2021-09-30-IRENA-De-Risking_Investments_in_North_Macedonia_48页_4mb

Executive Summary

North Macedonia's energy sector relies heavily on fossil fuels, but the country is actively pursuing renewable energy (RES) to align with climate goals and attract investment. Key strategies and legislation, such as the National Energy Strategy (2040) and National Energy and Climate Plan (NECP), outline ambitious targets for RES deployment. Despite progress, barriers include limited project readiness, insufficient private finance, regulatory gaps, and risks like policy uncertainty and transaction costs. Recommendations focus on creating an enabling environment through policies (e.g., feed-in tariffs, auctions), financial mechanisms (e.g., renewable energy funds, guarantees), and capacity building. Enhanced collaboration between government, DFIs, and private sector can mitigate risks, attract investments, and accelerate RES expansion.

1. National Strategies, Plans, Laws, and Regulations

• Climate Commitments: North Macedonia aligns renewable goals with the EU's Energy Community and is implementing missions like its Enhanced NDC (51% GHG reduction by 2030 vs. 1990).
• Key Strategies Plans: NSED (2040), NECP, and Earlier Law/Strategy documents set renewable energy targets for power, heating, and cooling.
• Legal Framework:
  • 2018 Energy Law harmonizes with EU Third Energy Package.
  • New Renewable Energy Action Plan (2025) and Law on Energy Efficiency adopted to support RES.

2. Overview of Renewable Energy Finance

• Public Finance: Dominated EPC and was EUR 115.77 million (34% of total investment).
  • KfW and EBRD led international funding.
  • Grants and incentive programs supported small-scale PV, heat pumps, and biomass.
• Private Finance: Growing, with investments in on-grid renewable projects and SMEs. Potential via debt, equity, and blending with public finance.

3. Barriers to Investment

• Project Start-Up and Development: Lack of experienced financial institutions, limited investment-ready projects, and capacity gaps.
• Investment and Regulatory Risks: Counterparty risk (utilities), insufficien investment caps, and unclear future support.
• Scaling Up: High transaction costs, financing constraints, strict capital requirements, and gaps in capacity building.

4. Recommendations

• For the Government of North Macedonia:

  • Adopt financing mechanisms for renewable heating/cooling (e.g., grants), support rooftop PV, and raise public awareness.
  • Streamline institutional procedures, create enabling legal/financial frameworks, and pursue sector integration.

• For DFIs/Institutional Investors & Public Institutions:

  • Support capacity building with technical assistance, leverage capital streams via funds, and foster market alignment.

• Immediate Actions (2021-2023):

  • Introduce capacity/budget caps for RES projects, support self-consumption, and finalize guarantees of origin systems.

• Medium-to Long-Term Actions (2024+):

  • Catalyze market growth via standardized contracts, aggregation, green bonds, and regulatory alignment with EU frameworks.

Collaboration Between Stakeholders

• A renewable energy fund and streamlined legal mechanisms (e.g., standardized contracts) are pivotal to mobilizing capital. International institutions play a key role via blended finance, technical support, and best practices sharing.