January 2021 – Following the expiration in Serbia on 31 December 2019 of the "Regulation on Incentive Measures for the Production of Electricity from Renewable Sources and from High-Efficiency Electricity and Thermal Energy Cogeneration" 1, the previously applicable feed-in tariff-based incentives are no longer available to power producers that acquired the status of a privileged power producer based on request submitted after 31 December 2019. In line with a request from the Energy Community Secretariat, the Government of the Republic of Serbia has decided to start the development of an auction-based incentives model, based on models already in place in some other member countries of the Energy Community (such as North Macedonia, Albania and Montenegro).
Although the new regulation for the renewable energy sector ("RES") was expected to enter into force by the end of 2020, the year-end brought only some hints of long-awaited developments in the field of renewable energy in Serbia in the form of guidelines for the upcoming draft law on renewable energy sources adopted by the Ministry of Mining and Energy, which were available for public debate until 12 January 2021 ("Guidelines"). These Guidelines, coupled with Serbia's taking over of the Presidency of the Energy Community in 2021 and the adoption of the Decree on the Amount of Special Incentive Fees for Privileged Power Producers in 2021 2 (where the fee for support in RES development payable by the end-users in 2021 was increased almost five times in comparison to the fee applicable in 2020), appear to send solid signals to the market that the RES incentive schemes will be regulated in due course, in line with the requirements from the Energy Community. Further, such developments are expected to bring new investors to the Serbian market and also unlock the development of already announced major RES projects, primarily in the wind sector 3.
Overview of the Guidelines
The Guidelines describe the current status of renewables in Serbia, the goals to be achieved by the new law on renewables, and define the main principles for arranging the status of and relationships between various stakeholders in the renewable sector (producers, consumers, the authorities). It represents the basis for further discussions in the course of drafting a new law on renewables, which will effectively carve out the regulation of a number of RES elements from the Energy Law 4 that is currently in force.
According to the Guidelines, some of the principles for the use of renewable energy are to mitigate the impact of fossil fuels on the environment; to encourage the development of new technologies and contributions to local communities; to facilitate the integration of renewable energy to the electricity market; and to grant support through auctions organised in a public, transparent, competitive, economic, and non-discriminatory manner. The Guidelines also define areas to be regulated by the new draft law on renewables. Key areas are further elaborated below.
Support scheme for RES power producers
As expected, the main novelty suggested by the Guidelines is the regulation of incentive prices for electricity produced from RES. Namely, two different incentive pricing schemes will be considered during the drafting of the law on renewables: (i) premiums – fixed or sliding (one-sided or two-sided), and (ii) feed-in tariff for small facilities.
The key element for the application of the premium is defining the reference market price, which is currently proposed to be the weighted average price on the organised day-ahead market in the Republic of Serbia in the certain calculation period (day, week or month). Premiums shall apply to power plants that do not fall into the category of small power plants (i.e., power plants with capacity of 500 kW and higher and 3MW and higher for wind power plants).
A feed-in tariff shall continue to be available to small power plants (i.e., power plants with capacity below 500 kW and below 3MW for wind power plants). The Guidelines note that while the aforementioned thresholds for installed capacity of the power plants are in line with EU rules on state aid, the scale of the power plants will be further discussed in the course of the drafting of the law.
Additional support measures also include:
- an incentive period, which cannot be longer than the period of amortisation of the power plant;
- taking over of the balancing responsibility from the guaranteed supplier for small power plants. The starting position for power plants that will be subject to auctions is that the privileged power producers should not overtake the full balancing responsibility until establishment of the organised intraday power trading; and
- additional support measures that will be further discussed in the course of drafting of the law.
Premium-based incentive measures are planned to be granted through the conclusion of physical or financial (CfD) agreements, while feed-in-based incentive measures are planned to be granted through the conclusion of a power purchase agreement ("PPA"), as is already the case.
Status of preliminary privileged power producer, status of privileged power producer and status of power producer from renewable resources
The assumption under the Guidelines is that the preferred bidders in an auction procedure will acquire the status of preliminary power producer on the day of the finality of the decision on their confirmation as preferred bidders issued by the Ministry of Mining and Energy. Such status will last three (3) years, with the exception of solar plants, where the status will last for one (1) year and may be extended for one (1) additional year if the plant has also been constructed as for a period necessary to remedy unforeseen circumstances, if such circumstances occur.
For small facilities, the status of preliminary privileged power producer and status of privileged power producer is considered to be acquired on the day of registration of such a producer in the Central Registry of Small Producers, which is to be organised and operated by a local authority. For small facilities, it is proposed that the status of a preliminary privileged power producer is valid for two (2) years and that it can be extended on the grounds of extension of the connection approval.
Guarantee of origin
The current proposal under the Guidelines is that the existing Energy Law will be the basis for the regulation of this field. Additionally, requirements of the RED II Directive should be considered 5. The envisaged system operates in the following manner:
- the transmission system operator ("TSO") issues the guarantee of origin at the request of the RES power producer and is liable for its accuracy, reliability and protection from misuse;
- the guarantee of origin may be transferred independently from the produced electricity to which it relates; and
- the TSO maintains the register of the guarantee of origins and calculates and publishes the shares of each energy source among electricity sold to end-consumers in Serbia.
Status of prosumer
The introduction of the concept of a prosumer should enable end-users that produce energy for their own needs to connect to the grid and sell any excess electricity to their supplier. The new law on renewables will define the manner of the price calculation for excess electricity and the minimisation of the electricity bill on such basis.
Renewable energy communities
The basic idea is to define the concept of renewable energy communities and to introduce a more relaxed procedure for their construction and connection to the grid. The main idea is to give to renewable energy communities the status of energy subjects and to regulate all energy-specific matters in the draft renewable law, while matters relating to the general corporate structure, incorporation, and governance of renewable energy communities will be governed by separate rules on cooperatives. The relevant rules will be formulated with the view of motivating households and small producers to group into communities.
Additional uses of RES
The Guidelines also contain proposals for additional uses of RES in the fields of cooling, heating, and transportation. The draft law should regulate the competency for issuance of the privileged status of heat producers from RES and incentive measures for entities that are active in the production, distribution, and supply of heating and cooling energy through the use of industrial waste-heating energy, heat pumps, solar energy, geothermal energy, biodegradable waste energy, biomass, and other sources.
In addition, the Ministry of Mining and Energy is proposing that the share of renewables in transportation is increased by imposing obligations on fuel suppliers to ensure the use of renewables in transportation to some extent. It should also be considered how hydrogen and biogas could be used in transportation.
More efficient procedures for construction and connection to the grid of RES power plants
Pursuant to the Guidelines, the Ministry of Mining and Energy proposes various ways in which the procedure for the construction and connection to the grid of power plants using RES can be made more efficient. For example, the establishment of a separate authority in order to monitor the construction and connection of power plants using RES and to suggest to the government more efficient procedures in this respect; the digitalisation of the procedure for connection of power plants using RES to the grid; and the possibility to replace the approval for connection with an agreement on connection. Further, the intention is to establish a "one-stop shop" through which citizens and investors may obtain all the information and permits necessary for the construction and connection to the grid of power plant using RES.
1. Official Gazette of the Republic of Serbia, Nos. 56/2016, 6020/17 and 91/2018.
2. Official Gazette of the Republic of Serbia, No. 152/2020.
3. E.g., Maestrale Ring Wind Park, near Subotica, with planned capacity of 599.2 MW, to be developed by Fintel Energija AD; Crepaja Wind Farm near Kovacica, with capacity of 220 MW, to be developed by New Energy Solutions; and Crni Vrh Wind Farm near Bor, with capacity of 50MW, to be developed by the SPV Crni Vrh Zagubica doo.
4. Official Gazette of the Republic of Serbia, Nos. 145/2014 and 95/2018.
5. Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources.
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