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Renewable Energy inSouth East Europe

Chris Moore and Kevin Smith


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Renewable Energy in SEE

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Publishers note

Every possible effort has been made to ensure that the information contained in this publicationis accurate at the time of going to press and neither the publishers nor any of the authors,

editors, contributors or sponsors can accept responsibility for any errors or omissions, howevercaused. No responsibility for loss or damage occasioned to any person acting, or refrainingfrom action, as a result of the material in this publication can be accepted by the editors, authors,the publisher or any of the contributors or sponsors.

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GMB Publishing Ltd.120 Pentonville RoadLondon N1 9JNUnited Kingdomwww.globalmarketbriefings.com

This edition first published 2007 by GMB Publishing Ltd.

Chris MooreandKevin Smith

Hardcopy ISBN 1-84673-050-3 E-report ISBN 1-84673-051-1

British Library Cataloguing in Publication Data

A CIP record for this book is available from the British Library
http://www.globalmarketbriefings.com/http://www.globalmarketbriefings.com/


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Contents

About the authors

About the report

List of Acronyms

Introduction What is Renewable Energy?

Why Renewable Energy?

How is RE defined?

Generic definitions

Financing

Environment

Current project developments

The review markets

Albania Overview

RE policy

Legislation

Grid access, distribution

RE resources

Contacts

Summary

Bosnia & Herzegovina Overview

RE policy

Legislation


RE resources

Contacts

Summary

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Bulgaria Overview

RE policy

Legislation


RE resources

Contacts

Summary

Croatia Overview

RE policy Legislation


RE resources

Contacts

Summary

Fyr Macedonia

Overview RE policy

Legislation


RE resources

Contacts

Summary

Romania Overview

RE policy

Legislation


RE resources

Contacts

Summary

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Serbia & Montenegro Overview

RE policy

Legislation


RE resources

Contacts

Summary

Turkey Overview

RE policy Legislation


RE resources

Contacts

Summary

Appendices

I. Country Maps Courtesy of CIA II. Electricity System Maps Courtesy of SEENERGY.org

III. References and links

IV. Banks

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About the authors

Chris Moore

A banker by profession, Chris has accumulated over 30 years of experience instructured project finance and international project development, at senior man-agement levels in both industry (Hawker Siddley, BTR, John Wood Group, RollsRoyce Power Ventures) and banking (Raiffeisen Bank, Singer and Friedlander).

His sectoral experience covers defence, infrastructure, oil and gas, and power,whilst his geographic exposure ranges from the Middle East, through Southern and

South East Asia, Latin America, and Europe. For the past 12 years he has had con-siderable involvement in project development and finance in Central and EasternEurope and the Former Soviet Union.

Since 2002, Chris has been actively involved in the business development aspectof renewable energy projects, including wind, wave power, and biomass, but withparticular focus on EfW (Energy-from-Waste) using advanced conversion tech-nologies and applications.

Chris is currently a senior consultant to a Renewable Energy group with both UKand international development interests.

Kevin R Smith

With a career covering international banking (Standard Chartered Bank, NordeaBank and Raiffeisen Bank) and financial consultancy, Kevin Smith has broad ex-perience in most aspects of structured finance. He has focused on the countries ofCEE (Central and Eastern Europe) and the FSU (Former Soviet Union) for some14 years.

For the last 10 years he has run a firm of international financial consultants, whosemain activity is advising on a wide range of finance-related matters in CEE and theFSU. He was also seconded to the British Government for two years, with respon-

sibility for all aspects of finance in Central Europe.Kevin is a regular speaker at seminars on trade and structured finance and is alsothe author of a book on PPPs (public-private partnerships) in Central Europe andmany published articles on a range of subjects for professional publications.


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About the report

Provides an overview of the RE (Renewable Energy) climate in [South EastEurope], with references to current legislative environment and promotionstrategy;

Reviews and assesses each market in terms of existing RE capacity, demand,government incentives support, drivers and economic viability;

Provides analysis of RE resources in each market; Reports on applicable tariff structures for RE projects by market and RE

category;

Gives examples of installed RE capacity by market and category; Comments on RE opportunities; Provides listings of useful contacts in the fields of government, technology

partners, investment partners, banking and legal.

Description

Recent developments in the European gas markets have brought into sharp focusthe need for Russias energy clients to give more serious consideration to their en-ergy supply security.

Many, if not all, of the markets covered by this publication are dependent upon

Russia for their principal basic energy source. This, coupled with increasing em-phasis world-wide on GHG (greenhouse gas) emissions reduction and the adventof carbon trading mechanisms, provides both an incentive and an opportunity forthese markets to maximize their RE resource development to meet future demand.

This publication will provide targeted background information to assist industryprofessionals, potential investors and prospective developers in their assessment ofthe opportunities available within the subject markets as they seek to incorporateRE into a balanced energy portfolio for future needs.


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List of Acronyms

ANRE The National Electricity and Heat RegulatorBEEF Bulgarian Energy Efficiency FundBGN Bulgarian LevCDM Clean Development MechanismCEE Central and Eastern EuropeCESE Central Eastern and South EuropeanCETEOR Centre for Environmental Technology DevelopmentCHP Combined Heat and PowerCIS Commonwealth of Independent StatesCNG Compressed Natural GasDH District HeatingEAR European Agency for ReconstructionEBRD European Bank for Reconstruction and DevelopmentEfW Energy from WasteERC Energy Regulatory Commission

ERE Electricity Regulatory AuthorityESM Electricity Supply CompanyEU European UnionEU ETS European Union Emissions Trading SystemFREE Romanian Fund for Energy EfficiencyFSU Former Soviet UnionGDP Gross Domestic ProductGEF Global Environmental FacilityGHG Greenhouse Gas

GJ Giga jouleGTZ Deutsche Gesselschaft fr Technische ZusammenarbeitGW GigawattHPP Hydropower PlantIBRD International Bank for Reconstruction and DevelopmentICEMENERG Energy Research and Modernizing InstituteIMF International Monetary FundJI Joint ImplementationLFG Landfill Gas


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MAPAM Ministry of Agriculture, Forests, Waters and EnvironmentMENR Ministry of the Environment and Natural ResourcesMIR Ministry of Industry and Resources

MSW Municipal Solid WasteMW MegawattNECC National Energy Conservation CentreNEK Natsionalna Elektricheska KompaniaNES National Energy SystemOG Official GazettePJ PetajoulePPP Public-private partnershipPV Photovoltaic

RO Reverse OsmosisSEEA Serbian Energy Efficiency AgencySERC State Energy Regulatory CommissionSFESD Special Fund for Energy System DevelopmentSHPP Small Hydropower StationTEIAS Turkish Electricity Transmission CompanyToe Ton of oil equivalentTWh TeraWatthoursUCTE Union Energetic System for Coordinating the Electric Energy

TransportUNFCCC United Nations Framework Convention on Climate Change


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INTRODUCTION

What is Renewable Energy?

enewable Energy (RE) has beendefined, somewhat strictly, asenergy flows that occur natu-

rally and repeatedly in the environmentand can be harnessed for human benefit.

A looser and, arguably, more widely

used description might be energyproduced from a renewable and/orsustainable fuel source. The charac-teristics of what qualify, for eachindividual country, as renewable,sustainable, or alternative fuels (thatis, alternative to traditional fossil fuels)under such definitions tend to vary,with certain exceptions being made(or legislation being open to interpre-tation) for sources such as municipal

and some industrial wastes.The most widely recognised formsof RE are, undoubtedly, wind powerand hydro power (for the purposes ofthis publication, and in common withgeneral practice, restricted to small-scale, ie


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supply (Euronews Interview, 31January 2006).

The worlds and, in particular, theindustrialised countries of the Wests,

reliance upon fossil fuels has beenthe subject of serious concern and de-bate for a number of years, as has,more recently, the impact on the en-vironment of increasing consumptionof these fuels.

According to the United Nations,the industrialized countries of NorthAmerica and Western Europe, alongwith a few other states, such as Japan,are responsible for the vast bulk of

past and current GHG emissions.As a consequence, the majority ofthe worlds countries have enteredinto a variety of undertakings toreduce the rate of climate change the most important of these being theKyoto Protocol by means,inter alia,of energy efficiency improvementsand GHG reductions. Some govern-ments (with the notable exception ofthe worlds leading consumer andproducer of emissions, together with asmall number of others) have, as a re-sult of membership of the UnitedNations Framework Convention onClimate Change (UNFCCC), ratifica-tion of the Kyoto Protocol and theobligations entered into under otherconventions, begun to introduce anumber of legislative incentives andpenalties designed to increase the useof alternative energy resources.

A number of countries, such as the

United Kingdom, have imposed taxesor levies on carbon emissions. En-hanced, or green, tariffs have beenintroduced by many governments toprovide a spur to the production anduse of RE, and guarantee access to thegrid by RE-generating plants.

Systems have been, and are being,developed in many countries to re-quire waste management companiesand landfill operators to manage theescape of greenhouse gases, such asmethane, from landfill sites.

The EU has introduced an emis-sions trading system (EU ETS) tocreate a market for GHG reductionunits, whilst the Joint Implementation

and Clean Development Mechanismestablished by the Kyoto Protocol of-fer potential financial leveraging ben-efits for qualifying RE projects as anindirect incentive for implementationof emissions-reducing technologies.

Some of these generic incentive sys-tems will be summarised later withinthe section on Financing.

An additional, if arguably indirect,driver for a move towards greater RE

generation has been the increasingrealisation by governments that ad-vances in technology now mean thattheir indigenous resources can beharvested with much greater efficiencyand lower cost than before. Muchof Central, Eastern and NorthernEuropean countries have significantDH (District Heating) infrastructures,to which cogeneration plants fuelledby biomass or waste feed-stocks can beconnected with minimal disruption.EfW plants have the added advantageof being able to address a waste prob-lem at the same time, providing anenhanced benefit.

How is RE defined?

This publication will, in respect ofeach of the markets being reviewed,examine each governments approach

to the definition and support for theirexploitable RE resources.A listing of the generally accepted

principal RE resources, and their def-inition, is set out below. Due to theintermittent nature of some of the REresources (eg wind, most tidal, solar),a balanced RE approach to planningmay need to include more than one ofthe resources and technologies listed.

The authors make no statement

as to which resource or technologyis their preference from the


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perspective of an RE project devel-oper or investor, it is clear that thebest or most attractive projects will bethose from which the greatest returns

can be made over the shortest period.This, however, has tended to be on theback of heavily subsidised tariffstructures, which often favour a par-ticular resource generally, wind.Governments, on the other hand, aredriven more by the need to meet theirinternational RE obligations and, in-creasingly, by the desire to achievegreater balance in their energy supplysecurity positions.

It will be seen, however, that thegreatest (and, arguably, most easilyimplemented) RE project develop-ment opportunities across the wholeregion lie principally in the Biomass/Biofuel/Energy from Waste sectors,with some markets also benefitingfrom substantial availability of smallhydro resources. Whilst in some casestechnologically viable, the currentstatus of technology in the solarpower sector does not yet appearto be commercially viable within theregion, although recent developmentsin both conversion efficiencies andcost reductions gives some encourage-ment to the view that solar powergeneration projects may eventuallybecome economically competitive inthe medium term. The developmentof wind projects may be feasible insome specific instances (eg Croatia) al-though, due to the intermittent na-

ture of power delivery from suchschemes, the authors take the viewthat wind developments may be bettersuited as part of an alternative appli-cation for example, the productionof water in desalination plants, or inthe generation of hydrogen for hydro-gen cells rather than in direct powergeneration for the grid.

EfW projects in particular ifdeveloped on an integrated, holisticbasis have, we believe, a particularlyinteresting place in the RE mix, as

they convert what would otherwise bea waste problem into a useful energysource, thereby addressing two issueswithin a single plant.

Generic definitions

Biomass

Biomass is, essentially, any matterwhich is composed of organic,biodegradable material this can in-clude anything from agriculturalcrops (some of which are specificallygrown as a renewable energy feed-stock) to municipal sewage.

Wood, generally wood waste (egsawdust, spoil, etc) from forestry pro-cessing industries, but also grown asan energy crop, can be used as a feed-stock for RE projects. The most widelyused process for conversion to energyis direct combustion in boilers (forheat and/or power generation), butother conversion technologies such as

gasification, pyrolysis, and fermenta-tion can also be used, dependent uponthe final form of energy requirement.Biomass projects can be run on abase -load (ie continuous operation generally accepted as 8,000 hours peryear or approximately 91 per centavailability) generation basis.

Biofuels

Biofuels are, in the main, generallyaccepted as being those liquid fuelsderived from biomass sources theseinclude biodiesel, bioethanol, and bio-gas. Whilst the principal focus to datewithin this category has been on theuse of biofuels in the transport sector(where biodiesel and bioethanol arealready in use as a blended additivefor fossil fuel), such biofuels can alsobe used as a fuel for traditional com-bustion, with the generation of elec-

tricity from such a process generally


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meeting RE qualifying criteria. TheEU is one of the legislative bodies thathas adopted a Biofuels Directive,which establishes a road transport fuel

energy content target of 5.75 per centfor renewable source-derived fuel by2010. Biofuel plants should be capableof continuous operation.

Biogas

Biogas is generally produced by a pro-cess of organic waste matter, such asanimal manure, poultry litter, sewage,etc being decomposed by anaerobic

digestion, or in landfill sites. The gas,for RE purposes, is captured and usedeither directly or blended with othergas for combustion, electricity gener-ation, or upgrading to higher valuefuel such as CNG (Compressed Natu-ral Gas) for transport use. Biogas, be-ing high in methane content, is amajor GHG contributor, and REprojects which demonstrate high lev-els of GHG mitigation may benefitsubstantially from carbon credit trad-ing. Biogas plants should be capable ofcontinuous operation.

Geothermal energy

Generically, this is any energy ex-tracted from the earth. At its simplest,this can take the form of gatheringheat from shallow-buried pipes bymeans of a heat pump and, at its mostcomplex, by drilling to depths where

water can be injected to return as pres-surized steam for use in heating or todrive steam turbines for power gener-ation. Geothermal power is limited tolocations where geothermal pressurereserves are found. High-energy sitesare suitable for electricity generation,whilst low-energy sites are suitable fordirect heating and process heatapplications. Geothermal plants canbe considered, in respect of large-scale projects, as base-load generationsources.

Hydro

As set out above, for the purposes of

this publication, this is a small-scalehydroelectric power plant with a ca-pacity of less than 10 MWe. Hydropower is one of the oldest and mostwidely used forms of RE generation,using the energy from flowing waterto drive a turbine. Dependent on cli-mate and location, most mini-hydroplants can be considered as base-loadgeneration sources (though in times ofunusually low rainfall, available deliv-erable capacity can be severely con-

strained).

Ocean

A wide variety of technologies hasbeen, or is being, developed to cap-ture the energy contained in theoceans. In scale, they can vary fromarrays of small-scale wave generatorsto large-scale tidal barrages and in lo-cation from shoreline to relatively

deep-sea. The tidal barrages capturewater at high tide to drive turbines inthe outflow phase, tidal stream andocean current devices, floating de-vices, etc. In certain locations, it maybe possible to generate power fromthermal gradients in seawater (OceanThermal Energy Conversion). Themajority of ocean wave power tech-nologies are, in theory at least, base-load energy sources, whilst tidalpower projects are likely to achieve ca-pacity factors of only some 25 per cent.It is unlikely that any of the marketscovered by this study, being all eitherland-locked or Mediterranean/BlackSea coast line, would be able to sustaina viable form of ocean power.

Solar heat

In wide use throughout the world,solar heating technology is well proven

and has applications in systems


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ranging from single dwellings tolarge-scale space heating and processheat. Generically, systems consist of afluid that circulates to deliver heat

elsewhere. Recent technology devel-opments have introduced the possibil-ity of power generation from a closedcycle fluid system, based on the use ofthe heat to convert fluid to gas, whichdrives a small turbine, the gas thencooling to re-form as fluid and recy-cled through the process. By defini-tion, this is an intermittent energysource.

Solar powerBased on either PV (photovoltaic) sys-tems which convert sunlight to elec-tricity, or thermal (Solar Thermal)systems, this resource is particularlysuited to areas of high incident sun-shine, de-centralised grid-connectedpower, and remote off-grid locations.Systems that achieve thermal powergeneration by concentration of sun-light (Solar Thermal) may reach suffi-ciently high temperatures for steam todrive turbine generator sets. By defi-nition, solar power plants are inter-mittent generators, although some ofthe latest Solar Thermal projects arecapable of storing their liquid mediumto give higher availability.

EfW (Energy from Waste) industrial

and municipal

A wide range of industrial, commer-cial, and agricultural processes gener-ate substantial volumes of organicwaste suitable for conversion to en-ergy. MSW (municipal solid waste)also has high levels of organic mattercontent and, with each Europeangenerating between 0.75 kilogrammesand 1.6 kilogrammes of solid wasteper day, can with some justificationbe categorised as sustainable.

Whilst these wastes have in the past

commonly been dealt with by large-scale mass burn (incineration) tech-nologies, today such an approachgenerally meets with substantial pub-

lic resistance to the permitting of largeplants, and increasingly the trend isnow to seek to treat at, or near, thepoint where the waste is being gener-ated (the proximity principle). Arange of small-scale processes, basedon established gasification/pyrolysisprinciples, are now becoming avail-able on a commercial basis to addressthese requirements.

WindWind power has been providing thedriving force for water pumps andgrain mills all over the world forcenturies. Since the 1980s, significantadvances have been made in wind tur-bine design and technology, withlarger aerofoil blades giving rise toever greater output ratings for land-based wind farms. Most recently,projects have been developed at off-shore sites, where wind resources tendto be greater than those on land, andwhich could allow for higher outputratings of up to 10 MWe. Most bladeand turbine designs include extremelysophisticated safety features, whichprevent excessive rotation during pe-riods of high wind speeds. By itsnature, however, wind power is inter-mittent, with annual capacity factorsin the 2540 per cent range.

Financing

In general, RE projects should, inmost of the review markets, be capableof being financed under standardProject Finance facilities from com-mercial banks. Under a Project Fi-nancing, the project sponsors will beexpected to contribute equity within,

typically, a range of 1540 per cent ofthe projects overall cost, with the


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balance being funded as debt by thefinancing bank. The range may varysubstantially from market to marketand, most significantly, will be heavily

influenced by the finance entitys as-sessment of the projects risk profile,in particular in relation to the tech-nology being applied biomass, LFG(landfill gas), hydro and wind tech-nologies are all now reasonably famil-iar to banks active within the REsector, and should attract lower mar-gins and higher debt leverage.

A short listing of financing entitiesactive in the RE sector is included

herein.A potentially significant contributorto the reduction in project riskprofile may be access to funds arisingfrom JI (Joint Implementation) orCDM (Clean Development Mecha-nism) carbon trading mechanisms,which provide a means through whichprojects may monetise the carbonbenefits arising. (Note that, for thepurposes of calculation, the GHGscovered by the Kyoto Protocol Carbon Dioxide, Methane, NitrousOxide, and various fluorinated gases are rated against a CO2 equivalentbase). Whether or not a host marketis, at the time of writing, eligibleunder the JI/CDM criteria (togetherwith any additional host governmentrequirements) will be indicatedwithin the discrete market surveysection.

An industrialized country which has

not yet set up the necessary approvedregistries and greenhouse gas inven-tory systems required under Kyotomay carry out JI projects under amore onerous second track processinvolving independent verification.Such verification, generally con-tracted out to suitably qualified West-ern consultancies, will ensure thatemissions are actually reduced, andwill certify by how much.

In essence, the JI programme allowsindustrialized countries to meet part

of their required cuts in greenhousegas emissions by paying for projects inthe transition economies of EasternEurope and the CIS that will reduce

emissions. The sponsoring govern-ments will receive credits that may beapplied to helping them meet theiremissions targets, whilst the recipientnations will gain foreign investmentand advanced technology.

Commitments under the Protocolvary from nation to nation. The over-all five per cent target for developedcountries is to be met through cuts(from 1990 levels) of between six and

eight per cent in the EU, Switzerland,and most Central and East Europeanstates; Russia, and Ukraine are to sta-bilize their emissions.

Environment

To a great extent, as illustrated above,we need to recognize that the contextwithin which RE projects need to bedeveloped is inextricably linked to

pressures with regard to environmen-tal issues. Indeed, it will be virtuallyimpossible to obtain approval forstructured project finance facilities tosupport such RE projects withouthaving met the increasing strict con-straints in respect of the environmen-tal impact such a project will have.

Current project developments

The European Bank for Reconstruc-tion and Development website

projects in development or construc-

development generally, and thesensitivities affecting the implementa-tion of such projects eg tariffchanges, protestations against adevelopment, imposition of stricteremissions criteria, etc such a register


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date register of renewable energy

tion. Given the nature of project

(www.ebrd.com)maintains an up-to-
http://www.ebrd.com/http://www.ebrd.com/http://www.ebrd.com/


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is liable to considerable variation frommonth to month.

There has been little evidence todate of any of the major RE players

having been directly involved in thedevelopment of currently operationalprojects within the region. This maybe due to uncertainties in respect ofsome of the fundamental elements inassessing the risk profile of a putativeRE project development host gov-ernment commitment to RE develop-ment, tariff structures, grid access andpermitting issues, most of which haveyet to be adopted or implemented to

the degree that would encourage sig-nificant investment in projects. As gov-ernments are seen to develop andimplement attractive RE develop-ment environments, then developerswill increasingly become involved at agrowing rate.

The review markets

The markets being reviewed withinthis publication are those of SouthEast Europe, defined as follows:

Albania Bosnia & Herzegovina Bulgaria Croatia FYR Macedonia

Romania Serbia & Montenegro1

Turkey

Bulgaria and Romania have recent-ly acceded to the EU, whilst Croatia isseeking to be one of the next countriesto achieve accession to membership ofthe EU and, as a consequence, havebeen enacting and continue to enactenvironmental and energy marketlegislation designed to incorporate theprovisions of relevant EU directives.The general perception may be,therefore, that the greatest short-term

RE development implementation op-portunities may lie in these markets,and within sectors which offer themaximum returns in terms of envi-ronmental impact.

The compilers of this study have ad-dressed this publication with a focuson background information on themarkets to provide assistance in theassessment of the market potential forRE development.

1Whilst the two countries have nowagreed to separation, it is too early atthis stage to determine how the re-spective RE policies might change.Consequently, the report sets out thestatus quo ante.


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Generating capacity

The greatest proportion of generation

capacity lies in hydroelectricity fromthree main hydro plants in the north,which produce some 80 per cent ofAlbanias ~1.7 GW installed capacity,with the balance being mainly dieselplant generation. According to theEconomist Intelligence Unit, domesticelectricity production increased by 4per cent in the first half of 2005.

Demand

For the period from 1992, demand forpower has shown an annual growthrate in excess of 8 per cent, againstwhich generation has struggled tokeep pace due, in part, to substantialsystem losses and a deterioratingtransmission system, aggravated byelectricity theft. Despite this situation,KESH had until recently been a netexporter of power. However, thesituation changed in the second

half of 2005 after severe droughtslowered the level of the waterreserved in Northern Albania.Albanias import capacity is severelyconstrained by its poor transmissionsystem.

Financing

The EBRD (European Bank forReconstruction and Development)indicates in its current CountryStrategy Overview statement that itwill provide financing for new powergeneration capacity, and that the de-velopment of a viable project pipelinein the municipal and environmentalinfrastructure sectorsolid wastemanagement, will be a priority.

An indicative listing of banks activein the RE sector within the regionis set out in the Annexes to thispublication.

RE policy

RE policy is primarily the responsibil-

ity of the Ministry of Economy, Tradeand Energy, supported by a numberof other agencies, whose responsibili-ties are summarized below:

National Energy Agency

The Agency is an institution under theauspices of the Minister responsiblefor energy matters. It advises thegovernment on energy matters and,under the Energy Efficiency Law of2005, is charged with administeringthe Energy Efficiency Fund andpreparing RE system programmes toencourage the development of smallhydro projects, biomass, wind, etc.

The Agency prepares and monitorsthe implementation of the nationalenergy strategy. It presents studiesand proposals for the enactment oflaws and regulations in the energyfield related to problems of particular

importance for the national economyand for the countrys energy policy.

Ministry of Environment

The Ministry is responsible for the im-plementation of state policy in thefield of nature protection, rational useof natural resources, ecological, nu-clear and radioactive safety and thearrangement of ecological precondi-tions for sustainable development, etc.It oversees the execution of state con-trol over adherence to legislative de-mands on environmental protection,rational use of natural resources, eco-logical safety, as well as state supervi-sion of the situation of nuclear andradioactive safety, etc.

Electricity Regulatory Authority (ERE)

ERE was set up in September 1999 in

charge of the regulation of tariffs. The


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ERE is responsible for approval of tar-iff and price, licensing of companies inthe electrical energy sector and moni-toring of their activity. It is financed

from the licensing fees.Among present issues are:

the approval of secondarylegislation such as transmissiontariffs, code of transmission,market rules etc;

the unbundling and privatiza-tion of KESH;

the deregulation of the electric-ity market;

the commercial and technicallosses in the networks; the integration into the South

East European regional marketin accordance with the Thessa-loniki Agreement.

Major barriers currently exist in re-spect of the development of viable REprojects - the current economic diffi-culties experienced in the country,low electricity prices, paucity of windresource studies, etc.

Legislation

The principal relevant legislation inrespect of RE is that of the EnergyEfficiency Law of 27 April 2005, whichcreated the framework necessary forpromoting and improving energy ef-ficiency. The Law established an En-

ergy Efficiency Fund and the fundingfor it to implement efficiency and re-newable energy programmes underthe Law On the Power Sector of 22May 2003, and mandated the NationalEnergy Agency as the administrator ofthe Fund.

The Law On Electrical Power seeksto enhance economic effectivenessand the quality service in the sphere ofgeneration, transmission and distribu-

tion of electricity in the public interest.It regulates the conditions of activity

in the electricity power sector, and es-tablishes the rights and obligations ofboth consumers and the state admin-istration.


The Albanian Power Corporation

(KESH)

KESH is a state-owned monopoly. Itis responsible for the production,transportation and distribution of

electricity in most of the country. Thecompany is undergoing restructuringand is implementing a comprehensiveprogramme for the modernizationand rehabilitation of the energy sec-tor, financed by international donorinstitutions as well as through its ownfunds. The government intends, fol-lowing privatization, to divide thecompany into three separate entitiesresponsible for production, trans-

portation and distribution.Shkoder, Elbasan and Vlora

The balance of the distribution ofelectricity in the remainder ofAlbania is shared by these three pri-vate companies.

RE resources

Biofuels

Reliable and up-to-date figures inrespect of utilizable resources in thissector are difficult to obtain. However,it was estimated in a 1995 study thatforestry waste feed-stock (which couldalso be utilized as a biomass feed-stock) could have delivered theenergy equivalent of some 460million GJ. Forestry waste, dependent

upon distribution and transportation


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infrastructure constraints, has the po-tential to be processed to bio-ethanolor bio-diesels for transport or otherapplications.

Biogas

The biodegradable fraction of munic-ipal waste, sewage sludge, togetherwith animal slurries, represent oppor-tunities for treatment through anaer-obic digestion processes for thegeneration and capture of significantquantities of methane for utilization asa combustible fuel. The energy value

of municipal waste has been predictedto reach some 400,000 TOE per an-num by 2010, of which some 40 percent could typically be available asbiodegradable matter. The energy po-tential of animal waste slurries was, in1995, calculated as approximately12,750 GJ. Both these estimates couldtoday represent much higher values.

Geothermal

Whilst Albania has numerous thermalsprings, some of which could repre-sent potential sources for geothermalenergy principally in the agricul-tural sector as greenhouse heatingsources it does not appear that anyof these are currently being exploited.All of the identified locations have lowand medium enthalpy characteristics,unsuitable for electricity generation.The thermal springs and wells in

Albania are located in three principalareas of the country, of which only theKruja area appears to have viablepotential for heating applications,with thermal reserve values of some3840 GJ/m2.

Hydroelectric

Hydroelectricity generation has his-torically provided the vast majorityof Albanias generation capacity, andcontinues to represent its main

generation source even though,through lack of investment funds,only some 35 per cent of potential ca-pacity for development is being ex-

ploited. Of a total generation capacityof 1.7 GW (figures from 2003), hydrorepresented 1.4 GW, or some 82 percent. Approximately 575 MW of large-scale (ie >10 MW) hydro projects arein the planning stage. In addition,however, some rehabilitation of small-scale operational plants is also beingundertaken.

Ocean

It is unlikely that any significant op-portunities exist for the exploitation ofviable ocean power.

Solar

Studies to date show that Albania hasa good solar energy potential, with acountry average radiation figure of4.0 kWh/m2/day, and a total energypotential of some 1,500 kWh/m2perannum. There are no large-scale PVprojects currently in operation, al-though the installation of some 63ktoe is planned by the government by2015. A 48 m2solar thermal heatingsystem has been installed by the Cen-tre for Energy Efficiency, and appearsto be the only operational project of itstype.

Biomass

As referenced earlier, at approxi-mately 460 million GJ, there appear tobe substantial biomass resource gen-eration opportunities based onforestry waste and agriculturalresidue which, dependent upon loca-tion, could be exploited for heat and/or power generation on both a large-scale and de-centralised basis. Oppor-tunities may exist for small-scale,off-grid generation plants to provideCHP (combined heat and power)


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solutions to remote or infrastructure-impoverished locations. There mayalso be opportunities to consider theimplementation of an energy crop

programme for the production of sus-tainable feed-stock supplies to suchplants. Given a reasonable electricitytariff and low-cost fuel inputs, this sec-tor could represent a comparativelyrapid option for Albania to achieve en-ergy source diversification.

EfW

As part of an integrated strategy, it

would appear that EfW plants couldprovide a good fit within the Albanianenergy portfolio, being able to ad-dress a large proportion of the non-degradable fraction of the municipalwaste streams, industrial wastes, andvarious Anaerobic Digestion (AD)residues (where not being used as fer-tilizer or other applications). Theavailability of small-scale, modularEfW units makes, as with biomassplants, off-grid developments particu-larly attractive.

Wind

No comprehensive assessment ofwind resource appears to have been

undertaken in Albania, and there arecurrently no known operational windfarms. It is believed that there may besome opportunity for both large- and

small-scale wind projects, and it is un-derstood that the governments futureplans include a detailed feasibilitystudy of this resource sector.

Contacts

A listing of some relevant contacts isgiven within the Annexes at the end ofthis publication.

Summary

In summary, it would appear thatthe most easily and practically ex-ploitable RE resources which, in lightof the transmission issues resultingfrom the poor grid infrastructure inAlbania, are those which are small-scale and can address off-grid or localgrid capacity constraints. We there-fore consider that the technologies forRE generation by solar, biomass, bio-gas and EfW processes are the mostappropriate for the market at thisstage.


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BOSNIA & HERZEGOVINA

Overview

he Dayton Agreement, signedin Paris on 14 December 1995,retained Bosnia & Herzegov-

inas exterior border and created ajoint multi-ethnic and democraticgovernment. This national govern-

ment based on proportional repre-sentation similar to that in existence inthe former Yugoslavian state isresponsible for the conduct offoreign, economic, and fiscal policy.The Dayton Agreement also estab-lished a second tier of government,comprised of two entities a jointFbiH (Bosnian/Croat Federation ofBosnia and Herzegovina) and theRS (Bosnian Serb Republika Srpska)

each presiding over approximately ahalf of the territory. The FBiH andRS governments are charged withoverseeing internal functions. TheBosnian/Croat Federation is furtherdivided into 10 cantons.

Whilst the FBiH and RS govern-ments have initiated programmesfor energy sector reform and policiesfor the encouragement of energyefficiency and alternative sources ofenergy, much of the countrys infras-

tructure remains damaged from theconflicts of the 1990s. As a conse-quence, in practice, most activitieshave been directed towards rehabili-tation rather than new RE projects.

On the macro level, the governmenthas actively pursued a policy of priva-tization and some 50 per cent ofsmall- and medium- to large-scaleenterprises have been sold to privateentities.

T

The Center for Energy at theUniversity of Sarajevo (q.v.)has pre-pared a document as a basis for along-term energy strategy for theFederation of Bosnia & Herzegovina.The strategy is designed to help thegovernment to implement EU EnergyLaw into Bosnian Energy Law andenable acceptance and ratification ofinternational environment protocolssuch as the Kyoto Protocol.

The medium-term strategy for theenergy sector of Bosnia & Herzegovinadeveloped by the Bosnian Council ofMinisters has outlined the followinggoals:

attracting domestic and foreigninvestments;

establishing reliable energy sup-

plies that conform with definedstandards; developing single electricity and

gas markets (Bosnia & Herze-govina is a signatory to Directive2003/54/EC of the EuropeanParliament and of the Council inrespect of common rules for theinternal market in electricity);

improving the use of energy re-sources and energy efficiency;

improving market liberalizationthrough the introduction ofcompetition and transparency;

adopting international standardsfor environmental protection;

protecting consumer interests; increasing the use of renewable

energy (Bosnia & Herzegovinais a signatory to Directive2001/77/EC of the EuropeanParliament on the promotion ofelectricity produced from REsources).


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Bosnia & Herzegovina is not yet asignatory to the Kyoto Protocol, buthas signed and ratified the UNFCCC,with Non-Annex 1 status. Projects are

eligible for CDM support considera-tion. The National Focal Point in thecontext of UNFCCC is the Ministry ofUrbanism, Housing Communal Ser-vices, Civil Engineering and Ecology.

Generating capacity

The countrys installed capacity in2003 was 4.3 GW, of which 53 per centwas thermal and 47 per cent hydro.

The current generating capacity ofsome 11.3 TWh (EPBiH, EPHZHBand EPRS figures) is still provided en-tirely by hydroelectric and thermalpower, of which ~40 per cent is pro-vided by hydro, and ~60 per cent bythermal, supporting the premise thatexisting capacity refurbishment is stillbadly needed. From 2000 to 2004, ca-pacity grew from ~9.2 TWh to ~10.3TWh. The transmission system is con-nected to Croatia, Montenegro, andSerbia via 220 kV lines as stated ear-lier, considerable investment is re-quired to refurbish the system andreturn it to pre-war status.

Demand

The country is still a net exporter ofpower, according to 2003 figures.Consumption was reported as being6.47 TWh, of which industrial con-

sumption was 17.5 per cent, andhousehold consumption 44.4 per cent.

Financing

EBRDs Country Strategy Overviewmakes no specific reference to a focuson RE or RE-related projects.

The Government of the Federationof Bosnia & Herzegovina establishedThe Fund for Environmental Protec-tion in 2003, the purpose of which isto finance and support projects

reducing emissions and improvingthe state of the environment. One partof this Fund is for renewable energyprojects. The Fund is intended to be

financed from penalties levied on forpolluters (vehicles, industry, energyplants etc).

An indicative listing of banksactive in the RE sector within theregion is set out in the Annexes to thispublication.

RE policy

RE policy in the FBiH is primarily theresponsibility of the Federal Ministryof Energy, Mining and Industry, inwhich the Department for Energy isresponsible for defining the energystrategy of the FbiH. The latter, sub-ject to agreement of the Council ofMinisters and Parliament, could beextended to cover the whole country.To date, whilst a number of consulta-tions have been held, no formallyagreed strategy appears to haveemerged.

Within the RS, responsibility lieswith the Ministry of Economy,Energy and Development, withinwhich energy-related matters aredealt with by five units. The Depart-ments for Energy and Energy PowerUtilities, Energy and Fuels, and De-velopment of Energy and Mining arethe most directly relevant to the REsector.

The Ministry of Urbanism, CivilEngineering and Ecology of RS hasresponsibility both within RS andnationally for ecology and laws in re-spect of protection of the environmentand climate change. The Ministryleads in the Kyoto Protocol negotia-tions and in UNFCCC discussions.

According to the law on liberaliza-tion of the electricity market adoptedin April 2002 (Law on Electricity

Transmission, System Regulatorand Operator in BiH) which was


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supplemented in both entities by cor-responding law on electricity genera-tion and distribution (Law onElectricity of the FBiH and RS), the

State Energy Regulatory Commission(SERC) is to take over the regulatorytasks for the transmission grid,whereas generation, distribution andtrading are to be the responsibilityof the regulatory commissions ofthe individual areas (ERCFBiH andERCRS) separately.

The above Ministries and Commis-sion are supported by a number ofother non-governmental agencies, in-

cluding the following:The Centre for Energy

The Centres main activities includethe analysis of the Bosnian energy sec-tor, input to an energy developmentstrategy, basis and methodology for aBosnian energy balance, involvementin creating an energy regulation sys-tem, energy efficiency and energytechnology improvements, etc. TheCentre is not a government agency,but operates within the MechanicalEngineering Faculty of the Universityof Sarajevo.

CETEOR (The Centre for

Environmental Technology

Development)

CETEOR is a private organization es-tablished in Sarajevo in 1992, whoseactivities have a focus on sustainabledevelopment, quality management,solid waste management, energy effi-ciency, and chemical safety. CETEORworks with a network of national andinternational partners.

CETEOR collaborates with the Cen-tre for Energy and Chamber of Econ-omy of FBiH, amongst others.

Legislation

The principal relevant legislation in

respect of electricity generation is out-lined below:Law on Electricity in FBiH(OG [Offi-

cial Gazette] of FBiH 41/02), and theLaw on Electricity in RS (OG of RS66/02, 29/03), focus on the develop-ment of an electricity market, settingout the goals outlined in the Overviewabove.

Decision about a Methodology for theDetermination of Purchase Prices forElectricity from Renewable Sources withInstalled Power up to 5 MW (OG ofFBiH 32/2002, OG of RS 71/2003) establishes that the government-owned utility companies, EPBih(Elektroprivreda BiH), EPHZHB(Elektroprivreda HZ Herceg-Bosna),and EPRS (Elektroprivreda Repub-lika Srpska) have an obligation to buyelectricity from renewable sources.The electricity tariff for electricity gen-erated from renewable sources with

installed power capacity of up to 5MW will be determined by applicationof corrective coefficients or premiumon the amount of the current tariff foractive energy set by the governmentfrom time to time the premiumranges between 80 per cent and 110per cent of the base tariff of approxi-mately 4.95 euro cents.

The following are also relevant tothe implementation of generic

projects:Law on Waste Managing(OG of FBiH33/03)

Law on Air Protection (OG of FBiH33/03)

Law on Water Protection(OG of FBiH33/03)

Law on Nature Protection (OG ofFBiH 33/03, OG of RS 50/02)

Law on Fund for Environmental Pro-tection in FBiH(OG of FBiH 33/03)


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As set out above, the power sector in

Bosnia & Herzegovina now consists ofthree vertically integrated monopo-lies: Elektroprivreda Bosne i Herze-govine (EPBiH), ElektroprivredaHrvatske Zajednice Herceg-Bosna(EPHZHB), and Elektroprivreda ofthe Republic of Srpska (EPRS). Thepower companies are synchronizedand interconnected but there is nocompetition among them they arevirtual monopolies within theirexclusive ethnically based serviceterritories.

The service territories are relativelysmall, with equally small customernumbers and an absence of major in-dustrial and commercial customers.As identified earlier, the countryselectricity infrastructure is in a poorstate, with substantial investment re-quired in the distribution system. Thegovernment has drawn up plansto restructure and privatize the

power sector under the Power SectorRestructuring Action Plan, which en-visages multiple generation and(cross-entity) distribution companieswith a single transmission company atstate level. The original formulation ofthe Action Plan made no distinctionbetween FBiH and RS territories theintention is that the energy marketswill be integrated; however there hasbeen difficulty in reaching agreementon implementation.

JP Elektroprivreda BiH (EPBiH)

EPBiH is based in Sarajevo, and servesa customer base of approximately619,000 customers, over 90 per centof which are household customers.EPBiH operates two coal-fired ther-mal power plants (Kakanj, 578 MWand Tuzla, 779 MW) and threehydropower plants (Grabovica,

Jablanica, Salakovac), with a total

installed capacity of 1,831 MW. Inaddition, EPBiH operates six smallhydropower plants, with a total in-stalled capacity of 9.6 MW. EPBiH is

divided into six departments:generation, transmission and systemcontrol, distribution, research anddevelopment, economic and financialaffairs and human resources.

JP Elektroprivreda Hrvatske Zajednice

Herceg-Bosna (EPHZHB)

EPHZHB is the vertically integratedelectricity company with a service ter-ritory in the immediate region aroundMostar. It serves around 168,000 cus-tomers, approximately 152,000 ofwhich are household customers.EPHZHB operates five hydropowerplants with a total installed capacity of1,086 MW Rama, Capljina, Jajce I,Jajce II and Mostar. The company isdivided into seven departments:generation, transmission, distribu-tion, research and development, sys-

tem control and operation, financeand legal, personnel and administra-tive, employing 1,745 people in total.

Elektroprivreda Republike Srpske

(EPRS)

EPRS serves the Republika Srpska,from its base in Trebinje. EPRS has acustomer base of 436,000, over400,000 of which are household cus-tomers. EPRS operates two lignite-fired thermal power plants (Gackoand Ugljevik, 300 MW each) and fivehydro plants (Bocac, Trebinje andVisegrad) with a total installed capac-ity of 1,424 MW. EPRS operates as aholding company for 11 legally inde-pendent operating companies whoare fully responsible for the operationof the company but report to theDirectorate of EPRS. Each of the

two thermal and three hydropower


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stations is a separate company, as wellas the five distribution districts and thetransmission business. In total, EPRSemploys 2,900 people.

Brcko

In addition to the three main compa-nies, there is also a small autonomousdistribution grid in the town of Brcko.It has no generation assets, purchas-ing all the electricity from the threevertically integrated companies. It hasapproximately 26,000 customers,around 90 per cent of which are

household customers.Joint Power Co-ordination Centre

(JPCC)

Since 1996, electricity exchanges be-tween the power companies have beenlimited due to the breakdown of manytransmission lines and the creation ofthree separate power companies. In1999, the power companies estab-

lished the Joint Power Co-ordinationCentre (JPCC) to co-ordinate the workof the three power transmission sys-tems. The ultimate goal is to establishfull operation of the 400 kV gridand synchronize it with the WesternEuropean grid and EU systems. TheJPCC was established in accordancewith the standards of the Union forCo-ordination, the Transmission ofElectricity (UCTE) and the EU.

Independent System Operator (ISO)

At the higher state level, an ISO hasthe task of guaranteeing trouble-freeoperation of the system. In order toachieve this, a national transmissiongrid operator is to be created. Thelaws to bring this about (Law on theBiH Company for the Transmission ofElectrical Energy; Law on Indepen-dent Service Operator for Electrical

Energy) were passed in October 2003

by the Council of Ministries of Bosnia& Herzegovina.

RE resourcesTo date, Bosnia & Herzegovina hasrelied on two major renewable energysources hydropower for electricityproduction and biomass for heat pro-duction, with wood being used as a firefuel in the traditional form.

Biofuels

According to a study conducted byInnotech HT GmbH, Berlin, in 2003on behalf of the GTZ (DeutscheGesselschaft fr Technische Zusam-menarbeit), there is an unexploitedpotential of approximately 1 millionm3/yr of residual wood, wood wasteetc, which could be used to provideheat to 130,000 residences or 300,000inhabitants. Alternatively it could beprocessed to produce bio-ethanol orbio-diesels for transport or other ap-plications. A significant proportion ofthis volume could also be directed tobiomass power generation projects.

Biogas

A small-scale (


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there was an initial pilot projectfor a 1 MW plant near Sarajevo, whichwas designed with a volume flow of240 l/s, with water at a temperature of

58 C. The project, however, was notcompleted due to lack of funding.

Hydroelectric

The theoretical potential of hy-dropower in Bosnia & Herzegovinais stated as being 8,000 MW, thetechnically feasible potential as 6,800MW and the economically feasiblepotential 5,600 MW. With an

installed capacity of 2,052 MW, hy-dropower is highly significant inBosnia & Herzegovina, although itspotential is far from being fullyexploited yet (37 per cent of economicpotential). The majority of the instal-lations are more than 30 years old.Five existing hydro plants (total 1,060MW) are part of multi-purpose devel-opments. There are 13 hydro plantswith a capacity greater than 10 MW.

Bosnia & Herzegovina has an esti-mated small hydropower potential of2,500 GWh/yr. There are 10 small,mini or micro hydro plants in opera-tion, with a total capacity of 31 MW.Another two plants are under con-struction (1.8 MW) and 20 more areplanned, totalling another 28 MW.Proposed plans include the installa-tion of 10 small hydro plants everyyear, with an average capacity of 1.5MW each. In addition, a study by the

Federation of Bosnia & Herzegovinalists a further 42 locations for small-scale hydropower plants, with a totalcapacity of 51 MW, which could bebuilt at existing weirs.

Currently, there are two projectsfunded by foreign investors, whichenvisage the construction of oneand four small hydropower plantsrespectively in Central Bosnia, witha total capacity of 5.4 MW. Bothinvestors have concluded contractswith JP Elektroprivreda BiH to feed

electricity into the grid for a period of20 years. One of the companies hasalso entered into a BOT agreementwith the Central Bosnian canton of

Srednjebosanski, according to whichthe plant is to pass into the ownershipof the canton after 20 years.

There is presently an ongoing ini-tiative launched by Austria to invest350 million in up to five hydropowerplants in Bosnia & Herzegovina withthe intention of using these to achievepart of the Carbon Dioxide reductiontargets for the Kyoto Protocol. To thatend, however, Bosnia & Herzegovina

would first need to ratify the Protocol(sterreichische Energieagentur).

Ocean

It is unlikely that any significant op-portunities exist for the exploitation ofviable ocean power projects.

Solar

With regard to solar irradiation,Bosnia & Herzegovina can be countedamong the highest in Europe, withsolar irradiation figures of 1 240 kWh/m2/yr in the North of the country andup to 1,600 kWh/m2/yr in the South.In the most favoured areas, actual ir-radiation achieved ~50 per cent ofpotential. Despite this, the use of solarenergy is minimal. The thermal ex-ploitation of solar energy with flat-plate collectors is also practised to

only a limited extent, representingless than 1 per cent of energyconsumption.

One of the first photovoltaic instal-lations is being fitted on the roof of anorphanage in Trebinje with assistancefrom the GTZ. The installation willbe used for training purposes for thelocal electrical trade. In view ofthe relatively high cost involved, theintroduction of PV on the marketbeyond very small-scale consumersfar from the utility grid is currently


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dependent on promotional pro-grammes and international projects.

A Bosnian company, NarodnoGrijanje, whose core business is pro-

ducing eco-heat boilers, accumulationtanks, and solar collectors underSwedish licence, has implementedseveral ecology-oriented projects, in-cluding a biomass-fuelled boiler and30 solar collectors in one building lo-cated in Zenica.

Biomass

Apart from the traditional use of fire-

wood and the recycling of wood wastein the wood-processing industry,there is little reliable data on the ex-ploitation of biomass in Bosnia &Herzegovina. It can be assumed, how-ever, that there is considerable poten-tial in the forestry sector for the use ofbiomass for energy generation (ap-proximately 50 per cent of the landarea of Bosnia & Herzegovina iswooded), and in agriculture. One fieldwhere wood waste is already used inBosnia & Herzegovina is where woodwaste is converted into electrical en-ergy in steampower plants, such as inthe state-owned Krivaja factory inZavidovici, manufacturing furnitureand timber houses. With a maximumthermal output of 15 MW, peakelectricity outputs of 4.5 MW aregenerated for the factorys on-sitepower needs. There may also be op-portunities to develop, in conjunction

with local authorities/DH companies,projects which feed into local DHschemes.

EfW

No specific studies appear to havebeen carried out to assess the potentialfor the conversion of waste streams toenergy. However, it would be reason-able to assume that the larger centresof population will be producing suffi-cient volumes of Municipal Solid

Waste and sewage sludge to warrantthe consideration of EfW plants basedon one or more process technologyconfigurations, such as small- to

medium-scale gasification and ADunits. Such projects could contributeto the DH network systems in, for ex-ample, Sarajevo, Tuzla, Zenica, Bihacor Banja Luka, whilst also contribut-ing to reductions in GHG emissionsthrough diversion from landfill, andincreased recycling.

Wind

To date, there have been insufficientmeasurements available to estimatethe potential for wind energy inBosnia & Herzegovina. The infras-tructure, however, offers adequateconditions for connecting possible lo-cations to the grid, as the high- andmedium-voltage network is well de-veloped and the damage has beenlargely repaired.

In a preliminary study carried outon behalf of the GTZ, it was estab-lished that there is an economic po-tential of approximately 600 MW thatcould be developed by 2010, on theassumption that an appropriateincentive system to build wind powerinstallations is set up. Sufficiently suit-able geographical locations appear tobe available. For example, there arepromising wind values shown by mea-surements taken before the war forthe region of Trebinje through Mostar

to Bugojno, and more up-to-datemeasurements from meteorologicalstations and airports which reveallarge areas of the country with windvelocities of over 10 m/s at a height of10 m on 150 days in the year. The firstsystematic wind measurement projectin the region of Mostar was plannedfor 2002, but due to a lack of fundingit was cancelled. There is still interest,however, in seeking to develop windfarm schemes.


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Contacts

A listing of some relevant contacts is

given within the Annexes at the end ofthis publication.

Summary

There appear to be significant oppor-tunities to explore the potential forbiomass CHP (combined heat andpower) and EfW projects to addresslocal and regional DH application

requirements. In addition, the oppor-tunities for wind project develop-ments also merit consideration, as dothe opportunities to develop a num-

ber of small-scale hydro plants at ex-isting locations. Solar energy, at leastfor thermal heating purposes if notalso in PV applications, offer signifi-cant potential, subject to cost con-straints. We therefore consider thatthe technologies for RE generation bysolar, biomass, and EfW processes cur-rently seem the most appropriate forthe market.


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BULGARIA

Overview

he Bulgarian Government has,as a precursor to the expectedaccession by Bulgaria to the

EU, established a significant set of REgoals, including a target of doublingthe share of RE power generation

from 6 to 12 per cent by 2010. Othersignificant policy goals include thefulfilment of Kyoto obligations byachieving an 8 per cent reduction (asmeasured against 1990 levels) in CO2between 2008 and 2012; an 18 percent improvement in energy efficiencyby 2010 (as measured against 1995levels); and increasing security ofsupply.

As a means of meeting the target

goals, the government has taken, or istaking, the following steps to createconditions for full compliance withthe requirements of the jointenergy market of the EU and the im-plementation of the planned energysector development (Mrs KostadinkaTodorova, Ministry of Economy andEnergy Renewable Energy Work-shop presentation on 24.01.2006,Sofia)

by proposing amendments to theEnergy Act and Energy Efficiency Acts:

adopted and incorporated intoBulgarian law the EU legislation

Directive on the promotion of elec-tricity from renewable energy sources

in the internal electricity marketandthe Directive on Combined Heat

and Power (CHP); in the process of incorporating

the EU Directive on Liquid

Biofuels.

T

The government is preparing forthe liberalization of the energy market(taking into account the provisions ofthe EUs Directive 2003/54 and2003/55 on the internal power marketand natural gas market respectively).The measures include the separationof the production, transmission, anddistribution services.

Bulgaria ratified the Kyoto Protocolin August 2002 and has Annex Bstatus thereunder. Bulgaria is also asignatory to the UNFCCC with Annex1 status. Projects are eligible for de-velopment under the JI mechanism.The National Focal Point in the con-text of UNFCCC is the Ministry ofEnvironment and Water.

Generating capacity

Bulgarias installed generation capac-ity in 2004 was 12,331 MW, of which53.6 per cent was represented by ther-mal, 23.4 per cent by nuclear, and 23per cent by hydro. Total generation in2004 was 41.5 TWh, with a forecast of42.8 TWh for 2005 (Bulgarian EnergySector 2001-2004, Ministry of Energyand Energy Resources).

In common with many of theCentral and Eastern European coun-tries, Bulgarias energy sector in-cludes substantial DH capacity, forwhich considerable work is being car-ried out. It is still required to improveboth the generation and transmissionsystems (losses between generationand delivered energy amount to some30 per cent). Heat energy produced in2005 was slightly in excess of 8,000GWh, whilst only some 6,200 GWhwas realised.


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Demand

Industrial consumption grew by 11.2

per cent between 2002 and 2004, anindicator of accelerating economic ac-tivity. Total consumption for 2004 was26.3 TWh, with a forecast for 2005 of27.1 TWh. Bulgaria is currently, andin the medium term continues to ex-pect to be, the largest net exporter ofpower in the region expected ex-ports for 2005 are 5.7 TWh (BulgarianEnergy Sector 2001-2004, Ministry ofEnergy and Energy Resources).

Financing

The EBRD indicates that the Bankwillpromote improvements in en-ergy efficiency and renewable energyresources. (European Bank for Re-construction and Development Coun-try Strategy Overview). A number ofinternational banking groups have apresence in the country and the re-gion, and a selective listing of these is

set out in the Annexes to this publica-tion.

Bulgarian Energy Efficiency Fund

(BEEF)

The BEEF was established in Novem-ber 2004 under the auspices of theEnergy Efficiency Act and, followingthe ratification of the necessarytreaties, began operation in Novem-

ber 2005. BEEF was established andinitially capitalized entirely throughgrants the main donors being theIBRD (World Bank), the Governmentof Austria, the Bulgarian Governmentand private Bulgarian enterprises.The BEEF will support the identifica-tion, development, and financing ofviable Energy Efficiency projectspredominantly implemented byBulgarian private enterprises and

municipalities, and which result insubstantial reduction of GHGs.

The underlying principle of BEEFsoperations is a PPP. The Fund will

pursue an agenda fully supported bythe Government of Bulgaria, but it isstructured as an independent legalentity, separate from any governmen-tal agency or institution. The Fund isprofit-oriented and will pursue finan-cial sustainability of its own opera-tions, and will offer:

Partial Credit Guarantees of upto US $500,000 per project to

commercial banks concedingcredits to Energy Efficiencyproject developers;

Loan Financing: offer credits toEnergy Efficiency projectswhose costs vary between BGN30,000 and BGN 3,000,000 atbelow market but commercially-oriented interest rates.

The fund will finance:

investments in improved energyefficiency in industrial pro-cesses;

rehabilitation of buildings in allsectors;

improvements to the heatsource and distribution system;

rehabilitation of municipal facil-ities (eg street lighting);

other energy end-use applica-tions.

Projects are eligible on the followingconditions:

at least half of the projects ben-efits should come from measur-able energy savings;

the project should involve theapplication of well-proven en-ergy-saving technology;

the project cost should range be-

tween BGN 30,000 and BGN3,000,000;


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the equity contribution of theProject Developer should be atleast 10 per cent;

the project must have a rela-

tively short payback time (up tofive years).

National Programme on Renewable

Energy Sources (NPRES)

The NPRES draft contains nearly1,000 investment projects and projectproposals from all administrative re-gions and public sectors in Bulgaria

including projects on:

solar hot water, heating and PVsystems;

wind farms; SHPPs (Small Hydro Power

Stations); geothermal; biomass; biogas and natural (digestor) gas.

The NPRES aims to considerably in-crease the share of RE within the na-tional energy balance, which, atpresent, is negligible.

RE policy

The regulatory framework governingthe sector reforms is currently com-posed of two main documents: theNational Energy Strategy, and the En-ergy and Energy Efficiency Act.

The regulatory bodies are the Min-istry of Energy and Energy Resources,the Energy Efficiency Agency, and theState Energy Regulatory Commission.The latter has now formally takenover responsibility for developing andimplementing a tariff and price-set-ting methodology for electricity, gasand heating, and for approval of tariffproposals submitted by companies in

the energy sector.

The national policy and regulatoryframework for RE is set out in the cur-rent Energy Law and Energy Effi-ciency Acts. RE is considered a priority

and is preferentially treated through apremium tariff structure and by therequirement on transmission and/ordistribution companies to take all ofthe output from RE generation plants.The Energy Law and Energy Effi-ciency Act, and the proposed amend-ments thereto, set out the followingadvantages for RE projects:

1. No licence is required for an RE

power generation plant with acapacity of up to 5 MW and/orCHP energy production.

2. The energy distribution com-pany is obliged to purchase elec-tric energy generated fromRE plants with a capacity up to10 MW.

3. Preferential prices are set for REelectricity generation.

4. The transmission and distribu-tion companies will be obliged togive priority connection to allRE generation plants with totalinstalled capacities of below10 MW.

5. The preferential tariff structurefor RE plants (


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Legislation

The legislation pertaining to the en-

ergy sector was substantially reformedduring the period 2002 to 2004, in or-der to align more closely with the EUdirectives and to clarify the definitionsof responsibility. The current applica-ble laws, the Energy Law and the En-ergy Efficiency law, were adopted on26 November 2003 and 19 February2004 respectively.

The Energy Law creates the rele-vant structures under which key reg-ulatory competences are delegated tothe State Energy Regulatory Commis-sion (SERC) as a financially indepen-dent entity with the authority to issuesub-laws in respect of EU Directivescompliance and for encouraging com-petition in the energy market. TheEnergy Law encourages the genera-tion of electricity from RE sources,and from efficient cogeneration.

The Energy Efficiency Law is pri-marily focused on the development of

improved efficiency measures, the es-tablishment of the Energy EfficiencyFund (q.v.), and vesting of controlfunctions in the Energy EfficiencyAgency.


The national electric utility, Natsion-alna Elektricheska Kompania (NEK),

set up in 1992, is responsible for trans-mission. NEK is an observer in theregional group of four transmi-ssion system operator companies,CENTREL.

The seven regional distributioncompanies have been incorporated asjoint stock companies in which theState, through the Ministry of Energy,owns 100 per cent of the equity shares.The eighth distribution company,Zlatni piasazi Service AD, is already

in private ownership. The govern-ment intends to privatize the others.

According to the Ordinance on Set-ting and Applying Prices and Rates of

Electric Energy within the EnergyLaw, renewable power enjoys prefer-ential pricing with priority connectionto the grid and sale of all quantities ofrenewable power that RE producersmake available.

RE resources

Biofuels

Some 60 per cent of Bulgarias overallland area consists of arable and agri-cultural lands, and approximately 30per cent is forest cover, representing amajor potential source for the produc-tion of biofuels (ethanol and diesel)from biomass. There is also significantpotential to utilize gas from landfilland anaerobic digestion processes.The majority of agricultural waste is

currently sent to landfill a study car-ried out by the Sofia Energy Centreunder the EU PHARE programme in2002 indicates potentials of almost5 million tonnes/yr of agriculturalsolid waste, and almost 500 millionm3of biogas from agricultural liquidwastes.

Biogas

In addition to the above estimatedagricultural waste potential, the coun-try has the possibility to capitalize onthe generation of landfill biogas fromover 3 million tonnes of municipalsolid waste per year being disposed ofin some 720 landfill sites.

Geothermal

Whilst at present there are nogeothermal power-generating sites in

operation, Bulgaria appears to have


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substantial geothermal energy poten-tial, and is rich in low enthalpygeothermal waters. Approximately30 per cent of the countrys poten-

tial is being used for space heating,greenhouses, drinking water and forbalneology (data from Geothermie,2000) representing some 107 MWt.The potential from proven but unex-ploited resources is estimated at ap-proximately 450 MWt with an overallpotential, including probable and pos-sible sources, of some 1800 MWt (In-ternational Geothermal Association,2002).

Hydroelectric

Utilization of hydropower as a re-source in Bulgaria has a history of over200 years, and Bulgaria has almost2,000 Mwe of installed capacity in thissector, the great majority of which isrepresented by large-scale hydroelec-tricity plants. Less than 100 MWe ofthe installed capacity is generated bysmall-scale HPPs. The governmenthas placed significant emphasis on themaximization of the use of this sub-stantial resource the potential fornew HPP is estimated at an annualoutput of 10,000 GWh, much of whichmay be small HPPs, and a number ofprivate companies are actively devel-oping small-scale plants. The SofiaEnergy Centre estimates the theoreti-cal potential for sub-2 Mwe HPPs atsome 130,000toe/yr, whilst the

UNFCCC Climate Change Report forBulgaria estimates that the total in-stalled capacity of micro-hydros by2020 could reach 212 MWe.

Ocean

It is unlikely that any significant op-portunities exist for the exploitation ofviable ocean power.

Solar

The exploitation of solar radiation for

energy purposes in Bulgaria has, todate, been somewhat patchy, with thetotal installed capacity for the countryas a whole being only some 60,000m2.The bulk of this, at around 40 per centof the total, in Burgas alone, is con-centrated on solar collectors for hotwater heating, primarily for govern-ment-owned holiday facilities on theBlack Sea coast. It is believed, how-ever, that less than 50 per cent of thisinstalled capacity is currently opera-

tional. A number of private companiesare developing pilot projects in thissector.

The annual mean radiation forBulgaria is approximately 4.2 kWh/m2/day with, according to the SofiaEnergy Centre in work carried out un-der the FEMOPET programme, atechnical potential of some 250,000toe/yr. Some experimental work hasbeen carried out on photovoltaic

projects but, to date, no significant so-lar power projects have been under-taken. EBRDs view1 is that the mostpractical wide-spread opportunitiesfor solar energy in Bulgaria lie in low-temperature applications within theagricultural and forestry industries,rather than in power generation.

Biomass

Currently, biomass is reported to ac-count for some 3.7 per cent of thecalculated total energy consumptionin Bulgaria, although it is believedthat this figure may be substantiallyunderestimated. The majority ofbiomass energy consumption is inrural areas, where approximately2 million m3/yr of wood and woodbriquettes produced from forestwastes and sawmill biproducts is used.A number of organizations in the

private and not-for-profit sector


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are performing power generation fea-sibility studies in this area. Local uni-versities, such as the AgriculturalUniversity of Plovdiv and the Forestry

University of Sofia have also spear-headed research and have both cur-ricula and research activities on theuse of biomass. In addition to theabove volumes, it is estimated thatsome 2 million tonnes/yr of energycrops could be available, together with1 million tonnes/yr of wood waste.

EfW

Wastes generated from agricultural,farming, and paper industry activitiesare produced in large quantities.Whilst the bulk of these wastes havehistorically tended to be dumped orlandfilled, the volumes involved indi-cate that significant opportunitiesshould exist for distributed genera-tion power or CHP projects based onsingle or integrated processes. In ad-dition, opportunities exist for the con-version of wastes such as MSW andplastics to power and liquid fuelsthrough the application of advancedtechnologies now becoming commer-cially available.

Wind

A country-wide wind-atlas is available.The wind-atlas identifies three mainareas, with annual average windspeeds in excess of 9 m/s, two areas

with more than 7 m/s, and several ar-eas with wind speeds between 4.5 to7 m/s. The data were all measured 10metres above ground, implying windspeeds of between 5 and 13 m/s at atypical hub height of 50 metres ormore. According to the wind-atlas, themost promising regions are theNorthern Black Sea coast, the Centralmountain range, and the Rhodopmountains in the South West.

In a study conducted by AssociateProfessor Dr Peter Ivanov, National

Institute of Meteorology and Hydrol-ogy at the Bulgarian Academy of Sci-ences, Sofia in 1982, the wind energyresource potential for Bulgaria was es-

timated at 2,200 to 3,400 MW.The Ministry of Energy and Energy

Resources indicates that there aresix implemented wind projects atpresent, but with an installed capacityof only 1,075 kW. However, there areplans for wind farms to be developedat Burgas, Cape Emine and Kavarna,whilst the US Trade and DevelopmentAgency is funding a feasibility studyfor a pilot wind farm project within

the Karlovo municipality.

Contacts

A listing of some relevant contacts isgiven within the Annexes at the end ofthis publication.

Summary

It is clear that significant opportuni-ties for the development of REprojects in Bulgaria exist, principally,in the sectors of biomass, biogas, andEfW, either as stand-alone or inte-grated process projects. Householdwaste, at levels in excess of 3 million(tonnes per annum), energy crops,wood-processing industry waste andagricultural wastes, both solid and liq-uid, represent a combined electrical

generation potential in excess of 12TWh/yr, exploitable on a small-scalemunicipal or regional basis. A substan-tial proportion of such projects couldbe developed with a CHP configura-tion, providing delivery of heat for in-dustrial processing and to DHschemes. Wind, small-scale hydro andlow-temperature solar heating also of-fer opportunities for development, al-beit at much smaller capacities.


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CROATIA

Overview

roatia, in common with othermembers of the formerYugoslav Republic involved in

the conflict following the break-up in1991, suffered badly from infrastruc-ture destruction and damage. Whilst

the country has made significantprogress in terms of political transi-tion, there has been little investmentin power generation facilities. As theexisting thermal generation capacity isnow old, substantial investment isrequired to refurbish, upgrade, andreplace the extant facilities.

Croatia has become a member of theAthens Process and is a supporter ofthe Energy Community Treaty forSouth East Europe, as part of thepreparations for accession to the EU.In 2001, the government passed a se-ries of new laws designed to establishthe foundations for the energy sectorsrestructuring.

In March 2002, the Croatian Parlia-ment adopted the Energy Sector De-velopment Strategy, which set out thecountrys objectives for the next tenyears. The principal elements were:

improvement of energy effi-ciency from the production,transformation, transmissionand transport to distributionand consumption of energy,which includes encouraging thegas pipeline installation and pos-sibilities of gas usage, and gen-eration of energy outside publicnetworks;

safe energy provision and sup-ply, inclusion in the interna-tional energy market, ensuring

C

interconnection with interna-tional networks for the energynetwork, development of trans-mission and transport networks,development of distribution net-works, observation of safely lim-itations and state interests;

diversification of energy-gener-ating sources to ensure safe sup-ply to consumers, and spatialarrangement of sources whichwill ensure the safety of supplyof each area;

utilization of renewable sourcesof energy which will be in accor-dance with sources, technologi-cal development and economicpolicy as a whole;

realistic and market-relatedprices of energy and develop-

ment of energy market and en-trepreneurship, the instigationof a privatization process to en-courage energy efficiency andgood energy management andenable the inclusion of Croatiainto the European energymarket;

enviromental protection, whichin the energy sector impliesthe improvement of energyefficiency, use of renewableresources, application of state-of-the-art protection technolo-gies, and promotion of bestpractices.

The general privatization processin Croatia has been progressingwell, with the private sector now ac-counting for around 50 per centof GDP (Gross Domestic Product).

Croatia is a signatory to the Kyoto

Protocol with Annex B status, but has


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not ratified to date it would poten-tially be eligible for JI support subjectto ratification. It is a signatory to theUNFCCC, with Non-Annex 1 status.

The National Focal Point in the con-text of UNFCCC is the Ministry ofEnvironmental Protection and Physi-cal Planning.

Generating capacity

Croatias installed generating capacityis approximately 3.7 GW, of whichsome 54 per cent is represented byhydropower. Gross production in

2003 was 12.89 TWh, with net pro-duction being 12.33 TWh, of whichhydro represented 41 per cent, andthermal 59 per cent the latter beingsplit almost equally between coal(19 per cent), oil (18 per cent), and gas(22 per cent) (sterreichischeEnergieagentur).

Demand

Total electricity demand (2003 fig-ures), at 13.72 TWh, indicate a gener-ation shortfall of some 1.39 TWh.

Financing

EBRDs Country Strategy documentmakes no specific reference to RE sup-port, although the Bank will providesupport to promote investment inenvironmental infrastructure at themunicipal level. A number of interna-

tional banking groups have a presencein the country and the region, and aselective listing of these is set out in theAnnexes to this publication.

RE policy

The Ministry of Economy is the com-petent ministry for the energy sector,suported by a number of other agen-

cies, some of whom are set out below.The Ministry of Economy submits to

the governments energy needs andpolicy proposals, and drafts secondarylegislation and/or regulations in col-laboration with the Croatian Energy

Regulatory Council, in order to estab-lish general principles on the basis ofwhich the Croatian Energy Regula-tory Council acts.

Local and regional authorities reg-ulate energy services at a local andregional level, including the produc-tion and supply of heat, publiclighting and gas distribution, and par-ticipate in decision making on loca-tions and construction of new power

plants, energy networks and otherfacilities and plants.

Croatian Energy Regulatory Council

(CERC)

The Croatian Energy RegulatoryCouncil supervises the energy sectorand gathers information for the en-ergy policymakers. The role of theCouncil also includes establishing the

tariffs on the basis of proposals of reg-ulated energy subjects, issuing energylicences and ensuring that the licenceconditions are observed, monitoringthe market operators and networks toensure proper functioning and oper-ation of the market, consumer protec-tion, settling disputes between energysubjects, approvals of market, plant,system management and distributionrules etc.

Energy Institute Hrvoje Pozar Ltd

The Energy Institute Hrvoje Pozar,founded by the Croatian Govern-ment, is the central scientific and pro-fessional institution in Croatia forglobal planning in the energy systemand its subsystems. One of its maintasks is the elaboration of the strategyof energy development of Croatiathrough the PROHES Project (Devel-

opment and Organization of the


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Energy Sector in Croatia) which wasaccepted by the government in 1994.

Some of the fundamental policy de-cisions taken by the Croatian Parlia-

ment under the 2001 legislationinclude:

the establishment of a minimumRE generation target;

the definition of RE generatio

renewable energy in see

Documents