Renewable energy sources, together with all the measures aimed at improving energy efficiency and saving energy, are the only solution for the most urgent and radical reduction of greenhouse gas emissions (CO2 emissions), caused by burning fossil fuels, deforestation and clearing up land for agricultural purposes.
While wind is undoubtedly a very cost-effective renewable energy source, which is increasingly used throughout Europe for electricity production, Serbia is not among the countries with a high degree of exploitation of wind potential. Moreover, of all available renewable energy sources in Serbia, gusts of wind, although often very powerful, are the least used potential.
To change this, it is necessary to introduce relevant regulations and set the more realistic and improved foundations for the development of the renewable energy sector, which has a huge potential, but at the same time requires large investments.
Therefore, on 30 March 2021, the Government of the Republic of Serbia sent the proposal of a set of energy laws to the National Assembly for adoption. One of these is the new Law on the Use of Renewable Energy Sources (“Law on RES“), which came into force on 31 April 2021.
With the adoption of this law, the use of renewable energy sources (“RES“) in energy production is legally recognized as one of the energy priorities of the Republic of Serbia, bearing in mind that the production of electricity from coal causes large emissions of harmful gases, with extremely detrimental consequences for the environment.
Until now, the area of RES use has been regulated by the Law on Energy (“Official Gazette of RS”, No. 145/2014 and 95/2018 – other law), but in an insufficiently comprehensive manner for such an important area. Also, given that the Republic of Serbia is a member of the Energy Community, there was an obligation to regulate this area in more detail.
With the adoption of a special law that deals exclusively with RES, the Republic of Serbia has shown determination to create the conditions for the production of electricity from RES to the greatest extent possible. It should be highlighted that the National Renewable Energy Action Plan set out for the Republic of Serbia to reach a share of 27% of RES in the total gross final energy consumption at the national level by 2020, whereas in reality it reached only 20% of total consumption by 2021.
The main goals defined by the new Law on RES:
- Reduced use of fossil fuels and increased use of RES with the aim of facilitating environmental protection;
- Long-term reduction of dependency on the import of energy-generating products; and
- Creation of new jobs and development of entrepreneurship in the field of RES.
In order to attract investments in this area, i.e. to achieve the set goal of achieving 27% share of RES in total electricity consumption in the Republic of Serbia, the Law on RES provides for various types of incentives for RES producers in the Republic of Serbia.
Incentive measures for producing renewable energy sources
The incentive measures prescribed by the new Law on RES include the following:
- Market premium;
- Feed-in tariffs;
- Buyer-producer;
- Taking over of balancing responsibility; and
- Priority access to the transport, i.e. distribution system.
Market Premium
The market premium is a new type of incentive for RES producers, bearing in mind that until now there was only the feed-in tariff system, which we will refer to below.
The incentive in the form of a market premium works by the guaranteed supplier paying a market premium (determined in eurocents per kWh) to the user of the market premium for each kWh sold, in addition to the price for the sold electricity. The amount of the market premium itself is not set in advance but is determined at auctions.
The procedure implies that the Energy Agency of the Republic of Serbia (“EARS“) announces the initial amount of the premium, i.e. the maximum amount of the premium and the benchmark market price for the purposes of conducting the auction, while the auctions are organized on the basis of available quotas determined by the Government.
The auction procedure consists of three parts – qualification, bidding and selection of the best bids. In the final phase of the auction, the Ministry of Mining and Energy (“Ministry“) chooses the best bids from the received ones, and thereby decides whether to grant or reject the right to the market premium to the auction participants.
The participants in the auction procedure whose bids have been selected acquire the status of a temporary privileged producer of electricity, which lasts for three years, i.e. one year for solar power plants. A temporary privileged producer may apply for an extension of the status for another year, no later than 30 days before the expiry of the status.
Feed-in Tariff System
In addition to the market premium, the Law on RES also introduces a feed-in tariff system different than the one in place so far. Namely, it is prescribed that the feed-in tariff system is a type of state aid granted as an incentive purchase price, the amount of which will be determined at an auction, and which is guaranteed per kWh for electricity delivered to the energy system during the incentive period.
Prior to the enactment of the Law on RES, the amount of the purchase price with the feed-in tariff system was fixed, i.e. determined in advance on the basis of the regulations in force at the time.
The difference between the market premium and the feed-in tariff is reflected in the fact that the feed-in tariff is actually the purchase price of electricity, while the market premium is only a supplement to the price achieved on the market. Also, in relation to the market premium, the feed-in tariff system is intended only for small plants and demonstration projects, plants with an installed capacity of less than 500 kW, or wind farms with an installed capacity of less than 3 MW.
Buyer-Producer
One of the most important innovations introduced by the Law on RES is the status of a buyer-producer, i.e. a person who is both a producer and a consumer of electricity. Namely, the Law on RES regulates this type of incentive for the first time, stipulating that a buyer-producer will not only be able to produce energy for their own needs, but also to deliver (sell) surplus energy to the system or store surplus energy for their own needs. Also, a buyer-producer has the right to reduce the invoice in the next billing period, i.e. to be compensated by the supplier.
This practically means that the producer of electricity can be anyone in their home, any household, regardless of whether it is a house or a building, which opens the opportunity for the development of entrepreneurship in the field of renewable energy sources.
Untapped Potential and Opportunities for Investment
The Law on RES has regulated a number of issues related to renewable energy sources, but special emphasis is placed on the new system of incentive measures. These measures are expected to foster investments in renewable energy sources, attract both domestic and foreign investors, and lead to a continuous increase of the share of RES in the total gross final energy consumption of the Republic of Serbia.
A particularly attractive opportunity for investment is the development of wind farms since wind as a RES certainly is an untapped potential in Serbia. Now that the relevant regulations are in place, we will hopefully witness a gradual replacement of the traditional fossil fuels by renewable energy sources in the foreseeable future.
Recent Comments