Western Balkans urged to end subsidies for destructive small hydropower – report

The European Commission and the Energy Community need to play a role in ending state financial support for destructive hydropower plants in the Western Balkans by ensuring that the EU’s rules on state aid – including provisions on environmental sustainability – are applied in the region, according to a new report released today by CEE Bankwatch Network.

Fueled by generous state-sponsored feed-in tariffs that contradict EU guidelines on state aid for environmental protection and energy, the number of hydropower plants under 10 MW in Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia, and Serbia quadrupled from 108 to at least 488 between 2009 and 2018, according to the Western Balkans hydropower: Who pays, who profits? report.

This boom in small hydropower has also caused public outrage across the region as rivers and streams, often in ecologically valuable and protected areas like the Stara Planina Nature Park in Serbia and Valbona Valley National Park in Albania, have been dammed and put into derivation pipes, leaving riverbeds dry and the communities who depend on them without vital sources of water, Bankwatch said.

One of the main drivers of the destructive small hydropower boom in the Western Balkans is the availability of public financial support in the form of feed-in tariffs. Originally foreseen as a means to boost all forms of renewable energy, including solar and wind, in the Western Balkans feed-in tariffs have been disproportionately directed towards small hydropower plants, the report notes.

In 2018, 70% of renewable energy support in the Western Balkans benefited small hydropower. Yet small hydropower’s contribution to electricity generation is extremely modest: In 2018, only 3.6% of electricity in the Western Balkans was generated by hydropower plants under 10 MW, the research finds.

“As well as contributing to environmental damage, incentives for hydropower in the Western Balkans have attracted widespread criticism for benefiting wealthy business people close to – or in – the region’s governments,” the report reads.

Perceived corruption and nepotism in the renewables incentives system endangers public acceptance of the whole transition to an energy-efficient, renewables-based energy system. This urgently needs to be addressed by switching to a more transparent renewables support system, in line with the EU’s Guidelines on State Aid for Environmental Protection and Energy, to ensure affordable and proportionate incentives, according to the report.

Solar, wind should be subsidized where appropriate

The report also notes that since Serbia, Bosnia and Herzegovina, and Kosovo* paid out more subsidies for coal than renewable energy in the period 2015-2017, renewable energy will have difficulty in competing if the playing field is not level, but that only technologies which are still developing and whose costs are expected to fall further need support through state aid, especially solar and wind in cases where they would not be viable without incentives.

Montenegro and Albania have already taken some action. Montenegro is phasing out incentives altogether and Albania approved a law in early 2017 introducing an auction-based system for larger plants by 2020, the report recalls. North Macedonia has also taken steps towards an auction system, but left feed-in tariffs for hydropower intact, giving it an unfair advantage over solar and wind, the report notes.

Serbia, Bosnia and Herzegovina, and Kosovo*, however, need to change their renewables incentives systems as soon as possible, the report finds.

Pippa Gallop of CEE Bankwatch Network and lead author of the report, said: “It is high time to end hydropower subsidies in the Balkans. Perceptions that these schemes benefit the wealthy and fuel environmental damage endanger public acceptance of the whole transition to a sustainable and efficient energy system. Those countries which have not done so urgently need to switch to more transparent schemes based on auctions and premiums to ensure affordable and proportionate incentives,” she added.