Policy, Regulation, and Financing in the Transition to Renewable Energy: A Case Study from Western Macedonia ^†

Abstract

This work presents the transition of Western Macedonia from a lignite-dominated energy model to a sustainable system based on renewable resources, with particular emphasis on the interlinked roles of policy, regulation, and financing. The analysis is centered on the utilization of biomass and residual waste for district heating applications, highlighting the contribution of the Just Transition Fund and the Greek Green Fund. The study also evaluates the regulatory and institutional frameworks that either support or hinder renewable energy deployment, while embedding the principles of circular economy and cross-border cooperation. The insights derived serve as a reference point for regions undergoing similar post-coal transitions, offering a comprehensive roadmap for sustainable energy integration underpinned by policy alignment and financial cohesion.

1. Introduction

The global imperative to decarbonize energy and shift toward renewable energy is now more pressing than ever, driven by the goals of sustainable development and the fight against climate change. This transition does not depend only on technology; it also requires well-designed policies, clear regulations, and the right financial tools working together. Western Macedonia, historically one of Greece’s lignite-reliant regions, is now undergoing a profound energy shift. An example of this transition is the Municipal District Heating Company of Amindeo (DHCA), which has introduced a biomass-fueled district heating scheme based on the utilization of agricultural residues and other waste-derived feedstocks. This work critically examines the enabling role of public policy, regulation, and financial instruments in supporting such a transition, with a particular emphasis on the DHCA initiative. Special attention is given to the contributions of the European Union’s Just Transition Fund [1] and the Greek Green Fund [2] in addressing the socio-economic impacts of lignite phase-out and in unlocking investment potential for clean energy alternatives. In parallel, the value of international cooperation is highlighted through its capacity to deliver technical expertise and foster the exchange of successful practices across similar regional contexts. By focusing on the Western Macedonian experience, the paper aims to offer insights and transferable knowledge to other regions engaged in comparable efforts towards a resilient, low-carbon energy future.

2. Methods and Discussion

The transition of Western Macedonia from a lignite-dependent energy system to a more sustainable and circular model is effectively represented by the activities of the DHCA. Operating in a region traditionally tied to coal-based energy, DHCA has initiated a major shift by substituting lignite with agricultural residues and biomass for thermal energy generation. This development is integrated into the Circular Economy Action Plan of Amindeo and aligns with both regional sustainability targets and the broader directives of the European Union concerning energy efficiency and waste valorization [3]. The project is supported by a solid consortium, including HELACTOR and DIADYMA SA, while its funding has been secured through the Greek Green Fund. Initial pilot activities were planned to commence in 2024.

The aim is twofold: to address the socio-economic repercussions of decarbonization and to reduce energy poverty by offering stable, cost-effective heating solutions. The initiative combines technical innovation with social benefit and positions DHCA as a case of applied circular economy in the energy domain [4].

In parallel, a SWOT analysis was conducted to strategically frame the region’s shift. The strong infrastructural foundation and collaborative local governance are marked as key assets. Conversely, weak innovation capacity and a narrow industrial base in renewables emerge as challenges. National legislation that facilitates energy recovery from waste and robust stakeholder involvement are seen as major opportunities, while regulatory inertia and the potential outmigration of skilled labor represent critical risks. To address these challenges, efforts are being made to streamline procedures and push for quicker, more responsive updates to legislation.

What makes DHCA’s role pivotal is not only the technical transformation but also the successful transfer of best practices from other European regions. Approaches that enhance energy efficiency and valorize waste streams were identified and tailored to Western Macedonia’s environmental and economic context [5,6]. This localization of European knowledge was made possible by policy instruments such as the Just Transition Fund, which was designed to support former coal-intensive regions [7,8,9].

Public–private partnerships are also expected to play a key role in propelling the project off the ground. These collaborations bring together resources, share risks, and help build the necessary know-how across different institutions. Public–private partnerships (PPPs) are often seen as important enablers in regional energy transitions, especially where public funding alone may not be sufficient to scale up infrastructure or innovation. However, such partnerships can also introduce governance and implementation challenges—such as unclear accountability structures, misaligned objectives between stakeholders, or limited public oversight over long-term contractual commitments. These risks underline the need for robust regulatory frameworks, transparent procurement procedures, and clearly defined roles when PPPs are involved.

On the financial side, DHCA follows a layered approach—using targeted subsidies and technical support to lower the risks for investors, encourage the involvement of local SMEs, and support the uptake of new technologies that are vital for putting circular economy principles into practice.

Overall, this integrated model—linking research, policy, and capital—demonstrates a structured pathway for embedding circularity in regional energy transitions. It serves as a scalable framework that could be replicated across similar post-lignite landscapes.

Financial instruments have been central to operationalizing the transition. At the EU level, the Just Transition Fund (JTF) has earmarked €1.38 billion for a portfolio of actions, including energy efficiency upgrades, renewable integration, and infrastructure development through the Innovation Zone. Nationally, the Green Fund and the Hellenic Republic Asset Development Fund (HRADF) provide strategic support, particularly for biomass and forest-related investments. Regionally, the 2021–2027 Operational Programme allocates targeted funding to reinforce district heating systems and promote clean energy solutions.

A significant share of these funds has been directed at DHCA to upgrade its infrastructure and shift toward locally sourced, non-fossil fuels. This not only strengthens the circular economy model but also offers a tangible response to energy insecurity and economic vulnerability.

3. Conclusions

The case of Western Macedonia, with the DHCA at its operational core, constitutes a representative paradigm for post-lignite regions aiming to decouple from fossil fuel dependence. The coordinated interplay of policy design, targeted financial support, and stakeholder collaboration has proven instrumental in steering the region toward a more sustainable and resilient energy model.

The lessons learned here go beyond the local context. They provide a practical roadmap that other regions can adapt as they move away from fossil fuels. With the right policies and financial support in place, the shift to clean energy can be both technically achievable and socially fair.