Challenges of the new Government of the Republic of Macedonia in the energy sector
Following the change of the government after 11 years, the energy sector is one of the sectors where thorough reforms are needed. Over the past decade, focus has been placed exclusively on fossil fuels and to some extent on large hydropower plants, with a very small, negligible emphasis on renewable energy and energy efficiency.
Corruption scandals, on the other hand, pointed to the serious need for reforms that would be in favour of enhancing accountability and transparency in the sector, which is otherwise still considered, closed to the public. Macedonia was once regarded as one of the most advanced in the reforms that began with joining the Energy Community in 2005, all this over the years to worsen and culminate in the failure to fulfil obligations that come with the membership itself, such as the failure to complete the entire liberalization of the electricity market. These are just some of the burning problems that await resolution.
The energy sector in the Republic of Macedonia is still characterized by closeness and insufficient inclusion of the public, which is partly a result of the legacy of the past, where the focus was on a centralized energy system based on several large thermal power plants in order to provide enough electricity for large consumers like steel factories, as well as the result of the way in which the institutional setup in the Republic of Macedonia functions, where there is no established mechanism in the institutions for cooperation with the public. Given that the energy transition is ongoing (the privatization of ESM from 2006, the opening of the electricity and gas markets that go slowly, the implementation of EU directives through the Energy Community, etc.), the problems that are being detected throughout this sector are inevitable and in large numbers. Furthermore, long-term strategies and the choice of options for efficiency and diversification of resources are often not properly developed due to certain private interests in this area.
What issues remain to be addressed from the previous decade:
- Insufficient investments in new capacities[1];
- Substantially unequal implementation of energy efficiency measures across the territory of the Republic of Macedonia - there is no exact figure how much of the housing stock has been renovated so far, although according to the Energy Community, the rate of implementation of the measures should reach 9% in 2018;
- High pollution, where the largest percentage is from the energy sector[2];
- Corruption in the sector - several cases of alleged corruption and no single verdict;
- Transparency problems - from not publishing annual reports to not publishing single audit report on the web pages of all institutions/state companies in the energy sector until 2017[3];
- Gas sector - the full dependence on Russia in the gas sector[4], as well as the abolished option for municipalities to gasify themselves in 2013[5];
- Unstable energy security - dependence on imports[6], lack of sufficient domestic production, excessive energy intensity;[7]
- Unused potential in renewable energy sources. Macedonia produces proportionally less electricity from solar energy than Denmark for example; [8]
- The unresolved problem with the widespread energy poverty in the country that does not only encompass those who are officially below the formal poverty threshold, but also people with regular income such as pensioners or multi-member families. [9]
The presented problems certainly require lot of effort and many years of dedicated work that is far from limited to one election cycle of four years. But their proper identification and strategic planning will help the institutions to resolve them more quickly. The strategic approach and goal setting, by answering the question of what kind of energy future we want for Macedonia, is the first thing that the new government needs to solve. Concerning the specific measures to be taken first it is important to note that energy did not enter the plan 3-6-9 of the new Government[10], although one of the biggest problems in Macedonia is the air pollution for instance. [11] Hence why, the Government should include this sector in the urgent reforms even though the changes in energy take lot of time and effort and usually foreign funds. It is important to start working on them as soon as possible so the citizens can feel the benefits from the improvements as soon as possible.
Furthermore, there is still no new strategy in sight and even though the first draft of the Energy Strategy by 2035 was published a few years ago, it has not yet been adopted. In Macedonia, there is no strategic approach between all the stakeholders whether the state will finally begin with the decarbonization, i.e., leaving the fossil fuels as the primary energy source for obtaining final energy or will remain to use coal, oil, etc. However, the data goes to show that due to the shortage of coal, i.e., lignite that has much less calorific value than coal and is with less quality, production has decreased from year to year, and it increased from solar energy. "Thus, according to the energy balances published by the State Statistical Office, solar electricity in just three years has increased from 1,173 GWh in 2012 to a total primary production of 22,599 GWh in 2015. Naturally, these gigawatt hours would increase with the direct involvement of households in electricity generation, but firstly, changes in the Energy Law are needed. Unlike solar energy, the production of electricity from thermal power plants has declined significantly over the years. Thus, from 4920 GWh produced in 2012, in 2015 they have fallen to 3434 GWh. This is another indicator of why such a measure is needed in Macedonia." [12] Furthermore, from all the thermal power plants that have been built in Macedonia, only REK Bitola is currently operating, TEC Negotino is a cold reserve and TE Oslomej is not operational due to the lack of lignite. Another capacity that is operational is Energetika which is using gas.[13] This is just another indicator of the urgency of the primary energy production situation in Macedonia and the need for the new government to strategically approach the problem and to use the potentials that the state has in terms of solar energy.
Macedonia has also finally ratified the Paris Agreement[14], thus formally entering it into force. According to the proposal submitted by the MEPP, Macedonia plans to reduce CO2 emissions from the burning of fossil fuels by 30%, or by 36% at the higher level of ambition, by 2030 compared to the business as usual (BAU) scenario (the problem with so small ambitions is that Macedonia in the BAU scenario actually predicts the growth of emissions, which means that if Macedonia introduces measures for their reduction, they would not decrease but would come to the level of 2015, which does not achieve significant success - note of the author). CO2 emissions from combustion of fossil fuels cover almost 80% of total greenhouse gas emissions in the country with dominant participation in the following sectors: energy, buildings and transport. [15] Regardless of the low ambitions around the overall reduction of the emissions that are dominantly coming from the energy sector, the Government will need to align all future laws, strategies and other documents with its obligations undertaken with the Paris Agreement otherwise its ratification will remain a mere pledge on paper.
A further urgent matter for settling is the new Energy Law or a set of laws.[16] Macedonia, with its membership in the Energy Community, is obliged to transfer the EU acquis in the field of energy in its legislation. What was to be done a few years ago but remained for now is the implementation of the Third Energy Package. These documents from the EU energy market legislation, known as the Third Energy Package, were adopted to improve the functioning of the internal (EU) energy market and address structural problems.
The general conclusion after what was written would be that the Government of the Republic of Macedonia, as well as the judiciary, must, as one of the priorities, put in place measures for preventing or punishing corruption and illegal operation in the energy sector. Moreover, the mandatory adoption of new strategies and laws and aligning with the EU regulations, as well as the liberalization of the energy markets must not be awaited. Furthermore, a serious focus is needed on renewable energy sources as well as energy efficiency and a step towards addressing the problems of the widespread energy poverty in the households. Energy is one of the most capital-intensive sectors, which in developing countries, such as the Republic of Macedonia, is almost entirely dependent on foreign investments and loans. The way the sector was governed by now does not go in favor of attracting serious investors who could make an important turnaround in this area in Macedonia and hence a recommendation to the Government of the Republic of Macedonia is to put energy in the plan 3-6-9 as soon as possible in order to emphasize the importance of the reforms in the energy sector.
NOTE: The text is an extract from the article "The energy sector between the business and public interest" (Енергетиката помеѓу бизнис и јавниот сектор) published in the latest issue of the magazine Forum-Analitika no.15 with the title "Reforms: With Full Sails, Forward!" (Реформи: Со полни едра, напред!), whose author is Sonja Risteska. The full document can be found there.
[1] In the last decade, apart from refurbishing there have been opened only two new capacities - HPP Sv. Petka and Windpark Bogdanci (link in Macedonian) http://www.elem.com.mk/
[2] Тhrid National Climate Change Plan, Ministry of Environment and Physical Planning (link in Macedonian) http://www.unfccc.org.mk/content/Documents/TNC_MK_draft.pdf
[3] Risteska Sonja, Analytica, Transport and energy sectors’ current standing in the country, how to accelerate the reform process, http://www.analyticamk.org/images/2017/transport-i-energetika.pdf, April 2017 (link in Macedonian)
[4] Risteska Sonja, The Russian (gas) connection – how Macedonia did its deals,
[5] Risteska Sonja, Stojilovska Ana, Analytica (Analysis of the Law for amending and supplementing the Law on energy from 2013) – link in Macedonian: Анализа на Законот за изменување и дополнување на Законот за енергетика од мај 2013
[6] In 2016, Macedonia imported as much as 65% of its total energy needed (gas, electricity, oil, etc.). Source: SSO: Energy Balances 2016, number 6.1.17.81, year LV, October 20, 2017.
[7] Energy intensity of the economy. For 2015, the EU-28 average was 120 kg oil equivalent per 1000 EUR, while for Macedonia it was double at 336.3 kg oil equivalent per 1000 EUR. Source: Eurostat: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tsdec360&plugin=1
[8] Macedonia compared with most EU countries is at a very low level of production from solar energy (only 1,715 ktoe), so even countries like Denmark that are in the north of Europe have higher electricity production from solar energy compared to sunny southern Macedonia. Increased usage of solar energy – from passive consumers to active producers of electricity, (link in Macedonian) http://respublica.edu.mk/blog/2017-10-27-11-36-45
[9] Most households choose to reduce their living space in winter so out of an average 85 m2 of living space, 70 m2 are heated. 40% of buildings have no insulation and 13 % have only walls insulation in different standards. Combined with mostly stove-based fuel wood heating (47%) or electrical heaters (18%) this shows high levels of inefficiency and waste of heat energy. The average visited household uses 5,295 kWh of electricity as compared with national averages of 5,423 kWh. Robic Slavica, DOOR, SEE SEP project, Energy Poverty in Southeast Europe. Surviving the cold, http://www.analyticamk.org/images/Files/EPSEE_Surviving-the-Cold.pdf, p. 32.
[10] Government of the Republic of Macedonia, Plan 3-6-9: the direction of reforms proposed by the Government of the Republic of Macedonia, contained in "Plan 3-6-9", derives from the Government Work Program 2017-2020, and takes into account the Political Przino agreement and follows the recommendations of high-level meetings with representatives of EU institutions, guidelines from the European Commission in the Emergency Reform Priorities (2015), the Recommendations of the Group of Senior Experts on Systemic Rule of Law Issues Regarding the Monitoring of Communications 2015, as well as a series of recommendations to the government (the Venice Commission, GRECO), the recommendations of the OSCE/ODIHR, the findings and recommendations of the European Commission's annual reports, including the High Level Accession Dialogue, the Conclusions of the Ministerial Dialogue on the Program economic reforms, the conclusions of the regular meetings of the Stabilization and Association Agreement bodies, the document prepared by a group of civil society organizations entitled "Proposal for Emergency Democratic Reform" (Blueprint) and the results of the consultations with the civil society, p. 1.
[11] World Bank, http://web.worldbank.org/archive/website01354/WEB/0__CO-43.HTM
[12] Risteska Sonja, Increased usage of solar energy – from passive consumers to active producers of electricity
[13] ELEM, thermal energy (link in Macedonia) http://www.elem.com.mk/?page_id=110
[14] At the time of the preparation of this document there was no official info on this.
[15] Submission of the Republic of Macedonia, Planned nationally determined contributions, August 4, 2015, https://goo.gl/nDZ2Sj, p. 1
[16] The unofficial proposal at that time was to have a general Energy Law and Law on Energy Efficiency and Renewable Energy, or a Law on Energy and Law on Energy Efficiency.
