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North Macedonia is a net energy importer that, like most of its neighbors in the Western Balkans, is reliant on lignite coal and hydropower for electricity generation. The Macedonian government has pursued energy transition policies, but coal currently provides 70% of electricity generation.[1] While no new coal facilities are planned, there are advanced plans for a new pipeline interconnection between North Macedonia and Greece. This would increase the modest gas volumes that North Macedonia imports from Russia via the single interconnector with Bulgaria.
In 2014, North Macedonia was the first country in the Western Balkans to build a wind facility with significant capacity, yet no new wind generation has been added since then. The government is looking to triple wind generation and increase solar generation by ten-fold in the coming years in order to meet domestic and international clean energy commitments. As consumer electricity needs grow, North Macedonia is working to navigate the energy transition toward clean energy carefully. In particular, it faces the challenge of bringing sufficient new energy generation online before older generation is brought offline for environmental and/or safety reasons.
North Macedonia has been a contracting part of The Energy Community (EC) since its creation in 2006. It made rapid progress in reforming its energy markets since 2018, when the Parliament adopted The Energy Law. Since then, the North Macedonia electricity market has almost fully opened as the regulation of wholesale and retail prices has been terminated, the transmission system operator (TSO) has been unbundled, and balancing rules were implemented for all market participants as of January 2020.
In addition, a Nominated Electricity Market Operator (NEMO) has been established and designed in advance of a desired market coupling with the Independent Bulgarian Energy Exchange (IBEX). The gas sector has been slower to reform, with a majority of the delays connected to a dispute between the owners of the transmission system operator Gasification – Macedonia (GA-MA). The dispute was settled in August 2021, and reforms in the gas sector are moving forward.
Energy utilities in North Macedonia are regulated by the Energy Regulatory Commission (ERC), which was established in 2002. The commission has authority to oversee and ensure safe, secure, and quality supply to energy consumers; nature and environmental protections; consumer protections; and the introduction and protection of a competitive energy market on the principles of objectivity, transparency, and non-discrimination.
With the support of the United States Agency for International Development, NARUC is currently engaged with the ERC to assist it as it works to harmonize the country’s natural gas market with the EU Third Energy Package. NARUC support is designed to assist the ERC in updating existing, but unadopted, regulation on capacity allocation methodology, congestion management, and transmission tariffs under a capacity-based regime. In addition, NARUC is developing a balancing methodology regulation that will help North Macedonia to operate under a competitive market construct.
The ERC also participates in NARUC’s regional initiatives such as the Electricity Market Performance Initiative, the Europe and Eurasia Cybersecurity Initiative, and the Improving Service Quality through Investments Initiative.
Cyber Preparedness
Following the adoption of the 2018 Energy Law, the ERC and other energy sector stakeholders have been drafting amendments to the law that aim to apply international cybersecurity standards to energy organizations in order to create of a more secure digital ecosystem. In its current tariff approval system, the ERC has included a requirement for utilities to provide detailed information on planned costs for cybersecurity and define regulatory indicators and objectives that must be reached. If an evaluation shows that the costs are reasonable and realistic, they are approved as part of the utilities’ investment plans for the following regulatory period. Subsequently, an annual review of the plans functions to verify their implementation status and the reliability of the data received from the utilities.
NARUC is assisting the ERC as it seeks to give feedback on the draft cyber amendments to better define the role and competencies of the regulators as well as draft internal bylaws and procedures for implementing the law after it has been adopted. Additionally, NARUC is supporting the ERC as it assesses the entities it regulates for cyber preparedness and prudency of cyber investments. Oversight of cybersecurity capacity at a regulated entity is a key function of the ERC, especially for entities deemed critical infrastructure.
Natural Gas Regulation
As of 2021, NARUC is working the ERC to update and develop natural gas regulations to better comply with the EC acquis as well as to prepare for future market coupling and pipeline interconnections with Bulgaria and Greece. The assistance covers three foundational regulations for the gas market, capacity allocation and congestion management, transmission tariffs, and balancing methodologies.
Through this technical assistance, the ERC, the gas transmission system operator – GA-MA – and other stakeholders in the industry will be trained on the importance of these regulations and the changes that will take place in the market once they are implemented. The delivery of these updated regulations and methodologies will aid the ERC as it continues to reform and expand the gas market, and will also support the regulator as it certifies and assists GA-MA, which is currently undergoing an unbundling process.
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[1] “North Macedonia: Energy.” International Trade Administration. https://www.trade.gov/country-commercial-guides/north-macedonia-energy
Project Dates: 2004-2006; 2021-Present
Partners:
Energy Regulatory Commission of the Republic of North Macedonia