FYR Macedonia (2012)

Degree of reliance on imported energy:

There are no domestic sources for production of natural gas and the supply of natural gas comes from imports. Gas has been imported from Russia since 1997, via a pipeline (capacity 800 million m3).  
 
In 2008, the import/export balance by energy source was as follows (all units ktoe, source: IEA): 
Crude Oil: 1078.0 / 0.0 
Oil Products: 219.0 / 377.0 
Natural Gas: 97.0 / 0.0 
Coal and Peat: 153.0 / 1.0 
Electricity: 235.0 / 0.0

Main sources of Energy:

Total installed electricity capacity (2006, source: ESM): 1,484 MW 
- Thermal: 68% 
- Hydro-electric: 29% 
 
 
Share of Total Primary Energy Supply* (2009, IEA): 2781 ktoe  
Oil: 35.5% 
Natural Gas: 2.4% 
Hydro: 4.1% 
Biofuels and Waste: 7.4% 
Geothermal/ solar/ wind: 0.4% 
Coal/ peat: 50.2% 
 
*Share of TPES excludes electricity trade 
 
 
The electricity production by fuel source type in 2009 was as follows (source: Enerdata): 
- Coal: 78.3% 
- Hydro-electric: 17.8% 
- Oil: 3.9% 
 
The Republic of Macedonia is very poor in primary energy resources.  There are two major open pit coal mines that supply two thermal power plants (TPPs) (TPP Bitola and TPP Oslomej), and two smaller open pit mines that produce lignite for the industry and other sectors. The coal deposits of the mines adjacent to the power plants are of very low heat value (lignite). Their capacities are limited and the plants are due for retirement in about 10 years. 
 
Macedonia has very limited hydro potential. Electricity production potential from the existing and future hydro power plants (HPPs) is estimated at 6500 GWh/year. Average annual production from the existing HPPs is approximately 1200 GWh/year with installed capacity of 540 MW. 
 
Due to some unresolved ownership issues, the gas transmission network has not been extended with an appropriate distribution network. Currently, only a handful of industrial facilities and the district heating company in Skopje use natural gas. Over the past 10 years the annual utilization of the pipeline has been between 8 and 12%. 
 
Wood is used mostly for space heating, and only a limited number of industrial facilities use wood waste as a fuel substitute. The use of geothermal water (with a relatively low temperature) is limited to district heating in a small city in the eastern part of the country, and for space heating of greenhouses in the agricultural sector.

Country:

Macedonia

Extent of the network:

National electrification rate (2000):  97.4% 
 
The 220 kV network is not very developed. It consists of three overhead lines (OHLs) and two substations (SS). Two OHLs connect SS Skopje 1 and TPP Kosovo A, but only one is in operation. There has been very limited exchange between neighbouring power systems over these two OHLs. Because of the present role of the 220 kV network, and its limited possibilities for improvement, there are no plans for its upgrade.

The main role of the 400 kV network is to connect the major production facilities in the south of the country with the major consumer base in the north. Besides that, through the three 400 kV OHLs (two with Greece and one with Kosovo), the 400 kV network provides interconnection to neighbouring power systems.

The 110 kV network had been used as the backbone of the transmission network of the country. As the 400 kV network developed, and as consumption grew, the role of the 110 kV network has changed. Nowadays, parts of this network have a regional or even local role.

Capacity concerns:

Macedonia is a net importer of many energy sources, including oil and natural gas. 
 
The country has a scarcity of domestic energy resources. The basic energy source is coal, specifically lignite, which accounts for almost 70% of the total energy production.  It is the main energy source for electricity production in the two major thermal power plants “REK Bitola” and “TEC Oslomej”. However, lignite as an energy source is not efficient. By nature the fuel’s calorific value is of low quality, and estimated reserves only extend until 2025. 
 
The other key fossil fuels are oil and natural gas, which are imported. There is only one oil pipeline transporting crude oil from Thessaloniki, Greece to Skopje, the capital of Macedonia.  
 
These factors, together with the drastic increases in global oil prices, have contributed to large expenditures from the state budget for oil imports, and have led to further increases in the trade deficit, as well as increasing the country’s trade volume with oil exporting countries such as Russia. 
 
Transmission losses in the high-voltage network are also high, amounting to roughly 20% in 2009.

Potential for Renewable Energy:

Hydropower 
Depending on hydrological conditions in the year, 15 to 18% of the annual electricity production in Macedonia comes from hydro power plants.  Macedonia has a significant potential for construction of small hydro-power plants (with installed capacity of less than 5 MW in size) located at roughly 400 sites throughout the country, which have been already identified, and which may meet over 10% of the country’s current electricity needs. An estimated 1088 GWh could be generated annually from this resource, 17.5% of the total theoretical potential of the country’s hydro resource. 
 
Geothermal energy 
Geothermal energy accounts for 2.4% of total production in the heat production sector. There are possibilities for increasing the exploitation of existing and new geothermal sources. Macedonia is quite rich in geothermal sources suitable for different uses except for the production of electricity. Proven thermal potential is estimated to be 220 MWt. The Macedonian Geothermal Association has identified eight existing geothermal projects for expansion and rehabilitation, mainly those used for geothermal heat in greenhouses, and for space heating. 
 
Solar energy 
The solar energy is being used at a symbolic level for domestic water heating. But the geographical position and climate in Macedonia offer a very good perspective to intensify the use of solar collectors, with the country having one of the most favourable solar regimes in Europe. The annual average for daily solar radiation varies between 3.4 kWh/m2 in the Northern part of the country (Skopje) and 4.2 kWh/m2 in the South Western part (Bitola). The first private photovoltaic plant in Macedonia opened in 2009, a 10.2 kW installation near Skopje. 
 
Biomass energy 
There is relatively high potential in the country for utilising biogas from animal manure for energy generation purposes, as well as growing crops for production of biofuel. There is also a significant potential for wood pellet use in the residential heating sector over firewood. An estimated 180,000 cubic metres of wood waste are produced annually, a potential which is entirely unutilised. 
 
Wind energy 
According to the Preliminary Atlas of the Winds in Republic of Macedonia, 15 possible locations with sufficient energy potential for construction of wind power plants with foreseen installed capacity 25 MW to 33 MW were identified. Average wind speeds of 6.5 – 8.5 m/s at 80m have been recorded in mountainous regions, with an average of 7 m/s in the in south-eastern regions of Macedonia. 
On the basis of the Atlas, a Monitoring Programme of the Wind Potential in the Republic of Macedonia is in implementation from 2006, with a grant from the Norwegian Government.

Potential for Energy Efficiency:

The Energy Efficiency Strategy of Macedonia has recognised different areas with huge potential of energy savings. 
The average savings recognised for different sectors are:
<ul>
<li>
Residential – 15% of electricity used by the average participating residences,</li>
<li>
Commercial facilities – 10%,</li>
<li>
Institutional buildings – 20%,</li>
<li>
Industrial/ agriculture –10%,</li>
<li>
Street lighting (from replacing lamps and  installing controls) – 25%.</li>
</ul>

 
Total energy savings until 2020 that may be achieved by the implementation of the Strategy’s energy programs, according to the conservative approach, are estimated at 130,000 MWh. 
 
Particular savings can be made in the residential sector. Average household energy consumption per unit GDP in Macedonia is four times higher than the EU average, indicating the need for improved building codes, together with further demand-side management programs to reduce the proportion of electricity use in households compared to total energy consumption, also elevated compared to EU averages.

Ownership:

Electricity: 
Power sector reforms in the Republic of Macedonia began in 1999 when the Government of Macedonia decided to transform the vertically integrated public utility ESM into a shareholding company, with intentions to privatize the company within a 2-year period. In 2000 the ESM was transformed into a shareholding company, 100% owned by the State. 
 
In mid-2005, ESM (<a href="http://www.esm.com.mk/">http://www.esm.com.mk/</a>) was split into four companies (ELEM http://www.elem.com.mk/, TPP Negotino, MEPSO, and ESM-Distribution) with the idea of privatizing the distribution company and TPP Negotino. 
 
At the end of 2005, 90% of the shares of ESM-Distribution were offered on an international tender. Several companies passed the prequalification phase, but only three submitted bids (EVN, CEZ and ENEL).  EVN's bid by far outranked its competitors. In 2006 and 2007 there have been two tenders to sell TPP Negotino to strategic investors. In both tenders bidders were asked to submit bids that would increase present capacity of the plant with new units operated on gas or imported coal. However, neither tender was successful, mostly for political reasons. In 2009, the running of the plant was taken over by the Canadian/American Hatch Consortium, in a 61.8 million Euro deal. 
 
The remaining 10% of the shares in ESM are held by the State. MEPSO, the high-voltage transmission grid owner/operator, and ELEM, the main power generating company, both remain in the hands of the state. 
  
Oil 
The OKTA Refinery has been privatized in 1999 and is owned by the Greek firm Hellenic Petroleum (<a href="http://www.hellenic-petroleum.gr/online/index.aspx">http://www.hellenic-...). The OKTA Refinery produces most of the petroleum products in Macedonia, including the bulk of the gasoline and diesel, and almost all of the heavy fuel oil. 
 
Gas 
GA-MA JSC is the Macedonian company for transportation of natural gas and managing the natural gas system. It is 50% owned by the government and 50% by MAKPETROL.  MAKPETROL is the former Macedonia's state oil and gas company, since 1998 a totally private joint-stock company. 
<a href="http://www.makpetrol.com.mk/index_en.asp">http://www.makpetrol.com.mk/in...

Structure / extent of competition:

Until the beginning of 2005 the only electricity company was the vertically integrated utility ‘Elektrostopanstvo na Makedonija’ (ESM). In 2005, the company was unbundled into four companies: MEPSO (Macedonian Electric Transmission System Operator), ELEM (‘Elektrani na Makedonija’), ESM-Distribution, and TPP Negotino. 
 
In April 2006 EVN AG from Austria bought 90% of the shares of ESM-Distribution for approximately €200 million. ESM-EVN has four licenses: maintenance and development of the distribution network, distribution system operator, retail supplier for tariff customers, and generation license for tariff customers. EVN currently operates the vast majority distribution network in the country, and is also responsible for 11 hydropower plants, with a combined capacity of 45 MW. 
 
According to the Energy Law, the Distributed Electricity Generator can sell power and/or energy to the electricity traders and to the eligible customers, at free price and to the Retail Electricity Supplier for Tariff Customers, at regulated price. 
 
Considering the Macedonian electricity market size and characteristics, the Government has approved a general framework to allow a phased introduction of bilateral contracts with a transitory regulated balancing mechanism, which will allow for competitive bids and offers by Market Participants, if any, to be included in the Overall Merit Order. 
 
In terms of oil and gas, MAKPETROL covers roughly 60% of the market. Reform of the market is covered under the provisions of the Energy Law.

Existence of an energy framework and programmes to promote sustainable energy:

In 2006, Macedonia ratified the Energy Community Treaty. The strategic priorities of Macedonia in the energy sector and provisions that transpose the acquis communautaire are incorporated in the new Energy Law, adopted by the Parliament in 2006. The new Energy Law clearly targets EE and RES by including a special chapter. The Law contains provisions about the development of a Strategy for improvement of EE for a period of ten years and a 5-year Program for the implementation of the Strategy. The Law includes provisions for EE in the construction of new and reconstruction of existing facilities, including energy audits and buildings certificates.  It also calls for applying technical specifications and standards for efficient use of fossil fuels on new motor vehicles, facilities for generation of electricity, heat and other energy intensive industrial capacities that are sold and/or imported on the territory of the Republic of Macedonia.  
 
The scope and provisions of the Energy Law provide an adequate legal framework for the energy efficiency policy of Macedonia. There are on-going efforts for developing and adopting the secondary legislation and technical regulations, as only the labelling of household appliances is regulated so far. 
 
To address some of the existing barriers to energy efficiency, the government of Macedonia initiated The Sustainable Energy Project, supported by the Global Environment Facility (GEF) and the World Bank.  The Sustainable Energy Project is aimed at introducing two appropriate instruments for financing energy efficiency and small scale renewable initiatives, both based on market principles: ESCOs and loan/guarantee facility. Utilities and local banks are involved in programme implementation. 
 
The legal framework for exploitation of renewable energy sources is the Energy Law. The adoption of a Strategy for Renewable Energy Sources is foreseen for 2008. 
Following the provisions of the Energy Law, preferential feed-in tariff for purchase of electricity generated by small hydropower plants and by wind power plants were adopted by the Energy Regulatory Commission in 2007.  Feed-in tariffs are currently in place for small hydropower, wind, solar, and biomass/biogas, ranging in price from 4.5 €cents/kWh for hydropower, to 46 €cents/kWh for small photovoltaic.

Current energy debates or legislation:

Draft Strategy for Development of Energy for the period 2008-2020 with vision until 2030. 
The Strategy envisages two scenarios for development of the energy sector in Macedonia, without and with construction of a nuclear plant. For realization of the Strategy Macedonia will have to provide four billion EUR for the scenario without the nuclear plant, and five billion EUR for a scenario with the nuclear plant. Of those, up to 2020 three billion EUR should be realized.  
 
Strategy for Energy Development in the Republic of Macedonia for the Period 2008-2020 with a Vision to 2030 at: <a href="http://www.economy.gov.mk/WBStorage/Files/Strategija%20za%20energetski%2... />
 
Polls taken in 2011 indicate that the majority of Macedonians oppose the construction of a new nuclear power plant in the country, particularly in the light of the Fukushima disaster of March 2011. 
 
The Energy Act, ratified by Parliament in February 2011, makes provisions for new market entrants into the electricity supply sector. Under the Act, EVN will no longer be the sole electricity supplier, but citizens will be able to choose a supplier among the companies that decide to compete on the Macedonian market.

Major energy studies:

In 2004, the government adopted the "Energy Efficiency Strategy until 2020". It focuses on the implementation of technologies to provide for efficient energy use, and renewable energy projects, and provides guidance for the energy efficiency policy in the Republic of Macedonia. 
 
 
“Energy Policy in the EU countries concerning environmental protection and energy efficiency: Possibilities for implementation in Macedonia", Synergy Project, supported by the EU. 
 
“Macedonia Energy Efficiency and Renewable Energy Assessment”, USAID, June 2009

Role of government:

The Ministry of Economy is the responsible government body for the energy issues in Macedonia. The Ministry has 12 departments; one of them is the Energy Department. 
Its main functions include:
<ul>
<li>
conducting the state energy policy through programs, measures and other activities,</li>
<li>
developing laws, sub-laws, and other legal documents on energy.</li>
</ul>

 
The Energy Agency was founded in 2006.  It has a mandate to initiate and coordinate energy-related studies in cooperation with domestic and foreign experts and specialized companies.  Based on these studies, it can suggest solutions and activities to the government through the Ministry of Economy . 
 
The Energy Regulatory Commission is in charge of tariff system and prices, authorization procedures, development of grid codes and market codes, and customer protection. 
 
The Ministry of Environment and Physical Planning is responsible for: monitoring the state of the environment, remedial of polluted areas, and environment protection aided by cooperation with scientific institutions).

Government agencies in sustainable energy:

The Regional Environmental Centre (REC) Country Office Macedonia has established cooperation with NGOs by providing grants, training and information. It has contributed to the general growth of environmental NGOs in Macedonia in the past decade. It has been working on the establishment of a good environmental approach towards businesses.  
 
Municipal Authorities 
Energy policy on the local level is implemented by municipal authorities. The Energy Law assigns them with the responsibilities for the following activities:
<ul>
<li>
Distribution of natural gas, management of the system for distribution of natural gas, and supply of natural gas to the tariff consumers</li>
<li>
Production, distribution and supply of heating energy</li>
<li>
Distribution and supply of geothermal energy.</li>
</ul>

 
MACEF (Macedonian Centre on Energy Efficiency) 
The mission of the Macedonian Centre for Energy Efficiency (MACEF) is to increase the Energy Efficiency (EE) and Environmental Protection at national level by capacity building, identifying and implementing EE measures in the cooperation with governmental institutions, local self-government units, engineers, donor organization and ecologists .

Energy planning procedures:

A Sustainable Energy Project in Macedonia has been approved by the Global Environment Facility (GEF) in December 2006. Under this project a grant of USD 5.5 million will be received, through the World Bank as an implementation agency. The project started implementation in March 2007 and restructuring of the project occurred in June 2010. The development objective of the project is to develop a sustainable market for energy efficiency and renewable energy by supporting the development of an enabling framework, institutional capacity, and necessary financing mechanisms. The June 2010 review saw completion of the planned studies and technical assistance contracting, as well as significant progress in the disbursement of funds through the Sustainable Energy Credit Line set up with the project. However, progress was still to be made in the EE retrofitting of public education buildings, and the preparation of a nation-wide plan for energy efficiency in buildings. 
 
The National Development Strategy of Macedonia also sets out a number of objectives that have an effect on energy, including:
<ul>
<li>
Speeding up privatization, restructuring the economy and the energy sector, and opening up the sector to foreign investment,</li>
<li>
A shift from heavy to light industry,</li>
<li>
The elimination of energy subsidies, so that prices reflect costs.</li>
</ul>

Energy regulator Date of creation:

The Energy Regulatory Commission (ERC) was established in June 2003 (with an amendment of the 1997 Energy Law).

Degree of independence:

The ERC consists of five Commissioners. The Commissioners are appointed by Parliament for a 5-year term, and they can be re-elected only once. The term of office of the Commissioners elected in 2003 ranged from 1 to 5 years. 
The Commission is an independent regulatory body with its own budget that is provided from the fees paid by every licensed company in the energy sector.

Regulatory framework for sustainable energy:

The Law Amending the Law on Energy Official Gazette of the Republic of Macedonia 40/05 br.38/03 was adopted, which strengthened the position of the Regulatory Commission, previously established in June 2003, in the energy sector. 
 
The new Energy Law from 2006 provides the legal framework for the operation of ERC, and clarifies the provisions concerning appointment and dismissal of the ERC members, financing, reporting, and the decision-making process.

Regulatory roles:

The Energy Regulatory Commission regulates electricity, natural gas, district heating, oil and oil derivatives and the geothermal energy sector. Among others, the ERC has the following authorities: prescribing conditions for supply of certain energy types; prescribing methodologies for the establishment of prices, establishing tariff systems, and making decisions for prices of certain energy types; issuing, changing, revoking and monitoring the performance of the licenses for performing certain activities in the energy field; prescribing rules for connection of the energy networks, and participating in dispute settlements.

Role of government department in energy regulation:

The <a href="http://www.economy.gov.mk">Ministry of Economy</a> is the responsible authority to draft the new Law on Energy Sector. Furthermore it fulfils a key role in all energy policy related regulatory and over-viewing tasks. The Ministry's Energy Supply Directorate is responsible for aspects related to energy supply, supply security, and harmonization of energy related legislation, regulation and data collection.

Regulatory barriers:

In addition to increasing the number of employed professional staff in the Energy Sector, it is also necessary to form professional advisory bodies in the Ministry of Economy, responsible for investments in the energy sector and other significant activities. The strengthening of the Energy Sector would largely strengthen the negotiating capacities of the Republic of Macedonia in the area of energy, during the EU accession negotiations. 
 
Regarding the Regulatory Commission, it is necessary to improve the legislation with a view to providing a greater independence for the ERC. 
 
It is also necessary to strengthen the capacities of the institutions and the companies that perform scientific and research activities, applicative and educational activities in the field of energy. 
In Macedonia there are a number of associations and nongovernmental organizations that are active in the energy area, operating without the capacity and network to fully utilise their strengths.  
 
Low energy prices (30-50% that of other SEE countries), a lack of awareness of the economic benefits of EE and RE, complex and cumbersome administrative procedures, and a lack of institutional capacity in the financial sector for RE and EE financing, have all also been identified as barriers to further legislative and technical development of RE and EE in the country.

References:

IEA Energy Statistics (2010). Available at: <a href="http://www.iea.org/countries/non-membercountries/macedoniatheformeryugos... [Accessed 16th September 2013] 
 
Austrian Energy Agency Country Profile - Macedonia. Available at: <a href="http://www.enercee.net/countries/country-selection/macedonia.html">http:... 16th September 2013] 
 
Energy Regulators Regional Association. Membership Profiles: Macedonia. Available at: <a href="http://www.erranet.org/AboutUs/Members/Profiles/Macedonia">http://www.er... 16th September 2013] 
 
Analytica MK. Natural Gas – an energy necessity for Macedonia: Overview of the Macedonian energy potential. July 2008. Available at: <a href="http://www.analyticamk.org/files/ReportNo15.pdf">http://www.analyticamk.... 16th September 2013] 
 
UN Development Programme. Macedonia National Strategy for Clean Development Mechanism for the first commitment period of the Kyoto Protocol 2008-2012. Available at: <a href="http://www.moepp.gov.mk/WBStorage/Files/National%20Strategy%20Kyoto%20Pr... 16th September 2013] 
 
USAID. Macedonia Energy Efficiency and Renewable Energy Assessment. Final Report 2009. Available at: <a href="http://macedonia.usaid.gov/Documents/USAID%20Macedonia%20Energy%20Effici... [Accessed 16th September 2013] 
 
UNFCCC, Government of Macedonia. Climate Change Mitigation Analysis in the Republic of Macedonia. April 2008. Available at: <a href="http://www.moepp.gov.mk/WBStorage/Files/Second%20National%20Communicatio... 16th September 2013] 
 
International Energy Regulation Network. Macedonia Market Fact Sheet. Available at: <a href="http://www.iern.net/portal/page/portal/IERN_HOME/IERN_ARCHIV/Regional_As... 16th September 2013] 
 
Food and Agriculture Organisation. Country Report on Macedonia. Policy options for wood energy. Available at: <a href="http://www.fao.org/fileadmin/user_upload/Europe/documents/Events_2009/Wo... 16th September 2013] 
 
Energy Community. The Former Yugoslav Republic of Macedonia. Available at: <a href="http://www.energy-community.org/pls/portal/docs/85829.PDF">http://www.en... 16th September 2013] 
 
Macedonian Ministry of Economy. Strategy for Energy Development in the Republic of Macedonia until 2030. 2010. Available at: <a href="http://www.ea.gov.mk/projects/unece/docs/legislation/Macedonian_Energy_S... 16th September 2013] 
 
EVN Macedonia. <a href="http://www.evn.mk/default.aspx?lang=en-US">http://www.evn.mk/default.asp... [Accessed 16th September 2013] 
 
Electricity Transmission System Operator of Macedonia (MEPSO). <a href="http://www.mepso.com.mk/en-us/Default.aspx">http://www.mepso.com.mk/en-u... [Accessed 16th September 2013] 
 
ELEM Macedonia. <a href="http://www.elem.com.mk/index.php?lang=en">http://www.elem.com.mk/index.p... [Accessed 16th September 2013] 
 
Macedonian Ministry of Economy. <a href="http://www.economy.gov.mk/">http://www.economy.gov.mk/</a> [Accessed 16th September 2013] 
 
Macedonia Energy Agency. <a href="http://www.ea.gov.mk/">http://www.ea.gov.mk/</a> [Accessed 16th September 2013] 
 
Macedonia Energy Regulatory Commission. <a href="http://www.erc.org.mk/">http://www.erc.org.mk/</a> [Accessed 16th September 2013] 
 
Macedonia Ministry of Environment and Physical Planning. <a href="http://www.moepp.gov.mk/default-en.asp">http://www.moepp.gov.mk/default-... 16th September 2013] 
 
European Commission. Managenergy. Macedonian Centre for Energy Efficiency. Available at: <a href="http://www.managenergy.net/actors/896">http://www.managenergy.net/actors... 16th September 2013] 
 
World Bank. Restructuring Paper. Sustainable energy project. Macedonia. June 2010. Available at: <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2... 16th September 2013] 
 
Tieman, A.F., IMF (2011) The Electricity Sector in FYR Macedonia. Available at: <a href="http://www.imf.org/external/pubs/ft/wp/2011/wp1130.pdf">http://www.imf.o... 16th September 2013] 
 
Macedonia International News Agency (2011) Poll: Macedonians Oppose Nuclear Energy. Available at: <a href="http://macedoniaonline.eu/content/view/18041/45/">http://macedoniaonline... [Accessed 16th September 2013] 
 
Macedonia International News Agency (2011) Parliament Passes Energy Act. Available at: <a href="http://macedoniaonline.eu/content/view/17526/45/">http://macedoniaonline... 16th September 2013] 
 
World Bank/GEF (2011) Sustainable Energy GEF Project - Implementation Status and Results. Available at: <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/ECA/... 16th September 2013]

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