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EBRD 2022: Coal-dependent Kosovo prepares for leap to renewables

Kosovo, which relies heavily on coal power generation, is preparing to leapfrog entirely over natural gas power, straight to renewable energy. 

Despite being extremely rich in lignite, Kosovo aims to switch to renewable energy and eventually achieve a full decarbonisation of its energy sector, according to plans outlined by Minister of Finance, Labour and Transfers Hekuran Murati and Minister of Economy Artane Rizvanolli at the European Bank for Reconstruction and Development (EBRD) annual meeting in Marrakesh on May 10.

To give an idea of the scale of the switch, according to Jens Lundsgaard, the EBRD board director for Denmark, Lithuania, Ireland and Kosovo, relative to its size, Kosovo has the largest coal reserves on earth, and in absolute terms it has among the largest coal reserves in Europe. Overall, Kosovo is fifth in the world for coal reserves, Murati told the panel. 

The country produces most of its electricity from two ageing power plants, Kosova A and Kosova B. 

“Kosovo never introduced any infrastructure for gas, and the question is whether it will be possible go straight from coal to renewable energy without gas as [an] intermediate step,” said Lundsgaard and if so, whether other countries might follow Kosovo’s example. 

Kosovo faces a growing need for energy, as its economy as a whole is forecast to be one of the fastest growing in the emerging Europe region this year, with export-oriented manufacturing an important part of its growth in 2021 and 2022. 

“Local companies [are] trying to fill the void created by supply chain disruptions at global level, which created opportunities at the manufacturing sector. All this requires energy,” said Murati. 

However, the energy transition is not simply a matter of expediency. “It’s important to make this transition, not because of national security, to become energy independent, [but because] we [are] committed to EU values and the decarbonisation agenda. We foresee a full decarbonisation despite [our] coal [reserves],” Murati added. 

The government is currently working on finalising its energy strategy, and as well as a state investment aimed at creating an environment and mechanisms to unlock potential investment from the private sector as well. 

Speaking via video link, Rizvanolli outlined the 2022-31 national energy strategy: Pristina’s vision is for decarbonisation, security of supply, affordability and regional market integration as the country leapfrogs from lignite to renewables. Overall, Pristina aims to have over 1,400 MW of wind and solar combined by 2031. 

There is a long way to go, even though two EBRD-financed wind farms have already added more than 15% to the generation capacity of Kosovo’s grid. 

“We rely quite heavily on electricity generation from two old coal-fired power plants. There is a limited contribution from renewable energy; only 12% of consumption,” Rizvanolli said. In addition, she pointed to the low energy efficiency in consumption and high energy poverty at around 30%, even though tariffs are the second-lowest in Europe. Taken all together, this makes it a “daunting challenge to integrate more renewables”, she commented. 

Unlike in neighbours such as Albania, Kosovo’s water resources are limited. It is therefore turning to innovative ideas such as building energy storage capacity to enable the integration of significant renewable energy sources into the national power system. 

According to Rizvanolli, energy efficiency is another top priority, as a lot of the power that is produced is lost due, for example, to the lack of proper insulation in buildings. 

The EBRD’s head of Kosovo, Neil Taylor, called the plan to expand capacity to 1,400 MW “ambitious but achievable”, noting that the country “has many friends and supporters”. 

However, aside from IFIs and donors, Taylor noted that Kosovo needs more private sector investors. “Energy intensity is four times the EU average, so there is a huge amount to do on both the supply and demand sides,” he said. 

However, he added, “We are fast approaching a tipping point in green transition with a huge range of investments as well as jobs in the sector, which bodes well for Kosovo’s young population.” 

At the conference, the EBRD and the Kosovan government signed a new agreement on energy efficiency in public buildings in the country’s second city, Prizren. This comprises a €5mn EBRD loan plus a €1mn grant from the EU.