Over the course of the previous year, the Western Balkan governments have announced several new gas pipelines, terminals, and power plants in an effort to shift the region’s focus away from Russia.
The implementation of these plans, which are receiving financial and political support from the EU and the US, may potentially hinder the region’s transition to renewable energy. In addition, it may also lead to increased economic and security risks, including those related to Russia. It appears that the Western Balkan governments may not have fully taken into account the challenges that arose due to the EU’s reliance on fossil fuel imports, particularly gas, which caused significant instability with global consequences. However, it should be noted that they are not alone in this regard.
Although it is still uncertain how effective the EU will be in reducing its reliance on Russian gas, it seems that its leaders are extending their experiences to a less gas-dependent region that consumed only a small fraction of Germany’s gas consumption in 2021. The EU Commission president Ursula von der Leyen, along with the energy commissioner Kadri Simson and enlargement commissioner Olivér Várhelyi, regularly hold meetings with the Azerbaijan government with the aim of promoting greater gas supplies to the EU and the Western Balkans. It appears that the Greece-North Macedonia gas interconnector may be funded by the European Investment Bank and European Bank for Reconstruction and Development. However, it is worth noting that even though it is being promoted as a means of diversification, it could potentially result in a significant increase in North Macedonia’s gas imports.
The gas consumption in the Western Balkans is currently at a level below four billion cubic metres per year, primarily for heating and industrial purposes. Serbia accounts for approximately 60 per cent of this consumption. However, it is worth noting that a significant portion of the region, including Albania, Montenegro, and Kosovo, is not yet connected to the international gas network. Based on the recent findings from Global Energy Monitor and Bankwatch, the proposed gas initiatives are estimated to be valued at over €3.5bn and entail the establishment of the region’s inaugural LNG import terminals in Montenegro and Albania, as well as a collection of modern gas-fired power plants that could considerably enhance the region’s reliance on gas for electricity. In many cases, building gas infrastructure from the ground up can be quite expensive and time-consuming, potentially tying up resources for years. This could also have long-term implications for the region. Therefore, rather than diverting resources towards this effort, it may be more beneficial to focus on investing in energy efficiency and sustainable renewable sources.
Based on the current slow progress of solar and wind development in the region, it may not be reasonable to anticipate that the countries will shift from gas to renewables by 2050. This is due to the limited financial resources and regulatory and institutional capabilities of these countries. The Western Balkans may be more susceptible to unpredictable gas prices due to the increased demand for gas. Considering the region’s high levels of energy poverty and the sensitivity of residents to expensive utility bills, it is unlikely that they will be able to afford gas at high prices. Consequently, there may be a risk of stranded assets. It is possible that in times of high gas prices, governments may need to provide subsidies which could put a strain on their limited public budgets, even if gas is utilized. It is also possible that they may consider turning to Russia for cheaper gas, as Russia is willing and able to offer it if it aligns with their geopolitical interests. It appears that there is currently no room for additional fossil gas infrastructure at this time.
