Renewable Energy in South East Europe (Renewable Energy Report)

Renewable Energy in South East Europe

Chris Moore and Kevin Smith

Renewable Energy in SEE

Publisher’s note Every possible effort has been made to ensure that the information contained in this publication is accurate at the time of going to press and neither the publishers nor any of the authors, editors, contributors or sponsors can accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editors, authors, the publisher or any of the contributors or sponsors. Users and readers of this publication may copy or download portions of the material herein for personal use, and may include portions of this material in internal reports and/or reports to customers, and on an occasional and infrequent basis individual articles from the material, provided that such articles (or portions of articles) are attributed to this publication by name, the individual contributor of the portion used and GMB Publishing Ltd. Users and readers of this publication shall not reproduce, distribute, display, sell, publish, broadcast, repurpose, or circulate the material to any third party, or create new collective works for resale or for redistribution to servers or lists, or reuse any copyrighted component of this work in other works, without the prior written permission of GMB Publishing Ltd. GMB Publishing Ltd. 120 Pentonville Road London N1 9JN United Kingdom www.globalmarketbriefings.com This edition first published 2007 by GMB Publishing Ltd. © Chris Moore and Kevin Smith Hardcopy ISBN 1-84673-050-3

E-report ISBN 1-84673-051-1

British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library

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Renewable Energy in SEE

Contents About the authors

vii

About the report

ix

List of Acronyms

xi

Introduction

1

„ What is ‘Renewable Energy’?

1

„ Why Renewable Energy?

1

„ How is RE defined?

2

„ Generic definitions

3

„ Financing

5

„ Environment

6

„ Current project developments

6

„ The review markets

7

Albania

9

„ Overview

9

„ RE policy

10

„ Legislation

11

„ Grid access, distribution

11

„ RE resources

11

„ Contacts

13

„ Summary

13

Bosnia & Herzegovina

15

„ Overview

15

„ RE policy

16

„ Legislation

17

„ Grid access, distribution

18

„ RE resources

19

„ Contacts

22

„ Summary

22

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Renewable Energy in SEE

Bulgaria „ Overview

23

„ RE policy

25

„ Legislation

26

„ Grid access, distribution

26

„ RE resources

26

„ Contacts

28

„ Summary

28

Croatia

29

„ Overview

29

„ RE policy

30

„ Legislation

32

„ Grid access, distribution

32

„ RE resources

33

„ Contacts

35

„ Summary

35

Fyr Macedonia

37

„ Overview

37

„ RE policy

38

„ Legislation

38

„ Grid access, distribution

39

„ RE resources

40

„ Contacts

41

„ Summary

42

Romania

iv

23

43

„ Overview

43

„ RE policy

44

„ Legislation

46

„ Grid access, distribution

46

„ RE resources

47

„ Contacts

49

„ Summary

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Renewable Energy in SEE

Serbia & Montenegro

51

„ Overview

51

„ RE policy

52

„ Legislation

53

„ Grid access, distribution

54

„ RE resources

54

„ Contacts

56

„ Summary

56

Turkey

57

„ Overview

57

„ RE policy

57

„ Legislation

58

„ Grid access, distribution

58

„ RE resources

58

„ Contacts

59

„ Summary

59

Appendices

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„ I. Country Maps – Courtesy of CIA

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„ II. Electricity System Maps – Courtesy of SEENERGY.org

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„ III. References and links

79

„ IV. Banks

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Also from GMB Publishing

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Renewable Energy in SEE

About the authors Chris Moore A banker by profession, Chris has accumulated over 30 years of experience in structured project finance and international project development, at senior management levels in both industry (Hawker Siddley, BTR, John Wood Group, Rolls Royce Power Ventures) and banking (Raiffeisen Bank, Singer and Friedlander). His sectoral experience covers defence, infrastructure, oil and gas, and power, whilst his geographic exposure ranges from the Middle East, through Southern and South East Asia, Latin America, and Europe. For the past 12 years he has had considerable involvement in project development and finance in Central and Eastern Europe and the Former Soviet Union. Since 2002, Chris has been actively involved in the business development aspect of renewable energy projects, including wind, wave power, and biomass, but with particular focus on EfW (Energy-from-Waste) using advanced conversion technologies and applications. Chris is currently a senior consultant to a Renewable Energy group with both UK and international development interests. Kevin R Smith With a career covering international banking (Standard Chartered Bank, Nordea Bank and Raiffeisen Bank) and financial consultancy, Kevin Smith has broad experience in most aspects of structured finance. He has focused on the countries of CEE (Central and Eastern Europe) and the FSU (Former Soviet Union) for some 14 years. For the last 10 years he has run a firm of international financial consultants, whose main activity is advising on a wide range of finance-related matters in CEE and the FSU. He was also seconded to the British Government for two years, with responsibility for all aspects of finance in Central Europe. Kevin is a regular speaker at seminars on trade and structured finance and is also the author of a book on PPPs (public-private partnerships) in Central Europe and many published articles on a range of subjects for professional publications.

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Renewable Energy in SEE

About the report „ Provides an overview of the RE (Renewable Energy) climate in [South East Europe], with references to current legislative environment and promotion strategy; „ Reviews and assesses each market in terms of existing RE capacity, demand, government incentives support, drivers and economic viability; „ Provides analysis of RE resources in each market; „ Reports on applicable tariff structures for RE projects by market and RE category; „ Gives examples of installed RE capacity by market and category; „ Comments on RE opportunities; „ Provides listings of useful contacts in the fields of government, technology partners, investment partners, banking and legal. Description Recent developments in the European gas markets have brought into sharp focus the need for Russia’s energy clients to give more serious consideration to their energy supply security. Many, if not all, of the markets covered by this publication are dependent upon Russia for their principal basic energy source. This, coupled with increasing emphasis world-wide on GHG (greenhouse gas) emissions reduction and the advent of carbon trading mechanisms, provides both an incentive and an opportunity for these markets to maximize their RE resource development to meet future demand. This publication will provide targeted background information to assist industry professionals, potential investors and prospective developers in their assessment of the opportunities available within the subject markets as they seek to incorporate RE into a balanced energy portfolio for future needs.

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Renewable Energy in SEE

List of Acronyms ANRE BEEF BGN CDM CEE CESE CETEOR CHP CIS CNG DH EAR EBRD EfW ERC ERE ESM EU EU FREE FSU GDP GEF GHG GJ GTZ GW HPP IBRD ICEMENERG IMF JI LFG

The National Electricity and Heat Regulator Bulgarian Energy Efficiency Fund Bulgarian Lev Clean Development Mechanism Central and Eastern Europe Central Eastern and South European Centre for Environmental Technology Development Combined Heat and Power Commonwealth of Independent States Compressed Natural Gas District Heating European Agency for Reconstruction European Bank for Reconstruction and Development Energy from Waste Energy Regulatory Commission Electricity Regulatory Authority Electricity Supply Company European Union ETS European Union Emissions Trading System Romanian Fund for Energy Efficiency Former Soviet Union Gross Domestic Product Global Environmental Facility Greenhouse Gas Giga joule Deutsche Gesselschaft für Technische Zusammenarbeit Gigawatt Hydropower Plant International Bank for Reconstruction and Development Energy Research and Modernizing Institute International Monetary Fund Joint Implementation Landfill Gas

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Renewable Energy in SEE

MAPAM MENR MIR MSW MW NECC NEK NES OG PJ PPP PV RO SEEA SERC SFESD SHPP TEIAS Toe TWh UCTE UNFCCC

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Ministry of Agriculture, Forests, Waters and Environment Ministry of the Environment and Natural Resources Ministry of Industry and Resources Municipal Solid Waste Megawatt National Energy Conservation Centre Natsionalna Elektricheska Kompania National Energy System Official Gazette Petajoule Public-private partnership Photovoltaic Reverse Osmosis Serbian Energy Efficiency Agency State Energy Regulatory Commission Special Fund for Energy System Development Small Hydropower Station Turkish Electricity Transmission Company Ton of oil equivalent TeraWatthours Union Energetic System for Coordinating the Electric Energy Transport United Nations Framework Convention on Climate Change

Renewable Energy in SEE

INTRODUCTION What is ‘Renewable Energy’?

R

enewable Energy (RE) has been defined, somewhat strictly, as ‘energy flows that occur naturally and repeatedly in the environment and can be harnessed for human benefit’. A looser and, arguably, more widely used description might be ‘energy produced from a renewable and/or sustainable fuel source’. The characteristics of what qualify, for each individual country, as ‘renewable’, ‘sustainable’, or ‘alternative’ fuels (that is, alternative to traditional fossil fuels) under such definitions tend to vary, with certain exceptions being made (or legislation being open to interpretation) for sources such as municipal and some industrial wastes. The most widely recognised forms of RE are, undoubtedly, wind power and hydro power (for the purposes of this publication, and in common with general practice, restricted to smallscale, ie 10 MW) hydro projects are in the planning stage. In addition, however, some rehabilitation of smallscale operational plants is also being undertaken.

Ocean It is unlikely that any significant opportunities exist for the exploitation of viable ocean power.

Solar Studies to date show that Albania has a good solar energy potential, with a country average radiation figure of 4.0 kWh/m2/day, and a total energy potential of some 1,500 kWh/m2 per annum. There are no large-scale PV projects currently in operation, although the installation of some 63 ktoe is planned by the government by 2015. A 48 m2 solar thermal heating system has been installed by the Centre for Energy Efficiency, and appears to be the only operational project of its type.

Biomass As referenced earlier, at approximately 460 million GJ, there appear to be substantial biomass resource generation opportunities based on forestry waste and agricultural residue which, dependent upon location, could be exploited for heat and/ or power generation on both a largescale and de-centralised basis. Opportunities may exist for small-scale, ‘off-grid’ generation plants to provide CHP (combined heat and power)

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Renewable Energy in SEE

solutions to remote or infrastructureimpoverished locations. There may also be opportunities to consider the implementation of an energy crop programme for the production of sustainable feed-stock supplies to such plants. Given a reasonable electricity tariff and low-cost fuel inputs, this sector could represent a comparatively rapid option for Albania to achieve energy source diversification.

EfW As part of an integrated strategy, it would appear that EfW plants could provide a good fit within the Albanian energy portfolio, being able to address a large proportion of the nondegradable fraction of the municipal waste streams, industrial wastes, and various Anaerobic Digestion (AD) residues (where not being used as fertilizer or other applications). The availability of small-scale, modular EfW units makes, as with biomass plants, off-grid developments particularly attractive.

Wind No comprehensive assessment of wind resource appears to have been

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undertaken in Albania, and there are currently no known operational wind farms. It is believed that there may be some opportunity for both large- and small-scale wind projects, and it is understood that the government’s future plans include a detailed feasibility study of this resource sector.

Contacts A listing of some relevant contacts is given within the Annexes at the end of this publication.

Summary In summary, it would appear that the most easily and practically exploitable RE resources which, in light of the transmission issues resulting from the poor grid infrastructure in Albania, are those which are smallscale and can address off-grid or local grid capacity constraints. We therefore consider that the technologies for RE generation by solar, biomass, biogas and EfW processes are the most appropriate for the market at this stage.

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Renewable Energy in SEE

BOSNIA & HERZEGOVINA Overview

T

he Dayton Agreement, signed in Paris on 14 December 1995, retained Bosnia & Herzegovina’s exterior border and created a joint multi-ethnic and democratic government. This national government – based on proportional representation similar to that in existence in the former Yugoslavian state – is responsible for the conduct of foreign, economic, and fiscal policy. The Dayton Agreement also established a second tier of government, comprised of two entities – a joint FbiH (Bosnian/Croat Federation of Bosnia and Herzegovina) and the RS (Bosnian Serb Republika Srpska) – each presiding over approximately a half of the territory. The FBiH and RS governments are charged with overseeing internal functions. The Bosnian/Croat Federation is further divided into 10 cantons. Whilst the FBiH and RS governments have initiated programmes for energy sector reform and policies for the encouragement of energy efficiency and alternative sources of energy, much of the country’s infrastructure remains damaged from the conflicts of the 1990s. As a consequence, in practice, most activities have been directed towards rehabilitation rather than new RE projects. On the macro level, the government has actively pursued a policy of privatization and some 50 per cent of small- and medium- to large-scale enterprises have been sold to private entities.

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The Center for Energy at the University of Sarajevo (q.v.) has prepared a document as a basis for a long-term energy strategy for the Federation of Bosnia & Herzegovina. The strategy is designed to help the government to implement EU Energy Law into Bosnian Energy Law and enable acceptance and ratification of international environment protocols such as the Kyoto Protocol. The medium-term strategy for the energy sector of Bosnia & Herzegovina developed by the Bosnian Council of Ministers has outlined the following goals: „ attracting domestic and foreign investments; „ establishing reliable energy supplies that conform with defined standards; „ developing single electricity and gas markets (Bosnia & Herzegovina is a signatory to Directive 2003/54/EC of the European Parliament and of the Council in respect of common rules for the internal market in electricity); „ improving the use of energy resources and energy efficiency; „ improving market liberalization through the introduction of competition and transparency; „ adopting international standards for environmental protection; „ protecting consumer interests; „ increasing the use of renewable energy (Bosnia & Herzegovina is a signatory to Directive 2001/77/EC of the European Parliament on the promotion of electricity produced from RE sources).

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Renewable Energy in SEE

Bosnia & Herzegovina is not yet a signatory to the Kyoto Protocol, but has signed and ratified the UNFCCC, with Non-Annex 1 status. Projects are eligible for CDM support consideration. The National Focal Point in the context of UNFCCC is the Ministry of Urbanism, Housing Communal Services, Civil Engineering and Ecology.

Generating capacity The country’s installed capacity in 2003 was 4.3 GW, of which 53 per cent was thermal and 47 per cent hydro. The current generating capacity of some 11.3 TWh (EPBiH, EPHZHB and EPRS figures) is still provided entirely by hydroelectric and thermal power, of which ~40 per cent is provided by hydro, and ~60 per cent by thermal, supporting the premise that existing capacity refurbishment is still badly needed. From 2000 to 2004, capacity grew from ~9.2 TWh to ~10.3 TWh. The transmission system is connected to Croatia, Montenegro, and Serbia via 220 kV lines – as stated earlier, considerable investment is required to refurbish the system and return it to pre-war status.

Demand The country is still a net exporter of power, according to 2003 figures. Consumption was reported as being 6.47 TWh, of which industrial consumption was 17.5 per cent, and household consumption 44.4 per cent.

Financing EBRD’s Country Strategy Overview makes no specific reference to a focus on RE or RE-related projects. The Government of the Federation of Bosnia & Herzegovina established The Fund for Environmental Protection in 2003, the purpose of which is to finance and support projects

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reducing emissions and improving the state of the environment. One part of this Fund is for renewable energy projects. The Fund is intended to be financed from penalties levied on for polluters (vehicles, industry, energy plants etc). An indicative listing of banks active in the RE sector within the region is set out in the Annexes to this publication.

RE policy RE policy in the FBiH is primarily the responsibility of the Federal Ministry of Energy, Mining and Industry, in which the Department for Energy is responsible for defining the energy strategy of the FbiH. The latter, subject to agreement of the Council of Ministers and Parliament, could be extended to cover the whole country. To date, whilst a number of consultations have been held, no formally agreed strategy appears to have emerged. Within the RS, responsibility lies with the Ministry of Economy, Energy and Development, within which energy-related matters are dealt with by five units. The Departments for Energy and Energy Power Utilities, Energy and Fuels, and Development of Energy and Mining are the most directly relevant to the RE sector. The Ministry of Urbanism, Civil Engineering and Ecology of RS has responsibility both within RS and nationally for ecology and laws in respect of protection of the environment and climate change. The Ministry leads in the Kyoto Protocol negotiations and in UNFCCC discussions. According to the law on liberalization of the electricity market adopted in April 2002 (Law on Electricity Transmission, System Regulator and Operator in BiH) which was

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Renewable Energy in SEE

supplemented in both entities by corresponding law on electricity generation and distribution (Law on Electricity of the FBiH and RS), the State Energy Regulatory Commission (SERC) is to take over the regulatory tasks for the transmission grid, whereas generation, distribution and trading are to be the responsibility of the regulatory commissions of the individual areas (ERCFBiH and ERCRS) separately. The above Ministries and Commission are supported by a number of other non-governmental agencies, including the following:

The Centre for Energy The Centre’s main activities include the analysis of the Bosnian energy sector, input to an energy development strategy, basis and methodology for a Bosnian energy balance, involvement in creating an energy regulation system, energy efficiency and energy technology improvements, etc. The Centre is not a government agency, but operates within the Mechanical Engineering Faculty of the University of Sarajevo.

CETEOR (The Centre for Environmental Technology Development) CETEOR is a private organization established in Sarajevo in 1992, whose activities have a focus on sustainable development, quality management, solid waste management, energy efficiency, and chemical safety. CETEOR works with a network of national and international partners. CETEOR collaborates with the Centre for Energy and Chamber of Economy of FBiH, amongst others.

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Legislation The principal relevant legislation in respect of electricity generation is outlined below: Law on Electricity in FBiH (OG [Official Gazette] of FBiH 41/02), and the Law on Electricity in RS (OG of RS 66/02, 29/03), focus on the development of an electricity market, setting out the goals outlined in the Overview above. Decision about a Methodology for the Determination of Purchase Prices for Electricity from Renewable Sources with Installed Power up to 5 MW (OG of FBiH 32/2002, OG of RS 71/2003) – establishes that the governmentowned utility companies, EPBih (Elektroprivreda BiH), EPHZHB (Elektroprivreda HZ Herceg-Bosna), and EPRS (Elektroprivreda Republika Srpska) have an obligation to buy electricity from renewable sources. The electricity tariff for electricity generated from renewable sources with installed power capacity of up to 5 MW will be determined by application of ‘corrective coefficients’ or premium on the amount of the current tariff for active energy set by the government from time to time – the premium ranges between 80 per cent and 110 per cent of the base tariff of approximately 4.95 euro cents. The following are also relevant to the implementation of generic projects: Law on Waste Managing (OG of FBiH 33/03) Law on Air Protection (OG of FBiH 33/03) Law on Water Protection (OG of FBiH 33/03) Law on Nature Protection (OG of FBiH 33/03, OG of RS 50/02) Law on Fund for Environmental Protection in FBiH (OG of FBiH 33/03)

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Grid access, distribution As set out above, the power sector in Bosnia & Herzegovina now consists of three vertically integrated monopolies: Elektroprivreda Bosne i Herzegovine (EPBiH), Elektroprivreda Hrvatske Zajednice Herceg-Bosna (EPHZHB), and Elektroprivreda of the Republic of Srpska (EPRS). The power companies are synchronized and interconnected but there is no competition among them – they are virtual monopolies within their exclusive ethnically based service territories. The service territories are relatively small, with equally small customer numbers and an absence of major industrial and commercial customers. As identified earlier, the country’s electricity infrastructure is in a poor state, with substantial investment required in the distribution system. The government has drawn up plans to restructure and privatize the power sector under the Power Sector Restructuring Action Plan, which envisages multiple generation and (cross-entity) distribution companies with a single transmission company at state level. The original formulation of the Action Plan made no distinction between FBiH and RS territories – the intention is that the energy markets will be integrated; however there has been difficulty in reaching agreement on implementation.

JP Elektroprivreda BiH (EPBiH) EPBiH is based in Sarajevo, and serves a customer base of approximately 619,000 customers, over 90 per cent of which are household customers. EPBiH operates two coal-fired thermal power plants (Kakanj, 578 MW and Tuzla, 779 MW) and three hydropower plants (Grabovica, Jablanica, Salakovac), with a total

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installed capacity of 1,831 MW. In addition, EPBiH operates six small hydropower plants, with a total installed capacity of 9.6 MW. EPBiH is divided into six departments: generation, transmission and system control, distribution, research and development, economic and financial affairs and human resources.

JP Elektroprivreda Hrvatske Zajednice Herceg-Bosna (EPHZHB) EPHZHB is the vertically integrated electricity company with a service territory in the immediate region around Mostar. It serves around 168,000 customers, approximately 152,000 of which are household customers. EPHZHB operates five hydropower plants with a total installed capacity of 1,086 MW – Rama, Capljina, Jajce I, Jajce II and Mostar. The company is divided into seven departments: generation, transmission, distribution, research and development, system control and operation, finance and legal, personnel and administrative, employing 1,745 people in total.

Elektroprivreda Republike Srpske (EPRS) EPRS serves the Republika Srpska, from its base in Trebinje. EPRS has a customer base of 436,000, over 400,000 of which are household customers. EPRS operates two lignitefired thermal power plants (Gacko and Ugljevik, 300 MW each) and five hydro plants (Bocac, Trebinje and Visegrad) with a total installed capacity of 1,424 MW. EPRS operates as a holding company for 11 legally independent operating companies who are fully responsible for the operation of the company but report to the Directorate of EPRS. Each of the two thermal and three hydropower

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stations is a separate company, as well as the five distribution districts and the transmission business. In total, EPRS employs 2,900 people.

Brcko In addition to the three main companies, there is also a small autonomous distribution grid in the town of Brcko. It has no generation assets, purchasing all the electricity from the three vertically integrated companies. It has approximately 26,000 customers, around 90 per cent of which are household customers.

Joint Power Co-ordination Centre (JPCC) Since 1996, electricity exchanges between the power companies have been limited due to the breakdown of many transmission lines and the creation of three separate power companies. In 1999, the power companies established the Joint Power Co-ordination Centre (JPCC) to co-ordinate the work of the three power transmission systems. The ultimate goal is to establish full operation of the 400 kV grid and synchronize it with the Western European grid and EU systems. The JPCC was established in accordance with the standards of the Union for Co-ordination, the Transmission of Electricity (UCTE) and the EU.

Independent System Operator (ISO) At the higher state level, an ISO has the task of guaranteeing trouble-free operation of the system. In order to achieve this, a national transmission grid operator is to be created. The laws to bring this about (Law on the BiH Company for the Transmission of Electrical Energy; Law on Independent Service Operator for Electrical Energy) were passed in October 2003

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by the Council of Ministries of Bosnia & Herzegovina.

RE resources To date, Bosnia & Herzegovina has relied on two major renewable energy sources – hydropower for electricity production and biomass for heat production, with wood being used as a fire fuel in the traditional form.

Biofuels According to a study conducted by Innotech HT GmbH, Berlin, in 2003 on behalf of the GTZ (Deutsche Gesselschaft für Technische Zusammenarbeit), there is an unexploited potential of approximately 1 million m3/yr of residual wood, wood waste etc, which could be used to provide heat to 130,000 residences or 300,000 inhabitants. Alternatively it could be processed to produce bio-ethanol or bio-diesels for transport or other applications. A significant proportion of this volume could also be directed to biomass power generation projects.

Biogas A small-scale (