Kosovo’s Financial and Economic Benefits from Natural Gas Investment Compared to the Western Balkans

Abstract

This paper analyzes annual energy production data in Kosovo and explores the potential benefits of introducing natural gas as an energy source. The study compares current coal-based energy production with natural gas in terms of not only financial impact but also environmental pollution and public health. The focus is on evaluating financial sustainability by assessing production costs and consumption effects, particularly the potential for expense reduction through natural gas adoption. A financial module analysis was applied, comparing energy prices from coal and natural gas sources. Special emphasis was placed on household economic benefits, return on investment, and reduced energy costs. With the integration of natural gas, household energy expenses could decrease from €0.12 to €0.10 per unit, resulting in estimated national savings of approximately €60 million per year. The investment evaluation was conducted using methodologies grounded in relevant case studies and price differentials in the energy market.

1. Introduction

Investment in energy resources represents a crucial pillar of economic and financial development, particularly for countries in the phase of growth and stabilization, such as Kosovo and other Western Balkan nations. Within this context, natural gas stands out as a viable and strategic energy source capable of significantly enhancing electricity supply, improving energy efficiency, and fostering broader economic development.

Kosovo, currently developing its energy infrastructure, holds considerable potential for integrating natural gas into its energy system. Leveraging this resource can contribute not only to meeting domestic energy demands but also to stimulating key economic sectors, reducing dependence on coal, and aligning with regional energy transition trends.

This paper seeks to examine the financial, economic, and ecological advantages of investing in natural gas as an energy source in Kosovo, drawing comparisons with experiences and outcomes from neighboring Western Balkan countries. While some of these countries have made notable progress in diversifying their energy mix, challenges remain—particularly in expanding and connecting the natural gas sector across the region. Understanding these challenges and opportunities will help to identify how Kosovo can enhance its energy competitiveness, attract investment, and improve the overall quality of life for its citizens.

By comparing Kosovo’s current energy landscape with regional efforts—such as Albania and North Macedonia’s steps toward infrastructure development and natural gas agreements—this paper analyzes how Kosovo can capitalize on similar strategies. It highlights energy efficiency, the diversification of energy sources, and the broader economic and environmental implications of such investments.

At the regional level, the Western Balkans have collectively recognized the strategic importance of natural gas, with several countries already integrating it into their long-term development strategies (Branković, 2022) [1]. Kosovo, although still reliant on coal, has a unique opportunity to benefit from cross-border cooperation and integration into regional energy markets (Popović & Stojanović, 2021) [2].

In summary, this paper aims to provide a comprehensive assessment of the benefits that natural gas investments could bring to Kosovo, emphasizing both short-term gains and long-term sustainability. The analysis will also explore how these developments could reinforce the country’s economic resilience and improve the overall standard of living.

2. The Financial Benefit of the State of Kosovo with the Investment of Natural Gas

Investing in natural gas in Kosovo would contribute significantly to the country’s overall economic development by increasing energy stability and reducing long-term production costs. A reliable energy supply is critical for sustaining industrial activity, attracting foreign investment, and supporting household energy needs—factors that collectively drive GDP growth.

One of the most important benefits of transitioning to natural gas is its environmental impact. Unlike coal or certain renewable alternatives, natural gas offers a cleaner and more efficient source of energy. While renewable sources such as wind and solar have environmental advantages, they also present challenges. For instance, wind turbines can contribute to bird mortality due to their height and the disruptive effect of sound waves, which attract and disorient flying birds. Similarly, solar panels are often manufactured using highly toxic materials, posing concerns over environmental degradation during their life cycle.

Scientific studies have demonstrated that replacing coal with natural gas for electricity generation substantially reduces harmful gas emissions and improves air quality [3]. This transition would also have a positive effect on public health, particularly in urban areas where air pollution is a significant concern.

In 2023, Kosovo’s electricity supply relied heavily on coal-fired thermal power plants—Kosova A and Kosova B—in addition to contributions from hydropower and wind sources such as Ujmani, Lumbardhi, Kitka Wind Park, and Selaci Wind Park. As shown in

Table 1. Electricity production in Kosovo.

2023 MWh	Total
TC Kosova A	2,111,258
TC Kosova B	2,976,440
HC Ujamni	145,295
Lumbardh cascade (KELKOS)	41,518
Kitka wind park	91,383
Selaci wind park	302,985
Entering the transmission from 35 kV	4622
Small producers in distribution	16,960
RES connected to distribution in the scheme	169,201
Total	5,859,662

, total electricity production in Kosovo during 2023 amounted to 5,859,662 MWh [4].

By introducing natural gas into the energy mix, Kosovo could reduce dependency on coal-based power plants, lower operational costs, and enhance the sustainability of its energy system, all while improving the health and well-being of its population.

Electricity Consumption

In 2023, the total electricity consumption in Kosovo was 461.7 KTOE (kilotons of oil equivalent). Using the conversions factor where 1 TOE = 11,630 kWh, the total consumption corresponds to approximately

$$461.7\times 1.000\times 11.630=\mathrm{5,369,571,000} \mathrm{k}\mathrm{W}\mathrm{h} (or 5.37 \mathrm{T}\mathrm{W}\mathrm{h})$$

According to

Table 2. Electricity consumption for the years 2022–2023.

Sector	2022	2023
Industry	95.4	84.2
Homemaking	291.4	260.5
Agriculture	12.2	10.2
Service	92.2	106.8
Total	491.2	461.7

, within the industry there is a decrease in the consumption value of about 6% of energy consumption compared to 2022, reflecting the improvement of low-level efficiency, the decrease in industrial activity or changes in consumer preferences. Also in the Homemaking sector there is pronounced productivity where there is a decrease of about 5.4%. The agricultural sector has also shown a percentage decrease of about 9%. While the household sector has had an increase of about 7.33%.

As can be seen from Figure 1, the household sector is the sector with the largest electricity consumption of: 57% of the total electricity consumption. The second sector that has consumed the most electricity is the industrial sector, with a consumption of 23% of the total amount of this energy, by investing in natural gas, Kosovo would benefit greatly in benefit its economic growth, reducing the cost of expenses, which consequently affects the well-being of citizens’ lives and the environmental quality, making where the level of air pollution would be much better

3. Research Methodology

3.1. Treatment of the Model on the Importance of Financial Impact

The financial performance of energy production in Kosovo is significantly influenced by labor costs and overall consumption patterns. These elements play a key role in shaping the economic efficiency of the energy sector and have direct implications on both business competitiveness and household expenses.

A central factor in optimizing economic value and improving the standard of living for citizens is the integration of natural gas as a primary energy source. Compared to coal-based electricity generation, natural gas offers lower operational labor costs due to increased efficiency and reduced maintenance demands, which ultimately translate into lower consumer prices and reduced economic burdens.

3.1.1. Investment Models for Natural Gas

• Models for evaluating natural gas investments incorporate the following:
• Capital investment costs (infrastructure, pipelines, plant conversions);
• Operational costs (fuel procurement, labor, maintenance);
• Energy output and consumption benefits;
• Return on investment (ROI), which is calculated based on both economic and social utility, particularly improvements in quality of life, energy affordability, and environmental benefits.

These models utilize user-specific input data or industry-standard benchmarks to estimate the following:

• Initial and ongoing investment costs;
• Energy generation efficiency;
• Savings in energy production and household consumption;
• ROI over time, often visualized through cost–benefit projections and sensitivity analysis.

3.1.2. Energy Pricing Context

As of 2023, the price of electricity in Kosovo is approximately as follows:

• EUR 0.29 per kWh, or
• EUR 290 per MWh

With natural gas adoption, preliminary models suggest that energy prices could be reduced by 15–20%, significantly easing financial pressure on consumers and businesses alike. Over time, this price reduction, combined with environmental and health benefits, shows that natural gas is a cost-effective and socially beneficial investment.

3.2. Variables Used in the Financial Module

The treatment of the case has to do with a general indicator that is used to perform an analysis of the financial model of production, energy consumption, according to the regulated price and the price of energy in the market for the period January–December 2023. These variables will compare it with the price of natural gas, household consumption, and profit in the financial aspect.

Let us take a closer look at the variables used and the indices applied in their calculation.

Adjusted Price Change Index According to the Market and the Stock Exchange = APCAMSE, obtained by using the general formula.

APCAMSE = QP × AP = TRAAP − QP × PAE = TIAS

• QP = Quantity Produced
• AP = Adjusted Price
• TRAAP = Total Revenue According to the Adjusted Price
• PAE = Price According to the Exchange
• TIAS = Total income according to the Stock Exchange
• CVAPE = Change between input values, according to the adjusted price and the price after the exchange.

3.3. Savings in Energy Costs for Consumers

To illustrate the potential savings in energy costs using solar gas, we can compare the cost of producing energy from gas with the cost of producing it from other sources such as coal, as can be seen in

Table 3. Comparison of energy production cost.

Energy Source	Cost per MWh (Euro)
Natural gas	50
Coal	80
Energy	70

.

Savings formula:

Savings = (Coal Cost−Gas Cost) × Energy Consumption

where

• Coal cost = 80 EUR/MWh;
• Gas cost = 50 EUR/MWh;
• Energy consumption is a variable that depends on the energy needs (in MWh).

Explanation:

• Calculate the difference between the cost of coal and gas:

• This shows how much more one would pay to produce 1 MWh of energy from coal compared to gas. In this case, the difference is 30 EUR (80–50 EUR).

2.

Multiply by Energy Consumption:

• After finding the difference, multiply it by the energy consumption to calculate the total savings over a certain period (in MWh).

Examples:

For 1000 MWh of energy consumption,

Savings= (80 − 50) × 1000 = 30 EUR/MWh × 1000 MWh = 30,000 EUR

So, the total savings would be 30,000 EUR see

Table 4. Savings for Families.

Energy Cost	Energy Consumption per Household kWh/Year	Estimated Price	Savings per Household (EUR/Year)
0.12	4000	480
0.10	4000	400	480–400 = 80

.

3.4. If Analysis

3.4.1. Input–Output (I–O) Analysis

I–O models trace how changes in one sector (like energy) ripple through the entire economy using fixed technical coefficients.

Application to Natural Gas and CO₂ Reduction:

Assess direct, indirect, and induced impacts of switching from coal/lignite to natural gas:

• Direct: Reduced emissions, lower coal demand;
• Indirect: Supply chain impacts on mining, transport, and energy distribution;
• Induced: Changes in consumer spending due to shifts in energy prices or employment.

Application for 100 M Investment:

Estimate how this capital inflow spreads across sectors:

• Construction and engineering services;
• Equipment supplies chains;
• Employment and wages in related sectors.

Outputs:

• ✓ Changes in output, employment, value-added, and emissions by sector;
• ✓ Often used for short- to medium-term impact estimates.

3.4.2. Computable General Equilibrium (CGE) Models

CGE models simulate an entire economy if all markets are clear (supply = demand) and economic agents optimize behavior (e.g., consumers maximize utility, firms maximize profit).

Application to CO₂ Emission Reduction:

Models’ dynamic substitution of coal with gas show how it affects the following:

• Energy prices;
• Industry competitiveness;
• Consumer behavior.

Quantify macroeconomic trade-offs: growth vs. emissions reduction.

Application for 100 M Investment:

Forecast long-term effects:

• GDP growth;
• Sectoral output shifts;
• Public finance impacts (e.g., tax revenues, subsidies);
• Labor market dynamics.

Environmental Module:

Integrate CO₂ emission coefficients to simulate carbon policy outcomes (like carbon pricing or emission caps).

Outputs:

• ✓ GDP, sectoral output, household welfare, CO₂ emissions, trade balance;
• ✓ Ideal for long-term, economy-wide policy assessment.

3.4.3. Cost–Benefit Analysis (CBA)

CBA quantifies and compares the monetary value of all costs and benefits over time, typically using Net Present Value (NPV), Benefit–Cost Ratio (BCR), or Internal Rate of Return (IRR).

Application to CO₂ Reduction:

Assign a monetary value to avoid emissions:

• If Social Cost of Carbon (SCC) = EUR 100/ton → 500,000 tons/year × EUR 100/ton = EUR 50 million/year in avoided climate damage;
• Add health benefits from reduced air pollution, improved productivity.

Application for 100 M Investment:

Estimate:

• Capital costs, O&M, infrastructure lifetime;
• Energy cost savings;
• CO₂ reduction benefits;
• Externalities (e.g., employment, health impacts).

Outputs:

• ✓ NPV, IRR, BCR;
• ✓ Time horizon: e.g., 20 years at a discount rate of 5%.

A simplified comparison of the three methods can be seen below (

Table 5. A simplified comparison of the three methods.

Criterion	Input–Output	CGE Model	Cost–Benefit Analysis
Scope	Sectoral, linear	Economy-wide, dynamic	Project-level
Handles Prices?	No	Yes	Partially (market + shadow)
Environmental Integration	Indirect	Integrated	Explicit (monetized)
Investment Forecast Impact	Output and jobs by sector	GDP, welfare, trade, CO2	NPV, IRR of investment
Policy Simulation	Limited	High	Scenario-based
Data Needs	Moderate	High	Moderate
Best For	Short-term shocks	Long-term structural changes	Evaluating project viability

).

Conclusion

All three methods can be powerful, depending on your goal:

• Use I–O Analysis for quick sectoral impact assessments of investment or fuel-switching;
• Use CGE Modeling for policy simulations and economy-wide forecasting (especially long-term);
• Use CBA for project feasibility, monetizing the value of reduced emissions and other co-benefits.

4. Natural Gas Investments in Kosovo

The prospect of integrating natural gas into Kosovo’s energy system is gaining strategic importance amid regional and global shifts in energy policy. A key component of this regional transformation is the Trans Adriatic Pipeline (TAP) project, which began construction in 2016. This pipeline originates from the Shah Deniz II gas field in Azerbaijan, traverses northern Greece, continues through a significant portion of Albania, and extends under the Adriatic Sea to reach southern Italy.

While Kosovo is not yet directly connected to the TAP pipeline, its geographic proximity to Albania and North Macedonia offers a potential opportunity for strategic interconnection in the future. This would enable Kosovo to diversify its energy sources and strengthen its energy security.

Recent global developments—particularly the energy crisis exacerbated by the war in Ukraine—have prompted the European Union to temporarily classify natural gas and nuclear energy as “clean” transitional energy sources. This classification has opened financing opportunities for energy projects involving natural gas, particularly in the context of the EU’s Green Agenda for the Western Balkans, to which Kosovo is a signatory [5].

4.1. Investment Scope and Estimated Costs

We incorporate government estimates for the total cost of the following:

• Constructing a natural gas pipeline network;
• Building a gas-fired power plant.

It is projected to be approximately EUR 200 million.

This investment would not only provide Kosovo with alternative energy sources but also enhance the country’s capacity to respond to energy crises, peak demand periods, and supply shortages in neighboring countries.

4.2. Current Energy Supply Challenges

Kosovo’s electricity system is constrained by several structural limitations:

• Heavy dependence on lignite-based thermal power plants (Kosova A and B), which are aging and environmentally harmful;
• Limited access to renewable energy resources and insufficient infrastructure to scale solar or wind power;
• Lack of flexible generators that can balance intermittent renewable supply;
• Import constraints due to energy shortages in neighboring countries, especially during peak winter demand;
• Absence of natural gas infrastructure, preventing Kosovo from taking advantage of lower-cost and cleaner energy alternatives [6].

4.3. Strategic Opportunity

Investing in natural gas infrastructure, particularly via interconnection with the TAP pipeline or regional distribution systems, could achieve the following:

• Enhance energy diversification and security;
• Lower production costs;
• Enable more stable and cleaner power generation;
• Align Kosovo with EU energy policies and climate commitments.

5. The Impact of Natural Gas Investment on Financial and Environmental Benefits

One of the most promising investments for achieving a sustainable and modern energy system in Kosovo is the combination of natural gas-based energy production with battery energy storage systems (BESSs). This integrated approach can serve as a qualitative replacement for aging lignite-fired power plants and significantly contribute to the reduction of carbon emissions.

5.1. Environmental Benefits and Air Quality

Pristina and other urban areas in Kosovo consistently rank among cities with the poorest air quality in Europe, primarily due to heavy reliance on lignite for electricity and heating. Transitioning to natural gas, which emits significantly fewer pollutants than coal, would reduce levels of the following:

• CO₂ (carbon dioxide);
• SO₂ (sulfur dioxide);
• PM2.5 (fine particulate matter).

According to the International Energy Agency (IEA), the global shift from coal to gas since 2010 has led to a reduction of approximately 500 million tons of CO₂—an environmental benefit comparable to replacing 200 million conventional vehicles with electric ones [7].

5.2. Role of Energy Storage

Pairing natural gas plants with battery storage systems enhances the following:

• Grid reliability during peak demand;
• Flexibility in energy dispatch;
• Integration of intermittent renewable sources (solar, wind).

Battery systems can store excess energy produced by gas plants during off-peak hours and release it when needed, helping to balance supply and demand while avoiding blackouts and reducing reliance on polluting backup systems.

5.3. Energy Supply Security and Economic Effects

Currently, Kosovo lacks direct infrastructure for importing natural gas. However, opportunities for interconnection through North Macedonia and Albania, both of which are linked to the Trans Adriatic Pipeline (TAP), make this transition technically feasible soon.

Diversifying from coal and integrating gas with battery storage could achieve the following:

• Energy bills for consumers would decrease, thanks to improved efficiency and lower fuel costs;
• Investment returns would improve, given reduced maintenance costs and emissions penalties;
• Long-term energy security would be enhanced, shielding Kosovo from fuel price shocks and supply volatility.

5.4. Current Energy Mix and Future Outlook

• As of the latest data, only 5.2% of electricity in Kosovo is generated from renewable sources, with the remaining 94.8% from lignite [8].
• If natural gas becomes a strategic energy input, consumption is projected to reach 2121 million cubic meters (M³) annually by 2040 [9].

This transition would place Kosovo on a path toward decarbonization, while simultaneously boosting economic efficiency, public health, and compliance with EU environmental standards.

Table 6. Demand for gas in Southeast Europe 2013–2025 (final consumption, cubic meters).

Country	2013	2025
Albania	6842	523,741
Bosnia and Herzegovina	136,500	612,972
Bulgaria	1,666,526	2,499,495
Croatia	1,700,632	1,977,717
Greece	1,504,605	0
Kosovo	0	207,858
North Macedonia	33,053	355,764
Montenegro	0	120,681
Romania	7,900,079	8,092,248
Serbia	1,226,816	1,726,638
Total	14,175,053	18,417,303

presents the level of natural gas development and interconnection in six Western countries, which has significant potential for fostering a secure and sustainable energy market. Such regional integration could lead to more favorable prices for natural gas compared to the high costs and environmental burden of other investments in old thermal power plants.

5.5. Benefits of Regional Market Integration

By integrating into a broader regional gas market, Kosovo and neighboring Western Balkan countries can benefit from the following:

• Economies of scale, reducing the cost per unit of energy;
• Increased supply security, through diversified routes and sources;
• Flexible and competitive pricing, resulting from higher market liquidity and reduced dependence on a single fuel source;
• Improved investor confidence, driven by regional market alignment and return-on-investment guarantees.

Natural gas market integration ensures price transparency and investment efficiency, which are crucial for attracting both public and private sector capital into the region’s energy infrastructure projects.

5.5.1. Compliance with EU Energy Policy and Climate Norms

As a potential candidate for European Union (EU) membership, Kosovo is expected to comply with the EU energy acquis—including environmental standards and market liberalization requirements [10]. These standards encourage the following:

• Reduction of greenhouse gas emissions, particularly in coal-dependent economies;
• Diversification of energy sources to reduce import dependency and environmental risk;
• Transparent and liberalized energy markets, which enhance regional cooperation.

Investment in ecological natural gas infrastructure aligns with EU climate policies and supports the Green Agenda for the Western Balkans, promoting decarbonization and sustainable energy development.

5.5.2. Strategic Importance of the Trans-Adriatic Pipeline (TAP)

Kosovo’s integration into the Trans-Adriatic Pipeline (TAP)—which currently transports gas from the Caspian region through Greece, Albania, and the Adriatic Sea to Italy—represents a strategic opportunity for long-term energy diversification. Connection to TAP would achieve the following:

• Secure a reliable and continuous natural gas supply for Kosovo;
• Reduce reliance on lignite and other polluting sources;
• Strengthening energy diplomacy and regional energy security;
• Enable Kosovo to align with European energy corridors.

5.5.3. Current Gaps and Future Opportunities

Despite Kosovo’s potential, there has been insufficient investment in renewable energy technologies, including solar power, and a lack of existing gas infrastructure. Therefore, prioritizing investment in natural gas transmission infrastructure—while also developing synergies with renewable sources—can ensure a sustainable and modern energy transition.

Kosovo must take concrete policy and infrastructure steps toward the following:

• Connecting to regional gas networks (via North Macedonia or Albania);
• Attracting international investors;
• Developing a national energy diversification strategy that includes both gas and renewables.

5.6. Impact on GDP Growth (Gross Domestic Product)

Formula:

GDP growth = Investment in the gas sector × Part contributing to GDP = Investment.

If the investment is EUR 100 million and the impact on GDP is 10%,

GDP growth = 100 million euros × 0.10 = 10 million euros

5.7. Creation of Jobs

Investments in the natural gas sector can create new jobs, which help to reduce unemployment and improve economic conditions see

Table 7. Creation of jobs.

Investment in the Sector (Million EUR)	Job Creation Report (Jobs per Million EUR)	Number of Jobs
100	10	1000

.

Calculation:

• Investment in the Sector = 100 million EUR;
• Jobs per Million EUR = 10;
• Number of Jobs = 1000.

Using the formula:

Number of Jobs = 100 million EUR × 10 jobs/million EUR = 1000 jobs

So, with an investment of EUR 100 million, 1000 jobs will be created. This matches the data provided.

Empirical analysis:

In this empirical analysis, we assess the efficiency of investments in creating jobs in a specific sector:

• For every 1 million EUR invested, 10 jobs are created;
• Therefore, with an investment of 100 million EUR, a total of 1000 jobs will be created.

6. Construction of Natural Gas-Fired Power Plants in Kosovo

There are other ways to convert natural gas into energy through the construction of new power plants, through turbines with a battery energy storage system with an installed capacity of up to 250 MW. A new natural gas-fired power plant could potentially be completed by 2028, which could partially replace lignite-fired power generation. Given this economic benefit and the budgetary feasibility and return on investment in benefits, plants could be built at an accelerated pace and at reasonable costs and could also use hydrogen as a fuel up to 30%. The construction of a plant could be completed within three years, and operating costs are relatively low: 19–26 EUR/kW. Based on the IEA, gas-fired power generation has a cost of USD 90/MWh [11,12].

If additional natural gas construction occurs after 2028, an economic efficiency of 60% could be achieved, with the citizens of Kosovo benefiting. This results in potential savings, reduced maintenance costs, and a cleaner and more livable environment. The average impact of natural gas is about 60% lower than that of coal (respectively, 430 kg CO₂/MWh and 1000 kg CO₂/MWh [13].

The possibility of producing electricity through natural gas will greatly reduce the electrical load for the business sector, which can positively impact the maintenance of energy stability at the national level. Kosovo can significantly benefit from improving its energy security situation, where a special role can be played by supply–demand and their impact on reducing environmental pollution standards.

7. Climate Benefits if We Use Natural Gas as an Energy Source

The less coal that we consume, the higher the achievement for our health.

According to the objectives set by the European Commission, in achieving the fulfillment of the EU Green Deal and the expectations of the Western Balkans, Kosovo should accelerate the adoption of policies for projects that help to remove carbon dioxide. Kosovo is committed to creating mechanisms to reduce carbon dioxide and support investments in energy production through renewable sources, as well as gradually phasing out energy production through lignite [14]. Considering that the carbon price in the European Emissions Trading System is currently greater than EUR 89 [15] per metric ton, protecting lignite will no longer be viable. Natural gas can have a special role in climate change, especially in the importance of “green” gas or “blue” that can be completely decarbonized [16]. The particular importance of natural gas is the connection with renewable energy [17], where it plays a major and critical role during the transition. According to Mantulet [18], natural gas will give the world an early opportunity to reduce CO₂ emissions by replacing lignite with natural gas. At the same time, a continuous focus on energy efficiency and market-based CO₂ pricing will keep demand growth under control.

Carbon pricing could reduce solids production; gas could emerge as an important, complementary product linked to the transition. The materialization of gas could be performed with the integration of the open market. Due to the lack of taxation of gas emissions in Kosovo, this is one reason why the price of energy in Kosovo is the lowest in the Balkans. If Kosovo were to apply a carbon tax of up to EUR 20 on CO₂ emissions from coal-fired power plants, KEK would have to pay EUR 600 million per year for CO₂ emissions [19]. Based on this analysis, we can emphasize that investing in natural gas increases the possibility of renewable sources being interrupted. The role of gas in improving air quality was also emphasized. Although gas emits approximately 50% less CO₂ than coal when burned in power plants and is cheaper than coal, it is still a fossil fuel that can slow down the path to decarbonization [20,21].

Reduction of Greenhouse Gas Emissions

Using natural gas for power generation has lower emissions compared to coal.

Table 8. CO₂ emissions per MWh.

Energy Source CO2	Emissions e CO2 (Ton/MWh)
Natural gas	0.4
Coal	0.9
Energy	0.2

reflects the CO₂ impact norm based on energy production through Coal and Natural gas. The elaboration through formulas presents the accuracy of their impact.

Formula for reducing gas emissions:

Emissions Reduction = (Coal Emissions − Gas Emissions) × Energy Consumption

If the energy consumption is 1,000,000 MWh: Reduction of Emissions= (0.9−0.4) × 1,000,000 = 500,000 tons of CO₂\{Reduction of Emissions} = (0.9 − 0.4)\times 1,000,000 = 500,000\{ tons of CO₂} Reduction of Emissions = ( 0.9−0.4) × 1,000,000 = 500,000 tons of CO₂.

• Coal Emissions: 0.9 tons CO₂/MWh;
• Gas Emissions: 0.4 tons CO₂/MWh;
• Energy Consumption: 1,000,000 MWh.

8. Improving the Standard of Living

To improve the standard of living through reducing the cost of energy and creating jobs, using natural gas to generate electricity can lower energy costs for consumers. If the cost of energy is reduced, these savings can help to lower costs for households and individuals.

9. Results on the Importance of Natural Gas Investment

• Given technological developments that significantly reduce pollution over time the process of lignite gasification, the new strategy should not overlook the possibility of lignite gasification for the transitional energy period in the country. The Government of Kosovo, to initiate the drafting of the feasibility study regarding the potential possibilities and limits of the development of modern lignite gasification industries in Kosovo, should consider current and anticipated technological developments;
• Results on the economic benefits of natural gas in Kosovo:

• Income from Taxes and Fees

• Benefit: An investment of EUR 100 million in the natural gas sector can bring in EUR 5 million in tax revenue;
• Comparison: This represents about 1% of Kosovo’s annual budget (considering a total budget of EUR 5 billion).

2.

Growth of Gross Domestic Product (GDP)

• Benefit: An investment of EUR 100 million can contribute up to EUR 10 million to GDP growth;
• Comparison: This contribution is about 0.2% of Kosovo’s GDP (for a GDP of EUR 5 billion).

3.

Savings in Energy Expenses

• Benefit: Savings from reducing the cost of energy for consumers can reach up to EUR 60 million per year, if the cost of energy is reduced and consumers benefit from savings of EUR 200 per family;
• Comparison: These savings are equal to about 1.5% of total energy expenditure per year for the entire population (considering a total energy expenditure of EUR 4 billion per year).

4.

Creation of Jobs

• Benefit: An investment of EUR 100 million can create up to 1,000 new jobs;
• Comparison: This number is about 2% of Kosovo’s labor force (considering a labor force of 50,000 individuals).

5.

Income from Export

• Benefit: The export of natural gas and energy can generate up to EUR 50 million in revenue, if the exported quantity is 1,000,000 MWh and the export price is 50 EUR/MWh;
• Comparison: These revenues are equal to about 1% of Kosovo’s total exports (considering total exports of EUR 5 billion).

6.

Reduction of CO₂ Emissions

• Benefit: Using natural gas can reduce CO₂ emissions by up to 500,000 tons per year;
• Comparison: This reduction is about 10% of the total CO₂ emissions of Kosovo (considering a total emission of 5 million tons of CO₂ per year) [21].

10. Conclusions

Kosovo has long relied on coal as its primary energy source. However, the global commitment to combat climate change, particularly through the European Union’s climate objectives and the Green Agenda for the Western Balkans, has made coal increasingly unsustainable both economically and environmentally. Many developed nations are phasing out outdated coal plants, and, under the EU’s new climate policies, coal-fired power generation is becoming more expensive and incompatible with future energy targets. As a result, Kosovo risks being excluded from regional coal trade and must consider alternative, cleaner energy sources.

This shift presents an opportunity for Kosovo to prepare a new national energy strategy that aligns with international standards and focuses on sustainable energy production. One of the most viable transitional solutions is natural gas, which offers a lower-emission alternative to coal and can help to ensure energy security during the transition phase. Kosovo stands to benefit from international financial institutions and development banks willing to support investments in cleaner energy infrastructure.

This paper examined the potential for natural gas in Kosovo by analyzing five case studies from other countries, providing useful insights and best practices. It aims to raise awareness of the broader developments in the natural gas sector and their relevance for Kosovo’s energy future.

An important lesson comes from the crisis on 12 December 2021, when the failure of the coal-fired power plant TC Kosovo B led to a severe energy shortage. This happened during a global energy crisis rooted in fossil fuel dependency, forcing Kosovo to import electricity at exorbitant prices, leaving thousands of families without electricity and heating. Such events underscore the urgent need for a strategic energy transition.

Natural gas could play a key role in supporting the population with a more stable and cleaner energy supply. It enables partial decarbonization while maintaining affordability and energy security. In the face of rising energy prices and the global impacts of climate change, Kosovo must act swiftly to ensure a sustainable and resilient energy system. Without embracing modern, clean technologies, the country risks falling further behind and incurring significant economic and environmental costs.

Undoubtedly, the time has come for Kosovo to ensure the long-term sustainability of its energy system that guarantees both stability and the well-being of its citizens while aligning with the objectives of the Energy Community Treaty (ENCT). Presently, the potential development of the natural gas sector is being explored within the framework of the Trans-Balkan Power Project (TPP), which aims to enhance energy stability in Southeastern Europe through regional cooperation with neighboring energy producers. In this context, Kosovo could connect with regional natural gas pipeline networks.

However, surveys with government officials and stakeholders reveal a significant lack of information and general passivity regarding strategic investment in the gas sector. This paper provides insights into the role of natural gas as a transitional energy source and aims to offer evidence to guide Kosovar policymakers. The current overreliance on coal, the lack of access to gas infrastructure, and the low competitiveness of gas against lignite highlight the minimal penetration of natural gas in Kosovo. Furthermore, limited regional infrastructure remains a barrier to growing demand.

Diversifying energy sources is not merely a trend but a necessity for Kosovo. This aligns with the priorities of the Green Agenda for the Western Balkans, the European Commission’s Economic and Investment Plan for the region, and support from international financial institutions (IFIs). The Government of Kosovo must actively consider natural gas integration into the national energy supply system. A vital first step is to engage relevant stakeholders—including civil society and energy-focused NGOs—to create a shared vision for natural gas as a component of Kosovo’s energy future.

Currently, the development of the natural gas sector in Kosovo is below satisfactory levels. The country lacks a comprehensive and regulated legal framework for investments in this sector. Concrete legislative and infrastructural actions are needed to initiate natural gas-based energy production. A clearly defined legal basis is essential for implementation, including the introduction of policies that promote transparency and open competition within the energy market.

Natural gas can play a pivotal role in Kosovo’s energy transition and decarbonization efforts. It should not be overlooked, as it supports green efficiency standards and contributes to energy security. Therefore, recognizing natural gas as a national investment priority is critical. The new national energy strategy for 2022–2031 must treat natural gas development as a central component. In parallel, Kosovo must urgently address the diversification of its energy mix and make informed decisions about the future of coal-fired facilities like Kosovo A—whether to rehabilitate or phase them out.

Ultimately, for Kosovo to align with the Western Balkans Green Agenda and the European Green Deal, it must adopt a strategic approach to energy diversification—one in which natural gas serves as a transitional and stabilizing force on the path to a sustainable energy future [22].