Unlocking the Trans-Balkan routes: Interview with Energy Community experts

The Energy Community Secretariat will hold its 20th Gas Forum on the 25th September, with the main topics being the diversification of gas supply, the opening of the Trans-Balkan Pipeline, the integration of Energy Community gas markets with the EU, and the decarbonisation of the gas chain.

We discussed these topics with the Secretariat’s gas experts: Predrag Grujičić, Head of the Gas Unit, Branislava Marsenić Maksimović, Senior Gas and Customer Expert and Karolina Čegir, Senior Gas Expert.

The organisation, with support from the European Commission and ACER, recently carried out a study on unlocking the full potential of the Trans-Balkan Pipeline, which can serve as a flexible corridor for LNG and Caspian supplies from Greece to Bulgaria, Romania, Moldova, Ukraine, and beyond.

“We wanted to focus on how Central and Southeast Europe, which have always been vulnerable and still are energy security-wise, can benefit from the existing infrastructure to adjust to the new reality,” said Predrag about the study.

As he adds, the Trans-Balkan Pipeline is a very good example, as it could bring significant volumes, a couple of billion cubic metres of gas, to Ukraine, and it could supply Central and Eastern Europe, Slovakia, or even Hungary – not necessarily competing with existing infrastructures, but complementing them.

However, the Secretariat has identified several obstacles preventing the full utilisation of the pipeline. These are technical, market-related and regulatory barriers, including high transmission tariffs, which are not justified in their opinion. “We wanted to look more deeply into the problems and solutions. We consulted all interested parties from Greece to Ukraine along the route, European institutions, the European Commission, and European energy traders,” he said, adding that the study and persistent discussions helped TSOs and NRAs along the route become more cooperative, resulting in the first practical outcomes.

Now the aim is to make its operation more streamlined and compliant, which is also part of the Commission’s agenda under CESEC, as market participants have been complaining about non-compliance.

One of the main problems is high individual tariffs, which could make this route less competitive compared to alternatives. When multiple countries are involved in this manner, this can create higher total transmission costs, even if each tariff is relatively low. Addressing this issue is complex, as reducing tariffs would require significant goodwill. TSOs must justify their costs to regulators, who then have to balance cost recovery with increasing flows on the route, and the matter remains under discussion.

If tariff levels are competitive, however, it could bring more liquidity and price convergence to the Greek and Bulgarian hubs, as well as the Austrian and Hungarian hubs.

“The crisis has driven changes in market developments in the Contracting Parties, but the level of infrastructure development, the size of the markets, the degree of connectivity, and the implementation of network codes (EU and Energy Community energy rules) remain very different and impede the market integration,” said Branislava about the market developments.

Regarding network codes, she noted that they should be implemented between Contracting Parties, but in practice, this applies to only two cases: between Ukraine and Moldova, and between Serbia and Bosnia and Herzegovina. In neither case, however, have these network codes been fully implemented, due to different reasons.

Still, Contracting Parties do implement certain elements, predominantly tariff-related network codes, for example, in Ukraine, Serbia and Moldova. Thanks to this, costs have been reduced, for instance, from Serbia to Bosnia and Herzegovina.

Regarding balancing network codes, which are intended to increase market liquidity, Ukraine has made significant progress. Unfortunately, other countries are still in the beginning of the process, she added.

“We are looking forward to the implementation of these network codes with EU neighbouring member states. I see in the new EU gas legislative package that this issue is being fully addressed, because, by default, network codes should be implemented at every interconnection point, whether between member states or between member states and third countries. If implementation is not possible, member states may request an exemption, but we hope that this is not going to be the case,” she said.

“But the technical preconditions for a fully developed market are still missing in many places, especially in the Western Balkans, where there is currently no connection, for example, between Serbia and North Macedonia, and between North Macedonia and Greece,” pointed out Karolina.

As she said, issues include infrastructure gaps, the dominance of national champions, and the long process of unbundling vertically integrated companies. However, there have been improvements. For example, Serbia has finally completed the unbundling process, despite it being a long and complex task under national legislation. Similarly, in North Macedonia, the TSO issue has been resolved, and the country is no longer supplied primarily by Gazprom, as it used to be. The company provides only smaller amounts under long-term contracts for industrial customers. Moldova has also established a new supplier.

“Sometimes we are not so happy about the speed, but things are moving. We will have the implementation report by the 1st of November, which will reflect these improvements,” she summarised.

“Ultimately, all this market integration and implementation should bring more security of supply on one hand, but also the convergence of prices. At the moment, among our Contracting Parties, prices are still largely influenced by infrastructure, security, supply sources, and geopolitics. Once the markets and our networks are better integrated, gas will flow more freely, and prices will converge,” said Branislava.

Regarding the role of gas in decarbonisation, the main focus is on the Western Balkans, where countries rely heavily on coal. “So the key question is how to realistically replace it. While wind, solar, and hydro power have significant potential and existing investments, they may not be sufficient to fully substitute coal. The most obvious transitional solutions are natural gas and biomethane – the former is a fossil fuel, but usable as a temporary ‘bridge’ energy source and the latter is its bio substitute, easily plugged into the same infrastructure and appliances. Some countries, such as Serbia, have enough gas pipeline capacity to make this option feasible. For North Macedonia and Bosnia and Herzegovina, new gas infrastructure will be needed to supply fuel to replace coal,” Karolina noted.

Moldova faces a different challenge, as she pointed out: it has no domestic energy resources, so its focus is on renewables to achieve energy independence. Considerable progress has already been made in replacing natural gas with biomass for heating in public buildings such as schools and kindergartens.

Ukraine is preparing for post-war reconstruction, aiming to fully rebuild its energy system, while Georgia is focusing heavily on its hydroelectric potential, both large- and small-scale, complemented by wind power, with goals including electricity production, electrification, and even export. Similarly, Montenegro plans to export renewable electricity to Italy via sub-Adriatic cables.

All these countries are guided by Energy Community obligations and negotiations with the EU, which shape their strategies and visions for decarbonisation. However, the pace of implementation remains a challenge.