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Q&A: Grid projects key for western Balkans integration

Q&A: Grid projects key for western Balkans integration

London, 23 October (Argus) — Investing in upgrading and expanding interconnection capacity in the western Balkans is key for adding renewables, boosting energy security and integrating these markets with EU markets. The European Investment Bank (EIB) is playing a key role in facilitating such projects, including the first cross-border interconnector between Montenegro and Croatia, EIB's head of representation to Montenegro Davor Kunc told Argus' Apostolos Tsarikas in an interview. Edited highlights follow: How important are interconnection projects for the western Balkans and the region's further integration with European markets? Is the EIB currently involved in supporting such projects? Interconnection projects and grid modernisation are essential for the western Balkans' energy security and renewables integration. As the region's power systems are relatively small, stronger cross-border links enable electricity trading, sharing of balancing resources and more efficient use of storage, helping to reduce costs and improve system resilience. Projects such as the Trans-Balkan electricity corridor connect and strengthen multiple national systems, while making the market more attractive to investors by promoting common standards, greater competition and more efficient procurement. At the same time, regional co-operation should complement, not replace, national responsibility for project implementation and delivery. It should therefore focus on planning, prioritisation, interoperability, market rules and aggregation. Strengthening physical connections with the EU and aligning the region's electricity systems more closely with the European market also supports the western Balkans' broader path towards EU integration. The EIB is financing grid modernisation projects in Serbia and Bosnia and Herzegovina. Most recently, the EIB and Montenegrin transmission system operator [TSO] CGES jointly submitted a proposal for a WBIF [Western Balkans Investment Framework] technical assistance grant to support a pre-feasibility study for an electricity interconnection between Croatia and Montenegro. Montenegro already has 12 interconnectors with neighbouring countries, but none with Croatia. We hope this will become the 13th — and that 13 will prove a lucky number. What steps should western Balkan countries take to attract foreign capital and accelerate renewable investment? The main bottlenecks remain the project preparation, permitting and implementation capacity rather than a lack of funding. The priority is to bring projects to a mature, bankable stage. This means having robust feasibility studies, permits, environmental and social assessments, land acquisition arrangements and procurement plans in place before seeking financing. When these elements are addressed too late, projects often face redesigns, procurement delays and financing that cannot be deployed effectively. Importantly, a modern, fit-for-purpose and consistent regulatory environment provides the predictability investors need to make informed decisions. To help bring projects to a bankable stage, the EIB can combine long-term financing with advisory support under the Team Europe approach. EU grants are particularly valuable for project preparation, affordability measures and capacity building. They can also address the lack of funding. International financial institutions such as the EIB can provide long tenors, rigorous due diligence, high standards, guarantees and risk-sharing instruments. Moreover, as we never finance the total project cost, our role is to leverage further investments from both the private and public sectors. The EU's WBIF provides a proven platform for co-ordinating these resources. Examples include the Poklecani wind farm project in Bosnia and Herzegovina, which benefits from a €42mn ($47mn) EU grant alongside an EIB loan support. What characteristics make a renewable or interconnection project particularly attractive for EIB financing in the region? Several factors are critical. First, a project must address a clear energy system need and align with national or regional energy plans. It should be supported by a capable promoter with strong implementation capacity, clear accountability and robust governance arrangements. A stable and sustainable regulatory framework is equally important. Regulatory methodologies should allow prudent investment and operating costs to be recovered over time while ensuring vulnerable consumers are protected through targeted support measures. For public-sector projects, transparent and competitive procurement processes are essential. All projects financed by the EIB must also meet the bank's environmental, social and climate standards, and be supported by a credible delivery plan, including realistic costs, timelines and funding sources. Effective reporting, monitoring and risk-management mechanisms should be established from the outset. Our support extends beyond traditional lending. We also invest in well-structured equity funds that can help mobilise private capital for renewables. For example, the EIB has invested alongside Team Europe and other international partners in funds managed by Alcazar Energy. Through Alcazar Energy Partners II, this investment is expected to support the Bijela wind farm near Savnik in Montenegro, where construction could begin in the first quarter of 2027. This demonstrates how the EIB can work with partners to channel investment and accelerate the western Balkans' energy transition. Has the implementation of the Carbon Border Adjustment Mechanism (CBAM) affected project financing in the region? Have you observed any changes in foreign investor sentiment since its introduction? CBAM should be seen less as a cost and more as an investment signal. As European industry decarbonises, western Balkan companies that move early can strengthen their position in EU supply chains and attract new capital. The challenge is developing a sufficient pipeline of bankable projects. We are already seeing investors become more selective. Carbon exposure, regulatory predictability and alignment with EU climate rules increasingly influence investment decisions. At the same time, demand is growing for renewables, storage, grids and industrial decarbonisation projects that can reduce future carbon costs and strengthen energy security. The financing landscape is also evolving. Proven technologies can often attract commercial funding, while more innovative projects typically require a blend of grants, guarantees, concessional financing and long-term debt. This is where financial institutions like the EIB can play a key role by sharing risk, supporting project preparation and mobilising private investment. The EIB's Innovation and Green Transformation Facility is one example, combining credit lines, EU grants and advisory support for companies investing in innovation, digitalisation and green technologies. We have already launched the facility with commercial banks in Serbia and Albania and are keen to expand it across the region. However, many companies still lack the technical studies, emissions baselines, transition plans and implementation capacity needed to bring projects to a bankable stage. Access to affordable clean energy is another critical factor, as industrial decarbonisation increasingly relies on electrification and renewable power. Ultimately, investor confidence will depend on the pace of reforms. Stable regulation, credible carbon-pricing frameworks and robust emissions monitoring and reporting systems are becoming increasingly important for attracting capital. Through EIB Advisory, we are already supporting the development of green taxonomies in countries such as Albania and North Macedonia, helping establish clear definitions of sustainable investment and providing greater certainty for investors. Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.