Energy

The lack of a reliable energy supply is the principal impediment to private sector development and economic growth in Kosovo. The electricity sector is also a major drain on the national budget due to persistent subsidies and the need for power imports, in 2009 and 2010 this was in the range of €40 - €60 million/year. Power shortages are a daily occurrence and technical and financial losses are high, although tangible improvements were achieved between 2006 and 2009. In the winter these shortages cause even greater problems as many people are dependent on electricity for heat.

The existing power plants (Kosovo A and B) are aged, in poor condition and subject to risk of major failure. Both plants burn lignite, the only fuel source available in Kosovo. The Kosovo A power plant was built in the 1960s and is the largest point source of air pollution in Europe. It is scheduled to close in 2017. The Kosovo B plant was built in the 1980s and is not functioning to its design capacity due to poor maintenance. Planned rehabilitation and emission control upgrades will allow it to operate at least through 2024. However these upgrades reduce generation capacity as units are taken out of service and repaired. Both plants are located within a couple of miles of Pristina and air quality, particularly in winter, is extremely poor and unhealthy.

The state-owned, vertically-integrated, electric power monopoly Korporata Energjetike e Kosovës (KEK) operates the lignite mining, thermal power generation, and the electricity distribution network. The World Bank, the EU and USAID support Kosovo’s decision to break up, or ‘unbundle’ KEK’s generation and distribution and to privatize them. The private sector will bring the capital necessary to build new capacity and the management necessary to reduce both technical and commercial losses.

Overall sector reform, including privatization, is essential and will best be achieved by attracting financially strong and technically experienced private investors. As a signatory to the Energy Community Treaty for South-East Europe (ECT), Kosovo’s energy sector reform and restructuring will comply with ECT requirements and obligations and with EU obligations for markets and environmental standards.

Current Assistance to the Energy Sector

The over-arching goal for USAID assistance to the Kosovo energy sector is to help ensure an adequate, reliable, economical, and environmentally sound energy supply. USAID currently engages directly with the Government of Kosovo to pursue the critical objective of privatizing KEK’s distribution functions (KEK Electricity Distribution and Supply – KEDS) to a strategic investor.

Successful conclusion of this transaction will be closely coordinated with the financial, institutional and technical requirements of the New Kosovo Power Plant (NKPP) transaction process, which is being managed under the World Bank-sponsored Lignite Power Technical Assistance Program (LPTAP). The NKPP transaction includes 600 MW of new lignite fueled capacity which will use the best internationally available technology for reducing greenhouse gas emissions. The USAID program works closely with the World Bank program.