Main power producers in Balkans can’t afford to fall behind in energy transition

The biggest electricity producers in Southeastern Europe need to adopt innovations, establish partnerships with one another and with the private sector, and move with the times in the way they do business, according to the speakers at the panel on power utilities in the energy transition at the Belgrade Energy Forum 2023. Their representatives agreed that changes are necessary for the companies to maintain strong positions in the market.

There is no more room in the energy sector for the mindset and approaches from the last century, particularly in the case of power utilities with obsolete generation capacities and coal plants that would be shut down, according to conclusions from a discussion on the future of the sector in the light of the switch to green megawatts. The panel held at the Belgrade Energy Forum (BEF 2023) brought together managers from Serbia’s EPS, Montenegro’s EPCG, North Macedonia’s ESM and Greek utility PPC and Mislav Slade-Šilović from the PwC consultancy.

They agreed that adopting the latest technologies and adjusting operations to the needs of the economy of the future, especially when it comes to integrating renewables, is necessary for a successful energy transition. Additionally, the participants pointed out at the event that power utilities in the region are in a favorable position to develop mutual cooperation but also to establish partnerships with innovative private firms.

Solar power, hydropower are complementary

Chairman of the Board of Directors of Montenegrin state-owned coal and electricity producer Elektroprivreda Crne Gore (EPCG) Milutin Đukanović highlighted what he believes is exceptional complementarity between hydroelectric and solar power potentials with regard to infrastructure and the deployment of renewables in the electricity system. He suggested that the company would work on an energy storage project “in a very specific way” at lake Skadar, also known as Shkodra and Scutari.

EPCG has an investment plan for 2.2 GW, Đukanović asserted.

“For any national electricity producer, the first goal is to produce more than we consume, so that we ensure the stability of the energy system. The second goal is the so-called green production, so that we don’t pollute the environment with our production,” he said. Đukanović acknowledged that currently the first part is fulfilled only because of the drop in industrial production.

The business policy of EPCG is to generate more electricity than what is consumed, but it is currently successful solely because industrial production has drastically weakened

Regardless, EPCG needs to accelerate the capacity expansion to meet the demand expected with economic development, in his view. If they don’t produce enough to cover consumption, power utilities are at risk of bankruptcy, Đukanović said. He pointed to the upcoming Solari 5000+ project for rooftop solar power systems for households with 70 MW in total capacity, and revealed that the EPCG solar gradnja subsidiary is already installing 5 MW per month and increasing the level.

National electricity companies are suffering under political influence

In the Balkans, all producers of electric power were founded as large systems that controlled everything, but they had no flexibility, said Chief Executive Officer of PPC Albania Georgios Lantzas, who is also responsible for business development in the Western Balkans. In addition, governments have big political influence on their national companies in the sector, he warned.

“Here is the basic contradiction. Energy needs a long-term strategy, but politicians have a short-term life. Politicians think about the next election,” Lantzas stated. He recalled that because of the European Union’s regulations, PPC had to spin off the Independent Power Transmission Operator (IPTO or ADMIE) and Hellenic Electricity Distribution Network Operator (HEDNO or DEDDIE) and sell minority stakes in the two companies.

Of note, the government also lowered its ownership in PPC to 34% in 2021.

Citizens and other electricity consumers are not aware enough of the prices and how the system works

In March, PPC announced that it is taking over the entire business of Italy-based Enel in Romania. Earlier, the company said it was pursuing strategic expansion in other Balkan countries.

Lantzas stressed the main obstacle in the development of green energy is that transmission companies are falling behind in fulfilling their goals. He added that regulatory bodies need to be more reflective and more flexible to the real needs of the market.

The head of PPC Albania said citizens and other electricity consumers aren’t sufficiently educated in the energy sphere. They are not aware enough of the real price of energy and the real investment costs, in his view. He noted that PPC has organized a hundred workshops to explain the big changes in infrastructure to the people.

Power utilities in region are playing defense

All the strongest companies in the countries in the region, where energy was and still is the driver for the economy, are more or less on the defense, though PPC is relatively further ahead, according to Mislav Slade-Šilović, PwC’s consulting leader in energy, utilities and resources for South East Europe. He attributed it to an outdated management mindset and development approach: “It is better to do nothing than make a mistake.”

Moreover, the tariff models and mechanisms for transmission and distribution operators are absolutely anachronistic, Slade-Šilović asserted and explained that they are based on a historical trajectory of operational expenditure.

Innovative private companies will keep conquering the market

In the next two decades, state-owned electricity producers will decommission up to 40% of their capacity and they will have to forget that part of their income, the consultant underscored and urged them to make changes. The companies are facing bad hydrology and the entry of investors from the private sector, he asserted.

“You need a faster and more agile organization. You need to invest in young people that understand storage, that understand B2B, that understand data analytics, that understand partnerships. Because tomorrow this private sector that is entering with storage, with renewable energy sources, can be your competitor, but it can be your partner as well,” Slade-Šilović said.

Serbia’s EPS wants to build hydropower plants with national electricity producers from neighboring states

In the words of the Director of the Strategy Department of Elektroprivreda Srbije (EPS) Aleksandar Jakovljević, the key precondition for an accelerated and more efficient renewables integration in Serbia is the Bistrica pumped storage hydropower project. According to earlier announcements, it would have 630 MW in capacity.

The endeavor was unsuccessfully initiated several times in the past thirty years, he noted. The state-owned company is considering the possibility to build hydropower plants with other power utilities in the region, in addition to the current projects of Komarnica in Montenegro and Gornja Drina (which is on the upper part of the Drina river) in Bosnia and Herzegovina, he revealed.

When it comes to increasing the renewables capacity in the system, it doesn’t only depend on EPS but also on the transmission and distribution system operators – Elektromreža Srbije (EMS) and Elektrodistribucija Srbije (EDS) – and it requires government support, he stressed.

Jakovljević: The deployment of renewable electricity doesn’t only depend on EPS but also on the transmission and distribution system operaters and state support

“If we want a reliable system, we have to continue to invest in production in thermal power plants,” Jakovljević asserted. He highlighted the current projects worth EUR 200 million each for desulfurization units in the country’s two biggest coal power plants: TENT A and TENT B. EPS’s representative argued that the segment is the source of baseload electricity and that the capacities would be aligned with all environmental protection requirements.

In its Go Green Road plan, the company envisages cutting emissions by 18% to 19% from the 2019 levels by 2025. The target for 2035 is 25%. Jakovljević also said EPS is analyzing the possibility to install a gas-fired power plant.

North Macedonian ESM intends to commission 100 MW in solar power capacity by year-end at old coal pit in Oslomej

Vasko Stefanov, the new CEO of North Macedonia’s utility Elektrani na Severna Makedonija (ESM), said he expects two photovoltaic plants of 50 MW each in the REK Oslomej coal and thermal power plant complex to be commissioned in the fourth quarter. Fortis and SolarPro are the contractors. A year ago, a 10 MW solar power unit was installed in the area. It was the first of its kind on a depleted open pit coal mine in the Western Balkans.

There is another 10 MW project underway in Oslomej. Within the efforts to get through the energy transition, ESM is building a district heating system in REK Bitola, its other coal power hub, and it intends to build a gas power plant there as well as two photovoltaic systems of 60 MW and 100 MW, Stefanov said.