Overview
North Macedonia came out of the winter-2022 energy crisis, driven in part by the war in Ukraine and lack of diversity in gas suppliers, with a better appreciation for the importance oof resilience and redundance in the energy sector. Construction of the gas interconnector with Greece and an internal gas distribution network continued, although at a slower pace, and installment of photovoltaic and wind capacities rapidly increased. The country intensified efforts for regional cooperation in electricity and gas supply but maintained heavy dependence on coal-fired power generation facilities, which are obsolete and often malfunction. Signing of a new gas interconnection agreement with Bulgaria on October 31, 2022, allowed for supply of non-Gazprom gas from early 2023. In response to the crisis and to protect economically vulnerable populations, the Energy Regulatory Commission introduced four separate tariff blocks to charge for electricity consumption. While there were no other major energy legislative changes, North Macedonia continues to harmonize its energy sub-regulations with the EU Energy Community’s Third Energy Package (TEP). The National Electricity Market Operator (MEPSO) launched May 10, 2023, the country’s first day-ahead electricity exchange, which featured 22 participating companies.
North Macedonia’s state-owned power company was unbundled and partially privatized in the early 2000s. Austrian utility company EVN has been responsible for electricity distribution in North Macedonia since entering the market in 2006. State-owned MEPSO (Makedonski Elektronprenosen Sistem Operator) is the country’s electricity transmission system operator, while ESM (Elektrani na Severna Makedonija/Power Generation Plants of North Macedonia; formerly ELEM) is North Macedonia’s state-owned electricity producer.
The electric power production system in North Macedonia consists of two coal power plants with a total installed capacity of 825 megawatts (MW), several hydro power plants with a total installed capacity of 695 MW, one combined generation power plant, a heavy oil plant, solar power plants, a few biogas plants, and two wind power farms. The two coal power plants produce approximately 55 percent of the country’s annual electricity consumption. The smaller coal power plant, “REK Oslomej,” which was dormant through 2020, was reactivated in 2021 to help North Macedonia reduce its reliance on electricity imports. ESM refurbished the “REK Bitola” coal power plant boilers in 2017, but its equipment is still largely outdated. There are two open pit lignite mines with a total capacity of 7 million tons/year and estimated reserves of 10 – 15 years. Domestic lignite has low-caloric value, and the government has announced plans for gradual closure of the REK Bitola power plant and the coal mines. Despite some investments in regular maintenance and minimal modernization, domestic production of electricity decreased by more than 25 percent over the last ten years. Due to a mild winter, electricity imports in 2022 dropped to 20.77 percent of total use, compared to 33.2 percent in 2021. Total annual production of electricity in 2022 was 5,639 GWh, 6.6 percent more than in 2021, and it provided 79.3 percent of total domestic electricity needs. North Macedonia is a full member of the Union for the Coordination of Production and Transmission of Electricity European Interconnection (UCPTE), which ensures interconnection compatibility with European electric power systems.
The government offered September 15 a concession to a Greek consortium consisting of state-owned Public Power Corporation (PPC) and private company Archirodon Group to construct the 333 MW Chebren hydro power plant (HPP), giving it a three-month deadline for the contract to be signed. The investment is estimated to be over $1 billion and will be crucial for balancing the electricity system.
ESM owns and operates North Macedonia’s 36.5 MW wind park in the southern part of the country, and a private company completed construction of another 36 MW wind park. ESM plans to increase capacity of the existing one by 14 MW and invest in another 50 MW in the same area. The government also designated a 415 MW wind park project with German company WPD Group as a “strategic investment” in the country’s northeast, but a final contract has not been signed.
A natural gas transportation pipeline now operated by the new gas transmission system operator NOMAGAS carries Russian gas from the Bulgarian border to Skopje. In 2022 Gazprom provided 100 percent of the consumed gas capacity delivered thorough that pipeline. This pipeline primarily supplies industrial users in the cities of Skopje, Kumanovo, and Kriva Palanka. NOMAGAS was established on December 14, 2022, when National Energy Resources (NER), the company established by the government to develop an internal gas distribution network, officially merged with gas TSO GA-MA. NOMAGAS took over the efforts to build natural gas interconnections with Greece, Bulgaria, Serbia, and Kosovo, as well as to become a co-shareholder in the Floating Storage Regasification Unit (FSRU) Alexandroupolis.
ESM and Greece-based project developer Gastrade SA signed an Advance Reservation Capacity Agreement (ARCA) March 14, 2022, which marked the beginning of North Macedonia’s investment in the FSRU Alexandroupolis. On April 14, 2022, ESM provided the required €5.6 million banking guarantee, committing to book gas capacity from the FSRU. On April 28, 2023, ESM signed a second ARCA agreement and the Terminal Use Agreement (TUA) with Gastrade SA, committing to uptake gas quantities in the next 20 years, according to a defined schedule. NOMAGAS is still expecting a positive decision by all five current shareholders of the FSRU to become a co-shareholder, under which each shareholder would own 10 percent of the shares. In March 2021, ESM signed a Memorandum of Cooperation (MOC) with DAMCO ENERGY S.A. of Copelouzos Group in Greece to acquire a 25 percent stake in the Alexandroupolis gas-fired power plant, however it appears the government withdrew from the MOC as the stake was sold to another investor.
ESM, together with private partners, constructed a 10 MW photovoltaic power station next to the coal power plant Oslomej in the western part of the country, which became operational in the summer of 2022. The European Bank for Reconstruction and Development (EBRD) approved a loan of €5.9 million ($7 million) for the project, with ESM financing the remaining €1.1 million ($1.3 million). In a competitive process, the government signed contracts with two foreign investors (Turkish and Bulgarian) for construction of 80-100 MW of photovoltaics at the site in Oslomej, however neither are yet operational. In addition, the government signed contracts with private investors to install 35 MW of solar on state-owned land and 21 MW on private land, committing to paying a premium tariff of €460,000 ($543,000) over the next 15 years.
A 213-km oil pipeline with a capacity of 2.5 million tons per year connects oil storage facilities at the Greek port of Thessaloniki with local company OKTA’s aging oil refinery outside Skopje. The pipeline and refinery have only been used for storage since 2013. Negotiations between the government of North Macedonia and Greek company Hellenic Energy, formerly known as Hellenic Petroleum, for re-opening the dormant oil pipeline are still ongoing. OKTA primarily operates as an oil trader in North Macedonia.
Opportunities
North Macedonia welcomes investments in the energy sector. The government invites companies to design, build, and operate new large and small hydro power plants, wind, solar, and biogas farms. Companies can also apply for tenders to construct sections of the national gas distribution network. The government also welcomes foreign investments in constructing gas-fired power plants. ESM is interested in upgrading some equipment at the “REK Bitola” coal power plant. In addition, the government is exploring the possibility of extending concessions for building small-scale hydro power plants along rivers across the country.
The government intends to increase installed solar energy capacity from the current 31.5 MW to 1,400 MW. It switched from offering a feed-in tariff to a premium tariff, while also offering free land and favorable connection fees to the electricity grid. The government intends to introduce a net metering system, allowing households to install solar panels on their residences and produce electricity for the grid. There are also opportunities to promote more efficient use of electricity through home insulation and installation of more efficient heaters and electromechanical devices.
The government is likely to replace the dormant heavy oil-fired “TEC Negotino” power plant with a new gas-fired power plant. The government has negotiated a loan with the EBRD to finance the construction of a gas distribution network in the ten largest cities in the country. A few of those cities, including the city of Skopje, have established public enterprises in charge of gasification at the local level. The city of Strumica already has a basic gas network, importing compressed gas from Bulgaria by truck. The government is also looking at options to connect the domestic network to alternative supply sources such as the Trans Adriatic Pipeline (TAP) and the liquefied natural gas (LNG) terminal in Revithoussa, Greece. In an international tender for a public-private-partnership (PPP) to finance, design, construct, manage, maintain, and develop the country’s secondary natural gas distribution system, two Turkish companies have submitted bids and technical negotiations are ongoing.