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The Western Balkan countries are waiting for EU to guide them through energy transition

Findings of the Secretariat of the Energy Community Annual Implementation Report – Western Balkan Countries

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On November 1st, 2018 Energy Community Secretariat has announced Annual Implementation Report on monitoring the implementation of key EU energy and environmental legislation in Energy Community contracting parties (Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania, Georgia, Moldova, Ukraine and Kosovo*). Analyse of the Annual Implementation Report for Republic of Serbia was published in a separate Article, thus Serbia is excluded from this writing.

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence

Summary

It can be concluded that ambitions of the Western Balkan Countries towards clean energy transition are far below European Union’s ambitions. The growing discrepancy with the ambitious objectives of the European Union poses a risk to the economies of the Western Balkan countries, especially considering the announcement of the introduction of special customs duties on carbon dioxide emissions (Carbon border taxes), by which the European Union wants to prevent Member States from benefiting from an integrated market without undertaking actual commitments. Secretariat of the Energy Community considers that the absence of Energy Community targets affects integrated energy and climate planning which should have been much more advanced at this point than it actually is.

I Bosnia and Herzegovina

Bosnia and Herzegovina (“BiH”) is completely non-compliant with EC legislation in Oil and Gas sector. Namely, current laws in Bosnia and Herzegovina do not envisage unbundling of the transmission system operator according to the Third Energy Package, thus the entity governments, who are responsible for operation of the public generation and supply utilities, also control the Independent system operator of Bosnia and Herzegovina (NOSBIH) and the transmission company Elektroprenos. According to the Secretariat’s report BiH is still far away from adopting a state law, which would regulate the gas market. Instead, BiH applies a non-compliant government decree from 2007. This is why the country is subject to several infringement cases. Also, according to the Secretariat BiH is nowhere close to meeting the obligations of Directive 2009/119/EC which imposes the obligation to maintain minimum stocks of crude oil and/or petroleum products oil. The State Electricity Regulatory Commission (SERC) is the only Contracting Party regulator whose legal set-up does not comply with the Third Package. Due to that reason several infringement procedures were initiated.

According to the latest data BiH is moving backwards, only reaching 22,7% share of energy from renewable sources in gross final energy consumption (“GFEC”) in 2017, which is 2,6 percentage points below the share of 25,3% registered in 2016. Despite this, Republika Srpska removed the support for wind projects. Secretariat of the Energy Community emphasize that Bosnia and Herzegovina must speed up the reform of its renewable energy framework.

Secretariat states that the entity authorities of Bosnia and Herzegovina have to significantly increase their administrative capacities dealing with environmental assessments, as well as to take steps to reduce the discretion of these authorities.

BiH did not transpose Regulation (EU) 347/2013 which is important for the realization of ongoing strategic infrastructure projects, and for this reason the Ministerial Council infringed BiH.

II Montenegro

The adoption of the draft Law on Security of Supply of Oil Products, which regulates the manner of establishing and managing emergency oil stocks and the procedure in case of disruption of supply of petroleum products, is pending since 2016.

According to the Report Montenegro has reached a 40% share of energy from renewable sources in GFEC in 2017, surpassing its 30, 7% median trajectory for 2017 – 2018. Secretariat believes that it would be important to harmonize strategies and reporting requirements on climate and energy with the Recommendation on National Energy and Climate Plans (NECPs) and determine the impacts.

With regard to large combustion plants, the opt-out of the thermal power plant Pljevlja (the only existing plant in Montenegro) means that the plant will be able to remain in operation for a maximum of 20.000 operational hours between 1 January 2018 and 31 December 2023 (remaining operational hours- 12.919 working hours).

Secretariat considers that without further delay, Montenegro should adopt the remaining secondary legislation on energy labelling of energy-related products as well as to facilitate private investments through Energy Services Company (ESCO) projects and establish a functional system for calculation of energy efficiency indicators and monitoring of National Energy Efficiency Action Plan (NEEAP) implementation.

III North Macedonia

North Macedonia is the only Contracting Party with a fully deregulated wholesale and, because of the negligible share of households in gas consumption, retail market. As the supply market is dominated by one source – Russia’s Gazprom – and is limited to bilateral trading agreements, the market is illiquid. Secretariat considers that the first and utmost priority for North Macedonia is finally executing the appropriate transmission system operator unbundling model, for which the deadlocked relationship between the State and Makpetrol, the country’s biggest gas importer, should be resolved.

Secretariat states that the Government did not adopt and submit the first NEEAP under the Energy Efficiency Directive by the 30 April 2019 deadline.

In 2017, North Macedonia achieved only a 19,7% share of renewable energy in GFEC, instead of its 21% median trajectory for 2017 – 2018. The 2018 Energy Law introduces support granted on a competitive basis (auctions).

With regard to environmental protection, the Secretariat considers that systematic application of strategic environmental assessments for plans and programs related to network energy is missing. Also, the key priority should be the proper implementation of the National Emission Reduction Plan, which started in January 2018, for which adequate financing must be allocated for emissions abatement.

As North Macedonia did not transpose Regulation (EU) 347/2013 and failed to designate the national competent authority, it is currently in breach of the infrastructure acquis.

IV Albania

Progress in the structural reforms of Albania’s electricity sector, according to the Secretariat, was only on paper this year. Secretariat states that the transmission system operator, OST, can only be considered fully unbundled after the transfer of competences away from the Ministry of Infrastructure and Energy to Ministry of Finance and Economy. Also, functional unbundling between distribution and supply has also been delayed, without explicit reason for such a thing. The initiation of work on the draft Trans Adriatic Pipeline’s network code and the establishment of a gas market model in Albania were the most significant developments during the past year.

Due to a less favorable hydrological year and high dependence on hydropower, renewable energy share in GFEC decreased on 34, 6% in 2017. compared to 37, 1% in 2016.

Secretariat states that despite the formal strengthening of the legal and institutional framework for energy efficiency, little was achieved by Albania, and Albania remains noncompliant in too many areas. It is necessary for Albania to adopt the missing by-laws and to adopt Directive 2012/27 / EU on energy efficiency.

Secretariat considers that existence of the numerous complaints shows that the implementation of legislation related to environmental assessments is still not sufficiently developed and that the effective opportunities for the public to participate in decisionmaking are not ensured in practice. The quality of environmental reports and procedures in Albania needs to be strengthened, as no positive progress was recorded in the previous year. During the last reporting period, two complaints were submitted to the Secretariat about the environmental impact assessments (EIA) of new hydropower plants in a protected area.

Implementation of the Regulation (EU) 347/2013 in Albania is particularly urgent due to its potential to facilitate the realization of ongoing strategic infrastructure projects, particularly the interconnection 400 kV overhead line (OHL) between Albania and North Macedonia. The project is expected to improve security of supply and overall operation of the energy system of Albania, as well as positively influence the regional market and its coupling.

V Kosovo*

Secretariat states that that Kosovo*’s regional integration is necessary, electricity market opening and fostering market competition. Amendments to the existing legislation are needed to introduce renewable energy auctions and reform of support schemes based on premiums paid on top of the electricity price rather than administrative feed-in tariffs.

In 2017, Kosovo* achieved a 22, 9% share of renewable energy in GFEC, just in line with its 22, 9% median trajectory for 2017 – 2018. This was due to the revision of biomass consumption for heating by household customers rather than investment in renewable energy. As the currently applicable legal framework fails to comply with the provisions of the Large Combustion Plants and Industrial Emissions Directives, the Secretariat referred the case to the Ministerial Council in July 2019. The current emissions of the dust and nitrogen oxides from large combustion plants under the NERP are particularly concerning.

Hristina Vojvodić, RERI

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