BY MISHA SAVIC AND LADKA BAUEROVA | BLOOMBERG NEWS
BELGRADE, Serbia — Tour-ists visiting the Macedonian mountain resort of Mavrovo this winter have been able to see the 19th-century St. Nicholas chapel for the first time in 50 years. Usually submerged in a reservoir, it stands once again on dry land as the worst drought in four decades lays bare the vulnerability of the Balkan energy grid.
The surface of the man-made lake, created to drive three hydropower plants in one of Europe’s poorest regions, has dropped by more than 23 feet since the beginning of last year, risking regional blackouts. Average rainfall for nine countries between the Black and Adriatic Seas was 44 percent below normal, Bosnia-Herzegovina’s Federal Hydrometeorological Institute said.
The record-breaking drought shows how Balkan nations need to diversify from unreliable hydropower, which accounts for about 40 percent of the region’s output and varies with the weather. In a region that’s typically self-sufficient for power, state-owned utilities including Serbia’s Elektroprivreda Srbije are paying to import electricity because governments lack cash to add plants and improve grids. Inadequate supply threatens to hold back growth in a region where electricity demand has surged 19 percent in a decade.
“Investments are needed urgently,” said Nikola Rajakovic, a lecturer on energy issues at Belgrade University’s School of Electrical Engineering and a former Serb deputy energy minister. “The drought simply exposed the fact that investments in the energy sector have been insufficient.”
The region is looking for increased foreign investment as ex-Yugoslav republics seek to follow Slovenia into the European Union, accelerating their recovery from the wars of the 1990s. Croatia will join the EU in 2013. Montenegro has started talks, while Serbia, bombed by NATO warplanes in 1999, waits for a March decision on granting candidacy status.
In Bosnia-Herzegovina, Elektroprivreda Bosne i Herzegovine’s hydropower output was probably 35 percent of its usual December production, said Mirsad Sabanovic, the company’s head of trade and supplies. Elektroprivreda Republike Srpske, which generates power in the country’s Serb sector, has suspended exports and was forced to import 1,500 megawatt-hours a day, said spokeswoman Danijela Subotic.
Serbia’s Elektroprivreda Srbije paid $1.3 million a day last month to import as much as 18 million kilowatt-hours, or 15 percent of national consumption, company spokesman Momcilo Cebalovic said. Serbian hydro plants, which account for a third of output, are running at half-capacity.
The Serb grid operator may post a 2011 loss because it’s losing money on imports. It retails electricity at government-capped 5.5 euro cents per kilowatt hour and paid twice that for imports when shortages pushed prices higher.
Its projects for new power plants total $7 billion, of which 45 percent in renewable sources, mostly hydro plants, and 55 percent in coal-fired facilities, as the utility seeks to reduce risk from volatile weather. Recently it announced plans for its first wind park, to be build east of Belgrade for estimated $45 million to $51 million and with 30 megawatt installed capacity. Strict controls over power prices have hindered foreign investment, said Matthias Heck, a utilities analyst at Macquarie Securities in Frankfurt. Those who have invested, like CEZ AS, the Czech power producer, or its Austrian rival EVN AG, have yet to recoup their cash because of government reluctance to anger voters with deregulation, he said.
Plans to build new nuclear reactors in the Balkans have also stalled. RWE AG, GDF Suez SA, Iberdrola SA and CEZ pulled out of a $5 billion project to develop two new reactors at the Cernavoda plant in Romania, while Bulgaria has been unable to lure more investors to its Belene nuclear station, estimated to cost at least $8 billion.
The fragile grid is another problem. Southeastern Europe needs to invest at least $387 million into new power lines to reduce the risk of blackouts that arose last year when a sudden drop in electricity production created demand for imports, according to Serbia’s grid operator.
