The Western Balkan energy sector: between Russia, the European Union and the green transition

To upgrade their energy sectors, Western Balkan countries should transition away from dependence on Russian energy, converge with the European Union through electricity market coupling and phase out coal. Significant strain characterises each of these transitions. Region-specific differences in each area are also pronounced: Serbia and Bosnia and Herzegovina still depend on Russian oil and gas, while Albania is the leader in the green transition, and Montenegro is relatively advanced in each of the three areas. Yet, all Western Balkan countries are behind on regulatory alignment with the EU, delaying market coupling that was initially planned for 2027.

There are strong reasons to accelerate this process, given significant EU/Western Balkan energy integration already: up to 70 percent of electricity flows in the Western Balkans pass between EU countries, for example. Given the strategic role of the Western Balkans as a major electricity transit corridor for the EU, faster integration would also enhance system efficiency, provide security against Russian interference and bring the benefits of complementary electricity markets to both the EU and the Western Balkans. Meanwhile, the region’s green energy potential remains untapped and further investment is needed. Western Balkan countries should set goals on merging faster with the EU energy union, phasing out coal and benefitting from abundant solar and wind resources, in way that are conducive to their energy sector competitiveness and in line with the green transition.

We thank Georg Zachmann, Marek Dabrowski, Marie Jugé, Ugnė Keliauskaitė, Ben McWilliams, Alexander Roth and Bruegel research meeting participants for their comments and suggestions.

This Working Paper was produced with financial support from The Open Society Foundations Western Balkans.