EU launches EUR 1 billion energy support package for Western Balkans

The European Union said it would back six renewable energy infrastructure projects in the Western Balkans with grants from its EUR 500 million package for short- and medium-term investments. Speaking at the EU – Western Balkans Summit in Tirana, European Commission President Ursula von der Leyen reiterated that another EUR 500 million has been approved in direct budget aid to ease the impact of the energy crisis on vulnerable households and small and medium-sized firms.

The European Union announced in late October that it was preparing EUR 1 billion in grants for the energy sector in the Western Balkans. The details of the EUR 500 million segment earmarked for short- and medium-term investments have just been presented at the EU – Western Balkans Summit in Tirana. The remaining EUR 500 billion is intended for subsidizing the energy bills of households and businesses that are at high risk from the energy crisis.

“Russia’s escalating war of aggression against Ukraine puts European and global peace and security at risk. It underscores the importance of the strategic partnership between the EU and the Western Balkans region,” the European Commission said.

The leaders of the 27-member bloc reaffirmed the commitment to the region’s European Union membership perspective. They called for the acceleration of the accession process based upon credible reforms by partners, fair and rigorous conditionality, and the principle of own merits.

The EU is the biggest donor, investor and trading partner of the Western Balkans.

With a €30 billion Economic and Investment Plan, we support the region's long-term recovery.

And our €1 billion Energy Support Package tackles the energy crisis & boosts its energy transition ↓

— European Commission (@EU_Commission) December 6, 2022

Grants to be directed into renewables, interconnections, energy efficiency

“Renewable energy is cheaper; it is affordable; it is cleaner; it is better for our planet; and it is home-grown. It provides good jobs here at home, so it gives independence and security of supply. The investment of these EUR 500 million will of course go in renewables, in interconnections, so infrastructure, but also energy efficiency,” European Commission President Ursula von der Leyen said at the event.

The package for short- and midterm investments in energy is part of the Economic and Investment Plan for the Western Balkans of EUR 9 billion in grants, aimed at mobilizing a total of EUR 30 billion. The entire EUR 1 billion in grants is funded via the Instrument for Pre-accession Assistance (IPA 3)

The EUR 500 million in grants for short- and medium-term investments is part of the previously approved Economic and Investment Plan for the Western Balkans

Ahead of the summit, the EU added six renewable energy projects to the list and approved EUR 120 million in grants from the Western Balkans Investment Framework. Total investments are valued at EUR 472 million:

• Solar4Kosovo – 100 MW photovoltaic plant
• Solar4Kosovo 2 – solar district heating in Prishtina
• Phase 3 of the rehabilitation of six hydropower plants in North Macedonia
• Phase 2 of the Bogdanci wind park in North Macedonia
• Reconstruction of the Vlasina hydropower plant cascade in Serbia
• Kostolac wind farm in Serbia

The grants are being added to projects that mostly had financing secured already, so apparently the idea is to cover the increase in expenses for works and equipment.

The EU said the Kostolac wind farm, under development by Elektroprivreda Srbije (EPS), would have 66 MW. The state-owned coal and power producer has said the envisaged capacity is 73 MW. Annual output is estimated at 187 GWh.

As for the Vlasina hydropower complex (Vlasinske hidroelektrane), the document notes that it works at just 60 MW to 80 MW because the equipment is old and sometimes breaks down, compared to 128 MW in nominal power. The project should extend the lifetime of the units in the cascade by 30 years and their capacity is planned to be lifted to 136 MW. Production is set to reach 309 GWh per year.

According to the announcement, the solar thermal facility planned by Termokos, the district heating system operator in Prishtina, will have 50 MW. Officials earlier spoke of 70 MW.

WBIF to get EUR 52 million for support to competitiveness of the private sector

Three flagship investments, to be backed with EUR 52 million in WBIF grants, were introduced in the segment of competitiveness of the private sector. The SMEs Go Green Programme, estimated at EUR 145 million, was launched by the European Bank for Reconstruction and Development, which will provide financing to local financial institutions for on-lending to small and medium-sized enterprises for investments in climate-smart solutions.

The second endeavor, worth EUR 200 million, is the Western Balkans Climate Programme, through which the International Finance Corporation will promote green financing to micro, small and mid-sized businesses and support the development of capital markets with green bond issuances. Finally, the Green Finance for Inclusion scheme (EUR 50 million) is for innovative energy efficiency and climate-resilient investments in the same sector.

The EU earmarked EUR 100 million for the Regional Energy Efficiency Programme and EUR 130 million in guarantees for investments in green energy and technology and digitalization

Another part of the EUR 500 million package is for the Regional Energy Efficiency Programme (REEP), run by the EBRD and Germany’s KfW Development Bank. It will be boosted with EUR 100 million, the EU revealed, compared to the EUR 78.8 million in total grants since its inception in 2013.

The remaining EUR 130 million will be in the form of guarantees for support to projects for green energy and technology and digitalization. The Western Balkans Guarantee Facility is part of the European Fund for Sustainable Development Plus (EFSD+).

In the Tirana Declaration, issued after the summit, EU leaders said the funding would also be used for gas infrastructure including for liquefied natural gas – LNG.