IEA and UNDP advocate new Energy Policies for Southeast Europe

Southeast European countries must devise sound new energy policies and establish the necessary institutions to implement them to catch up with the energy sector reforms realised by their Central European neighbours. Unless this is done, liberalising the domestic retail electricity markets or creating a Regional Energy Market (REM) is not realistic by 2005. Aggressive reform is also essential for eventual integration into the internal EU energy market.

These were the main conclusions of two workshops on Energy Policies and Emergency Oil Stocks in Southeast Europe, recently organised by the International Energy Agency (IEA) in conjunction with the United Nations Development Programme (UNDP) and the Slovene Oil Stockholding Agency (ZORD).

After years of economic recession and isolation, Southeast European countries face major challenges in achieving the market reforms necessary to rebuild their economies. Success in strengthening their infrastructure, notably energy infrastructure, is crucial for economic recovery. Low energy prices, poor management and high losses have undercut the viability of energy sectors in the region.

Initial reforms in the region, notably in the Federal Republic of Yugoslavia and Bosnia and Herzegovina, have progressed slowly. International donors have focused too much on energy supply rehabilitation. "The rehabilitation process appears to be too focused on large electricity infrastructure projects, while the government and company policy objectives appear not to have been established," said William C. Ramsay, Deputy Executive Director of the IEA. "It is vital to start with a comprehensive strategy, which includes energy demand forecasts and least-cost plans for investment." Regulatory reforms and a demand-side approach are needed to address the imbalances and high energy intensity of the final consuming sectors.

If the region's domestic retail electricity markets are not adequately reformed, there will be insufficient convergence among these countries to permit their full integration into the regional market.

Based on the experience of Central European countries in effective market reforms, policy makers in Southeast Europe should consider the following priorities:

• Establishment, development and implementation of strong, well-designed energy policies and related action plans;
• Reinforcement of the role and capacities of government in driving market reforms and promoting the good governance essential to effective reform;
• Acceleration of the restructuring of state-owned energy companies to ensure transparency and accountability and improve economic, social and environmental performance;
• Enhancement of energy security by diversifying energy imports and fuels, implementing energy efficiency action plans, and building up oil and natural gas stocks and oil emergency plans;
• Establishment of a market-based energy sector to promote investment before market opening.

1 Documents of the IEA-UNDP Workshop on "New Energy Policies in Southeast Europe - The Foundation for Market Reforms" (Serbia, 1-2 October 2002) and IEA-ZORD Workshop on "Emergency Oil Stocks in Southeast Europe" (Slovenia, 11-12 October 2002) available on http://www.iea.org/about/nmccee.htm

The IEA has developed an energy co-operation programme for European economies in transition. The work is designed to help the countries achieve market-oriented, efficient energy policies and increase energy security. Activities include energy policy reviews, workshops, harmonisation of statistics and research activities.

The IEA was founded in 1974 in the wake of the first oil shock. It is an independent organisation of oil-consuming nations within the framework of the Organisation for Economic Co-operation and Development. Its core mission was and is to meet energy supply disruptions. Over the years, the Agency has extended its tasks to include extensive gathering of statistics, analysis and projection of energy market trends, the promotion of energy efficiency and involvement in energy-related environment issues, especially climate change.