In order to fully develop the energy sector, Montenegro will have to make progress in creating a favorable regulatory framework and improve the transmission and distribution network in order to keep pace with the expected increase in the production of renewable energy, the European Investment Bank estimated.
The head of the regional representative office of the European Investment Bank (EIB) for the Western Balkans, Alessandro Bragonzi, said that the energy transition, although it represents a challenge for the country, can be a significant catalyst for its growth.
“Montenegro has already demonstrated the ability to support important projects, such as the installation of an underwater electric cable for the transport of electricity between Montenegro and Italy,” said Bragonzi in an interview with the Mina-business agency.
He added that most countries in the Western Balkans still rely heavily on fossil fuels for energy production and cogeneration. According to him, Montenegro has a relatively balanced energy mix, because electricity is mostly produced in the Pljevlja Thermal Power Plant, as well as in the Perućica and Piva hydroelectric plants.
“Currently, hydropower dominates the production of electricity from renewable sources. “Montenegro has an abundance of rivers and streams, but it also has the potential to develop additional solar power plants and wind farms, given its favorable geographical exposure to sun and wind,” said Bragonzi.
He said that the wind farms at Krnovo and Možura, with a power of 72 MW and 46 MW, significantly contribute to covering the electricity demand, and that plans for capacity expansion are well underway, with the construction of a new 55 MW wind farm near Gvozd.
“As far as solar energy is concerned, in addition to the plans of Elektroprivreda (EPCG) for the development of photovoltaic facilities, for example, solar power plants on the Slano and Vrtac dams, the increase of the main solar projects was presented by private investors, where the capacities of the planned investments reached over one gigawatt since last year”, Bragonzi announced.
He reminded that Montenegro committed itself to the goal of 33 percent participation of renewable energy sources in gross final energy consumption by 2020 and that these goals were exceeded, with participation of 43,7 percent.
“In this way, the country became one of the three contracting parties of the Energy Community, which achieved its goal of renewable energy sources for the year 2020.” However, the report of the Energy Community for last year notes that the significant increase in the share can be attributed to the decrease in consumption,” said Bragonzi.
He added that, within its non-EU activities arm, EIB Global has intensified its work in the energy sector.
“The bank is also aware of the social and economic costs of transitioning from fossil fuels and is a member of the European Commission’s Initiative for Coal Regions in Transition in the Western Balkans and Ukraine.” It seeks to help countries transition to a carbon-neutral economy, ensuring that this transition is fair and has a positive socio-economic impact,” said Bragonzi.
He reminded that Montenegro is a net importer of energy with the aspiration to become an exporter, as well as that the increase in capacity for renewable energy sources is key to the plans to close the capacity for coal, which affects the increased emission of greenhouse gases.
“Those plans must be supported by the adoption of the remaining regulations on energy and the upgrading of the transmission and distribution network,” Bragonzi said.
He stated that Montenegro joined the initiative of the Energy Community to establish a regional system of guarantees of origin. Under the Law on Energy, the Development Strategy until 2025 was drawn up, and progress is being made with the strategy until 2030, which includes 436,3 GWh/year for the production of electricity from wind farms and 52 GWh/year from solar power plants.
“The country has also adopted the necessary regulations for the rights and obligations of renewable energy producers, including the introduction of obligations to purchase electricity for 12 years, combined with feed-in tariffs,” said Bragonzi.
He added that Montenegro is making progress in adopting new regulations on labelling, finalizing amendments to the Law and building certification tools.
“In order to ensure the further progress of the market of renewable energy sources and use the full potential of the geographical location, it is important to simplify the administrative and licensing procedures, establish a one-stop shop for investors and open the market to ensure greater competition, transparency, integration and better quality services,” said Bragonzi.
He believes that existing electricity systems should increase demand flexibility and baseload capacity, in order to support an increased share of renewable energy sources.
“In addition, flexible electrical systems will require more interconnections and a reinforced grid with storage solutions.” On top of that, the recently established day-ahead electricity market will allow greater flexibility of the entire power system,” Bragonzi announced.
He said that estimates show that this year around 61 percent of electricity will be produced from renewable sources – hydroelectric power plants, wind farms and solar power plants. Those results have been supported by a series of EPCG programs since last year designed to simplify the installation of solar PV devices for households and businesses.
“In order to use the potential of the sun and wind, Montenegro will have to increase its electrical capacity when it comes to storage and distribution, and adopt the necessary laws, especially when it comes to renewable energy.” It should also step up efforts to finalize its national energy and climate plans. The huge potential around more efficient use of energy should be used,” said Bragonzi.
He recalled that the International Energy Agency indicates that the country’s energy intensity, although in decline in recent years, is still twice as high as in the EU.
“In order to support a series of renewable energy projects, it is necessary to develop spatial plans and environmental impact assessments for the implementation of wind and solar power plants.” Significant progress has been made in this area. It is also important that the development of new renewable energy projects, especially hydropower, takes place in accordance with the EU legal acquis on concessions, state aid and the environment,” said Bragonzi.
He said that EIB Global is working throughout the region with governments and national public companies on the development of new projects of wind and solar power plants, or the modernization of existing energy infrastructure, as well as on the implementation of energy efficiency projects in public buildings, companies and district heating systems.
Bragonzi added that the EIB believes that the Western Balkans market is attractive for investments in renewable energy, thanks to its strategic location with well-established interconnections with the EU energy market.
“There is great potential for delivering additional electricity through renewable sources.” However, according to estimates, several billions of annual investments are needed until 2030 to build infrastructure for renewable energy sources and phase out coal for the entire region,” Bragonzi announced.
He reminded that Montenegro, as a candidate country for EU membership, harmonizes its energy policy and regulations with the Union’s policy and legislation in the field of energy and the environment.
“As an EU bank, we welcome the launch of the day-ahead market in April, which brings greater transparency and efficiency to the electricity market and supports its integration into the EU. We also expect that in the coming period, Montenegro will switch to market support schemes for the production of renewable energy based on simplified procedures for issuing permits and connection,” said Bragonzi.
He stated that, in addition, the regulation on Trans-European energy networks should be transferred and applied.
“Also, from the perspective of the climate bank, the EIB is convinced that by investing in solar and wind technologies, Montenegro and the entire region could very quickly transform the power industry and successfully join the continent’s decarbonization path, while providing a positive return on investment to domestic and international investors,” Bragonzi announced.
He recalled that EIB Global closely cooperates with the Investment and Development Fund (IRF) when it comes to the first joint credit line to support climate projects among small businesses.
“To date, we have invested more than one billion euros in the state for the rehabilitation of five main roads and the Bar-Vrbnica railway, as well as for the modernization of schools, water supply, energy infrastructure and support for small and medium-sized enterprises,” said Bragonzi.
EIB Global, he said, will continue to invest in those sectors, with plans to expand participation, particularly in the rail and education sectors, where they see numerous opportunities for the country in terms of improving connectivity, skills and competitiveness.
“We are looking forward to the opening of our local representative office in Podgorica, which will help us to build even closer cooperation with partners in Montenegro and, together with the European Commission, contribute even more to the realization of more sustainable projects,” concluded Bragonzi.