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Energy & Competitiveness Twist Throughout Western Balkans
Aleksandar KovacevicSenior Visiting Research Fellow
Oxford Institute for Energy Studies
Western Balkans: Energy and Competitiveness Twist
• Overview• Governance
– Natural resource (& transit) rents– Barriers to entry– Access to international markets
• Supply – Energy cost and energy efficiency– Adequacy and security of supply
• Demand– Domestic aggregate demand and its– Seasonal character
1 Wood services Land Use REM Water Resources Crude oil resources
Direct wood resources
Indirect wood resources
Crude Import
Natural gas & regulation services import
Underground mines
Open pit lignite mines
Oil refineries Natural gas mains &
regulation
HPPs Handling & transport
TPPs
Drying facility
Oil products
Mazut
Energy Services
Storage & Blending
Transport
HoBs
Fuel wood / lignite retail market
Natural gas resources
Cutting & Transport
Storage
Storage
Storage
Storage
Transport Transport
Household Storage
T&D Grid, Metering, Billing & Collection
DH Grids
Filling stations
Distribution M&B&C
Retail market
Vehicles Heating devices
Heating devices
Appliances DHW tanks
Solid fuels burning devices
DHW Services
Heating Services
Houses
Apartment buildings
DH services
Cooking services
Food storage
Transport services
Mechanical services
Lighting
Living Space
Settlements
Inhabitants
Facilities Surrounding Areas
Import
Import
Concerns and Objectives
• Security of Supply
• Energy supply to selected social clusters
• Social affordability
• Budget revenues
• Natural Resource Rents
• Transit fees and rents
Key Energy Challenges:
1. Capacity building and policy formulation
2. Energy market reform and regulation
3. Energy security
4. Energy Efficiency
5. Environmental policy and climate change
6. Energy Poverty
7. Energy cooperation and trade
8. Oil and transportation in Southeast Europe
Western Balkans Region
Economic Overview
Energy Overview
Energy Indicators
Some Comparisons
New HV links support potentially lucrative electricity trade with the rest of Europe enhancing notion of opportunity costs but doing
little about market access and lowering barriers to entry
Access to international natural gas markets brings potential to lower barriers to entry to power markets and remove rents
thus improving quality of governance
Source: Aleksandar Kovacevic, "Potential Contribution of Natural Gas to Sustainable Development in South Eastern Europe", Oxford Institute for Energy Studies, 2007
http://www.oxfordenergy.org/pdfs/NG17.pdf
Tightening electricity supply situation
Power markets structure demonstrates poor diversification of generation portfolio
SEE lignite industry in the European context
Commitment to Environmental Remediation
While about 1/3 of electricity is generated from hydro sources, that are unpredictable and getting
more volatile
Source: EPCG
Secondary adjustments of industrial output
INDUSTRIJSKA PROIZVODNJA SRBIJE 2001–2009.INDEKSI (Ø 2008 = 100)
70
75
80
85
90
95
100
105
110
115
jan.
01
apr.0
1ju
l.01
okt.0
1ja
n.02
apr.0
2ju
l.02
okt.0
2ja
n.03
apr.0
3ju
l.03
okt.0
3ja
n.04
apr.0
4ju
l.04
okt.0
4ja
n.05
apr.0
5ju
l.05
okt.0
5ja
n.06
apr.0
6ju
l.06
okt.0
6ja
n.07
apr.0
7ju
l.07
okt.0
7ja
n.08
apr.0
8ju
l.08
okt.0
8ja
n.09
Originalna serija
Desezonirana serija
Trend-ciklus
Energy supply situation• High-risk portfolio• Inadequate security of supply with high probability for
further deterioration• Natural resource rent management facilitates economic
performance demonstrating character of governance– Example: subsidized cost of district heating services
delivered to urban areas supporting “low labor costs of skilled work”
• Further deterioration likely to reveal high cost nature of energy supply and eliminate remaining traces of competitiveness
• Investment projects promoted by Governments not likely to affect the difficult trend
Fuel wood is fuel of choice for more than half of households while the reduction of heated space is common practice (Serbia and Kosovo examples)
0.3%
1%
60.5%
22.2%
12.2%
3.8%
Wood/coal
District heating
Electricity
Gas
Propane-butane gas
Petrol/gas/fuel
Source: UNDP Survey, 2004 / 2007
Kosovo heating strategy
Demand Side Effects
• High energy intensity associated with very high unit energy cost and ex-economy nature of fuel supply
• Current or latent high energy costs affect aggregate demand and its orientation toward imported consumer goods
• Contributes to seasonal character of demand and low utilization of infrastructure
• Supports further devastation of human capital
• In search for active public policy
Energy and poverty: Concept of Affordable Energy
• Total social costs of energy that could be covered by productivity gains facilitated by suitable and secure energy
supply
• In a way that the people could conduct economic activity to support
• Appropriate standard of living for themselves and their families within
• A healthy environment
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