The year 2020 proved to be positive for renewable energy in the EU. Data published by Eurostat shows an overall increase in the share of energy produced from renewable sources, and the share of renewable electricity exceeded that of electricity produced from fossil fuels.
North Macedonia relies on fossil fuels, mostly coal, and hydropower. The data for 2020 also confirms this trend, as 63.4% of the energy was produced by thermal power plants. To date, 2020 could be known as the year in which electricity production from fossil fuels reached its historically lowest point: 1.02 million gigawatt-hours from TPPs in 2020, compared to a peak of 1.58 million gigawatt-hours in 2007. At the same time, the overall share of energy produced from renewable sources has been increasing over the years. Last year, renewable energy production in North Macedonia increased by 10.1%.
That said, and bearing in mind the EU expectations, the Government of North Macedonia adopted the Energy Development Strategy 2020-2040. The strategy sets three different scenarios – reference, moderate transition, and green. The Government has recently confirmed that it plans to implement the most ambitious, green scenario. This scenario envisages the total phasing out of coal by 2040, and 45% of total energy production coming from renewable sources. It foresees phasing out coal by 2025, which would make North Macedonia the first country in the Western Balkans to set a concrete goal to eliminate coal power before 2030. According to the strategy, solar and wind power plants are also expected to be the fastest-growing technologies for electricity production.
Along with other Western Balkans states, North Macedonia has signed the Sofia Declaration on the Green Agenda, which commits to pursuing the target of a carbon-neutral continent by 2050, along with the rest of the EU. Both the strategy and the Sofia Declaration set the goals quite high.
At the moment, the statistics do not appear to be in favor of the government’s ambitious plan. The share of solar energy in total energy production is only 0.6%, the share of wind energy is 2.3%, and biogas stands at 1.3%. North Macedonia only has one 36.8-megawatt state-owned wind park in Bogdanci (planned to increase to 50 megawatts), with other privately-owned ones under construction. Surprisingly, the solar potential in North Macedonia is barely tapped. Additionally, electricity losses in the grid range from 14 to 16 percent of gross national electricity consumption, and practices such as electric heating have contributed to increasing energy costs for many households, on one hand, and alarming levels of pollution, on the other. On a separate note, North Macedonia (together with Croatia and Slovakia) has one of the highest shares of imported electricity. In 2019, the total annual production of electricity was 5,447 gigawatt-hours, with 2,297 gigawatt-hours being additionally imported.
However, the latest tenders of state-owned energy production company ESM, in cooperation with the EBRD, are promising. In June 2021, PPP agreements were signed with companies from Turkey and Bulgaria for the construction of two solar 50-megawatt plants. Private greenfield projects are also on the rise.
As part of the EU harmonization process, North Macedonia adopted the new Energy Law in May 2018, which harmonized the energy legislation with the EU Third Energy Package in the electricity and natural gas sector, as well as with the RES Directive. However, the legal framework is still incomplete, as further laws and bylaws need to be enacted. For the Strategy not to be deemed too ambitious, besides an appropriate legal base, professional personnel and a unified practice are also of crucial importance.
Finally, some of the most recent news is that the Government has introduced a new “environmental” tax, which is expected to be used to support investments in renewable energy production (wind, solar, and gas plants), as well as to strengthen the state’s institutional and financial capacities. The government intends to collect an additional EUR 48 million from this tax, annually.
All the above should also have a positive impact on regional economic growth. It is safe to say that renewable energy production will be the industry with the best growth potential in North Macedonia, for years to come.
By Marija Filipovska, Partner, and Zlatko Kujundjiski, Attorney-at-law, CMS Skopje