ANALYSIS
The Balkan electricity connections
By Ioannis Michaletos | Blog
November 15, 2008

The electricity market in the Balkans is characterized by certain features that differentiate it from other European regions.

First of all, most of the countries are net importers of electricity, with the exception of Romania and Bulgaria. Another important aspect is the significant seasonal load variations, due to consumption structure which is strongly influenced by households.

Also it has to be pointed out that there are issues concerning the use of aging power stations and the need to modernize the existing electricity networks. For instance the Greek network manager authority has recently announced that at least 600 million Euros are needed in order to upgrade the country's island network within the coming years. Much more are estimated for the rest of the countries, an issue of great interest for potential investors.

Situation at hand

The Balkan networks operate synchronically with those of the Union for the Coordination for the Transmission of Energy (UCTE) since 2001. UCTE has as an aim to 'Coordinate the operation and development of the electricity trans-mission grid across Europe' and has members from most states in the Continent.

Balkan Regional Network Model 

The most important network grids in the region are:

Bulgaria-Nis (Serbia)-Kosovo-Skopje and the one connecting Bulgaria with Greece.

Due to the existence of large imports by all countries mentioned (Except Bulgaria), during the summer season, the network often faces tremendous pressure into filling up the necessary trade and it is a regular phenomenon to witness power cuts.

The connection between Bulgaria and FYROM has an 800MW power link and the one between Greece and Turkey a 400 MW. For the latter it has to be noted that Turkey hasn't synchronized its system according to UCTE regulations. Thus for the moment the trade between is limited and reserved only for the heavily burdened summer period.

UCTE has begun a study in collaboration with the Turkish authorities and the most important aspects of it are:

-Funding will be done by pre-accession funds

-The study will be performed by a consortium led by RWE, Netz and HTSO

According to industry experts in Greece, the successful completion of it will play a great role in securing the bilateral electricity trade between the two states and the rest of the neighboring countries. Moreover the Greek-Italian network has a 500 MW link.

Lastly in early 2009 it is expected that the completion of a new 400 kV will take place between Skopje and the Mogila area in Bulgaria that will greatly ease the main line of Nis-Kosovo-Skopje.

Important steps

The geopolitical upturns that took place in the Balkans over the past 15 years, have greatly affected the electricity networks in the region. By 1994, the EU under the project named ' Phare 92' laid the framework by which all countries could eventually join UCPT, under the condition they proceed into investing for their production and transportation systems.

Greece since 1988 had proceed into an agreement with Italy and over the years constructed a  subwater transmission line, that played a great role in the coming years when the Yugoslavian civil war disrupted significantly the electricity trade in the region.

Regional Interconnections 

Moreover in 1994, the Albanian KESH company, the Romanian Renel and the then Yugoslav EKC, interlined their networks with the Greek power company. By September 1995 the Bulgarian NEC along with the rest proceeded into testing fully their newly formed regional network and since May 1996 all the above countries operate a joint interconnected Southeastern European system.

The role of the EU was quite important for the speedily process of the aforementioned, and that constitutes a success by Brussels, although that was not claimed by the EU authorities, perhaps due to the low popularity this important issue has for the ordinary citizens.

In 1996 the EU organized a conference in Thesaloniki-Greece where it was decided by all countries in the Southeastern periphery to create a Task-Force that would monitor the issues involved in order to accelerate the process towards a full interconnection of the electricity market.

In 1998 in Bucharest, the EU officials announced the results of the Task-Force that relayed as first priority steps:

- The creation of 400 kV Romania-Hungary line

- The activation of the 400 kV line in Mostar-Bosnia that was inflicted by the war

As a second priority it was decided that:

- The upgrading of a 400 kV line between Greece & FYR-Macedonia

- The creation of a second 400 kV line between Greece & Bulgaria

- And a 400 KV line between Greece & Turkey.

By 2002 the Mostar line was reconstructed via funds provided by EBRD and the ZEKC Company of Bosnia-Herzegovina.

According to information obtained from the UCPT, the overall completion of all the projects is closely followed by ' The connection of all European states along with Turkey, North African states and the Black Sea one. The S.E European region is a crucial step into creating the so-called Mediterranean ring and simultaneously aligning the Balkans with the Centrel states The electricity markets of Poland, Czech Rep. Slovakia and Hungary'

The 400kV line between Romania and Hungary was financed by EBRD with a 34 million Euros loan and it is projected to be completed by late 2008.

The rest of the projects were completed by late 2007, thus making a great progress since the 1998 task-force recommendations.

Problems & Potentials

A corporate presentation held recently in Athens and presented by managers who have been occupied with electricity trade in the region, provided several interesting points regarding the potential and problems of the current situation of the electricity connections.

First of all the present day cross-border transmission capabilities are deemed as insufficient due to national bottlenecks caused by regulations and seasonal load variations. Furthermore there a general estimation by industry professionals that security criteria are often not completely followed and there are insufficient monitoring, metering and communication facilities.

On the other hand there is satisfactory available power capacity and service performance, comparable to the EU criteria.

The future projections are optimistic, since there are continuous deregulation efforts in the areas of generations and supply by all countries, but competition on internal markets has not been fully effective yet.

There are growing net imports of electricity in the region that is split between exporters such as Bulgaria and Romania, importers such as Albania and Montenegro and countries more or less in between like Serbia and Italy.

One of the main obstacles is the political pressure exercised with a variety of methods on regulators, causing uncertainty for prospective investors on regional electricity trade. Lastly there are plans for further infrastructure investments, although funding constraints have to be dealt rather quickly.

The network manager authorities, as in the case of Greece, are often accused by businesses that they hinder the electricity trade due to lack of perception of the availability of their own electricity networks. On the other hand the organizations responsible for the operation of the networks, are eager to point out that it is their task to make sure electricity flows unconstrained by commerce dealings that may hinder market supply when most needed.

The bottom line can be summoned as ' There is still a long way towards a regional electricity market, which is a feasible target though'.

All industry experts in Greece agree that once regulation and infrastructure issues are dealt within the next few years, the electricity trade will multiply within the S.E European area which depends on the progress of the regional electricity networks.

Estimations

The electricity market in the Balkans will shortly come into the attention of all industry conglomerates, especially the European ones.
First of all, large-scale infrastructure programs are either underway or are considered necessary and that provides ample opportunities for market players to expand.

Secondly, the electricity trade in the region, although not fully developed, is characterized by the excessive profit margins reaching almost 100% in Greece for instance.

Moreover, credible sources inform that in Bulgaria, the trade is being heavily influenced by the presence of organized crime networks that have been able to manipulate the companies involved through the use of political patronage and indirect ownership of the shares of the organizations involved. In essence the liberalization of the market and the entrance of new players in the Balkan market will have numerous ratification, even of a political nature.

Thirdly, the completion of a Pan-European electricity market based on a Continental electricity network will surely have as an effect the emergence of mega-energy trade companies with the largest competitors being German, French and Italian companies.

In overall the Balkans due to their geopolitical placement, is about to experience yet another reconstruction, this time in the electricity connection sector and under the aegis of Brussels that has nurtured carefully the aforementioned planning.