RESOURCES/FEATURED STORIES

Transition to Renewable Energy under Market Based Mechanism in the Western Balkans

30 July 2020
Transition to Renewable Energy under Market Based Mechanism in the Western Balkans
The Western Balkan countries of Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia rely heavily on carbon-intensive energy. The countries have prioritized adding more renewable power to their energy mix to improve their energy security and ensure a clean energy future. The six countries have made strong commitments to implementing the Paris Agreement. This is being supported by the Energy Community, which launched the Western Balkan 6 Initiative in 2014 providing technical assistance to strengthen the regional energy market in the Western Balkans.

The Western Balkan countries of Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia rely heavily on carbon-intensive energy. The countries have prioritized adding more renewable power to their energy mix to improve their energy security and ensure a clean energy future. The six countries have made strong commitments to implementing the Paris Agreement. This is being supported by the Energy Community, which launched the Western Balkan 6 Initiative in 2014 providing technical assistance to strengthen the regional energy market in the Western Balkans.

Over the years, the countries have been integrating renewable energy into their total energy mix. However, as prices for certain renewable energy technologies rapidly decline, the current feed-in tariff incentive system has become costly for the governments. For this reason, the European Union mandated that Western Balkan countries shift towards market-based mechanisms, such as auctions to stimulate investment in renewable energy.  

PPIAF, in partnership with ESMAP, is working with the countries to identify and recommend pathways for adopting and implementing market-based mechanisms to speed up their transition and promote private investment in renewable energy. This is being done in two phases. In Phase I, PPIAF conducted a gap analysis of the current renewable energy policy environment and proposed recommendations. PPIAF also provided technical assistance and capacity building for designing and implementing market-based mechanisms. Together, these Phase I activities will help the six countries move away from feed-in tariffs.

In June 2020, PPIAF and ESMAP began Phase 2 where tailored support will be provided for up to three countries identified in the previous phase to provide recommendations for the optimization of their legal and regulatory frameworks to enable market-based mechanisms to work effectively within their country contexts. 

PPIAF’s support to the Western Balkans in scaling-up renewable energy will help the countries move closer to the goals established in their National Renewable Energy Action Plans, which are aligned with the Energy Community Renewable Energy Directive. The knowledge gained through this work will also be used to support similar efforts in other countries looking to attract private investment in developing greater renewable energy capacity.