.

Vujnović: energy savings must be the first step we take

“Given that the development of new energy sources is impossible in the short term, our first step must be to resort to energy savings,” according to Vujnović.

Various energy efficiency measures must come first, followed by “cleaning” the use of coal as much as possible – from better preparing coal for use in thermal power plants to installing appropriate filters, as well as optimizing the technological process and ensuring state support to increase the use of heat pumps and solar energy.

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