Crisis highlights weaknesses of North Macedonia’s energy system

Crisis highlights weaknesses of North Macedonia’s energy system
The TE-TO, gas fuelled power and heating energy plant in Skopje. / Valentina Dimitrievska
By Valentina Dimitrievska in Skopje February 1, 2022

The global energy crisis that hit North Macedonia has forced the country to import high-priced electricity from international markets, due to the lack of domestic production.

The crisis has highlighted a number of issues facing the energy system and indicated the steps that need to be taken to find a long-term solution. These include the construction of large energy facilities that would help the country avoid electricity shortages and could even make it an exporter of electricity, experts interviewed by bne IntelliNews say.

The neglect of existing energy facilities, delays or slow implementation of major new energy projects and poor energy policy are some of the problems that bumped up the effects of the crisis.

The country is dependent on energy imports, and produces only electricity.  It possesses no gas or oil, and has limited quantities of coal.

To stabilise the situation amid soaring prices on international markets the authorities declared a state of crisis in the energy sector last year, which was extended by six months in December, until June 9, 2022.

In response to electricity shortages, North Macedonia also decided to import 3mn tonnes of coal from neighbouring Kosovo for its REK Bitola thermal power plant.

As a result of the crisis the price of electricity for households delivered by power distribution company EVN Home increased by 9.48% starting from January 1 while heating energy prices for the city of Skopje grew by 14.05% due to the high prices of natural gas.

Some public enterprises are on the verge of collapse due to the high electricity price they were charged for January.

The country has not been facing power cuts like in neighbouring Kosovo, but the citizens of Skopje were threatened with spending some winter days in freezing homes, if the government did not intervene in a timely manner. Some parts of Skopje were left without heating for several days in January, while in other parts of the city radiators did not heat up sufficiently, which caused the citizens to panic.

On January 17, the government declared a crisis in the heating energy sector, after privately-owned BEG that provides heating for the city of Skopje said it was facing serious problems due to the lack of natural gas, and proposed that the government take over the management of the company until the end of the crisis.

Later on, the government adopted a decision on providing additional quantities of heating energy in conditions of crisis in the sector, which paved the way for state-run power producer ESM to temporarily take over the management of BEG starting from January 21.

The new government decision envisages that additional quantities of electricity will be provided from gas-fuelled power and heating energy producer TE-TO by increasing its production and pushing it to the maximum capacity.

The TE-TO, gas fuelled power and heating energy plant in Skopje. 

Ad hoc solutions

Some local experts blame the government for poor crisis management, accusing it of proposing ad hoc solutions rather than taking a more innovative approach to finding long-term solutions.

“The state has undertaken a role of a firefighter with no serious analysis and vision. They lack knowledge, competencies, but also courage. The same matrix of political actions in the past is not able to find new creative solutions not only in politics, but also in energy policy,” Prof. Dr. Goran Rafajlovski from the Faculty of Electrical Engineering and Information Technologies at Skopje’s Ss. Cyril and Methodius University, told bne IntelliNews in an e-mailed statement.

According to the professor, the way out of the current crisis is by good management of energy demand and supply. He said that budget intervention is needed, not at the expense of the taxpayers, but through cost cutting in some ministries.

According to economist Goran Rafajlovski from Skopje-based firm Rafajlovski Consulting, the government’s current solution for taking care of most of the citizens of Skopje is good, but he underlined that the energy sector in general needs long-term solutions.

Rafajlovski pointed out that the authorities should not have allowed the privatisation of major energy companies, such as those in the heating energy sector for the city of Skopje.

“There are some companies that should not be privatised or this [should] be done in a serious way,” he told bne IntelliNews by phone.

Rafajlovski also mentioned the slow progress of gasification in the country. “Instead of the citizens of Skopje using gas for heating, we use a primitive way of heating, which is converting electricity into heating,” he said.

In the meantime, he noted, the country is solving the problem by importing gas without a tender; had the authorities responded on time they could have carried out a tender process.

Gasification of the country is one of the major infrastructure priorities of the Macedonian authorities in the expectation that this will reduce energy costs and greenhouse gas emissions, but the implementation of the project that was launched seven years ago is very slow.

Neglected energy facilities

According to Rafajlovski, the solution to the energy crisis is to have major energy facilities that will produce electricity, but he noted that the existing facilities have been neglected for years and brought to the “level of destruction”. 

“This is something in progress. None of the governments in Macedonia for political reasons have built any energy facilities in the last 20 years. HPP Kozjak was the last one. Neither the construction of HPPs Cebren and Galishte has started, nor the thermal power plant Negotino, nor were there any attempts to build a nuclear plant,” Rafajlovski said.

The idea to build the Cebren and Galiste HPPs on the Crna River in Mariovo region dates back a decade ago, but a number of tenders have failed so far.

"All that has been done is to leave private individuals to build small hydropower plants that are far from what we need for a serious and stable system," Rafajlovski said.

He noted that there is “complete neglect” of REK Bitola, the country's biggest energy facility, with no serious overhauls of the plant’s units in the last 15 years. This has forced North Macedonia into costly electricity imports. 

“The production price of electricity of REK Bitola is about €40 per MWh, while the country is now buying electricity for a price of €230 per MWh, but it is not that we have no coal,” Rafajlovski said.

He pointed out that the government is importing huge quantities of coal from Kosovo even though the country has its own coal reserves for up to eight years, but the problem is that for the last two and a half years the management of the power plant has failed to procure a new excavator for domestic coal excavation.

“They use a regular excavator, which is used for construction works. It’s like digging a house foundation with an ice cream scoop,” he said.

The other problem with the import of the coal from Kosovo, according to Rafajlovski, is that Kosovo’s coal is of higher quality, so slag must be used in order not to damage the blocks of the REK Bitola thermal power plant.

Another problem is the transport of coal by land, as the country does not have solid infrastructure, Rafajlovski said, noting that roads would be seriously damaged if it is transported that way.

According to him, if REK Bitola works with three units, which is about 500 MW, plus taking account the production from hydropower plants, domestic power generation would reach 700 MW and the import of electricity would have been much lower.

“The energy crisis is a serious world problem, for which other countries started to look for solutions in May, June, July, but it was barely mentioned here last September,” Rafajlovski noted.

Nuclear power plant not an option any more

“If a nuclear power plant had been built, we would have been exporters of electricity,” Rafajlovski said, noting that the country has uranium deposits in the southern Mariovo region. He said that there were plans for the construction of such a plant a decade ago with the help of a French state-run company.

The expected construction of the Cebren and Galiste hydropower plants would have created sufficient water accumulation to cool the plant.

There is no official confirmation of the existence of uranium in Mariovo near the Greek border, but some media reports revealed that secret explorations had been conducted back in the 1950s and samples had been sent to the nuclear institute in Belgrade under the project led by the Yugoslav secret services. Now the pits are covered with lead plates.

The previous energy strategy until 2030 envisaged the construction of a nuclear power plant in the Mariovo region, but it has never been realised.

The idea of building a nuclear power plant came into the spotlight for the first time back in 2011. Some arguments against building a nuclear power plant were that such projects are too expensive for a small country like North Macedonia, as well as the lack of trained staff and space for the nuclear waste to be stored.

According to the country's new strategy for the energy sector until 2040, drafted by the Social Democrat-led government, the construction of a nuclear power plant is no longer an option.

North Macedonia attempted to join the construction of the Belene nuclear power plant in Bulgaria a few years ago, but in 2020 it decided to withdraw from the project. Later on, Bulgaria also abandoned the plans to pursue the Belene plant.

"The world was not ready for green energy and the closure of nuclear power plants and some thermal power plants is part of the price we are paying at the moment," Rafajlovski said.

He argued that North Macedonia’s green energy targets are among the reasons for the crisis. The country, like others, has been abandoning thermal power plant projects as it sets emissions reduction targets and pursues the green transition and coal phase-out, but at present coal fired power plants are its main source of electricity and solar and wind capacity is not yet large enough to meet energy demand. Solar and wind parks accounted for just 1.8% of the total electricity production in November, according to bne IntelliNews calculations. 

The authorities in North Macedonia are committed to gradually reducing the use of coal and switching to clean energy sources as part of the government's plans to meet EU goals on reducing carbon dioxide emissions. They have also announced that the REK Bitola and Oslomej thermal power plants will be closed by 2030 as part of efforts to switch to renewable sources and reduce the air pollution.