Artur Lorkowski, Director of the Energy Community Secretariat

Without stronger support and market reform, the Western Balkan region risks missing a critical window to turn climate ambitions into strategic gains

The Western Balkans are now better positioned than ever to accelerate their green transition, with the continued support of the Energy Community,” says Artur Lorkowski, Director of the Energy Community Secretariat, speaking in this interview that was conducted on the eve of the opening of the Third Belgrade Energy Forum (BEF 2025), which he inaugurated alongside Serbian Mining and Energy Minister Dubravka Đedović Handanović. Nevertheless, he notes, turning this opportunity into lasting progress will require focused effort and sustained commitment.

The forum brought together more than 400 participants from over 30 countries, gathering leading energy experts from the region, Europe, and beyond. Among them were ministers and senior officials from Serbia, Montenegro, Croatia, Hungary and Repub lika Srpska, as well as high-level delegations from the Energy Community Secretariat and the EU’s energy regulator, ACER. The event also drew directors of international energy institutions, representatives of regional utilities enterprises and power exchanges, investors, bankers, consultants and top industry professionals.

It provided a timely platform for stakeholders to take stock of progress and chart the next phase of the region’s energy transition. Mr Lorkowski utilised this interview to underscore the key steps that now stand between ambition and real transformation.

“The Energy Community was created with the purpose of extending the EU’s internal energy market and climate standards to its neighbours, and we’ve made important strides together over previous years,” explains Lorkowski. “Through the adoption of the Clean Energy for All Europeans Package, the development of National Energy and Climate Plans (NECPs), and the implementation of core market reforms, the Western Balkan countries have taken meaningful steps towards aligning their objectives with EU climate and energy goals.”

However, notes our interlocutor, the pace of progress has been uneven. While expectations have often been high, real-world constraints— economic, institutional and political— have shaped the trajectory in ways that were not always predictable. “That said, we have a functioning regional framework in place, and in many ways, the Western Balkans are better positioned today to accelerate their green transition than they were even five years ago,” says our interlocutor. “With the upcoming obligation to prepare second-generation NECPs possiand the need to define 2040 targets, there is a unique opportunity to further embed long-term climate neutrality as a shared goal.”

What are the main reasons behind the gaps? Is this a matter of political will, institutional capacity, or economic constraints; and how can the Energy Community help close them moving forward?

— In reality, it is a combination of all three. Political will fluctuates with domestic circumstances and election cycles; institutional capacity is still maturing in many Contracting Parties; and economic constraints—especially the high upfront costs of the energy transition—remain a major barrier.

The Energy Community Secretariat works to address each of these dimensions. Our role is not only to monitor and report on implementation, but also to provide hands-on assistance, legal guidance and platforms for peer learning and coordination. Going forward, we see our role expanding further: supporting just transition planning, advising on carbon pricing models, coordinating regional investment efforts and strengthening the political narrative that the green transition isn’t an EU-imposed obligation, but rather a strategic development opportunity for the region. Importantly, we know that the willingness is there, but the countries need significantly more structured support for decarbonisation, especially in terms of access to financing.

Missing the 2025 deadline to couple with the EU market and gain CBAM exemption is expected to have a negative impact on trade, the financial stability of coal-based producers and the pace of the energy transition in the Western Balkans

There is also an urgent need to scale up deployment of renewable energy, particularly wind and solar, where untapped potential remains high. And perhaps most critically, Contracting Parties must accelerate the establishment of functioning electricity markets that enable integration of renewables and facilitate the broader green transition. Without this, the pace of transformation will remain constrained, regardless of political ambition.

Serbia recently aligned its Environmental Impact Assessment procedures with EU law—marking a development that was acknowledged as a significant step forward. From your perspective, have these legal reforms led to observable improvements in how EIAs are conducted and enforced in practice? More broadly, do you see a narrowing of the gap between legal compliance and on-wthe-ground implementation across the Western Balkans?

— Non-compliance risked jeopardising key strategic energy investments in the country, including renewable energy projects, some of which were backed by international financial institutions. The Secretariat actively assisted Serbia in preparing the draft legislation, which was prepared in 2023 and finally adopted in December 2024. We are still awaiting the adoption of necessary secondary legislation that will complete the legislative framework. Only once this full package of legislation is in place will it be possible to properly assess any improvements in the EIA procedures on the ground. The adoption of the law itself is a critical and essential step, but effective implementation requires robust secondary legislation to enable key processes and enforcement.

Where do you see the greatest disconnect between legal frameworks and actual practice in the region, and what are the risks if this gap persists, particularly when it comes to renewable energy and infrastructure projects?

— While most Contracting Parties have transposed elements of the Renewables Directive into national law, actual implementation is often lagging behind.

Permitting procedures in the Energy Community remain excessively complex and non-transparent, despite legal obligations to streamline them. Similarly, while legal provisions often guarantee grid access for renewable energy projects, in practice they frequently encounter delays and restrictive connection conditions driven by limited network capacity and the need to maintain system stability. This situation underscores the urgent need for comprehensive grid upgrades to enable the reliable integration of growing renewable energy volumes within modern power systems. In an effort to help overcome some of these obstacles, the Energy Community Secretariat has launched the project “Planning, Programming, and Permitting of RES Projects.” This initiative aims to streamline planning and permitting procedures, develop practical guidelines and identify tailored solutions for each Contracting Party. A core focus is the establishment of RES acceleration areas and the initiation of pilot projects—particularly on brownfield sites—to demonstrate effective spatial planning and permitting in practice. By addressing institutional shortcomings and supporting comprehensive assessments, the project seeks to foster a more informed, coordinated and efficient approach to renewable energy deployment across the region. Ultimately, it aims to align national frameworks with EU standards, enable faster project development and strengthen stakeholder cooperation across the Energy Community.

With regard to the disconnect between legal frameworks and actual practice in the region, I should also mention the high level of non-compliance with environmental standards, especially those related to air pollution. While Contracting Parties have successfully transposed the relevant legislation into their national legal frameworks and adopted the related plans, we observe that implementation is still lagging. Investments to refurbish and upgrade fossil-fired combustion plants are being delayed, with the result of breaching the pollutant ceilings for sulphur dioxide, nitrogen oxides and dust for several consecutive years. The Secretariat is following up these cases via dispute settlement procedures.

In accordance with the Energy Community Treaty, Serbia is already part of the single energy market. What are the main challenges preventing fully liberalised trade in electricity and gas, and what new developments does market coupling bring? Are there any distortions in the functioning of the single market caused by state aid or EU assistance?

— The full market integration of Serbia and other Contracting Parties is yet to be achieved. In terms of electricity, it is advancing with the November 2024 adoption of the new Energy Law and the ongoing adoption of remaining decrees to finalise the transposition of the Electricity Integration Package as a precondition for the market coupling with the EU. This is not yet the case when it comes to gas.

The Energy Community plays a key role in helping Western Balkan states align with EU energy and climate goals through a coordinated, realistic and inclusive transition that leaves no country behind

Whilst Serbia has finalised certification of the Transportgas company, alignment with outstanding issues with the SRB’s formal unbundling of the transmission owner, as conditioned by AERS in line with the Secretariat Opinion, real independence of the Serbian TSO needs to materialise. Serbia needs to ensure effective, non-discriminatory and transparent third-party access at all gas entry points, most notably with Hungary (Horgos) and Bulgaria, and to certify the Banatski Dvor underground gas storage facility in accordance with the Gas Storage Regulation, align with and implement the Gas SoS Regulation, including the development of a Risk Assessment, Preventive Action Plan and Emergency Plan.

What tangible ramifications should the Western Balkan countries expect to face if they fail to comply with electricity market integration requirements after 2026 – particularly in terms of financial costs and their pathway to EU energy integration?

— The fact that the CPs missed the opportunity to couple by 2025, and thus receive an exemption from the Carbon Border Adjustment Mechanism (CBAM) as of 1st January 2026, when it will start to apply, is expected to have a negative impact on electricity trading in the Western Balkans and its electricity exchanges with EU member states. Even though the region as a whole is mainly an importer at the annual level, the negative impact on the trading activities and financial balance of incumbent producers that have a high share of coal-based electricity production, as well as on the volumes traded in the regional power exchanges, is anticipated. Furthermore, due to the lack of clarity on how transits will be calculated, it is possible that the region – as an important transit route for EU member states – will not be utilised fully, and negative impacts could be expected on both sides of the borders. Since EU imports of RES production from this region are subject to a set of very strict conditions that must be met in order to be exempted from the CBAM, it is also expected that it will have a negative impact on the pace of energy transition and we are already seeing a slowing down of power purchase agreement (PPA) contracts in the region.

Photo: Irena Herak