The EU and US are fossil-fooling the Western Balkans with gas. How can the region cut to a clean future?

The Western Balkans’ energy transition is finally starting to pick up pace. But false solutions such as fossil gas threaten to divert resources and create new fossil-fuel lock-in. So why do the EU and US continue to push such projects in the region and what can be done about it?

Although progress often seems painfully slow, the nascent energy transition in the Western Balkans has undoubtedly picked up pace since the recent energy crisis

Whether it’s Bosnia and Herzegovina’s draft National Energy and Climate Plan including no new fossil fuel power plants, North Macedonia and Bosnia and Herzegovina completing utility-scale solar plants, AlbaniaKosovo and Serbia holding renewable energy auctions, the cities of Niš and Sarajevo planning to build large-scale heat pumps, or Montenegro’s power utility EPCG installing more than 2000 rooftop solar installations within a year, signs of progress abound.

EU and US funds and European public banks are certainly supporting these efforts to a considerable extent. Projects approved for financing in the last year include a solar thermal district heating project in Prishtina, Kosovo, and the second phase of the Bogdanci wind farm in North Macedonia. Technical assistance projects are also supporting energy efficiency improvements and the development of renewables legislation and auctions, for example in KosovoSerbia and Albania.

One step forwards, two steps back

But EU and US officials, as well as the European Bank for Reconstruction and Development (EBRD), regularly undermine the transition to an energy-efficient, 100 per cent renewable economy by fervently promoting the construction of fossil gas infrastructure in the region—even since Russia’s full-scale invasion of Ukraine so painfully exposed the EU’s own dependence on imported fossil gas.

In recent months we’ve seen the US Ambassador to Bosnia and Herzegovina heavily lobbying for the Southern Gas Interconnector between Croatia and Bosnia and Herzegovina, despite the latter’s very limited use of gas (around 2.8 per cent of gross available energy). EU Enlargement Commissioner Olivér Várhelyi has also promised to help Montenegro with building a liquified gas (LNG) terminal at the port of Bar. 

The EBRD is planning to finance a new pipeline to lock North Macedonia into increased fossil gas imports via Greece, for which the European Investment Bank (EIB) already signed financing in December 2021. Earlier this month, the EU’s Western Balkans Investment Framework (WBIF) and EBRD also pledged support for a further pipeline between North Macedonia and Serbia. While the EU and EBRD packaged it as a response to the energy crisis, the governments involved are clear that it would encourage further gasification of southern Serbia.

Earlier this year, together with Global Energy Monitor, we identified 3.5 billion euros in planned fossil gas infrastructure in the region, comprising 2,715 km of pipelines, two LNG terminals and 2442 MW in power capacity (compared to 779 MW existing). Of these, the majority of pipelines and LNG terminals are explicitly backed by the EU, US or both.

Albania’s plans for an LNG terminal at Vlore took a step forward in March 2021 when Excelerate Energy, ExxonMobil LNG Market Development, and Albania’s Ministry of Infrastructure and Energy of Albania signed a memorandum on the project, however its current status is unclear. 

As well as being backed by the EU’s Enlargement Commissioner, Montenegro’s LNG plans are also backed by the US, and in May the then Montenegrin government signed a memorandum on an LNG terminal and gas power plant with US companies Enerflex Energy Systems and Wethington Energy Innovation.

The European Commission’s fixation on promoting gas

US support for new fossil gas infrastructure is at least easy to understand in terms of blatant self-interest, even if it does clearly conflict with the country’s own standards on financing fossil fuel projects via multilateral development banks. In the first half of 2023, the US was the largest LNG exporter globally and its businesses are clearly interested in developing LNG terminals and power plants. 

But the European Commission’s fixation on promoting gas in the Western Balkans is less easy to understand, as it struggles to secure its own supplies in the short-term and wean itself off gas in the medium term. It is true that some EU companies such as TotalEnergies are profiting from fossil gas production in Azerbaijan, where some of the region’s gas is likely to come from, but most of the benefits accrue to the Azeri government and non-EU companies such as BP and even Russia’s Lukoil.

The Commission has relied on a sweeping narrative about securing alternatives to Russian gas, but although securing alternatives to Russian gas is important for Serbia, North Macedonia and to a lesser extent Bosnia and Herzegovina, this has to be kept in perspective.

In the EU in 2021, fossil gas made up 23.7 per cent of gross available energy. But in the Western Balkans, only in North Macedonia and Serbia did gas make up more than ten per cent. In all the other countries it was less than three per cent, with Montenegro and Kosovo on zero. Considering Albania is only a transit country, without a functional gas network, much or all of its consumption presumably consists of gas from the Trans-Adriatic Pipeline used to power the compressor station near Fier.

Serbia is the largest fossil gas consumer – by a long way – and its consumption has clearly increased in recent years with the construction of the Pančevo combined heat and power plant and increased use of gas for heating.

But here’s the thing: Serbia and North Macedonia are not aiming merely to replace existing gas volumes. They have major plans to increase gas use, by building new gas power plants (e.g. new units in Skopje, Bitola and Negotino, and a new 350 MW plant in Serbia) and new pipelines and distribution networks in eastern Serbia and southern parts of North Macedonia. And as long as the European Commission and other international donors don’t send clearer messages about the need to reduce – not expand – their gas consumption, as well as adjusting their financing accordingly, they will keep on building more gas infrastructure. 

When diversification becomes multiplication

In order to promote diversification, the EU has already supported a new gas interconnector from Bulgaria to Serbia with EU and EIB funds. The project is due to be completed at the end of this month. This might have been excusable if it was really a replacement for Russian gas—although it is questionable whether becoming dependent on Azerbaijan or LNG, which is more expensive due to the liquefaction and regasification process, is a major step forward.

However, even if securing gas imports to North Macedonia and Serbia in the short term is difficult, building major new infrastructure to bring additional gas, not replacement gas, is utterly counterproductive in terms of decarbonisation and overall import dependence.

The planned Greece-North Macedonia interconnector brings the same problem. In 2021, North Macedonia’s highest gas-consuming year so far, the country used 426 million cubic metres, yet the pipeline’s initial capacity would be 1.5 billion cubic metres per year. Thus it clearly encourages the country to massively increase its gas use, particularly as the existing pipeline from Bulgaria will also likely continue to operate. 

In fact, in late October 2022, Bulgaria and North Macedonia signed an agreement to expand the technical capacity of the existing pipeline and to allow it to transport non-Russian gas. Although it is unclear whether this agreement has had any real-life impacts yet, it illustrates the fact that solutions other than building oversized new pipelines may exist. 

Creating new import dependence

Possibly even more frustrating than the EU’s bankrolling of increased gas dependence in Serbia and North Macedonia is the EU and US’s support for creating gas dependence where it does not currently exist, or exists only to a low extent.

Yes, most of the Western Balkan countries have a difficult job on their hands replacing lignite in their energy mix, but that should not have to mean exposing them to higher energy import dependence and volatile prices. With the exception of North Macedonia—dependent on significant electricity imports as well as its gas habit—all the Western Balkans countries have significantly lower import dependence than the EU and should aim to keep it that way.

But too often, EU and US representatives refer to gas as a ‘transition fuel’ and say that energy transition in the Western Balkans is ‘not possible’ without increasing gas consumption. We have not yet found any evidence that this is the case. 

Indeed, the European Commission has confirmed that no comprehensive analysis has been carried out regarding the Western Balkans’ future energy needs, fossil fuel alternatives and potential EU support for gas infrastructure.

Any fossil fuel infrastructure built now will last for decades – well beyond 2050, when the region needs to be totally decarbonised. Either it will end up not being used, and the money spent on it wasted, or it will lock in fossil fuel use and hinder the transition for decades to come.

Another common myth is that ‘at least it’s better than coal’. Getting the entire English-speaking world to call fossil gas ‘natural gas’ has been one of the great PR successes of the gas industry. In fact, it’s mostly composed of methane, a potent greenhouse gas.

Scientific studies have repeatedly shown that fossil gas is often as bad for the climate as coal. The idea that it is better comes from only comparing direct coal and gas combustion, without taking into account the whole lifecycle of coal, whose mines leak methane, and gas, whose extraction sites and pipelines also leak methane.

As the International Energy Agency and Intergovernmental Panel on Climate Change have both stated, there is no more space to build new fossil fuel infrastructure if we want to prevent even more severe climate chaos than we already have.

A chance to cut to a clean future

It’s too early to say whether the EU is finally overcoming its gas addiction, although estimates for 2022 show 12 per cent lower demand than the average for 2019 to 2021. But the Western Balkans, with its lower gas dependence, doesn’t have to wait. A series of upcoming opportunities exist for Western Balkan governments and international donors to turn the tide towards a more sustainable energy transition.

On December 13 the EBRD is expected to adopt a new energy lending strategy. So far, the draft indicates that the Bank will leave the door open for mid- and downstream oil and gas projects ‘in exceptional cases’. But given that climate chaos is happening faster than predicted, we also need to act faster. The EBRD can start by finally saying a clear ‘no’ to fossil fuels.

Since its draft strategy was published, yet another reason to do so has appeared. In October, the European Parliament called for the EU to adopt targeted sanctions against Azerbaijani government officials responsible for ceasefire violations and human rights abuses in Nagorno-Karabakh and to suspend any negotiations on a renewed partnership and current energy memorandum with Baku. Both the EU and the EBRD need to urgently review what this means for their gas strategy in the Western Balkans.

The day after the EBRD decides on its strategy, the Energy Community Ministerial Council will hopefully adopt a new version of the EU’s so-called TEN-E Regulation. This will mean that straightforward fossil gas infrastructure projects can no longer be designated as Projects of Energy Community Interest (PECIs).

This represents a good moment to reconsider the region’s fossil gas plans, especially as all the countries need to submit their final National Energy and Climate Plans by mid-2024, which must help to steer them towards a sustainable energy future.

For electricity generation, solar and wind, supported by existing hydropower, strengthened distribution grids and demand response should make up the backbone of the supply. After years of underinvestment, scaling this up quickly enough will obviously be a challenge, but we are not talking about massive countries. The whole region has around 17.3 million inhabitants, with an ongoing decrease in almost all cases. This brain drain obviously brings its own problems in terms of capacity, but with the right support, a sustainable energy transition ought to be possible without resorting to false solutions. 

Electrification of transport and heat are the way forward. As well as drastically improving public transport and city environments for non-motorised transport, governments and local authorities need to explore heat sources such as heat pumps, solar thermal and geothermal. This way, the region can truly cut to a clean future.

This article was first published at CEE Bankwatch.

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