Europe’s most coal-dependent country Kosovo turns to renewables

Europe’s most coal-dependent country Kosovo turns to renewables
Most of Kosovo's electricity companies from Kosova A and B near Pristina, two of the most polluting power plants in Europe. / bne IntelliNews
By Clare Nuttall in Pristina January 23, 2024

On the outskirts of Kosovo’s capital Pristina, two ageing coal-fired power plants supply electricity to much of the country. The clouds of smoke they constantly emit are clearly visible from roads out of town and from higher ground within the city. 

Kosova A and B, only around 5km from central Pristina in the town of Obiliq, are two of the most polluting power plants in Europe. Built in the Yugoslav era the first unit of Kosova A was put into operation back in 1962 and Kosova B opened in 1983 they still supply around 90% of Kosovo’s electricity. 

Now, however, there are plans to change that. One of the Southeast Europe region’s largest wind power plants is already in operation at Bajgora in the mountains of northern Kosovo, and in 2023 the government adopted an ambitious energy strategy to shift Kosovo towards renewables.

A big step forward 

The Selac wind farm near Bajgora, with capacity of 102.6 MW, opened in 2022, becoming Kosovo’s largest wind farm and one of the biggest in the region. 

It is located about 40 kilometres north of the capital Pristina in the southern foothills of the Kopaonik mountains. Developed by a joint Kosovo, German and Israel venture, Sowi Kosovo, it received funding from the European Bank for Reconstruction and Development (EBRD), Erste Bank Austria and Slovenian bank NLB. 

“It was in the end the biggest renewable energy project in Kosovo at 105 MW. One of the highlights of this project for me is that it was a JV from a German company with partners from Israel and Kosovo,” head of Potsdam-based Notus Europe Rico Koch says in an interview with bne IntelliNews in Pristina. 

“It was an important project for Kosovo because as a country we are an energy importer, and we are faced with a lack of electricity especially during the winter season,” says Guri Shkodra, Notus’ country manager for Kosovo. 

“It continues to be one of those landmarks, the starting point of a long process of decarbonisaton the country has to go through which includes the energy transition as well.” 

The wind farm currently accounts for around 10% of Kosovo’s energy generation capacity.

Asked how difficult it was to carry out the project, Rico says it was helpful that the authorities were behind it  even with multiple changes of government during the planning and construction periods. 

Technically, the project was complicated by the fact the site is up in the mountains, and the turbines were imported via the port in Durres in neighbouring Albania. However, as Koch points out, Notus has existing projects in the mountains of Austria, France and South America, so the firm had experience in working in a mountainous environment.

The company is now in the process of expanding in Kosovo and the broader Western Balkans region.

More investments planned

Opening the plant was an important step, and there are plans for further investments in both wind and solar. Despite being extremely rich in lignite, Kosovo aims to switch to renewable energy and eventually achieve a full decarbonisation of its energy sector. 

At the same time, Kosovo faces a growing need for energy, as its economy is among the faster-growing in the region, with export-oriented manufacturing an important part of its growth.

This won’t be easy given that coal has long been the logical choice in Kosovo given the country’s immense resources; the small country has 12.5bn tonnes in proven reserves of lignite, which officials say is the fifth largest of any country worldwide. 

However, there is growing awareness of the health and environmental problems caused by burning coal to generate electricity, by far the largest source of greenhouse gas (GHG) emissions in Kosovo. 

“Kosovo’s carbon intensity, as measured by CO2 emissions per unit of output, is the highest in the Western Balkans and about four times the average of the EU,” points out a 2023 International Monetary Fund (IMF) report. It adds: “The burning of fossil fuel for heating is the main cause for the high concentration of harmful PM2.5, one of the leading causes of illness and death associated with respiratory, pulmonary and heart diseases.”

Unreliable supply 

On top of the pollution from the two ageing power plants, they are highly unreliable, resulting in frequent unplanned outages. This became particularly problematic during the recent hike in energy prices sparked initially by revival of industry after the pandemic and intensified by Russia’s invasion of Ukraine and related sanctions. The crisis fell particularly hard on Kosovo. 

“Kosovo is a very small economy and we rely largely on imports. This means that if a major shock happens in large economies then we have some imported in inflation in the country; if there is a major disruption in the supply chain it also affects us as small economy,” says Blendi Hasaj, executive director of think-tank Institut GAP, in an interview with bne IntelliNews.

“With respect to the most recent crisis in the energy sector, even though Kosovo looks like it has sufficient production of energy, this is based on coal and they [the power stations] are not operating at full scale. They were built decades ago, and go out of the system many times,” Hasaj adds. 

“Unreliable domestic supply makes the system vulnerable to short-term price fluctuations. Frequent unplanned outages of Kosovo’s old coal-based plants have been a main reason preventing the sector to engage in long-term electricity supply contracts, rendering the system dependent on the volatile day-ahead and intraday markets,” confirms the IMF report, “Kosovo’s Electricity Sector Challenges and Opportunities”. 

On a more positive note, the government in Pristina was commended by international financial institutions (IFIs) such as the IMF and World Bank for taking targeted and short-term measures to alleviate the financial burden on consumers. 

Pristina’s renewables strategy

In March 2023, the government unveiled the energy strategy for the next eight years. The key target set in the strategy was to increase the share of electricity derived from renewable resources to 35% by 2031, from 6.3% at the time. 

Overall, power-generating facilities with a combined installed capacity of 1.6 GW will be developed by 2031. Wind and solar capacities will contribute 600 MW each. At least 100 MW of installed capacity will come from prosumers (consumers, mostly residential, with PV panels installed on their roofs).

To accommodate these intermittent power generation facilities, storage capacities with a transfer capacity of 170 MW and a total storage capacity of 340 MWh will be developed. 

Industry insiders describe the plans as ambitious. Shkodra says the strategy is “maybe a bit too ambitious for such a short time”, pointing out that it took Notus seven years to build the Selac wind farm, and the government's strategy is due to end by 2032. 

“Kosovo has recently approved a new and ambitious energy strategy with a significant focus on reducing emissions. The cost of implementing such an ambitious strategy, including for new renewable energy supply infrastructure, electricity transmission, energy storage, as well as district heating and energy efficiency, is significant and imminent for laying the foundations for greener growth in Kosovo,” says the World Bank office in Kosovo in comments emailed to bne IntelliNews

GAP’s Hasaj comments that the “government-produced strategy looks promising in a way, aiming for a transition from coal-based to green energy.” 

However, he adds that the country has had problems with the stability of governments in the past, making it difficult to take a long-term approach. 

He also pointed to the importance of increasing energy efficiency at the same time as investing into new capacity, given that the residential sector is the largest energy consumer in the country. “We noticed very poor insulation of homes, windows and boilers. Energy performance is very low, there is a major need,” he says. 

Pippa Gallop of the NGO Bankwatch notes that the timeline for reaching total installed renewables capacity of 1,600 MW by 2031 requiring 1,320 MW of new renewable energy generation capacity is “quite tight”. 

“For utility-scale solar, in principle it is possible as there are definitely at least 600 MW of projects being proposed, with some of them very large, such as a 100-MW solar plant on the ash dump at Kosova A, which may, according to the draft, be funded by the EIB. For wind, we are aware of just under 500 MW in the pipeline, so that might be tight, but again it is possible in principle,” Gallop says. 

“I would love to see 200 MW of prosumer capacity, but it’s quite ambitious by 2030-2031 and this would definitely depend on a good level of support by the government, as many people cannot afford to install their own systems,” she adds. 

Leaving coal behind? 

For coal-rich nations, removing the fuel from the energy mix is complicated. Alongside Kosovo’s renewables ambitions, there have long been plans to update the country’s coal power generation capacity.

Previously, ContourGlobal was due to build a major new coal power plant in Kosovo, Kosova e Re, that would have replaced the two existing coal power plants. However, the World Bank, which had initially planned to back the project that was estimated at €1.3bn, withdrew its support as the climate crisis worsened and IFIs backed away from funding coal power. As politicians in Pristina also turned against the plan, ContourGlobal cancelled the 500-MW coal-fired power plant project in March 2020, seeking compensation via the International Center for Settlement of Investment Disputes (ICSID).

There are currently plans to refurbish Kosova B and one of two units of Kosova A to bring them into compliance with Kosovo’s legal obligations under the Energy Community Treaty. 

Gallop tells bne IntelliNews this would be an improvement on the current situation, though less optimal than investing into renewables. 

However, she adds, “with such old units, only time will tell whether the reductions are really achieved. What we are also seeing at Ugljevik in BiH and Kostolac B3 in Serbia is that even with installed pollution control equipment, they don’t always want to use it, because it requires a lot of energy to run, which means less electricity for them to sell. Another concern is the high cost of refurbishing such old plants, and the likelihood of efforts and resources being diverted from increasing energy efficiency and renewables.”

For the longer term, Gallop said it is concerning that Kosovo’s National Energy and Climate Plan (NECP) “doesn’t clarify anything about the closure dates of the coal plants”. The Energy Community secretariat said in 2023 in its assessment of Kosovo’s draft NECP that Pristina should commit to phasing out coal and achieving climate neutrality by the middle of this century. 

A report by Climate Action Network (CAN), a European NGO coalition dedicated to combating climate change, also pointed to the absence of a comprehensive strategy for phasing out lignite. Expectations for coal power plants to remain operational beyond 2040 raised concerns, with the report arguing that this lack of strategy represents a critical gap in Kosovo's commitment to decarbonisation.

There have been some strong steps in the right direction, notably with the opening of the country’s largest wind farm and the adoption of the government’s strategy. However, as is the case globally, more will be needed.