Within the framework of Energy Week Western Balkans 2024, we talked to Daniel Calderon, Co-Founder and Managing Partner at Alcazar Energy

Alcazar Energy has expanded its presence in the Western Balkans with several high-profile projects. What motivated your decision to focus on this region for renewable energy investments?

Alcazar Energy operates in markets that have an energy deficit, with a focus on providing capital primarily in non-OECD countries to help them catalyse their renewable energy journey. We see a huge opportunity in the Western Balkans as each country looks to build out their installed renewable energy capacity in line with ambitious decarbonisation goals and we believe the region holds significant untapped potential.

Several key factors have motivated our focus on this region. Its strategic location, favourable solar and wind resource, availability of technically suitable sites, and strong interconnection to the EU energy market, allow us to tap into the broader European energy landscape. Robust legal frameworks around renewables and progress toward EU integration also help to facilitate private, utility-scale renewable projects, making it a favourable environment for development. Additionally, the nascent nature of the renewable energy market in some of the markets helps to create affordable opportunities for large-scale projects.

We are particularly encouraged by the commitment from regional stakeholders, such as the energy ministries and transmission system operators (TSOs), who align with high regulatory standards. Competent developers and local engineering firms are ready to collaborate, and there is a growing demand from private off takers with strong financial backing, further enhancing the region’s attractiveness for renewable investments.

With your second fund aiming to develop 1.6GW of renewable energy, how are you navigating the regulatory and financial hurdles in the Western Balkans compared to other regions like the Middle East or North Africa?

In the Western Balkans, we are navigating regulatory and financial challenges by leveraging a regulatory framework that is not only appropriate but continuously evolving. Montenegro, for instance, has shown a strong commitment to advancing its renewable energy sector through recent legislative developments. These align with the EU’s Energy Efficiency Directive, enhancing the country’s attractiveness as an investment destination. Furthermore, the introduction of mechanisms like market premiums and contracts for difference (CfD) based auctions offer stability and predictable revenue streams that are encouraging for investors.

Amendments to the Energy Act, (particularly the introduction of operational flexibility for power plant connections), have lowered entry barriers, provided greater clarity on project costs, and accelerated timelines, all of which are key for our investment strategy. These reforms strengthen our confidence in the long-term viability and profitability of the region’s renewable energy market.

Compared to other regions, the Western Balkans’ regulatory framework is largely driven by its alignment with EU energy policies. Aspirations for EU membership have encouraged the region to prioritize market liberalization, decarbonization, and energy security, which when combined, foster a more competitive and stable environment for renewable energy projects.

The Western Balkans offer greater alignment with EU standards, providing a more predictable investment climate, although challenges like the infancy of the corporate PPA market in the region and the reliance on traditional energy sources still need to be addressed.

You have recently announced the launch of the largest wind farm project in North Macedonia with a capacity of up to 400 MW. Can you tell us more about the Shtip project and how it contributes to the energy security of the wider Western Balkans region?

The Shtip Wind Farm project is a transformative step forward for North Macedonia’s renewable energy sector. With a planned capacity of up to 400 MW and an investment exceeding USD $500 million, after all project phases have been completed, it will be one of the largest onshore wind farms in the Western Balkan region, representing a milestone in the nation’s clean energy transition. The project will be developed with the assistance of our local development partners, and we anticipate achieving financial closure by Q4 2025, with construction beginning in early 2026.

Once operational, the Shtip project will nearly quintuple North Macedonia’s wind energy capacity, have the capacity to reduce 670,000 tons of CO2 emissions per year, and power 100,000 households.

Beyond North Macedonia, the Shtip Wind Farm will have a far-reaching impact on energy security across the Western Balkans. The country’s well-established grid connections with Greece, Bulgaria, Serbia, Kosovo, and soon, Albania, mean the project will play a crucial role in reducing energy deficits throughout the region. It will also help drive the broader transition toward renewable energy in Southeast Europe, contributing to energy diversification and strengthening regional cooperation in the pursuit of a more sustainable energy future.

Last year Alcazar Energy announced its acquisition of rights to a 118 MW wind farm project in Montenegro. The Bijela wind farm in Montenegro is one of your key projects in the region. Can you tell us more about this milestone project?

In September 2023, we finalized the acquisition of the Bijela Wind Project, marking a key milestone in our ambition to build the largest renewable energy platform in the Western Balkans, with an estimated total project investment of USD $170+ million. We partnered with well-known local companies Simes In?enjering and Sistem MNE, the original greenfield developers, to build this project.

Bijela, which directly supports Montenegro’s 2040 National Development Strategy, is expected to create over 700 construction jobs and will double Montenegro’s installed wind capacity, producing enough clean energy to power over 20,700 households annually while reducing the release of over 235,000 tons of CO2 emissions.

Project development is ongoing with a number of key environmental, technical, design, permitting and other milestones already achieved. The project has recently reached a key project milestone, securing access to the grid by entering into a connection agreement with the TSO. anticipated in Q2 2025, with construction starting shortly thereafter.

Like the Shtip project in North Macedonia, Bijela is part of our broader ambition to support the Western Balkans' transition to net zero and to ensure energy security for the entire region.

You have mentioned plans to acquire additional projects in the region. Could you elaborate on the criteria you consider when evaluating potential acquisitions in the Western Balkans?

When evaluating potential acquisitions in the Western Balkans, we focus on utility scale renewable energy assets, particularly wind and solar PV projects. We consider opportunities at various stages of development with a preference for projects at an early stage, when our internal technical, investment and project finance expertise can add the most value to help successfully develop, and subsequently construct and operate the project. For any project we consider, we always look for a clear vision of the development process and timeline, as well as a solid regulatory framework to ensure a successful execution. We value long-term partnerships with our local developers and always look to partner with strong reputable local players, as their sector expertise and well-established relations with key stakeholders are of key importance in successful development and implementation of the project.

While financial viability, bankability, and a balanced risk profile are key factors in our assessments, our top priority is ensuring that all projects adhere to the highest Environmental, Social, and Governance (ESG) standards. Sustainable development and responsible energy production are central to driving long-term success and creating value for all stakeholders involved.

How do you foresee the Western Balkans' role in Europe’s overall renewable energy landscape in the coming decade, and how does Alcazar Energy plan to contribute to this vision?

The Western Balkans are set to become a crucial player in Europe’s renewable energy landscape over the next decade, thanks to their significant resources, investment potential and increasing alignment with EU climate goals. As Europe continues its push towards a greener economy, the region is poised to contribute significantly to the supply of renewable energy, positioning itself as a key part of Europe’s clean energy future.

The region holds enormous promise in wind and solar power generation. As regulations harmonize with EU policies, the Western Balkans will become even more attractive to investors, benefiting from EU-backed financial support. Investments in grid infrastructure and cross-border interconnectors will also enhance the region’s ability to export surplus renewable energy to neighbouring EU countries, playing a critical role in reducing Europe’s dependence on external energy sources.

We anticipate rapid growth in renewable energy development over the coming decade, offering significant opportunities for both local and international players. At Alcazar Energy, we’re committed to playing a leading role in this transformation. With substantial capital from a diverse group of private and public investors we’re well-equipped to drive the development of renewable energy projects in the Western Balkans. Our experience in bringing projects from concept to operations, combined with our strict adherence to environmental, social, and governance (ESG) standards, ensures that we’re delivering sustainable energy solutions that meet the needs of the region.