REL's analysis: "Bad signals" for investors in renewable energy in Kosovo

Kosovo's first steps towards greater renewable energy generation, which it aims to achieve by 2031, did not start quickly. Energy policy experts even warn that the achievement of this goal may be put in jeopardy if the processes related to it are not pushed forward in time.

This week, the deadline for the first auction for the solar power park in Kosovo, with a production capacity of 100 megawatts per hour, was postponed once again - until January 2024.

The Ministry of Economy told Radio Free Europe that the postponement was made at the request of interested companies to complete the appropriate documentation for participation in the auction.

"We expect until January 31, 2024, to accept offers, and then publish the list of companies that have entered the competition", said the ministry through a written statement.

When asked by REL if there is a lack of investors, they said that Kosovo and the region "do not have much experience in such projects" and that therefore "efforts must be made to attract investors".

In the announcement he made on November 6 on Facebook about postponing the auction, the Prime Minister of Kosovo, Albin Kurti, did not give any reason for this decision.
He said that Kosovo's offer to interested investors is a fair and transparent process, with attractive investment criteria.

What is the first solar auction?
Kosovo opened the first auction for solar energy in May of this year.

It aims to create a solar park, with a production capacity of 100 megawatts per hour, in Kramovik, Rahovec municipality - the southern part of Kosovo.

Kosovo in the auction offers public land on lease for 30 years, easy access for vehicles and equipment, guaranteed solar power purchase agreement for 15 years and guaranteed connection to the transmission network.

In the Institute for Development Policy in Kosovo, INDEP, remember that the auction has been postponed several times.

Originally, the deadline for its closure was August 15, it was moved to September 30, it was moved again to October 16 and, last time, to January 31, 2024.

"This postponement is a bad signal for investors and for the energy sector itself in general, because it shows that Kosovo is not yet ready to undertake processes to advance the transformation of the energy sector", says Dardan Abazi, an expert on energy policies energy in INDEP.

According to him, it can be expected that investors will not see sufficient security for investments in Kosovo.
For another energy expert, Lulzim Syla, once a managing partner in a renewable energy company, the deadline was short at first. According to him, there was also a lack of information from the authorities.

"Such projects with large capacities - 100 megawatts - are complex projects and strategic decisions must be made for them, at the board level of large corporations, in order to be qualified later. Such decisions take time for companies", says Syla.

Moreover, he adds, it is not enough to announce such an auction and to be notified only by the Government, but "all the institutions that have the mandate to promote foreign investments must be mobilized".

At the time the auction opened, the Ministry of Economy of Kosovo, in cooperation with USAID, organized a pre-bid conference, which, according to authorities, gathered over 200 participants and was broadcast in real time to a global audience.
What does the Energy Strategy envisage?
The Assembly of Kosovo approved the 2022-2031 Energy Strategy in March of this year.
Based on it, Kosovo aims to generate 35 percent of its energy needs from renewable energy by 2031.

Currently, about 82 percent of electricity in Kosovo is produced by burning coal, while the rest comes from renewable sources, such as: hydropower plants, wind power plants and solar panels.

Production capacities from renewable sources are currently over 250 megawatts per hour.
With the Energy Strategy, it is foreseen that these capacities, until 2031, will reach up to 1,600 megawatts.

But can they be achieved?

Abazi, from INDEP, says that the current dynamics do not look very promising.

"With this dynamic of investments, it will be very difficult for us to achieve the installation capacity of 1,600 megawatts by 2031, as stated in the Energy Strategy", says Abazi.

He says that in the energy market there is no serious investment in the field of renewable resources.

"We have information that the Government's approach is not the best possible towards investors. I think that much greater diplomacy should be done in the energy sector", says Abazi without specifying more.

Among the projects that generate renewable energy in Kosovo, there is a wind park in Bajgore, South Mitrovica - which is a collaboration of firms from Kosovo, Germany and Israel - as well as another similar one in Kitka, Kamenica, invested by the Turkish company "Guirish".
Syla is more optimistic about increasing capacities from renewable energy.

"We are on the way, but investors should be given opportunities by eliminating technical barriers, such as problems with land, their return from agricultural land to land where construction is allowed, and these should also be included in development plans. If it is possible to eliminate the barriers, there will be no lack of investors", says Syla.

Complex legal infrastructures, energy insecurity and corruption are often mentioned as barriers to foreign investment in Kosovo.

Foreign investments in Kosovo
From the data of the Central Bank of Kosovo (CBK), it appears that since 2008, when Kosovo declared independence, the value of foreign direct investments in the country has reached nearly 5 billion euros.

However, these investments have been mainly concentrated in the real estate sector, then that of finance and insurance, and their greatest value has been attributed to the Kosovo diaspora.

According to the data of the Statistics Agency of Kosovo, the number of enterprises registered in the country in 2022 was 11,024, while only 49 were registered as foreign companies.

Foreign direct investments in Kosovo increase
In the first four months of this year, foreign direct investments in Kosovo have increased by tens of millions of euros, compared to the same period of 2022. Germany leads with the highest level of investments.
According to KAS, in the first quarter of this year, the number of registered foreign companies was 16.

For the small number of foreign investors in Kosovo, representatives of economic organizations have often blamed the successive riots in the north of Kosovo - an area inhabited by a majority of Serbs.

The electricity situation in Kosovo
Kosovo has the capacity to produce about 800 megawatts of electricity per hour, while its needs, on winter days, reach up to 1,300 megawatts per hour.

One of the reasons for underproduction is the decades old power plants "Kosova A" and "Kosova B", which operate with coal.

According to the Energy Regulatory Office (ERO), Kosovo imported over 750 thousand megawatts of electricity last year.

The Kosovo Electricity Distribution Company, KEDS, warned that import needs will continue this winter and that prices on international exchanges "will be unpredictable".

Last year, the average price of electricity for the category of family consumers in Kosovo went to 6.14 euros per kilowatt - from 5.60 euros in 2021.

Whereas, for non-family consumers, the average electricity price in 2021 was 8.39 euros, to go to 9.27 euros in 2022.

In April of this year, the price increased again – by 15 percent for all categories of consumers.
The European Union - the block where Kosovo is trying to integrate - has set several deadlines for the gradual closure of coal-fired power plants, since its combustion also negatively affects global warming.

By signing the Sofia Summit Agreement, Kosovo has pledged that by 2050 it will decarbonize or reduce its dependence on coal./REL