A new report on how the Western Balkans electricity mix can be made sustainable was published today
Among European capitals, Skopje in FYR Macedonia remains one of the lesser-known cities. Strenuous efforts to raise the city’s profile yielded fruit when the Lonely Planet travel guide recently recognised Skopje as “a quirky cocktail of styles”.
A less-desired distinction was awarded to the city now when the World Health Organization listed Skopje as “the most polluted capital in Europe”.
This serves as a stark warning beyond the country: the entire Western Balkans region (Albania, Bosnia and Herzegovina, FYR Macedonia, Kosovo, Montenegro and Serbia) suffers from high levels of air pollution caused by its dependence on ageing coal-fired thermal power plants.
The currently installed electrical capacity in the region is about 18,000 MW, almost evenly divided between hydropower and thermal power plants, with the latter being mostly coal-fired. The amount of carbon emitted into the atmosphere, adjusted for the size of the economy, is up to three times the European Union average.
One answer to this challenge is to upgrade existing plants or construct new, more efficient and environmentally friendly facilities. Among the 10 most polluting coal power plants in Europe, seven are in the Western Balkans.
As many countries in the region have substantial reserves of cheap coal – mainly the most polluting form, lignite – plans for new coal-fired plants are under serious consideration or preparation in many places.
However, this threatens to be a serious mistake, not only in terms of environmental impact but also economically, as we argue in a new paper, “How can the Western Balkans electricity mix be made sustainable?”, published today.
Even if the upgraded or new plants meet EU Best Available Technology (BAT) standards, the cost of emitting each tonne of carbon is expected to rise as the EU tightens its emissions-trading scheme, making the continued use of high emission power sources uneconomical.
This could lead to these assets falling into disuse, effectively stranding big investments, because it will become cheaper to use alternative energy sources. These projects would effectively lock in assets that may have significant economic and health costs for current and future generations, given that the average life of coal power plants is 40-50 years.
Fortunately, in recent years alternatives have become more and more viable. Already today, half of the installed electrical capacity in the Western Balkans is generated by hydropower plants. While hydropower has its detractors, too – mainly because of the physical impact on the environment – other renewable sources such as wind, solar and biomass remain in their infancy in the region.
As the cost of these technologies has fallen and their performance has improved, they now represent an important low-cost alternative, reflected in the growing interest from investors.
Apart from technological progress and a supportive regulatory environment, renewables will also benefit from the competitive and transparent procurement procedures that most Western Balkans countries are introducing as part of their EU approximation process.
Most of the region still has some way to go to approach the EU goal according to which each member state must generate one-third of its total energy from renewable sources by 2030.
In these efforts, the region can build on the existence of a relatively well-developed infrastructure in terms of power connections. The establishment in 2014 of the EBRD-supported SEE coordinated auction office, which is responsible for managing cross-border capacity for transparent electricity trading, was a major positive step.
More than anything, eventually kicking the coal habit of the Western Balkans countries will require finding a suitable replacement. This already exists: at least for a transitional period, gas is a viable alternative that offers considerable advantages relative to coal, both economically and environmentally.
The completion of huge projects such as the Trans-Adriatic-Pipeline brings new dimensions not only in terms of supply but also in the creation of new links – in the spirit of “a quirky cocktail of styles”.
Jakov Milatovic and Damin Chung are EBRD economists