The energy sector in the Balkans is facing tough years ahead

Increasing energy prices, the massive dependence on Russian gas, obsolete mining and outdated productions infrastructure and the path towards decarbonization are some of the elements that could pave the way for a severe energy crisis unfolding soon in the Balkans. Severe disruptions were observed in the region in December and January, showing the potential for more severe problems shortly. 

Kosovo, in particular, faced probably the worst energy crisis since its independence, with the government forced to implement emergency measures and scheduled power cuts, particularly damaging for factories and shops. Those events forced Pristina to ban the so-called ‘crypto mining’, a business quite florid in Kosovo, because of the high demand for electricity in the sector. 

The problems in the former Serbian province arose primarily due to the obsolescence of the Kosovo B power plant, which suffered severe breakdowns already in December. Kosovo B, the largest lignite-fired power plant in the country, was opened back in 1983. The second power station, Kosovo A, is even older and entered into operation in the 1960s. No significant investments were carried out in the last decades in the two power plants, while a project for building a new power plant was cancelled in 2021. Outdated power plants, fired by brown coal -which contribute to making Kosovo one of the most polluted countries in Europe – combined with the ongoing global energy crisis has increased import prices, forcing Kosovo to import electricity for a price several times higher than in the past. 

Around 40% of the households in Kosovo and Albania were already living in energy poverty before the current crisis, 33% in North Macedonia, 7-22% in Serbia, 15% in Montenegro. Households and businesses could also see their bills doubling in the following months. In January, protests against increasing energy prices were already held in Pristina, while demonstrations took place in Albania.

Problems with the energy sector are not limited to Kosovo. In North Macedonia, where the energy crisis was declared already in November, authorities are considering postponing the coal exit deadline from 2027 to 2030 due to increasing gas prices. Serbia, where coal power plants and some distribution network grids are also becoming obsolete, suffered significant disturbances in the electricity supply in December. The main problem in Serbia arose from damages at one of the largest lignite-powered plants due to low-quality coal used and “bad equipment,” authorities said. Albania, which declared a state of emergency due to increasing energy prices in October, is considering restoring a thermal power plant to produce electricity on its own without importing from abroad. Meanwhile, in Montenegro, the aluminium smelter KAP, one of the biggest companies in the country, was forced to shut down due to the energy price hike, leaving 500 people without jobs. Even in Slovenia, almost 40% of the companies said their business is in jeopardy due to rising energy costs. They expect an increase of 128 per cent in this year’s bills.

In general, the region is affected by several negative factors, both internal and external. Concerning gas supplies, Russia oligopolistic or even monopolistic position in some countries might benefit pro-Russian governments in the Balkans, which could be offered – like in the case of Serbia – preferential lower prices and long-term contracts with advantageous conditions. On the other side, Moscow intends to exploit its energy hegemony by increasing its political influence in several countries, including Bulgaria, North Macedonia, Serbia and Bosnia and Herzegovina. Only Romania remains largely independent from Russian gas. In the area, it is still ongoing an indirect clash between the West (pushing for American gas and liquefied natural gas, plus TANAP-TAP pipeline, which could double its capacity to bring non-Russian gas to the Balkans) and Russia (with Turk Stream and Turk Stream 2 to Bulgaria, circumventing Ukraine) over existing and planned gas pipelines and supplies.

Furthermore, in a region that still shares the strategic goal to enter the EU and has one of the highest pollution levels globally, the need for a coal phase-out is becoming more and more urgent. However, the process has high costs, both for states and consumers and could lead to new disruptions and problems in production during the decarbonization process, i.e., the path from the production of electricity from cheap domestic coal to more expensive but greener sources of energy. However, this could be the way to increase energy independence from foreign sources and, at the same time, geopolitical autonomy.