The energy policy of post-World War II Yugoslavia largely overlooked coal, focusing instead on hydropower, imported oil and the potential construction of 14 nuclear power plants—only one of which was built in Slovenia. Although this strategy aimed to utilize domestic resources, it also relied heavily on imported oil and oil derivatives. The infrastructure for electricity was notably advanced compared to other Central European countries.
However, the collapse of Yugoslavia and the imposition of sanctions disrupted energy imports and led to the breakdown of the energy system in 1992. As energy expert Aleksandar Kovačević discussed on the Novo Magazin podcast, this crisis forced the population to switch from high-quality coal and heating oil to firewood, with severe consequences for the wood industry and the loss of over 200,000 jobs. This first energy transition, occurring abruptly and without adequate planning, highlighted the need for better preparation and foresight in future transitions.
Challenges facing the coal industry
While the electric power system of former Yugoslavia was initially of high quality, it has suffered degradation in recent decades due to poor maintenance. Today, the primary issue is the low quality of domestic lignite, which has low calorific value, high sulfur and moisture content, and is poorly distributed geographically. This increases costs and the need for heavy machinery.
Estimates show that coal in the Western Balkans has half the calorific value of that in the European Union. Additionally, the coal sector in the region generates 12 times less energy per worker than its EU counterparts, reflecting low productivity and competitiveness. This raises questions about the wisdom of further investing in this sector, especially considering Serbia’s Integrated Climate and Energy Plan, which outlines investments of 1.3 billion euros. The recent failures in Serbia’s energy system, including a major collapse in December 2021 and a regional network failure in June, have undermined confidence in energy supply security. For instance, the price of firewood in Serbia surged by 50 percent after the 2021 system failure and remains high, impacting the most vulnerable citizens. The Western Balkans’ collective dependence on imported energy—34.7% of its needs—further challenges the notion of achieving energy sovereignty through coal.
Opportunities for energy transition
The transition to renewable energy sources presents an opportunity to enhance the productivity of the energy system and stimulate economic growth. The Western Balkans has significant potential in solar, wind, biomass, geothermal, and hydropower energy. Currently, renewable sources account for only about 2% of the region’s energy mix, while firewood constitutes 16% and hydropower an even larger share. This highlights the potential for increasing renewable energy use and improving efficiency. For example, the current efficiency of biomass is below 10%, indicating a waste of resources. Developing district heating systems could make more efficient use of biomass, heating entire cities and reducing deforestation pressures.
The transition to renewable energy will impact coal sector jobs, with estimates suggesting that about 90% of workers lose their jobs when a mine closes. However, this transition does not have to be as disruptive as in the 1990s if managed properly.
Just transition and regional cooperation
The European Commission’s concept of a “just transition,” which focuses on retraining workers for new roles in small and medium-sized enterprises, may not fully address the Western Balkans’ needs. Instead of dismantling existing industrial structures, efforts should focus on improving these organizations and leveraging their capabilities for developing new sectors in renewable energy. Large coal industry companies with established workforces and organizational structures could play a role in building infrastructure for biomass, geothermal and hydropower.
This approach requires investment in upskilling and enhancing the industrial framework. By doing so, jobs can be preserved, and a foundation can be laid for new industries and technologies, fostering regional economic growth and sustainability. Given that large infrastructure projects often exceed the financial and technical capacities of individual Western Balkan countries, cooperation with the EU and international financial institutions is crucial for securing necessary support and investments.
High capital costs in the Western Balkans, nearly double the European average, present an additional challenge, favoring cheaper but less efficient investments. The lack of financial instruments like green bonds hampers the efficient allocation of domestic savings, estimated at 12 billion euros, towards energy efficiency and renewables. Establishing a robust international and national financial framework for the energy transition could address these challenges.
The low productivity and competitiveness of the coal industry suggest that pursuing energy sovereignty through coal is impractical. Instead, the Western Balkans has an opportunity to leverage its renewable energy potential, existing workforce, and regional cooperation to build a sustainable and secure energy system. Studies indicate that regional integration of power systems could lead to savings of 2.7 billion euros and enhance the capacity for integrating renewable sources. This transition requires bold decisions, strategic planning, investments, and collective effort from all regional stakeholders and the EU. By creating a strong financial framework, the region can ensure a future of clean, reliable, and affordable energy for generations to come.
