Bosnia and Herzegovina, Montenegro and Serbia need to be more active in defining their energy transition models, a task that lies ahead of all the other countries of the region as well. Defining energy transition models goes hand in hand with energy goals, and the share of renewable energy sources in the energy mix is one of the most important. If the countries fail to define their own energy transition models, the European Union, the Energy Community or foreign consultants will do it for them. In the situation when these three countries do not lack experts who could use their knowledge and experience in this important endeavour, the recommendation is that leading energy experts from the region join forces and thus empowered and united more efficiently influence decision makers in the region, and beyond.
This is one of the key conclusions that could be heard at a workshop held this month on Mount Jahorina in Bosnia and Herzegovina. The workshop was a part of the “Renewable Energy Policy Consensus – REPCONS” project, implemented by civil society organizations NERDA from Bosnia and Herzegovina, ASOR from Serbia and CLEAN from Montenegro and supported by the European Climate Foundation. It gathered energy experts from the three countries: representatives of state- and privately-owned energy companies, ministries as well as independent experts.
This article was produced by the Balkan Green Energy News portal, which is the REPCONS project’s media partner. The event was organized under the Chatham House Rule, which means that the statements and comments by the participants are presented in the report, but without revealing their identity.
The most discussed topics at the workshop were the key elements required to define and implement a sustainable energy transition in the region, the integration of renewable energy sources into energy systems and the strengthening of cooperation between experts from the region.
If countries from the region fail to define the energy transition dynamics, others will do it for them
The countries of the region need to seriously address the issue of energy transition or else others will do that instead of them – the European Union, the Energy Community Secretariat or various consultants. The consequences could be similar to the unsatisfactory results of the privatization process in the region.
The usual approach to energy transition in the region looks like this: countries get targets, as is the case with renewable energy targets, and only after that discussions are launched on whether they are good or achievable.
Experts who took part in the workshop said that the other side should not be blamed for the situation since EU representatives, for example, very often suggest that the region is the one that should formulate proposals. Bosnia and Herzegovina, Montenegro and Serbia have enough experts to do the job, but they need to join forces as that would help them influence decision makers more effectively.
As could be heard at the event, the Energy Community Secretariat, which is in charge of implementing the energy transition process in the region on the behalf of the EU, will not gather experts from the region to hear their opinions, since its approach to energy transition is technocratic, so the experts themselves need to organize and unite.
Brussels and Vienna are preparing to introduce a CO2 tax
The participants addressed three topics as examples of ongoing processes which will affect the region, but which do not include representatives from the region.
The first one relates to the introduction of a CO2 tax, which would also cover electricity exports. The EU has named this measure the Carbon Border Adjustment (CBA) mechanism, and its defining has entered, as could be heard at the event, into the operational phase in the EU.
Legal experts in Brussels are examining whether the introduction of this tax is in line with the rules of the World Trade Organization, and if they succeed in the endeavor, the tax will be introduced soon.
The second example is a study on models for introducing a CO2 tax, commissioned by the Energy Community Secretariat. The third one relates to the preparation of the Green Agenda for the Western Balkans, which is being developed in parallel with the European Green Deal.
A majority of participants in the workshop agreed that coal has no future. They also agreed that it would not make much difference whether the coal phase-out is completed by 2040 or by 2050, given that ten years is a rather short period of time in the energy sector.
It would not make much difference whether the coal phase-out is completed by 2040 or by 2050, given that ten years is a rather short period of time in the energy sector.
The region, however, is seeing new thermal power plant projects, such as the Tuzla thermal power plant’s unit 7. Since those facilities will use new technologies, fewer workers will be needed both in the mines and in the plants.
It is very important to note that regardless of whether governments decide to proceed with developing thermal power plants or not, workers in this sector will lose their jobs, and it is an important task for all of us to ensure a fair transition for them.
Funding the transition may be the biggest challenge, yet there is room for the region to be more active in this area as well.
Namely, if the region introduces the same emissions trading system as the one applied in the EU, the money paid by polluters for CO2 emissions would stay in those countries. However, if the EU imposes a CO2 tax, the money would go to the EU budget.
Montenegro has introduced CO2 emissions trading, BiH is preparing NECP, and Serbia is developing software
Montenegro has recently introduced an emissions trading system, becoming the first country in the region to do so. The price of emissions has been set at EUR 24 per ton, which is close to the EU‘s price.
The local authorities believe that a 47% share of renewables in the energy mix of the country, the target proposed by the Energy Community for the post-2020 period, can be achieved. This goal may be reached though the development of solar power plants, such as the Briska Gora project, of wind power plants (Brajici) and hydropower projects (Komarnica and a hydropower plant on the Moraca river.)
At the same time, Bosnia and Herzegovina is preparing its National Energy and Climate Plan for the 2021-2030 period, hoping to adopt a proposal by the end of 2020. The authorities in charge are trying to secure the budget for a study to determine the cost of the energy transition and decarbonization for the country, as well as to calculate the amount that BiH can afford for this purpose.
Serbia is currently working on software for energy development modelling, which is based on the economic viability principle. The preliminary results indicate that even in the best case scenario, Serbia cannot reach the 35% share of renewables proposed by the Energy Community.
The energy transition and decarbonization processes may be accelerated by the air pollution problem that the whole region has been facing. This problem has already influenced and it will continue to influence political decisions, and some of the participants noted that air pollution may be even more powerful than the Energy Community Secretariat.
However, it is not yet clear if the region is close to a decision to commit to decarbonization as its strategic orientation.
National power utilities slow in investing in renewables
Nearly 90% of the respondents in a survey conducted within the REPCONS project think that energy transition is inevitable, but they have different views on the pace of its implementation – one group supports an immediate switch to renewable energy sources with a fixed date when thermal power plants are to be closed, while the other group supports a gradual shift towards renewable energy sources and keeping thermal power plants running during the transition period.
Most national power utilities from the region, which are at the center of energy transition, are very slow when it comes to investments into renewable energy projects. This creates an impression that they are developing renewable energy projects because they are forced to do so or just for the sake of appearances.
However, there is a shining example set by the power utlity Elektroprivreda Hrvatske zajednice Herceg Bosne (EPHZHB) from Mostar, BiH, which has developed an impressive renewable energy portfolio over the last 10 years – three renewable energy power plants: one hydropower plant (Mostarsko blato) and two wind farms (Mesihovina and Jelovača).
The Mesihovina wind farm is a good example of how investments are slowed down by complicated licencing procedures, as well as the sluggishness of state power utilities. The general design for the project was finished in 2009 and the financing was secured in 2010, but the licences were obtained only in 2017. The construction took a year, and the wind farm was online in 2018.
Who will pay the price of energy transition?
If we further take into consideration that the power utilities are state-owned, and that governments make political decisions to sell electricity at below-market prices thus preventing the companies from accumulating capital needed for investments into decarbonization, it seems that energy companies will pay the highest price.
The severity of the challenge posed by decarbonization is illustrated by the examples of two power utilities in Bosnia and Herzegovina – public companies Elektroprivreda Bosne i Hercegovine (EPBIH) and Elektroprivreda Republike Srpske (ERS) – which together employ around 15,000 people in mines and in thermal power plants.
There are also differences in the way power utilities address this topic – the management of the power utility EPBIH openly speaks that it is necessary to close down the mines, while in some countries of the region this topic is a kind of taboo.
The management of the power utility EPBIH openly speaks that it is necessary to close down the mines, while in some countries of the region this topic is a kind of taboo.
The position of power utilities will be additionally burdened by the huge interest of private investors, especially those from abroad, to develop power plants.
In BiH alone there are around 1,000 MW of wind farm projects in the pipeline, which, according to the workshop’s participants, will certainly be developed, but the energy generated in those plants will be exported. At the same time, the construction of these power plants will burden the transmission network which, for the time being, can integrate energy produced by new power plants.
This ultimately means that the national renewable energy potential will not be utilized by Bosnia and Herzegovina, i.e. national power utilities, but other companies and countries.
Transmission system is not ready to integrate renewable energy
The transmission system, however, is not ready to integrate renewable energy. This can be seen in two BiH regions with the biggest potential for green energy, Hercegovina and the western part of the country, where despite the huge potential, the transmission system cannot integrate renewable energy from power plants that would be built there.
The transmission system of Serbia is not in a better situation. The first estimates, from ten years ago, showed that the system can integrate 500 MW of wind power, and most of that capacity has been already built.
At this moment, investors are interested in developing around 3,000 MW of wind power projects, and it is uncertain whether the system can provide access to the grid for all the planned capacities, since no investment has been made into the network itself.
What is needed are visionary steps
So far, no clear decisions have been made. There are different scenarios, possibilities are numerous, but the countries in the region, as well as their power utilities, need to be aware that major changes are yet to take place.
However, from what can be seen in practice, both governments and companies wait for something to happen and then they react. In the case of energy transition, this reactive approach cannot help them win the battle. They need to have a vision.
One visionary proposal was heard at the workshop – since power utilities are slow to invest in renewable energy, why not give their land, or some abandoned mine pits, to private investors to develop solar power plants much faster. That is a good way to utilize solar energy potential, which today is considered to be the best investment in the renewables sector.
A project of this kind is already under way in North Macedonia, where the government has launched a tender for the construction of solar photovoltaic power plants on state and private land, and the national power utility is looking for private partners to build 100 MW of solar power plants at the coal pit Oslomej.