Countries in the western Balkans have made notable regulatory progress in recent years in ensuring closer alignment with EU energy market standards. But significant gaps remain, and commitments to carbon neutrality are being implemented unevenly, the head of the European Investment Bank's (EIB) regional hub for the western Balkans, Damien Sorrell, told Argus ahead of the Energy Week Western Balkans conference in Montenegro.
In recent years, the western Balkans have advanced their regulatory frameworks for renewables. Are these advancements sufficient, and what further steps would streamline foreign investment?
While regulatory progress in the western Balkans energy sector signals greater alignment with EU frameworks, significant gaps remain.
Despite commitments to carbon neutrality by 2050, implementation is uneven. Structural challenges such as outdated infrastructure, the implementation of governance reform in state-owned utilities, and fragmented regulation continue to deter private investment.
Unlocking foreign capital for renewables will require co-ordinated, continuous reforms to adopt market-based energy pricing, transparent auction systems and streamlined permitting, while improving regional energy market integration and grid infrastructure. These priorities are embedded in the EU Growth Plan for the Western Balkans, and in associated reform agendas setting up obligations to adopt renewable energy auction plans, adjust tariffs to market levels and implement just transition roadmaps.
To support this shift, the EU has launched an energy package for the region under the growth plan, allocating €87mn in grants to support €487mn investments in hydropower rehabilitation, solar district heating and transmission upgrades. These are critical steps toward decarbonisation and energy security.
The EU Carbon Border Adjustment Mechanism (CBAM) has been a key part of the discussion over the past year or so, especially regarding its impact on the western Balkan countries. How will it affect project financing in the region?
Regional economies are preparing for the impact of CBAM as of next January, when it comes into force. Some estimates show that CBAM-covered goods exported to the EU account for 4-6pc of GDP in countries such as Bosnia-Herzegovina, Montenegro, North Macedonia and Serbia.
Large exporters of carbon-intensive goods will be the most exposed, while small and medium-sized firms (SMEs) may be exempt from reporting and fees thanks to recent simplifications.
The change favours cleaner technologies and thereby incentivises the decarbonisation of the industrial and energy sectors, driven by clear policy frameworks and stronger institutional support. Long-term financing instruments remain vital to enabling this transition and EIB Global is here to support.
In the context of CBAM's impact on financing, we see technical assistance to guide the transition, tailored financing for SMEs, and large-scale investments in clean energy and energy infrastructure as essential to enabling the economic transformation of regional economies. EIB Global is actively scaling up its initiatives across all three of these areas to support this shift, and stands ready to do more with local governments.
Under the first pillar, EIB's JASPERS programme provides expert guidance for project preparation and implementation. To further embed sustainability into financial systems and scale up green investment among businesses the EIB has also launched the Greening Financial Systems technical assistance programme in the western Balkans. The bank also provides technical assistance under the EU for Green Agenda in Serbia initiative — backed by the EU, the Swedish and Swiss governments, and the UN Development Programme, which has already mobilised €26mn for over 80 green innovations.
The second pillar focuses on tailored credit lines for SMEs. Since 2020, EIB Global has invested €1.2bn in the regional private sector to help companies modernise operations and reduce carbon emissions. A new €187mn Innovation and Green Transformation Facility, backed by €17mn in EU grants, will further stimulate private-sector investment in energy transition, sustainability and digitalisation.
Finally, under the third pillar of clean energy infrastructure, EIB's recent investments include the installation of smart meters in Serbia and the rehabilitation of hydropower plants to boost renewable generation capacity. In partnership with German development bank KfW, EIB Global is also advancing two onshore wind projects — Poklecani and Vlasic — in Bosnia-Herzegovina, as well as a 100MW solar plant near Pristina, Kosovo.
What characteristics make a renewable project ideal for EIB support in the western Balkans?
EIB Global prioritises projects that promote energy market integration, regional co-operation and system flexibility.
This strategic focus reflects a commitment to financing not just clean energy generation, but also the requisite enabling infrastructure. In line with the EIB energy lending policy, the bank supports projects that advance EU decarbonisation objectives and fully align with the Paris Agreement. Eligible investments include solar, hydropower, wind farms, geothermal energy and sustainably sourced biomass.
We finance infrastructure critical to the energy transition, such as smart grids, battery storage and district heating systems powered by renewables. Energy efficiency initiatives are also a key part of broader efforts to ensure a stable and sustainable energy supply. In 2024, the EIB invested a record €31bn to back energy security across the world — including for efficiency, renewables, storage and electricity grids — which is expected to support over €100bn in investment.
The EIB has invested in distribution and transmission upgrades. How will system-wide upgrades shape the region's future power mix?
Much of the western Balkans' energy infrastructure dates back to the 1970s and remains heavily reliant on coal.
The energy transition requires not only technical upgrades, but also regulatory reform — phasing out coal, scaling up renewables and introducing carbon pricing mechanisms.
Modernising electricity grids is central to this transformation. Smart technologies, advanced metering systems and cross-border interconnectors are essential to integrating renewables. More energy storage must be installed to stabilise intermittent supply, while greater digitalisation will enhance efficiency and reduce system losses. Adapting existing infrastructure to withstand extreme weather events is also essential, helping to prevent damage and reduce the risk of power outages as climate impacts intensify. Investing in climate projects makes good economic sense, as every euro invested saves between five and seven euros in repairs and reconstruction.
These reforms go beyond infrastructure, and the transition they help create must be just for all. In this regard, the EIB plans to develop just transition schemes to help countries address the negative social and economic consequences of transitioning from coal to sustainable energy sources. Harmonised legislation and tailored financial instruments are also needed to unlock green investment and accelerate this transition. As the EU climate bank, EIB Global stands ready to deepen its engagement in the western Balkans' energy sector, supporting countries as they capitalise on the opportunities presented by the region's growth plan and broader EU initiatives.
