Now in 2022, we are looking for a solution to the crisis, and we have missed more than 25 years in not investing and reducing domestic production. The energy industry is a slow one; there are no overnight solutions…
Energy has always been a complex area, but since the independence of Macedonia, it was not given much importance because energy consumption was mostly met by the large domestic capacities that had already been built, and on the other hand, the price of energy was within some ‘normal’ limits. For populist reasons, the price of electricity was kept at a low level, and investments in new capacities were almost non-existent, so they could not be realized in the period between two parliamentary election cycles. But despite that, the price of electricity has always been the most commented on by citizens and the media. That’s why in this text I will focus on the phenomenon called ‘price of electricity’.
After 2000, with the reactivation of energy-intensive industry, electricity consumption increased rapidly. For the reasons stated above, the domestic production capacities could not satisfy the demand, so the import of electricity in a period of 8 years grew from 0 to about 30%. This, combined with European trends and the hope that this will strengthen the Macedonian electricity economy, led to a gradual liberalization of the electricity market.
In addition, starting from 2010, under the threat of climate change, at the level of the European Union, investments in renewable energy sources (RES) were intensified, and parallel to that, stock exchanges for electricity trading began to be opened. The production cost of electricity from RES was incomparably more expensive than coal, nuclear, etc. In order for investments in renewables to pay off, they had to be supported by subsidies from the states, but through the accounts of citizens and companies.
The opening of stock exchanges and the liberalization of the electricity market in a number of countries made it possible to create competition between companies that produced electricity. Subsidization in renewables contributed to the price of electricity in the period from 2011 until 2020 moving within the limits of 30-55 EUR/MWh. This period, it is safe to say that it was a paradise for companies, especially for those in which electricity participates with a large percentage in the creation of their product. But why do I say at the very beginning that the price of electricity is a ‘phenomenon’? This low price of electricity additionally ‘killed’ investments in the Republic of Macedonia, but also in a large number of countries in the region. There was almost no technology where the production price of electricity was lower than the market price. Precisely because of this, not only is not a single larger capacity for electricity production realized, but on the contrary, from the existing ones that we have, production has drastically decreased because they were not competitive with the price on the market and could not offer lower prices to the consumers that were on the free market.
If in 2011 about 5250 GWh were produced from coal thermal power plants in the Republic of Macedonia, in 2021 the production is about 2100 GWh, of which about 200 GWh are produced from imported coal.
In the period from 2010-2020, only subsidized investments in RES were realized, with the exception of two thermal power plants / heating plants of natural gas that were built in Skopje. Political elites are largely to blame for the lack of investment; they argued with each other that a certain investment should not be realized because the market price is low, or that investment in RES energy should not be subsidized because it would increase the price of electricity.
All this has led us to import more than 50% of electricity, whether as a finished product or produced in Macedonia (from energy sources that we import). This just shows why we are so vulnerable right now in the electricity sector, especially the companies that are directly in the free market.
Now in 2022, we are looking for a solution to the crisis, and we have missed more than 25 years in not investing and reducing domestic production. The energy industry is a slow one; there are no overnight solutions, so we must keep in mind that we should be preparing for hard winters: not only this upcoming winter, but also the next one. That’s why commitment is needed, at least for the next winter to be milder; and for this one…
Dr. Aleksandar Dedinec, expert associate at MANU
Published with permission from Okruzenje