Overview

The Balkans are at a critical juncture of shifting to renewable energy. Over 50% of energy production in the Western Balkans comes from lignite coal-fired powerplants. However, the vast majority are operating at end of life and are due to be decommissioned. These must be replaced with renewable energy sources, as the Balkans all have ambitions to join the EU and therefore have made commitments to phase out coal by 2030. The Governments of North Macedonia, Montenegro and Albania have adopted legislation in line with the EU regulation and have taken serious commitments to battle climate change and promote green economy and technologies. There are several types of financing available for green initiatives in the region, however most popular are green loans from commercial banks and DFIs and grant financing. Equity financing although present is still in development.

Investments in green projects is increasing in popularity in all three countries. As a result, SCF conducted a market study on energy sector landscape to see whether there is a market for green lenders in the region.

The Challenge

As a consequence of their highly prevalent, aging fossil fuel infrastructure, shifting reliance on green energy (both on a macro and micro level) has a more significant carbon mitigation impact than anywhere else in Europe. The Governments of the North Macedonia, Montenegro and Albania have taken serious commitments to battle climate change and promote green economy and technologies. However, there are no green banks and there is a lack of specific local governmental initiatives supporting individuals, SMEs and others in the implementation of green projects which may contribute towards the goals set by the respective Governments. There is also lack of initiatives for supporting green lenders in the process of financing of green projects. While there are no limitations in any of the three jurisdictions of the green projects which lender may finance, certain green projects are subject to fulfilment of certain regulatory requirement. These projects include development of renewable sources power plants, roof photovoltaic power plants and reconstruction of existing buildings for energy efficiency purposes. Green lenders may finance both large scale projects (for ex. large capacity power plants) and smaller scale projects (for ex. roof photovoltaics, energy efficient inputs, such as house renovation or machinery, purchase of EVs etc.).

The development of renewable energy sources power plants has been on the rise in each country due to the worldwide energy crisis. The disruptions to the supply chains and decreased stability affected the production and distribution of energy resources. Subsequently this caused sharp increase in energy prices for household and commercial and industrial users, which is notable in the whole region. Due to this, Governments have introduced regulatory reliefs for the development of smaller capacity renewable energy sources projects.

SCF’s Involvement

The SCF conducted a market study on energy sector landscape in the region to identify and inform on:

• Political and energy sector landscape – to understand readiness and obstacles for green initiatives
• Opportunities for green lending – both on a macro level (PPAs) and micro level (e.g. corporate retailers, solar panel producers, etc.)
• Availability and terms of green financing
• Existing players/competitors providing green loans
• Assessment of the C&I market, including the availability/impact of products eligible for green loans

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The project described above is only receiving Technical Assistance from SCF at the time of writing. There can be no guaranty that any investments will be completed or that impact targets will be achieved.