A Clean-Energy Transition in

Southeast Europe: Challenges,

Options and Policy Priorities
IMPULSE

Matthias Buck, Sonja Risteska and Christian Redl 11.2018

Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

CONTENTS

Introduction 3

Opportunities for a clean-energy transition

in Southeastern Europe 4

Policy priority area #1:

Remove barriers and implement instruments to lower
the cost of capital of deploying renewables 7

Policy priority area #2:

Increase security of supply through regional cooperation 9

Policy priority area #3:

Create flexible power systems 10

Policy priority area #4:

Gradually phase out coal 11

Policy priority area #5:

Improve energy efficiency, particularly in buildings 12

Policy priority area #6:

Empower consumers 14

Policy priority area #7:

Introduce integrated planning for energy security,
cost-competitiveness and the mitigation of global warming 15

Conclusions 16

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Introduction

Right now is an auspicious moment for advancing a

clean-energy transition in Southeastern Europe
(SEE).1 First, the EU along with the vast majority of
the international community has pledged to meet the
climate targets laid down by the 2015 Paris Agree-
ment. Second, the EU has begun to push for an inte-
grative approach to climate and energy policy in the
region, where four countries are already EU mem-
bers, four Western Balkan (WB) countries are candi-
dates for EU membership and two Western Balkan
countries are potential candidates. Third, this inte-
grative approach, in addition to helping the climate,
will narrow the divide between Western Balkan
countries and the SEE EU, and between SEE and the
other regions of Europe.

Fourth, the costs of renewable energy technologies

have fallen markedly in recent years. If the SEE is to
reap the benefits of these cost reductions and develop
low-cost renewable energy projects that are cheaper
than conventional alternatives, however, it must
overcome significant barriers in its regulatory, pol-
icy, financing and market framework for investment.

This paper addresses the main challenges to a clean-

energy transition in SEE and provides a number of
policy recommendations for achieving it. The paper
is a result of two projects: the Western Balkans En-
ergy Transition Dialogue project2 and South East Eu-
rope Energy Transition Dialogue.3

1 For example, the recent SEERMAP project has demonstrated that (BMNT). The information and views set out in this paper are
deployment of renewable capacity in the EU SEE and Western those of the authors and do not necessarily reflect the opinion of
Balkans not only is feasible but also has several advantages over the Austrian Federal Ministry for Sustainability and Tourism.
fossil fuel-based investment: Deployment of RES does not result 3 See https://www.agora-energiewende.de/en/projects/south-
in higher wholesale prices, avoids stranded assets in fossil fuel east-europe-energy-transition-dialogue/ for more details for our
power plants, decreases reliance on imported fossil fuels for im- ongoing project in EU SEE. This project is part of the European Cli-
proved external balances and lowers investment needs in fossil mate Initiative (EUKI) of the German Federal Ministry for the Envi-
fuel energy infrastructure. See http://rekk.hu/analysis-de- ronment, Nature Conservation and Nuclear Safety (BMU). The
tails/238/south_east_europe_electricity_roadmap_-_seermap opinions put forward in this paper are the sole responsibility of
2 See https://www.agora-energiewende.de/en/projects/western- the authors and do not necessarily reflect the views of the Fed-
balkans-energy-transition-dialogue/ for more details on our on- eral Ministry for the Environment, Nature Conservation and Nu-
going project in the Western Balkans. The project is funded by clear Safety (BMU).
the Austrian Federal Ministry for Sustainability and Tourism

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Opportunities for a clean-energy power markets and specific political targets for in-
transition in Southeastern Europe creasing renewable energy, energy efficiency and
the number of interconnections.
Countries throughout SEE have high shares of elec-
tricity generated by an aging fleet of coal-fired In the EU, a focal point for this debate is the develop-
power plants. Some of the “youngest” coal plants in ment of integrated national energy and climate plans
the Western Balkans were built in 1988, before the (NECPs) required by the new European Regulation
break-up of Yugoslavia. Within the next decade, on the Governance of the Energy Union. In 2018 and
utility companies and governments will have to de- 2019, Member States will develop NECPs in consul-
cide whether to modernise or replace roughly 50% of tation with their neighbours and the European Com-
the region’s existing coal and lignite generation ca- mission.
pacity (see Figure 1 and Footnote 1).
The contracting parties of the Energy Community,
The debate about how to proceed comprises a host of which includes the Western Balkan countries, are
concerns: the vested interests of utilities, negative pursuing similar goals. In particular, they are dis-
effects on health, tighter standards for air quality cussing new national targets for reducing green-
and carbon dioxide emissions, more integrated house gas emissions, increasing renewable energy
and enhancing energy efficiency.

Figure 1: Installed generation capacities in SEE in business as usual and decarbonisation scenarios

REKK (2017): SEERMAP Regional report

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

The combined effects of EU targets for renewable However, while the majority of Western European
energy and energy efficiency will – if achieved – re- countries have committed to phase out coal genera-
duce EU greenhouse gas emissions by 2030 by well tion by 2030 or before, no country from SEE has an-
over 45% compared with emission levels in 1990. By nounced concrete plans (Figure 2). On the contrary,
2030 an average of 55% of electricity in Europe’s many of them, especially in the Western Balkan
power grids will be from renewable energy sources.4 countries, are looking for investors for new lignite
Solar photovoltaics and wind power – driven by sig- and coal TPPs.
nificant cost reductions – will almost certainly con-
tribute the largest share of zero-carbon technologies. Given the region’s strong reliance on coal, renewable
This presents new challenges to power system oper- energy – in particular, renewable electricity – has
ators, regulators and planning authorities.5 enormous potential for the future development of
power systems in SEE countries.6 By 2030, renewa-
ble electricity could in principle cover 45–55% of

Figure 2: Coal phase-out years and operational capacity

Europe Beyond Coal campaign 2018

4 This would be a cost-effective share of the EU average based on 5 See IEA (2017), Getting Wind and Sun to the Grid.
Commission modelling, though it will be significantly higher in 6 IRENA (2017), Cost-competitive renewable power generation: Po-
Austria (100%), Denmark (>90%), Germany (65%), Portugal tential across South East Europe
(>80%), Spain (>70%) and Sweden (>80%).

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

power demand in Western Balkan countries even if Furthermore, sound planning for the expected in-
demand rises as projected.7 crease in the share of variable renewable electricity
will significantly reduce the costs and the practical
Unlocking this cost-competitive potential depends challenges of power system integration. Regional co-
on the satisfaction of a number of preconditions. operation can play an important role in this regard.
Figure 3 above shows how cost-competitive poten- The development of NECPs provide space and focus
tial corresponds directly with the perceived political, for identifying specific challenges of a clean-energy
regulatory and financing risks of developing renew- transition and for developing pragmatic solutions.
able energy projects. The higher these risks, the
higher the cost of capital for renewables investors Because decarbonisation rests on continuous in-
and the lower the cost-competitive renewables po- vestment in wind turbines and solar photovoltaics
tential. The International Renewable Energy Agency (PV), a policy environment that promotes coupled
recently showed that a 4-percentage-point reduc- power markets, the coordination of security of
tion in the financing risk for renewables in South- supply policies, the deployment of renewables, the
east Europe would increase the cost-effective po- managed phase-down of coal-fired assets, energy
tential in 2016 from 53 GW to 293 GW – an increase efficiency investments and de-risking policies is
of 450%. Concrete steps to address investment risks key for a cost-effective clean-energy transition.8
should thus be part and parcel of any clean-energy Below, we describe these policy areas, associated
transition strategy in the region. challenges and our recommendations in more detail.

Figure 3: Cost-competitive wind potential in SEE as a function of cost of capital

IRENA 2017

7 See REKK (2017), SEE Regional report. 8 See, for instance, Agora Energiewende (2016): The Power Market
Pentagon: A Pragmatic Power Market Design for Europe's Energy
Transition.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Policy priority area #1: Robust and reliable frameworks are seen as lower
Remove barriers and implement instru- risk, which translates into lower costs for project de-
ments to lower the cost of capital of de- velopers and lower rates of return needed to make an
ploying renewables investment profitable. Low-risk projects will need
less or even no help in closing possible revenue gaps
Robust and reliable renewable energy frameworks and are thus cheaper for consumers and taxpayers.
are crucial for providing investors with the confi- At the current level of capital costs, investment in
dence to invest in RES capacity. At the same time, RES in SEE EU and SEE Western Balkan countries
there are significant barriers to RES investment in costs up to twice as much as it would in Germany or
the regulatory, policy and market framework. These France (Figure 4). It is critical, therefore, that coun-
barriers have kept the costs of capital for RES projects tries remove the most important and costly barriers
in SEE significantly above the European average.9 to RES and promote instruments to lower the cost
of capital of RES projects.

Figure 4: Capital cost estimations for onshore wind projects in Europe in 2014

DiaCore (2016)

9 See Eclareon and Ecofys (2017), Pricetag. Mapping the cost of

capital for wind and solar energy in South Eastern European
Member States.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Identifying barriers to RES investments in the na- Recommendations:

tional regulatory and policy framework leads to → A comprehensive approach by SEE countries, the
better cross-border RES cooperation, which can European Commission, the Energy Community
minimize distortions from differing domestic and development banks is needed to overcome
frameworks with regard to, say, permitting, grid key barriers to RES deployment and to establish
connection rules, fiscal policies and taxation.10 At the best-practice renewable energy policy environ-
same time, removing policy and regulatory barriers ments that keep the cost of new renewables as
to investment helps lower cost of capital regardless low as possible.
of a country’s financing conditions. → Financial de-risking instruments need to com-
plement best-practice renewable energy policy
Renewables investment is very capital intensive. environments to fully reap the benefits of low-
Furthermore, the capital costs of RES investment di- cost renewables. Thorough analysis of ex-ante
rectly reflect how investors perceive risk. Hence, it investment risk factors can help policy makers
is important to lower relevant risks through the use reform those elements that lead to the strongest
of financial de-risking instruments.11 Reducing decrease in cost of capital for investors.
the costs of capital for investment in renewables in → International financial institutions should as-
SEE would ensure that renewable energy projects are sess the scope for pooling available funds (e.g.
economically more attractive than continued in- EU budget, EIB, KfW, AFD, etc.) and from this
vestment in conventional capacity. Likewise, it develop a joint financing strategy for South-
would avoid new investment in coal, which is likely eastern Europe.
to become stranded by future decarbonisation poli- → De-risking pilot projects should be established in
cies; it would generate significant savings to con- SEE prior to 2021. These would help gather expe-
sumers and taxpayers; and it would allow for more rience with larger-scale de-risking instruments
sharing of the social, economic and health benefits of that will become available through the EU’s
renewable energy. 2021–2027 budget .

New instruments for de-risking RES investment

have already been discussed for intra-EU and the EU
neighbourhood as part of the 2021–2027 EU
budget.12 Such an instrument should also be available
for WB countries, not least because some invest-
ments in conventional assets come with govern-
ment-backed guarantees (such as those from Chi-
nese banks). The European Investment Bank could
play a role in de-risking RES investment, as could
the European Bank for Reconstruction and Develop-
ment or the Western Balkan Investment Framework.
There could also be bilateral arrangements between,
say, the German development bank KfW or the
French development bank AFD.

10 See Ecofys and eclareon (2018), Cross-border renewables cooper- 12 See Footnote 11 and the RES-CRF concept in the 2030 EU frame-
ation. Study commissioned by Agora Energiewende. work for climate and energy.
11 For example, see Ian Temperton (2016): Reducing the cost of fi-
nancing renewables in Europe. Study on behalf of Agora Ener-
giewende.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Policy priority area #2: power. As a result, countries benefit from geograph-
Increase security of supply through ical “smoothing out” effects, the regional residual
regional cooperation load peak is lower than the sum of national load
peaks and fewer power plants must meet the load.
The need to collaborate across borders on security of
supply issues is of utmost importance. This is espe- In the European energy market, opportunities for re-
cially crucial in crisis situations, such as extreme gional cooperation must be seen in both intra-re-
weather, but system integration and other forms of gional and inter-regional contexts. With regard to
cross-border collaboration bring additional benefits wind and solar deployment, particularly strong ben-
as well. Regional cooperation and power system in- efits from reduced flexibility needs and increased
tegration are a low-cost and effective way to system reliability can be achieved by integrating
strengthen the supply security of electricity. countries with fundamentally different weather re-
gimes, as shown in Figure 5 below. For example,
When it comes to achieving a reliable power system, Grams C. et. al. (2017) find that balancing future wind
regional approaches cost less than national ap- capacity across regions – deploying slightly more
proaches. The quantity of required resources de- capacity in the Balkans than at the North Sea, say –
creases and options for balancing the system expand would eliminate most wind production output varia-
as market size increases. Peak-load periods are tions, better maintain average generation, and in-
decorrelated among neighbouring countries, as is the crease fleet-wide minimum output.
feed-in from variable renewables, especially wind

Figure 5: Weather-regime-dependent changes in wind electricity generation

Grams et al. (2017)

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Central Western Europe also stands to benefit di- the benefits for SEE but for other regions in Eu-
rectly from supporting a clean-energy transition in rope as well. Furthermore, it should include as-
the Western Balkans through reduced flexibility sessments of the infrastructure investment and
needs and enhanced, low-carbon system reliability. regulatory reforms needed to unlock these bene-
(This assumes adequate transmission capacity, fits, which can help catalyze outside investment
however.) Grid infrastructure, both domestically and or finance support in the region.
across borders, is the cheapest and most effective
flexibility enabler. Accordingly, the sound planning
of transmission infrastructure requirements within Policy priority area #3:
and between European regions is key. Create flexible power systems

Regional cooperation can take various forms, from Flexibility is key to tackling the real-world chal-
improved collaboration between existing institu- lenges of transforming today’s power systems to-
tions to new, “stronger” institutions with a regional wards clean energy. It applies to both power system
mandate. Moreover, regional assessments of system operation (by TSOs) and power market operation (by
adequacy can help national decision makers better power exchanges and other trading venues). Cross-
project when reliability problems with domestic border coupling of systems and markets must be
power systems will appear on the horizon. accompanied by deeper market reforms to reap the
full benefits of progressive integration. Accord-
Recommendations: ingly, regional developments should reflect the re-
→ Fostering regional cooperation and trust building forms discussed in the Clean Energy for All Europe-
between countries is a slow process, but no re- ans (CE4All) package.
grets come with it. Achieving it requires top-
down approaches initiated, say, by the European The SEE region could also consider lessons from
Commission and the Energy Community, and other regional initiatives in the area of market
bottom-up cross-border approaches initiated coupling and power market reform, such as the Pen-
voluntarily. Each type can reinforce the effects of talateral Energy Forum. These experiences of these
the other. In particular, the latter can provide im- initiatives could provide a basis for deeper regional
portant lessons for integrating top-down pro- cooperation between EU and non-EU countries and,
cesses so that they can be transferred more easily even more importantly, between Western Balkans
across regions. countries, where mistrust from past conflicts still
→ Experience from existing regional initiatives on hampers deeper cooperation in many fields, includ-
system adequacy (such as the TSOs’ regional ade- ing energy.
quacy report in the Pentalateral Energy Forum)
should be transferred to the SEE region. Recommendations:
→ The Energy Community, the European Commis- → The Western Balkan countries should prioritise
sion and EU member states should assist in solv- implementation of the CE4All package. The Euro-
ing regional disputes especially in the Western pean Commission, the Energy Community and
Balkans, where the legacy of past conflicts still EU member states should lend their strong sup-
lingers. port to this cause.
→ An analysis is needed of the benefits of the in- → All countries in the SEE region should prepare
creased deployment of wind and solar in South- power system flexibility roadmaps. Policy mak-
eastern Europe, where potentials are still under- ers should consider recommendations from the
explored. The analysis should consider not only EU and regional bodies as well as input from

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

think-tank networks, the private sector, civil so- power plant fleet in these countries is generally very
ciety and other stakeholders. old; the average coal plant went into operation 30
→ Timely power market reform, power system inte- years ago. To take one example, Greece needs to re-
gration and cross-border cooperation can benefit place approximately 40% of its current fossil fuel
from knowledge exchange between regional co- generation capacity by the end of 2030. In doing so,
operation forums in Western, Eastern and South- it plans to build two coal-fired power plants, totaling
ern Europe. 1100 MW. Romania, for its part, wants to construct a
→ Increasing demand flexibility (demand-side re- new 600 MW lignite unit.14
sponse) should be a policy priority.
Recommendations:
→ Energy planning strategies need to address both
Policy priority area #4: the phasing-in of renewables and the phasing-
Gradually phase out coal down of coal.
→ The EU’s Coal Regions in Transition Platform is a
Due to aging power plants, countries in the SEE re- good example for an enabling and empowering
gion will need to replace approximately 50% of approach to national coal phase-out discussions.
their current generation capacity by 2030 and The Platform activities could be expanded to the
around 95% by 2050 (see Figure 1). Many countries Western Balkans.
in the region, especially the Western Balkans, are → Insights from national coal phase-out discus-
planning to replace their old generating units with sions (such as the German Coal Commission)
new fossil fuel capacity. (As many as 26 new coal- should be used in other countries as well.
fired power plants are in the pipeline.) This new in- → Progressive utilities could add important per-
vestment in coal-based generation will result either spectives and insights to discussions on lowering
in a carbon lock-in or in a significant amount of the share of coal in the power system and plan-
stranded assets, making decarbonisation costlier ning the larger energy system transition.
and politically uncertain. The environmental im- → Targeted financing instruments should help to
pact assessments carried out so far have all been facilitate the social and economic transition of
challenged in court. mining regions and the clean-up of mining sites.
→ Reducing the share of coal and developing low-
China is emerging as the main funder of these pro- cost renewables should be regarded as the central
jects. Ongoing Chinese investment in the Western building blocks of integrated national energy and
Balkans’ energy sector is already enabling coal pro- climate plans.
jects such as Serbia’s Kostolac B3 and Bosnia’s Tuzla
7, which do not comply with EU emissions regula-
tions and thereby jeopardize European regulatory
harmonisation and decarbonisation.13

In EU SEE, the share of hard-coal- and lignite-fired

generation in the power mix ranges from almost 20%
in Croatia and 25% in Romania to 45% in Bulgaria
and 50% in Greece. As in the Western Balkans, the

13 See Bankwatch, Coal in the Balkans, https://bankwatch.org/pro- Win €1.75bn from EU Climate Scheme to Build Two Coal Plants,”
ject/coal-in-the-balkans#1503303885469-aa188fed-71ee The Guardian, 3 November 2016. https://www.theguar-
14 See Bankwatch’s “Rovinari unit 7, Romania.” https://bank- dian.com/environment/2016/nov/03/greece-set-to-win-175m-
watch.org/project/rovinari-unit-7-romania ; and “Greece Set to from-eu-climate-scheme-to-build-two-coal-plants

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Figure 6: Planned new coal-fired power plant capacities in SEE

CEE Bankwatch, WWF, News outlets

Policy priority area #5: Despite the critical role of energy-efficient buildings
Improve energy efficiency, particularly in reducing energy imports, in reducing consumer
in buildings electricity bills and in improving public health, build-
ings are not perceived as part of the critical infra-
Energy efficiency is a central pillar of the CE4ALL structure. Few financing opportunities for the energy
package. The EU’s new energy efficiency target for system target building efficiency, and opportunities
2030 is 32.5%, and an upwards revision is planned for investment in energy-efficient demand have
by 2023. The countries of the Western Balkans have been underexploited. Only 4.4 % of the regional fund-
not yet set targets, though they will have to align ing and 1.7 % of the total committed financing of in-
with the EU eventually. The EU countries in the re- ternational financial institutions (IFIs) are allocated
gion will have to implement EU targets sooner, to demand-side infrastructure.15
which reinforces the need to implement energy effi-
ciency policy reforms and accelerate investment in Residential and public buildings account for more
energy efficiency measures. than 40% of energy consumption in most of the SEE
region and thus have significant room for improve-
ment. However, the widespread problem of energy

15 See BPIE (2017). Financing the future of buildings in Central, East-

ern and Southeast Europe. A reality check of current public fund-
ing allocation.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Figure 7: Funding streams dedicated to energy efficiency in buildings in SEE

BPIE (2017)

poverty in the region is the foremost cause of ineffi- → Governments must secure additional measures
cient energy use in the building sector. According to and instruments, including innovative private-
estimates, up to 60% of households qualify as energy sector funding, to accelerate the implementation
poor. Inefficient energy use results in high energy of energy efficiency measures.
intensity. Energy intensity is much higher in Bul- → An environment is needed that encourages more
garia, Romania and the entire WB region than the EU energy service companies in the region. Energy
average (see Figure 8). This gap will increase if these efficiency requirements for energy suppliers
countries do not take a more ambitious approach should be introduced as well.
that channels investment into energy efficiency → Product standards for building codes and appli-
measures. ances are important instruments for policy mak-
ing and must therefore be adopted and enforced.
Recommendations: Public buildings should serve as energy efficiency
→ The EU’s Cohesion Fund and IFIs should include pilot projects. Energy performance certificates can
dedicated funds for implementing energy effi- provide benchmarks for financial support.
ciency measures, especially in the building sec- → Financial instruments must complement product
tor. Among other things, energy efficiency standards. Taxes – on property, say – and depre-
measures will help alleviate energy poverty and ciation rules should be designed to incentivize
public health issues in the region. energy efficiency investments.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

→ Consumer education and capacity building in Policy priority area #6:

Governments and IFIs is necessary to leverage Empower consumers
the effects of financial instruments and stand-
ards. For consumers, focus should be placed on The transition to clean energy produces a more de-
clean heating and cooling systems. centralised energy system. For instance, the CE4ALL
→ Energy poverty in the region is so widespread package assigns consumers rights and possibilities
that many households are unable to implement with regard to the self-generation, distribution,
even the most basic energy efficiency measures storage, consumption and sale of electricity.16 En-
such as replacing standard light bulbs with LEDs. gaging with and empowering consumers in SEE can
The region’s governments should therefore iden- also help utility companies create innovative ap-
tify vulnerable consumers and implement proaches and help power systems better cope with
measures that alleviate energy poverty while en- bad governance and corruption.
couraging energy efficiency.
Most people in the region own their own homes, and
many are dissatisfied with the energy services and

Figure 8: Energy intensity of the economy, 2005 and 2015

(kg of oil equivalent per 1 000 EUR of GDP)

SQ Consult (2018)

16 See European Commission, Clean Energy for all Europeans,

August 2018.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

utility prices they receive. Thus, financial mecha- An integrated approach to energy and climate
nisms to promote decentralised RES and energy effi- planning helps to identify opportunities for eco-
ciency investments allowing consumers to become nomic improvement, energy security and climate
prosumers are required. The fact that electricity protection from cheap renewables and enhanced ef-
prices are still subsidized and lower than those of EU ficiency by, say, eliminating costly barriers to RES
countries suggests that financing mechanisms with deployment. It can also ensure that RES deployment
simple and transparent administrative procedures does not increase the overall cost of the energy sys-
for households and SMEs could be key to, say, fast- tem, and it can secure the long-term competitive-
track the rapid scaling of rooftop PV systems. ness of a country’s energy sectors. Finally, integrated
climate and energy planning can avoid stranded fos-
Recommendations: sil assets, decrease reliance on imported fossil fuels,
→ Calculate and understand the economic benefits improve external balances and lower investment
that result when citizens in SEE participate in the needs in fossil-fuel infrastructure.
energy transition.
→ Create financing opportunities for small-scale Because countries in SEE have a relative high num-
(mostly rooftop) PV throughout the SEE region. ber of interconnections, a cooperative approach to
These opportunities should lie mostly outside of integrated climate and energy planning can maxim-
existing utility companies. Governments need to ise the potential for boosting energy security, cost
put in place a clear, transparent and stable regu- competitiveness and climate change mitigation.
latory and policy framework for small-scale RES,
and financial institutions should make it easier The recently adopted EU Regulation on the Govern-
for those who want to install private PV units to ance of the Energy Union requires EU member
receive affordable loans. These measures would states to prepare National Energy and Climate Plans
help households and small and medium-sized (NECPs). EU SEE countries have just begun the
businesses to utilize the region’s potential for NECP process, while other EU member states are
roof-top PV. further along, though in most cases their progress
→ Introduce net metering and/or net billing to sup- has been slow.
port the self-consumption and feed-in of decen-
tralized RES. As a complementary measure, es- For the Western Balkan countries, a similar process
tablish grid tariff systems that allow for rooftop is expected to start soon. The Energy Community is
PV while recouping investment in the public grid. committed to helping the region develop energy and
climate plans in order that its countries do not fall
too far behind the EU. In March of 2018 the Energy
Policy priority area #7: Community agreed to create work groups on inte-
Introduce integrated planning for en- grated NECPs in the Western Balkan countries and
ergy security, cost-competitiveness and to set regional 2030 targets for renewables, energy
the mitigation of global warming efficiency and reductions in greenhouse gas emis-
sions.
A clean-energy transition based on efficiency, re-
newables and the gradual phase-out of coal is eco- Recommendations:
nomically sound, enhances energy security and → Regional cooperation in preparing the NECPs is a
delivers on climate targets. Moreover, renewables key, albeit often overlooked, element of holistic
and efficiency investment come with significant co- and least-cost energy and climate planning. The
benefits such as more job creation and cleaner air.

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Agora Energiewende | The Clean-Energy Transition in Southeast Europe: Challenges, Options and Policy Priorities

Energy Community and the European Commis- → Regional cooperation and power system integra-
sion should work on fostering closer cooperation tion to minimise power system costs for con-
between all SEE countries (EU and non-EU). sumers and maximise supply security
More open and transparent procedures can facil- → Regulatory and financing instruments that help
itate better planning outcomes. consumers and energy cooperatives to achieve
→ Create short-term incentives for implementing the benefits of decentralized energy solutions
NECPs in the Western Balkans. Experience has → Holistic long-term energy system planning that
shown that the prospect of EU membership alone combines top-down and bottom-up elements
is not sufficient for short-term action. (The prob- and takes into account the effects of climate
lems that the Western Balkans have had comply- change
ing with EU emissions regulations are just one → National Energy and Climate Plans should ad-
example.) dress both the phasing-in of renewables and the
→ Foster holistic long-term planning in the energy phasing-down of coal. The NECPS should also in-
sector extending through 2050, with an empha- clude considerations on access to finance to help
sis on regional cooperation and knowledge the social and economic transition of mining re-
sharing. gions and the clean-up of mining sites.

Conclusions

To reap the benefits of low-cost renewables and en-

ergy efficiency investments in Southeastern Europe,
it is necessary to overcome significant barriers in
the region’s regulatory, policy, financing and market
framework. With roughly half of the installed coal
and lignite generation capacity in SEE requiring
modernization or replacement in the next decade, we
now have a perfect opportunity to shape the region’s
energy systems for years to come.

Unlocking cost-competitive renewables and energy

efficiency potential depends on a number of “no-re-
gret” policy priorities in Southeastern Europe:

→ Stable and transparent regulatory and invest-

ment frameworks for renewables and energy ef-
ficiency including EU-level de-risking instru-
ments and de-risking pilots to lower the cost of
capital;
→ A comprehensive EU framework for the energy
sector of the Western Balkan countries, with fi-
nancial and political incentives linked to rigorous
regulatory compliance

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Agora Energiewende
Anna-Louisa-Karsch-Straße 2 | 10178 Berlin
P +49. (0) 30. 7001435-000
F +49. (0) 30. 7001435-129
www.agora-energiewende.de
[email protected]

Agora Energiewende is a joint initiative of Stiftung Mercator and the European Climate Foundation.