Renewable energy in North Macedonia

1. Introduction 

The renewables sector is one of the strategic areas of North Macedonia’s economy, and renewable energy projects are among the most popular opportunities for new investors.  

At the moment, most of the electricity in North Macedonia is produced from thermal power plants with coal as the primary energy source. The share of the renewable energy sources in the total installed capacity in North Macedonia is 38%, with most of the renewable energy coming from large hydro powerplants. Although North Macedonia’s renewable energy potential is huge (especially solar), the country is still dependent on importing electricity –imported electricity constitutes around 30% of the overall gross consumption.  

The current Government’s Energy Development Strategy 2020-2040 envisages total phasing out of coal by 2027, with 45% of total energy production to come from renewable sources by 2040.  

Along with other Western Balkans states, North Macedonia has signed the Sofia Declaration on the Green Agenda, which commits to pursue the target of a carbon-neutral continent by 2050, along with the rest of the EU.  

On its path to the EU, North Macedonia has adopted its Energy Law in May 2018 (which harmonised the energy legislation of North Macedonia with the EU Third Energy Package).  

Most recently, in November 2022, the EU Regulation 1227/2011 (“REMIT Regulation”) as well as EU Regulations 347/2013 and 2015/1222 have been introduced in the Macedonian legislation. Beside these legislation changes, some of the key recent developments in the renewables market that are presented in this Expert Guide are the record high number of issued energy licenses as well as the launching of day-ahead energy market in May 2023. 

2. Records in issued energy licenses vis-à-vis lack of large renewable projects 

There is a significant interest in the construction of renewable energy projects in North Macedonia over the last two years. In 2022, there was a record high number of issued energy licenses. Additionally, the Macedonian Regulatory Commission for Energy (“RKE”) has already announced that it issued 278 licenses for only six months in 2023, which is more than in the whole 2022.  

If all the issued energy licenses result in operational power plants, that would amount to 270MW of newly installed capacity. This is a huge number for North Macedonia as the biggest solar plant at the moment is only 17MW, with the second biggest being 10MW.  

According to the RKE 2022 Annual Report, 267 new renewable energy power plants are currently in the works (with solar plants having the biggest part - 254 plants). This has resulted in the total producing capacity increasing to 144.4 MW (out of which 99.2MW is solar). The rest of the new energy power plants are 11 small hydro-plants (with an installed capacity of 7.2MW), one wind plant (with an installed capacity of 36MW) and one biogas thermal powerplant (with an installed capacity of 2 MW). 

Despite this progress, the renewable energy support schemes have not been popular in North Macedonia. Although there was a large number of issued energy licenses, there was also an unprecedented amount of requests for cancelation of producer preferential status. 

North Macedonia still has only a few large-scale power plants, with the biggest wind and solar parks still being state-owned.  

The crucial challenges for renewable investors in North Macedonia are: 

  • Assessing the possibilities for grid connection – this must be made at earliest stage of the project.  
  • Initiation of adoption of a new or amended spatial plan or project for the impacted area. This procedure is one of the longest, as the preparation and adoption of spatial plans can last even several years. 
  • Performing a land conversion procedure. As North Macedonia’s land is predominantly agricultural, there are only few large portions of privately owned construction land. Therefore, if the land intended for building of a power plant is agricultural, a prior conversion procedure should be performed. We see that there is still no practice of converting only part of the agricultural land parcel (that is needed for building the power plant) which presents additional challenge.  
  • Considering the option for building an energy battery system along with a large renewable generation system. In this manner, RKE has already announced it is considering amendments to the legislation with which it would be required all new plants mandatorily to have a battery system.  

3. Launching day-ahead energy market

Since the adoption of the new Energy Law in 2018, a day-ahead energy market has been expected to be implemented in North Macedonia. 

On 10 May 2023, the Macedonian National Electricity Market Operator (“MEMO”) rolled-out and started operating the day-ahead electricity market exchange. This market is envisaged as one of the key elements of a future Western Balkans energy market, integrating into the European internal market. It was part of a broader initiative to create a regional energy market in the Western Balkans, funded by the EU. The average price landed on the first day was EUR 115.74 per MWh and its participants bought and sold a total of 500MWh. 

The legislative framework for the day-ahead electricity market exchange had been adopted on April 10 2023. Such Rules consist of four documents: 1) the General operating rules of the organized market for electric energy, 2) the Operating rules, 3) the Rules for clearing and financial settlement on the organized market of electric energy, and 4) the Code of Conduct. 

The General operating rules of the organised market for electric energy, among other things, include terms for 1) organisation of the market, 2) the general market principles, 3) the legal and regulatory framework, 4) bodies of the stock exchange, 5) the conditions and the procedure for access, and 6) types of contracts, market zones and market segments. 

Тhe MEMO’s Operating rules, on the other hand, among other things, stipulate terms for 1) trading procedures on the day-ahead market, 2) the general conditions for providing services, 3) a pricelist, and 4) technical rules for access and rules for clearing and financial settlement on the organised market of electric energy. The rules for clearing stipulate terms for clearing, bank accounts, financial guarantees, financial settlement, non-fulfilment of conditions. 

Finally, the Code of Conduct consists of rules for 1) ban for manipulation of the market, 2) requests for organisation of the market participants, and 3) information on instructions and penalties. 

At first, trading will be conducted only within North Macedonia, until the first market coupling with a neighboring country. An intraday market is yet to be introduced in the near future. 

According to the Energy Community Secretariat, the establishing of the Macedonian exchange is a major step forward in the country’s energy markets, providing clear and transparent pricing signals for renewable energy investment.  

4. Latest changes in the Energy legislation 

In November 2022, North Macedonia implemented the EU Regulation 1227/2011 (for integrity and transparency of the wholesale energy markets, “REMIT Regulation”), as well as EU Regulations 347/2013 (for guidelines for trans-European energy infrastructure) and 2015/1222 (for establishing a guide for the allocation of capacities and management of suppressions).  

The implementation of the abovementioned documents brought changes to the main Energy law as well as adoption of secondary legislation (e.g., Rulebook for Monitoring of Energy Markets).  

On one hand, the changes in the main Energy law, among other things, brings: 

  • harmonisation of the Energy Law with the horizontal laws which were adopted in the previous period, i.e., the Law on Strategic Investments, the Law on Inspection Supervision and the Law on Electronic Documents and Electronic Identification. 
  • introduction of electricity storage (battery systems) as a new energy activity. 
  • increasing cybersecurity in the energy field through the introduction of basic rules for the prevention or reduction of the harmful consequences of cyber-attacks and incidents on the network and information systems of large entities in the energy sector. 
  • transfer of the authority for issuing guarantees of origin (from the Energy Agency to MEMO). 
  • introduction of virtual producer, operator of electricity storage and strategic projects of energy infrastructure. 
  • increasing the level of price deregulation in electricity supply by the universal supplier. 
  • introduction of the Energy and Climate Plan as a compatible document with the energy and climate planning documents of the contracting parties of the Energy Community and EU member states. 
  • provision of new support measures for production of electricity from renewable energy sources.  

The new Rulebook for Monitoring Energy Markets, on the other hand, prescribe the form and the content of the “REMIT” forms for:

  1. registration of wholesale energy market participants
  2. awarding ECRB registration code
  3. requests for registration in the Register
  4. notice for application of the exclusion from the ban for trade based on internal information
  5. notice for late publishing of internal information
  6. notice for potential breaches and
  7. notice to the ECRB and EC Secretariat. 

According to the Rulebook for Monitoring Energy Markets, the license holders are obliged to submit specific data and information prescribed with the Rulebook for Monitoring Energy Markets to the ERC. Such forms are delivered in electronic form only, via specific web platforms maintained by the ERC. As a rule, the data should be submitted no later than 30 days from the last day of the reporting period (except for the data related to the electricity market, for which the deadline is 60 days). 

Portrait ofMarija Filipovska
Marija Filipovska Jelčić
Partner
Skopje