Altin Raxhimi in Tirana and BIRN teams in Sofia, Skopje, Sarajevo, Belgrade and Podgorica (Balkan Insight, October 26 2006)

Gjergj Bojaxhi, Albania’s deputy energy minister, suffers from back pain that gets worse when he sits. He walks around the office, hunching and wincing, absorbing the twinges as he speaks. But one word makes him stand up straight – Kozloduy.

The towering chimneys of Kozloduy Nuclear Power Plant lie 300km from Albania, in northern Bulgaria. But the distance is irrelevant in a Balkan energy market that was unified by a major treaty one year ago.

Across the region, energy officials like Bojaxhi are keenly concerned by the imminent closure of two of the plant’s four Soviet-built reactors by December 31, the last day before Bulgaria joins the European Union. EU officials have made closure a precondition for accession.

“It makes me nervous,” said Bojaxhi. But the Albanian minister is not alone. Concern about the impact of the closure on the whole of South East Europe is widespread. Hungarian and Slovenian members of the European parliament issued an extraordinary eleventh-hour appeal to the European Commission, requesting a “temporary reprieve” for Kozloduy.

There is concern also in Montenegro. “We were hoping they would delay the shutdown again and keep it open for another year,” Srdjan Kovacevic, head of Montenegro’s electricity utility, EPCG, told the newspaper Vijesti.

But a reprieve is most unlikely. Bulgaria’s nuclear plant faces the same fate as other outdated, Soviet-built facilities in other new EU member states, most notably Lithuania.

The Baltic state’s massive Ignalina nuclear power station was taken off-line at great cost to the country before it could join the EU in 2004.

Slovakia, a net exporter of energy in Eastern Europe, faces the same dilemma. It may turn into an importer if it closes Jasovske Bohunice, another old Soviet-made plant.
The difference is that Kozloduy’s decommissioning threatens to have an impact on a larger set of countries in a region where energy resources are perilously low already.
Albania has a particular problem. Last winter it struggled with daily power cuts lasting up to 10 hours. This winter, Bojaxhi says the country must “pay any price” to maintain a better supply.

As other countries feel the same way, experts expect energy prices to rise quickly once bidding for winter power supplies begins in earnest.

Croatia and Albania will announce their bids in October 27, while Macedonia and Montenegro will buy electricity in November.

As demand for electricity in the region rises by about five per cent annually, most countries, with the exception of Bulgaria, Romania and Bosnia, have turned into net importers already, or are about to. Those three countries have together poured more than 14 terawatt hours (TWh) in the regional market in the past year.

But they cannot fill the gap. “There is simply not enough electricity in the regional market anymore,” said Atanasko Tunevski, director of Macedonia’s transmission operator MEPSO.

The closure of Kozloduy units 3 and 4 will drain about 40 per cent of the pool of electricity that Albania, Macedonia, Montenegro and Kosovo use to cover their energy deficits, according to Platt’s, the industry newsletter.

Other importers from Bulgaria, including Serbia and Croatia, could also feel an impact. Serbia has assured its winter imports from Bulgaria until February but Mijat Milosevic, a manager at Elektro-Privreda Srbije, said the country could still suffer as a result of unreliable Russian gas supplies if there is a cold winter.

Bulgaria itself might have to import power after the two reactors shut down, as domestic consumption increases in line with economic growth. The country exported half of its 7.6 TWh production last year to Greece, while the rest was sold in the region.

Utility officials across South East Europe predict prices to climb by at least 20 per cent from 0.05 euro per kilowatt hour (KWh) to more than 0.06 euro.

Officials in Kosovo and Macedonia say their prices may surpass 0.07 euro per KWh. MEPSO, which has been struggling financially, said it could cost the country at least 50 million euro more next year than this one.

Some bids already exceed these price levels. Albania’s utility KESh has announced it is ready to pay up to 0.078 per euro KWh for supplies during the first quarter.

This could means increases in household electricity bills. At the moment Montenegrins and Macedonians pay just over three euro cents per KWh while, Greece pays seven cents. This in turn is the lowest electricity price in the European Union. The EU average is more than 10 cents a KWh.

“If MEPSO buys for more, we will automatically increase the price,” said Lence Karpuzoska, a spokeswoman with EVN, Macedonia’s distribution company.

Wary of rising prices in the international market, energy utilities are searching for extra supplies closer to home. Tunevski, of Macedonia’s MEPSO, suggested Macedonia may attempt emergency refurbishment of the aged Negotino thermal power station if the market price approaches 0.07 euro per KWh.

But old plants such as the one at Negotino are in poor shape and are unreliable. The region is strewn with them, however. Albania’s last power station was built in 1986, and Montenegro’s in 1982. If utilities in the region lean too heavily on ageing facilities, “we will face even worse problems in domestic production later”, said Tunevski.

In the meantime, utilities may have to take out high-interest loans to pay for the imports at a time when governments are desperate to cut expenses. Customers will bear the cost of such loans, in the form of immediately raised electricity bills, or down the line.

Many already cannot afford much power. Evgenia, aged 72, in Skopje, who lives on small pension in a country where pensions average 120 euro a month, says higher bills will be a big blow. “It is too expensive for me already,” she said.

The most obvious way out is a substitute supplier, and Romania aspires to fill this role. Romania boosted electricity exports 20 per cent in the first half of this year, to 2.9TWh, and with a new nuclear reactor due to reach full capacity by next summer, it could plug part of the supply hole left by Kozloduy.

However, next summer is too late for this winter, when electricity demand will peak, especially if it is dry and cold, as it has been at least three times in the last 10 years.

Altin Raxhimi is a BIRN contributor. Tamara Causidis in Skopje, Albena Shkodrova in Sofia, Saida Mustajbegovic in Sarajevo, Sijka Pistolova in Belgrade and Nedjelko Rudovic in Podgorica also contributed to this report. Balkan Insight is BIRN’s online publication.