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Western Balkans invest in green energy

Western Balkans invest in green energy

In recent months, the Western Balkans have been facing high and volatile energy prices. This is mainly due to a lack of sustainable power generation capacities and a great dependency on the import of electricity or fossil fuels (oil and gas) needed to produce electricity.

The current energy crisis has been felt on the macro and micro levels, directly and indirectly. While governments, households, and businesses are struggling with rising electricity bills, prices for a wide range of products and services have also skyrocketed, as electricity and petroleum products are important inputs in basically every sector of economic activity. Spill-over effects in turn lead to higher inflation and thus a further reduction of citizens’ living standards, as well as putting extra pressure on countries’ monetary and fiscal policies for maintaining economic stability. 

Governments, companies and even more and more households consider investing in renewable power generation capacities to be a way out of this dilemma. For the ongoing energy crisis has made renewable energy a highly attractive business opportunity for investors worldwide, but especially so in the Western Balkan region, where there is an enormous and largely untapped natural potential. According to World Bank data, the average fossil fuel energy consumption in the Western Balkan countries lies at around 76% of the total energy consumption, as opposed to the EU countries where this share is 67%. On the other hand, despite the significantly higher number of sunny days in the Western Balkan region, as well as the significantly higher level of solar radiation, the average electricity production from renewable sources, excluding hydroelectric, in the Western Balkan countries is less than 1% of the total energy production, which is far from the EU average of around 17%. These figures clearly express the unused potential of the Western Balkan region for developments in the renewable energy production. 

Wind and solar clearly offer the most promising opportunities for renewable energy production in the Western Balkans, due to favourable climate conditions and steadily falling costs for the associated technology and thus falling capital expenses. Hydroelectric plants on the other hand are less attractive in the region, as their uptake is already rather high and seasonal rainfall patterns exacerbated by climate change threaten their profitability. Many investors are therefore interested, or already investing, in wind parks and photovoltaic systems as the most easily implementable solution for meeting the growing demand. Recent high-profile examples include an onshore wind-park in Albania with a capacity of 150 MW, as well as the construction of the first private wind farm in North Macedonia, an investment worth 61 million euros with eight turbines and a capacity of 36 MW. This flagship project is expected to start operating by 2025 and to provide green energy for the next 25 years for about 20 thousand households, which is a proof of the favourable conditions provided for investing in private wind farms in North Macedonia de facto and de lege. 

Amendment of the Building Code in preparation 

Governments in the Western Balkan countries recognize the positive impulse and act accordingly to support it. For example, out of seven current projects in North Macedonia granted a status of strategic investment, six are solar parks and one is a wind park. 

The Law on Construction of the Republic of North Macedonia allows specifically the construction of photovoltaic panels to produce electricity on the ground, while the installation of photovoltaic panels for electricity generation on buildings is regulated with a maximum installed capacity of up to 1 MW. The procedure for obtaining a building permit for the construction of photovoltaic panels, i.e. a decision for installation is simple and equally accessible for all business entities. Additionally, the Government of North Macedonia is working on a trailblazing proposal for the Western Balkans region by preparing a proposal for amendments to the Law on Construction: this should also create the legal conditions for investors in the Technical-Industrial Development Zones to be able to install photovoltaic panels on the rooftops of their production facilities for electricity production for their own consumption. 

LGP has recognized the current market trends early on and is actively involved in the Western Balkans’ renewable energy projects market. Through its vast network of partners and collaborators, LGP brings together landowners, developers, and investors, while also facilitating strategic communication with competent authorities and regulatory bodies. In this manner, LGP is uniquely positioned as a central player connecting all important dots in the story and basically acts as a one stop shop provider of services for any party interested in the Western Balkan renewable energy market. 

Relying on LGP’s comprehensive approach has by the way proven to be a smart choice. Currently, we consult clients involved in several photovoltaic projects in different stages of development, in North Macedonia and Albania, adding up to almost 1,2 GW of potential generation capacity. These projects encompass opportunities with private and public partners, private investors, landowners, and developers, as well as investment opportunities on a state-owned land. Especially innovative types of renewable energy projects are the several “agri voltaic projects” announced primarily in Albania, in which LGP brings strategic partners and key players from the agricultural and renewable energy sectors to the table. 

However, the rising interest for such investments in the Western Balkans will undoubtedly put extra pressure to the current infrastructure in the next years and also open the question of regional grid integration, an already longstanding demand of the EU. Rapid developments towards renewable energy production, such as solar and wind, will thus require public investments for upgrading the national transmission networks and interconnectors needed to facilitate green energy transition. 


AUTHOR:

Arlind Zeqiri, M.A., Managing Partner and Business Development Director at LGP

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