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Title page 1

Contents 1

1. Introduction 2

2. Western Balkan energy dependence on Russia 3

2.1. Russian ownership of Western Balkan oil refineries and US sanctions 3

2.2. Limited dependence on Russian gas, but without an optimal phase-out strategy 5

3. The Western Balkan electricity market is already highly integrated with the EU 8

3.1. The Western Balkans are important for electricity transit and trade with the EU 8

3.2. Western Balkan electricity prices are regulated 12

4. The green energy transition is not yet happening in the Western Balkans 16

4.1. The Western Balkans electricity generation mix is both a blessing and a curse 16

4.2. Renewable energy potential in the Western Balkans: high, but untapped 20

5. Electricity market coupling would foster the triple transition 23

6. Policy implications 25

References 28

Tables 4

Table 1. Oil refineries in the Western Balkans and ownership structure 4

Table 2. Western Balkan coal phase-out plans 19

Table 3. Benefits of integrating the Western Balkans into the EU energy union 23

Figures 6

Figure 1. Gas pipeline system in the Western Balkans 6

Figure 2. Electricity generation in the EU and Western Balkans, TWh 8

Figure 3. Western Balkan electricity imports and exports (TWh), 2020-2024 9

Figure 4. Western Balkan electricity imports and exports (TWh) from/to EU neighbours, 2024 9

Figure 5. Electricity imports/exports into and out of the Western Balkan region (TWh), 2020-2024 10

Figure 6. Energy sector SOEs assets, % of GDP 12

Figure 7. Day-ahead auction average prices (€/MWh), EU, Norway and Western Balkans, 2024 13

Figure 8. Domestic electricity prices (€/MWh), EU, Norway and Western Balkans, 2024 and 2014 14

Figure 9. Electricity prices (€/MWh) for industry, EU, Norway and Western Balkans, 2024 and 2014 15

Figure 10. Electricity generation mix in the Western Balkans, 2014 and 2024 16

Figure 11. Coal-based electricity generation per capita, Western Balkans and EU, 2014-2024, kWh 18

Figure 12. Solar energy potential, yearly average photovoltaic power output, kWh/kWp/day 21

Boxes 5

Box 1. Sanctions on Russian oil refineries affect Serbia's energy sector? 5

Box 2. Impacts of CBAM on Western Balkan electricity trade and implications for market coupling 11