Energy

1
Energy Competitiveness Twist Throughout Western
Balkans

• Aleksandar Kovacevic
• Senior Visiting Research Fellow
• Oxford Institute for Energy Studies

2
Western Balkans Energy and Competitiveness Twist

• Overview
• Governance
• Natural resource ( transit) rents
• Barriers to entry
• Access to international markets
• Supply
• Energy cost and energy efficiency
• Adequacy and security of supply
• Demand
• Domestic aggregate demand and its
• Seasonal character

3
(No Transcript)
4
Concerns and Objectives

• Security of Supply
• Energy supply to selected social clusters
• Social affordability
• Budget revenues

• Natural Resource Rents
• Transit fees and rents

5
Key Energy Challenges

1. Capacity building and policy formulation
2. Energy market reform and regulation
3. Energy security
4. Energy Efficiency
5. Environmental policy and climate change
6. Energy Poverty
7. Energy cooperation and trade
8. Oil and transportation in Southeast Europe

6
Western Balkans Region
7
Economic Overview
8
Energy Overview
9
Energy Indicators
10
Some Comparisons
11
New HV links support potentially lucrative
electricity trade with the rest of Europe
enhancing notion of opportunity costs but doing
little about market access and lowering barriers
to entry
12
Access to international natural gas markets
brings potential to lower barriers to entry to
power markets and remove rents thus improving
quality of governance
Source Aleksandar Kovacevic, "Potential
Contribution of Natural Gas to Sustainable
Development in South Eastern Europe", Oxford
Institute for Energy Studies, 2007
http//www.oxfordenergy.org/pdfs/NG17.pdf
13
Tightening electricity supply situation
14
Power markets structure demonstrates poor
diversification of generation portfolio
15
SEE lignite industry in the European context
16
Commitment to Environmental Remediation
17
While about 1/3 of electricity is generated from
hydro sources, that are unpredictable and getting
more volatile
Source EPCG
18
Secondary adjustments of industrial output
19
Energy supply situation

• High-risk portfolio
• Inadequate security of supply with high
  probability for further deterioration
• Natural resource rent management facilitates
  economic performance demonstrating character of
  governance
• Example subsidized cost of district heating
  services delivered to urban areas supporting low
  labor costs of skilled work
• Further deterioration likely to reveal high cost
  nature of energy supply and eliminate remaining
  traces of competitiveness
• Investment projects promoted by Governments not
  likely to affect the difficult trend

20
Fuel wood is fuel of choice for more than half of
households while the reduction of heated space is
common practice (Serbia and Kosovo examples)
Source UNDP Survey, 2004 / 2007
Kosovo heating strategy
21
Demand Side Effects

• High energy intensity associated with very high
  unit energy cost and ex-economy nature of fuel
  supply
• Current or latent high energy costs affect
  aggregate demand and its orientation toward
  imported consumer goods
• Contributes to seasonal character of demand and
  low utilization of infrastructure
• Supports further devastation of human capital
• In search for active public policy

22
Energy and poverty Concept of Affordable Energy

• Total social costs of energy that could be
  covered by productivity gains facilitated by
  suitable and secure energy supply
• In a way that the people could conduct economic
  activity to support
• Appropriate standard of living for themselves and
  their families within
• A healthy environment