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Challenges to financing renewable energy projects in the Balkans

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Balkan countries, with their vast untapped renewable energy potential, have adopted obligatory binding targets for renewable energy. However, they have been struggling to mobilise capital in order to fund and bring projects to fruition. It is estimated that EUR 2.3 billion is required to finance regional renewable projects of common regional interest (Energy Community, 2013). Restricted by public budgets, state-owned incumbent utilities are unable to finance such projects on their own balance sheets, thus creating opportunities for private sector independent power producers (IPPs) to bridge the funding gap. However, attracting investors has proved to be rather difficult, as national energy markets do not yet provide for stable, transparent regulatory frameworks and a competitive environment for such investments. Moreover, national markets are considered to be small on an individual basis, which limits potential for economies of scale.

 

Initial development funding in the Balkans is usually sourced from either local developers or international renewable project developers with a local or regional presence. Although expertise is often missing in project planning, both on institutional and project development levels, thus hindering implementation of targets, there has been some progress throughout the region regarding such activities. However, challenges remain to structuring complete bankable solutions in order to attract non-recourse project financing.  

 

Nevertheless, despite limitations on funding sources, multilateral financing institutions (MFIs) like the European Bank for Reconstruction and Development provide lending facilities for renewable financing, as well as technical assistance programmes designed to assist developers in achieving bankable projects and to serve as a catalyst for private sector financing. Furthermore, the Energy Community Secretariat is making significant efforts to encourage and foster inter-regional cooperation and coordination in terms of market design and policymaking for a successful promotion of renewable projects, and policymakers appear to be increasingly oriented towards improving the local regulatory environment to attract foreign direct investment. Based on these trends, all indications are that the current challenges will be overcome, allowing the region to unlock its significant potential for renewable energy.

 

 

For further information, please visit the relevant Balkan Green Energy News website.