Overview
Rising energy prices in the last quarter of 2021 and the first six months of 2022 severely impacted North Macedonia. Multiple private electricity trading companies canceled contracts to avoid selling at a loss, disrupting the operations of their clients, and forcing clients to fall back on the universal supplier. Still, construction of an internal gas distribution network continued, regional cooperation for electricity and gas interconnections increased, and the government pursued new investments in wind and photovoltaic plants. There were no major energy legislative changes, but North Macedonia continued to harmonize its energy regulations with the EU Energy Community’s Third Energy Package (TEP).
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, a few solar power plants, a few biogas plants, and one wind power farm. 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 ESM refurbished the “REK Bitola” coal power plant boilers in 2017, but its equipment is still largely outdated.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 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, and electricity imports in 2021 reached 33.2 percent of total use. Total annual production of electricity in 2021 was 5,285 GWh, 3.1 percent more than in 2020, and it provided 66.8 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 has offered a concession to private investors to construct the 333 MW Chebren hydro power plant (HPP). Nine bidders were selected in the first phase of the international call in December 2020 and the government conducted technical negotiations with all bidders in 2021. Final bids are expected in the second half of 2022. The investment is estimated at $640 million and will be crucial for balancing the electricity system.
ESM owns and operates North Macedonia’s only wind farm, a 36.5 MW park in the southern part of the country. It plans to increase capacity with two separate 14 MW investments 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 operated by Gasification – Macedonia (GA-MA), formerly jointly owned by the government and private oil distributor Makpetrol, carries Russian gas from the Bulgarian border to Skopje. Gazprom provides 100 percent of the capacity within the pipeline. This pipeline primarily supplies industrial users in the cities of Skopje, Kumanovo, and Kriva Palanka. National Energy Resources (NER) was established by the government to oversee construction of an internal gas distribution network. On August 29, 2021, NER bought Makpetrol’s share in GA-MA for $35 million, and a merger between NER and GA-MA is expected by Q4 of 2022. Efforts to build natural gas interconnections with Greece and Bulgaria to diversify the country’s sources of natural gas are ongoing.
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 began testing in April 2022 and is expected to become fully operational by the end of summer 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 of Oslomej. 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. The governments of North Macedonia and Greece are discussing re-opening the dormant oil pipeline. OKTA primarily operates as an oil trader in North Macedonia.
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 Alexandroupolis Floating Storage Regasification Unit (FSRU). On April 14, 2022 ESM provided the required €5.6 million banking guarantee, committing to book gas capacity from the FSRU. NER is expecting a positive decision by all five current shareholders of the FSRU to become a co-shareholder with 10 percent of the shares. In March 2021, ESM signed a Memorandum of Cooperation with DAMCO ENERGY S.A. of Copelouzos Group in Greece to acquire a 25 percent stake in the Alexandroupolis gas-fired power plant.
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, possibly through a public-private partnership. 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.
Resources
www.economy.gov.mk
https://www.esm.com.mk/?lang=en#cta55
https://www.mepso.com.mk/index.php/en/contact
https://evn.mk/default.aspx?lang=en-US
https://www.erc.org.mk/Default_en.aspx