Potential impact of COVID-19 on the new legislation on energy efficiency in North Macedonia

Authors: Marija Filipovska, Partner, and Dušan Bosiljanov, Attorney at Law, CMS Skopje

With the COVID-19 pandemic experiencing its peak throughout the region, and as North Macedonia declares a state of emergency for the first time in its history, it is clear that we are facing major social challenges and uncertainties. The current situation clearly shows that we are going to face an economic downturn which is expected to hit even the strongest branches of the economy such as the energy sector.

This article will attempt to illustrate how the current health crisis with COVID-19 will potentially affect new energy efficiency legislation, designed to reduce energy needs and consumption through efficient use of energy and to reduce negative environmental impacts.

Namely, in February 2020, the Parliament of the Republic of North Macedonia adopted the Law on Energy Efficiency – Official Gazette of North Macedonia no. 32/2020 (MEEL). With this, for the first time, energy efficiency is regulated with a separate law. So far, the issue of energy efficiency has been regulated by the old Energy Law, the relevant bylaws and energy efficiency action plans, which in practice have not proved to be a good way to regulate this legal area. In addition, with the new MEEL, our country fully implements the relevant European Union energy efficiency regulations.

With the adoption of the MEEL, the following energy goals would be achieved:

1. Reduction of energy needs through efficient use of energy by implementing energy efficiency measures;
2. Achieving the goals of sustainable energy development through:
   • reducing energy consumption by applying energy efficiency measures and reducing the negative impact on the environment, and
   • efficiency in energy production, transmission and distribution;
3. Increasing energy efficiency in the area of ​​housing and construction by improving the energy characteristics of the buildings;
4. Increasing energy efficiency in the public sector, large traders, the transport sector and energy-using products;
5. Increasing energy efficiency by utilizing renewable energy sources; and
6. Creating conditions for energy services provision, as well as developing the market through the availability of services and products that increase energy efficiency.

Energy audits

The new law is expected to enable the realization of the necessary investments and measures in the field of energy efficiency, following the positive examples from EU countries and the region, whereas many levels benefit both the citizens and the economy in general.

With the Law on Energy Efficiency, North Macedonia is fully implementing relevant European Union energy efficiency regulations

As a novelty, the MEEL regulates energy auditors. Namely, the energy auditors and the companies licensed to perform energy audits will finally be able to start operating and thereby actively participate in the improvement of energy efficiency in North Macedonia. The MEEL, among other things, regulates in detail the energy audits of large traders and the energy audits of buildings as separate areas.

In particular, in the future, energy audits will be performed by trained and authorized auditors for each area separately – energy audits of large traders on the one hand and buildings audits on the other. This legal solution provides clear working conditions for energy auditors and companies that have obtained a license to perform energy audits, as well as new employment in the sector.

More measures in pipeline

The MEEL also prescribes energy efficiency obligations in the transmission, distribution and supply of energy, thus consumers in the energy markets can expect additional instruments and measures that will enable more savings in the use of energy.

It is also important to emphasize that the MEEL will enable the implementation of long-term energy service contracts by the energy service providers. This legal solution specifies the provisions and model contracts that allow for the implementation of energy efficiency improvement projects, both for the reconstruction of buildings and for other investments in energy equipment and installations.

Investments won’t be an expense to the customers as they are financed by the energy savings themselves

It is important to underline that by using this model, such investments will not be an expense to the customers as they are financed by the energy savings themselves. Hence, it is expected to revive the energy services market and thereby to make significant investments, especially in the public sector, in such an innovative way – reconstructions and savings without significant financial disruption to the users of these energy services.

In addition, the law introduces innovations in information requirements and a label that indicates the class of energy efficiency and the eco-design of energy efficient products offered on state markets. By doing so, the law will provide the supply of exclusively energy efficient products and inform the citizens about the level of consumption of individual product groups.

These legal solutions are introduced in accordance with the latest EU legislation, but in a way and dynamically consistent with local reality and mentality, certainly taking into account the needs of traders and product suppliers regarding the successful and long-term application of these requirements in the future.

Energy efficiency fund

Finally, we would like to point out that, in order to enable the achievement of the objectives and support of energy efficiency policies, it is envisaged to establish an energy efficiency fund as an independent legal entity. Funds will be used to finance energy efficiency projects and measures, following examples from European Union countries, where energy efficiency funds have existed for a long time and have successfully assisted in the development of energy services and the improvement of energy efficiency in general.

Although with the adoption of the MEEL, North Macedonia introduced modern legislation by which it fulfilled one of the strategic energy goals, the Macedonian energy sector is completely neglected and played a secondary role given the impact of the health crisis on the entire economy. The law that was supposed to enable the reduction of energy needs and consumption through the efficient use of energy is obviously going to postpone its practical implementation due to the current state of emergency.

It remains to be hoped that the goals such as a) improving energy efficiency and achieving energy; b) job creation; c) opportunities for financial support for energy efficiency projects through the energy efficiency fund; and d) improving the energy efficiency of products available in the Macedonian market, in accordance with the new rules for labeling and eco-design of energy-using products, will start to be implemented in the near future and that we could see the real development of energy efficiency in the Macedonian energy sector.