By Katarina Uherova Hasbani, Energy Policy and Business Development Consultant, EIR Global and the lead author of REN21 UNECE Renewable Energy Status Report in 2015
South East Europe stays on the margins of global renewable energy investment despite its proximity to EU market
Seventeen countries of South East and East Europe, the Caucasus, Central Asia and the Russian Federation received less than 1% of global renewable energy investment in 2014, concludes the United Nations Economic Commission for Europe (UNECE) Renewable Energy Status Report launched by the Renewable Energy Policy Network for the 21st century (REN21) on the margins of COP21 summit.
South East Europe is doing comparatively better than the other countries covered by the document. This relative advance is pushed by the countries’ membership in the Energy Community and prospects of integration into the European Union. However, the enabling environment needs to be improved in South East Europe to attract more investment into renewable energy sector, which has a lot of potential for growth.
Energy challenges could be drivers
Selected UNECE countries face a number of challenges which could eventually become drivers for renewable energy development. Most of the countries (all in South East Europe) are energy importers, which creates an energy security driver for diversification of energy supply by sources and technologies. Energy subsidies are rooted in the countries’ energy systems and present an obstacle to development of renewable energy and energy efficiency. South East Europe has two countries, Serbia and Bosnia and Herzegovina, which are in the world top 10 with the percentage of energy subsidies in the gross domestic product, according to a 2015 study by the International Monetary Fund.
South East Europe has two countries, Serbia and Bosnia and Herzegovina, which are in the world top 10 with the highest percentage of energy subsidies in the gross domestic product.
Seasonal variation of hydropower in countries with high shares of hydro-based power generation (which is the case for several of them in South East Europe) could be a driver for development of non-hydro renewable energy sources. The report interestingly highlights heating as an issue of energy access in the region, including South East Europe. Part of population continues to rely on traditional use of biomass for heating, as well as cooking purposes with damaging health and environmental consequences. Percentage of population without access to non-solid fuels is high in several countries: 58% in Bosnia and Herzegovina, 38% in Albania, 38% in Montenegro, 33% in the Former Yugoslav Republic of Macedonia, and 31% in Serbia. Replacement of this traditional biomass use by modern renewable technologies, both for district heating and local heating purposes, could drive renewable energy development. There are some interesting initiatives in the region, addressing energy access through renewable energy development. Montenegro has the only government programme for conversion to modern biomass. In Bosnia and Herzegovina, a technology innovation challenge supported by the United Nations Development Programme resulted in the installation of off-grid renewable power at costs rivalling connection to the national grid.
Modest progress in modern capacity
Shares of renewable energy in total final energy consumption are high in a number of countries, in international comparison. This trend is based on high shares of hydropower (such as in Albania and Montenegro) and the persistent use of traditional biomass. Shares of modern biofuels remain very modest and represented less than 1% of total consumption in 2012 in the 17 countries which were covered. In the power sector, installed capacity for wind (Bosnia and Herzegovina, FYR of Macedonia and Serbia), solar (all countries of South East Europe), and biogas-based (Serbia) power was reported in the region in 2014. It totalled 64 MW, comparing to more than 9 GW of hydropower. The report highlights a power project pipeline for several technologies. Wind-based power generation is in different stages of planning and development in Serbia (500 MW), Bosnia and Herzegovina (138 MW) and Montenegro (118 MW). Small hydro capacity is being tendered in Montenegro.
Figure 1: Share of renewable energy in total final energy consumption, 2012, source: UNECE Renewable Energy Status Report, 2015, REN21
Wind-based power generation is in different stages of planning and development in Serbia (500 MW), Bosnia and Herzegovina (138 MW) and Montenegro (118 MW).
Albania (99 MW) and Macedonia (33 MW) have the highest reported solar water heating installed capacities. Known geothermal heat capacities are reported for Serbia (119 MW out of which 22 MW in heat pumps) and Albania (12 MW). Liquid biofuel production capacities are reported only in Macedonia (30,000 tonnes of biodiesel per year).
Policies not bringing investment flows
South East Europe is relatively well positioned in terms of renewable energy policies in the context of selected UNECE countries. All have renewable energy targets and regulatory policies in place. Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia all have feed-in tariffs. The report highlights that the absence of clear, enforceable secondary legislation – resulting in complicated permitting, licensing procedures and rules for the grid, is hampering investment into renewable energy in the region. National renewable energy action plans, which are adopted by the countries in compliance with EU Directive 2009/28/EC on the promotion of the use of renewable energy, are mentioned as a driver of regulatory changes. While South East Europe has potential for renewable energy use in heating and cooling, Montenegro is the only country that has a mandate in place to drive its deployment.
Figure 2: Renewable energy investment in the region, 2004-2014, UNECE Renewable Energy Status Report, 2015, REN21
While South East Europe has potential for renewable energy use in heating and cooling, Montenegro is the only country that has a mandate in place to drive its deployment.
When it comes to investment, South East Europe is lagging behind global developments similar to the rest of the selected UNECE countries. In 2014, the region received around USD 400 million (EUR 366.6 million) of EUR 249.5 billion placed in global renewable energy investment in 2014, according to Bloomberg New Energy Finance data used by the report. The public sector plays a dominant role in renewable energy financing in the region. The Global Environment Facility (GEF), the European Bank for Reconstruction and Development and the World Bank are contributing to financing renewable energy projects. Climate investment funds are highlighted as a source of financing in Eastern Europe, the Caucasus and Central Asia, but they aren’t yet active in the region.
Finally, energy efficiency is pointed out as a complementary avenue to renewable energy deployment. South East Europe is comparatively more advanced than the rest of the region included in the report. The building sector in particular is covered by projects and energy efficiency policies. While financing is available from international donors, interested to advance energy efficiency projects, absorption capacity is a challenge in South East Europe to speeding up project execution.
In conclusion, renewable energy and energy efficiency policy landscape is comparatively more advanced in the context of 17 selected UNECE countries. The enabling environment hasn’t been so far conducive to increasing investment flows to the region’s renewable energy projects. Yet, the countries could benefit from the proximity to the EU and from the convergence of their industry, installers, and developers with the EU energy market.