Balkans Face Need to Increase Power Imports

An over-reliance on coal and scant progress in diversifying energy sources will force Balkan nations to increase power imports in 2014 to keep the lights on this winter and drag down their struggling economies, traders and experts say.

Recent floods in Serbia and a blast in June at Kosovo's second biggest power plant have sent the countries scrambling to find emergency electricity imports and underlined how easily fragile power sectors in the region can be de-stabilised.

Officials in Serbia say the country, which produces 70 percent of its power from coal and the rest from hydro, will have to import a third of its power needs to offset the shortfall in output in the last quarter of the year due in part to damage from the floods.

Traders warn, however, the biggest Balkan nation may have to import power much longer than authorities anticipate, especially if aging power plants stay offline longer than expected or the region experiences a hot, dry summer or a harsh winter that could limit hydro supplies.

"If the winter is mild and hydrology normal, power imports will vary between 400 and 600 gigawatt-hours (GWh) a month in autumn and go up to 800 GWh a month from December through April," one trader said.

Based on current prices, that could cost up to 30 million euros a month.

The floods engulfed a mine supplying Serbia's biggest power plant - which meets half the country's power demand - and pushed the cash-strapped nation to cut its 2014 economic growth forecast to between zero and -0.5 percent from an earlier estimate of 1 percent.

The damage to the mine was estimated at 100 million euros ($136.41 million) and officials estimate it will take a year to get the site back to full capacity.

"In an era of increasingly frequent floods, storms and droughts in the region, a strategy of putting all your eggs in one basket is highly risky," Pippa Gallop, the research coordinator at CEE Bankwatch Network, an EU-funded advocacy group told Reuters.

In normal years, the region's power generation capacity is already 2 GW short of demand, which experts estimate will jump 50 percent over the next decade as economies expand.

The problem is Balkan nations have made little progress in cutting red tape and improving the regulatory framework to jump-start plans to invest 28.8 billion euros in new hydro and coal capacity by 2025.

"Recovery will be long and costly and governments should rethink their energy policies, taking into account climate change and need to decommission ageing coal power plants," said Sijka Pistolova, analyst and editor-in-chief of the Energy Observer web portal.

In Slovenia, power utility HSE has voiced a concern that a strike over unpaid wages of 900 coal miners at the Velenje coal mine could jeopardise the future operation of the Sostanj plant which supplies a quarter of Slovenia's power.

Other countries, such as Albania, are over-reliant on hydro power and vulnerable to swings in water levels while nations such as Kosovo have staked their future on highly polluting and inefficient lignite.

($1 = 0.7331 Euros)

(By Maja Zuvela, Reporting by Maja Zuvela; Editing by Zoran Radosavljevic, Michael Kahn and David Evans)