One year ago this month, severe flooding in Serbia, Bosnia-Herzegovina and Croatia killed 79 people, displaced about half a million and caused economic paralysis of the region. In the wake of these the catastrophic events, a renewed focus has emerged on how to repair infrastructure sustainably and harmonize the region’s energy sector with the environment.
The Balkan Region has enormous renewable energy potential but to date progress has been hindered by financing, weak legislation and poor grid infrastructure.
Croatia Halts Wind And Solar PV Growth
Of the three countries hit by the catastrophic floods, Croatia was the only member-state of the European Union (EU), thus it had to comply with binding EU renewable energy targets. At the end of 2014, the country had installed 340 MW of wind power capacity, 33 MW of solar PV capacity, 19 MW of bioenergy capacity and 1 MW of small hydropower capacity. A national energy standard adopted by Croatia’s Parliament in 2009 set a target of 1.2 GW of wind power and 52 MW of solar PV by 2020.
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| Zagreb, Croatia – February 12, 2014: The Sava River rising almost to the edge of embankment during heavy rains in Zagreb. Hieronymus / Shutterstock.com |
However, although the country possesses significant renewable resources and the EU law means it has binding commitments to fulfill, Croatia’s energy market operator (HROTE) announced in January that it would not provide feed-in tariff (FIT) contracts to new wind and solar PV projects in 2015. Moreover, HROTE said it would not issue licenses for new solar plants until further notice since in 2014 quotas for solar energy were achieved.
HROTE’s announcements fly in the face of the country’s national energy strategy targets leaving some to wonder if Croatian institutions were taken by surprise by the boom of the renewable energy sector and made a conscious choice to halt it. At the end of 2012, Croatia had installed only 141 MW of wind and a very small 90 kW of solar PV.
Meanwhile, Ana Sračić, business secretary at the Croatian Energy Regulatory Agency (HERA) said in an interview that Croatia’s energy mix is dominated by large hydro and fossil fuels plants, which provide more than 60 percent and 30 percent of the country’s power needs, respectively. Around 4 percent of Croatia’s energy mix comes from wind, Sračić said, while “solar power and biomass still have a pretty negligible share in the overall mix, but both have grown rapidly over the last few years.”
Serbia’s New Energy Law Bears Hope For Hydro And Wind
While Croatia was shutting the door to new wind and PV investments, a new energy law approved by Serbia’s Parliament at the end of 2014 was, on the contrary, generating hope.
The new law brings the country in line with EU energy policy, the so-called Third Legislative Energy Package, which is the bloc’s main tool towards the liberalization of the electricity sector.
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| House and street in Obrenovac under water. The water level of the Sava River remained high in worst flooding on record across the Balkans on May 20, 2014 Fotosr52 / Shutterstock.com |
According to the EU policy, vertically integrated electricity companies need to create separate accounts for their grids, separate the networks management from their companies’ management and also separate corporate subsidiaries. Thus, Serbia’s utility, the National Power Industry (Elektroprivreda Srbije, EPS), which currently performs almost all of the country’s electricity generation and supply, will be forced to open up to competition from independent power generators.
Furthermore, the EU law compels EPS to abandon low, state-regulated tariffs and offer customers a choice of electricity generators. Since the government will not be able to set all EPS tariffs, costs and payments, the electricity market will, at least in theory, become a more even playing field so that renewable power generators can hopefully grab some of this market opportunity.
The Serbian government hopes the new law will both entice energy project investment and bring it closer to the EU membership. “European Union membership and attracting foreign investments, as a way of improving depleted public finances, are clear priorities of the Serbian government at the moment,” according to Alex Stojanovic, Accounting and Finance Department Head at the University of Greenwich in London. “Anything that can speed or facilitate the EU membership talks or improve the current budget, such as harmonization of legislation and liberalization of the energy sector, is given full support by the Prime Minister Aleksandar Vucic and is fast-tracked through the legislative procedure,” he added.
“Serbia’s hydropower reserves specifically,” Stojanovic said, “have a lot of untapped potential and should be attractive to foreign investors. The sector reform, therefore, kills two birds with one stone,” he said. While adding new generation could raise prices for consumers, “the negative political consequences of an imminent rise in energy prices in the domestic market should be offset by improved public finances via foreign investments and improved prospects and speed of the EU membership,” he said.
Serbia’s action plan calls for renewables to make up 37 percent of overall electricity production by 2020, an 8 percent increase from today’s 29 percent, which is almost entirely provided by large hydro plants.
A separate law related to production from renewables by 2020 has set the following quotas:
· 500 MW of wind
· 250 MW of large hydro plants
· 188 MW of small hydro plants (each up to 10 MW)
· 100 MW of biomass
· 30 MW of biogas
· 10 MW of solar PV
· 1 MW of geothermal
Of the tariffs Serbia provides per renewable energy sector, solar PV plants receive the higher FIT at € 0.163 to € 0.198 [US $0.18 to $0.22] per kWh, however the country has installed only about 6 MW of PV. Serbia’s power needs are predominantly met by coal (around 60 to 70 plants) and coal-fired plants were severely impacted by last year’s floods.
Bosnia: Cumbersome Bureaucracy and Lack of Legislation
Unlike Croatia and Serbia, Bosnia and Herzegovina lack a national renewable energy target and the existing framework for the promotion of energy from renewable sources is non-compliant. Current legislation is split between various entities and “the simplification of the procedures and the reduction of the number of regional and local/cantonal institutions as well as improving transparency of the processes have to be considered another key priority” together with the adoption of a national renewable action plan, according to a statement by the Energy Community, a group that brings together the EU and non-EU countries from the South-East Europe and the Black Sea and which aims to extend the EU internal market to these regions. Serbia is a member of this group as well.
That said, there are an increasing number of wind power projects in Bosnia, said Stephan Leudesdorff, director of Germany’s KfW development bank office in Sarajevo. However, the country’s high wind potential, around 900 MW, is constrained by “limited grid capacity” and “legal caps” he said.
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| May 21, 2014 – Flood Natural Disaster in Maglaj, Bosnia Jasminko Ibrakovic / Shutterstock.com |
KfW has signed development loans for the 44-MW Mesihovina wind farm and the 40-MW Podvelezje wind and has an additional wind power project in development with the financing contract to be signed this year, Leudesdorff said. However, although more wind farm projects are getting closer to the implementation stage and private investors have many project ideas, only limited funding is available for investors to finance their projects, Leudesdorff explained. In addition the legislative framework is quite complex, he said.
According to the KfW, after the civil war ended in 1995 the electricity system in Bosnia and Herzegovina was in dire straits. Thanks in part to the support of KfW, which promotes the region’s hydro and wind power potential, the system is vastly improved since then. However, the country has installed less than 50 MW of wind capacity and only a couple of MW of solar PV. The region’s energy infrastructure following last year’s deadly floods should present an opportunity for renewable development.
