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Dec 18, 2007 13:48 EEST
December 18 (SeeNews) - Macedonia faces a crippling power crisis this winter thanks to a combination of insufficient electricity generation facilities, instability in neighbouring Kosovo and a lack of a coherent government energy policy, government officials and analysts say.
"Macedonia basically imports electricity from its northern neighbour Serbia through the province of Kosovo with a 400-KW transmission line connecting Nis-Kosovo pole-Skopje. If this line is cut Macedonia will suffer serious problems, especially the big industry consumers, which according to the new government ruling will receive all the electricity they need through imports on the free market, or through this line.
"Domestic electricity will probably cover the domestic consumption of households and small industry, but they will also suffer in the daily peak hours when the consumption is bigger. This means that heavy industry may totally collapse, households and light industry may feel some discomfort in the evening but the transmission system will face serious problems to deliver all the electricity needed in the peak hours," Professor Atansko Tuneski, former director of state transmission company MEPSO and now on the faculty of Mechanical Engineering in the St.Kiril and Methodi University in Skopje, told SeeNews.
Recently Serbia has threatened to break off diplomatic ties with countries that recognise an expected early 2008 unilateral independence declaration by its U.N.-rin southern province of Kosovo, thus creating an economic and electricity crisis in the region .
An embargo on Kosovo would mean the cutting off of the main 400-KW artery for import of electricity to Macedonia leaving the country minus a vital source of energy.
“This 400-KW artery practically cannot be substitued,” Professor Tuneski added.
“Macedonian electricity demands in 2007 were covered by an increase of electricity imports with much higher prices than the relatively cheap Bulgarian electricity, both through the Macedonian-Kosovo border and the Macedonian-Bulgarian border,” Tuneski said.
Kosovo is home to some two million people and has been a U.N. protectorate since 1999 when NATO bombing stopped a Serb crackdown on rebel ethnic Albanians. Serbia rejects Kosovo's independence aspirations, a goal sought by ethnic Albanians who outnumber Serbs and other nationalities in the province by nine to one.
After an extra 120 days of talks between ethnic Albanian leaders and the Serbian authorities recently ended in deadlock, Kosovo's future status is once again to be debated by the U.N. Security Council, with the first session scheduled for December 19. But the Council remains divided on the issue as Russia, a long-time Serbian ally, continues to insist that an independent Kosovo will mean chaos for the Balkans.
"From a regional point of view Macedonia's economic development depends on the resolution of Kosovo's problem," Prime Minister Nikola Gruevski told SeeNews in a recent interview.
“The Macedonian Government will back any (U.N. envoy and former Finnish president) Martti Ahtisaari plan for a peaceful decision on Kosovo’s issue,” government spokesman Ivica Bocevski told SeeNews. On the question of how Macedonia plans to deal with such a power crisis, Bocevski said that the government does not pay attention to “predictions”.Macedonia, an impoverished ex-Yugoslav state of nearly two million people, has already suffered from loss of investment because of its proximity to unstable Kosovo.
Macedonia consumes some eight million megawatt hours (MWh) of electricity per year and imports around 35% of the energy it needs. The country has so far avoided prolonged power shortages although its main supplier, neighbouring Bulgaria, nearly halted exports from January 1, 2007 when it closed a pair of 440-megawatts (MW) reactors at its sole nuclear power plant under pressure from the EU.
The country has network losses of more than 30 percent annually, which is around five times the average in EU countries.
“Macedonia paid a lot of money for electricity imports at the end of 2006 and during the whole of 2007. However, the electricity prices in the country have not been changed since August 2006. This is the major reason the energy companies now face significant financial problems,” Professor Tuneski told SeeNews.
In 2007 the average price was 70.42 euro ($102.1) per MWh. But the market being small may attract much higher prices this year, analysts say.
PRIVATISATION AND STATE POLICY IN THE SECTOR
Macedonia split in 2005 its communist-era power monopoly ESM into an electricity generation unit, ELEM, a distribution unit, ESM AD, and a transmission company MEPSO, as part of plans to liberalise its energy market. Austrian power utility EVN bought 90% of ESM AD in 2006, while ELEM and MEPSO remained state-owned.
The previous Macedonian government planned to sell 100% of ELEM but failed to privatise the company by the end of its term of office.
ELEM’s CEO Vlatko Cingoski said earlier this year that the current government has abandoned plans to sell 100% of ELEM and would seek a strategic partner for up to 25% of the company.
A recent struggle between the government and EVN deepens the impression of instability in the energy sector.
The coalition cabinet in Skopje, dominated by the right-wing VMRO-DPMNE party, took office in August 2006. Besides abandoning plans to sell ELEM, it has said it was willing to buy back ESM AD from EVN.
The government’s proposal has come at a time of increased tension between the Macedonian authorities and EVN over a new energy law that envisages the liberalisation of the energy market from 2008.
According to the draft law, EVN will become partly liable for transmission losses. It will then have to buy replacement electricity on the open market at prices that are much higher than the tariffs the company now pays to state-owned power plants.
EVN thinks that the new law could lead to higher power prices next year. In November, the government accused EVN of failing to invest the agreed 40 million euros ($57.6 million) in infrastructure in 2007, saying that if the company had carried out the investment as foreseen in the contract, it would have significantly cut electricity losses caused by obsolete equipment.
EVN disagreed, saying that the majority of their loss was from theft, as whole areas in Macedonia traditionally refuse to pay for their electricity.
Under the contract, after a revision of the investments made, the government has to give back to EVN 10% of the investments. However, the contacts between the sides have not produced agreement so far.
If the disagreements are not settled, EVN is ready to send the case to the London Court of International Arbitration, the company said.
“We are not planning to sell our assets in Macedonia. But we are receiving clear signals that our investments are not welcomed in Macedonia. That is why we are going to redirect our efforts to the other countries of the region,” EVN’s spokeswoman Lence Karpuzovska told SeeNews.
The country's largest largest production capacity is provided by the lignite-fired Bitola complex with 3 units of 225 MW each and net production of about 1,434 GWh per unit.
Remaining demand is met by hydropower. The most important hydro power plant in Macedonia is HPP Vrutok which generates about one third of the total energy production (400 GWh), and is very important for the stability of the electric grid. The second most important hydro power plant is HPP Spilje, which generates some 300 GWh.
The main transmission network consists of 400kV, 220kV and 110kV lines. The 400kV system is the backbone of the transmission network. It connects the Bitola thermal plant to the main load centre at Skopje, and connects Macedonia to the European UCTE system.
“By the end of the year the tender results on the concessions of two of the major hydro-power plants (HPP) in the country, Cebren and Galiste are expected to be announced. On January 15 the tender results for the construction of another big hydro-power plant, Boskov Most have to be announced too. These projects, I believe, will keep Macedonia out of the southeastern Europe energy crisis,” Deputy Prime Minister Zoran Stavreski told SeeNews. However, the new plants will not be operational for three to five years.
“MEPSO has no official opinion how to handle a possible energy crisis. There are also no hints from the government about any concrete measures, because the danger is still hypothetical,” MEPSO’s spokesman told SeeNews.
($= 0.6899 euro)
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