Two years after the Law on the Use of Renewable Energy Sources (“Law“) entered into force on 28 April 2023, the Parliament of the Republic of Serbia adopted the Law on Amendments to the Law on the Use of Renewable Energy Sources (“Amendments to the Law“), which entered into force on 7 May 2023.
The main goal of adopting the Amendments to the Law was to establish a balance between two equally important public interests, the integration of renewable energy sources into the power system and ensuring the safe operation of the system.
Accordingly, the adopted Amendments to the Law resolves the issue of huge number of requests for the connection of a new solar and wind power plants, whose required capacity for connection, according to the Ministry of Mining and Energy (“Ministry”), has increased from 4.8 GW to 20 GW in the last two years, which is two and a half times more than the total capacity of all power plants in Serbia.
Below is a brief overview of some of the most important amendments.
The issue of balance responsibility
The prior legal solution in Article 10 of the Law gave the right to all producers from renewable energy sources to transfer the balance of responsibility to the guaranteed supplier, i.e. to the then Public Company (now a joint-stock company) “Elektroprivreda Srbije” (“EPS“), which performs the duties of guaranteed supplier, and it is also the largest participant on the market. This right is guaranteed by the law regardless of whether the producers are in the incentive system. After the adoption of the Law, a connection requests were submitted to the transmission system operator for about 14,000 MW of wind and solar power plant projects. In order to understand the scope of the projects, it should accentuate that the current total installed capacity in Serbia is around 8000 MW of all power plants.
According to the Amendments to the Law, EPS will assume balancing responsibility only for producers who are entitled to a market premium or feed-in tariff (privileged producers). This obligation of the EPS ceases (i) at the end of six months from the date of the merger of the organized intraday electricity market of the Republic of Serbia with the single European organized intraday electricity market or (ii) at the end of 30 months from the date of establishment of the organized intraday electricity market in Republic of Serbia, depending on which of mentioned period expires first. Other producers will have to regulate their balancing responsibility according to the market conditions. The amendments also introduced a principle that will protect the financial stability of EPS – including the obligation of producers who are entitled to a market premium to pay fees to EPS (amounts determined in the public call for auction) as compensation for the transfer of balance responsibility.
The Amendments to the Law prescribe a new mechanism of mutual financial compensation between the privileged producer and EPS, which is based on the principle that the privileged producer is obliged to pay the EPS additional compensation if it produces less electricity than the forecasted in the submitted plan and vice versa, i.e. EPS is obliged to pay the compensation to the privileged producer for the surplus of produced electricity by the privileged producer. The newly introduced mechanism represents an additional responsibility of privileged producers regarding the accurate forecasting of electricity production, due to the fact that in case of a bad forecasting, privileged producers would be obliged to pay the negative difference.
Determination of the maximum bid price at the auction for market premiums
Under the Law it was stipulated that the Energy Agency of the Republic of Serbia determines the maximum price at auctions, and the Ministry conducts the auctions, which led to the inefficiency of the entire process, so it was necessary to centralize the auction system around one state authority. In order to solve the low ceiling price and the concerns of an increasing number of investors who have been raised in connection with the methodology used by the regulator to determine the ceiling price, the Amendments to the Law provides that the responsibility for determining the ceiling price will be transferred from the Energy Agency of the Republic of Serbia to the Ministry.
The right to priority access to the transmission, distribution or closed distribution system
The Law prescribed the right of priority access for all producers from renewable energy sources. In accordance with the reference of European regulation (with which Serbia agreed by adopting the Amendments to the Law), the new solution prescribes the right of priority access and limits it only to small plants up to 400 kW, and from 1 January 2026 only to small plants up to 200 kW.
A few more important changes / conclusion
The Amendments to the Law also introduced a definition that primarily refers to wind and solar energy / the definition of variable energy sources / which states that variable energy sources are primary energy sources (wind energy, solar energy, etc.) whose energy potential depends on meteorological conditions that are difficult to precisely determine to forecast, as a result of which, when producing electricity from such sources, greater aberration may occur between the produced electricity and the planned electricity production in relation to other sources of energy. The reason for the introduction of this definition is the protection of system operation due to the impossibility of planning the amount of energy that will be available and that is produced from variable energy sources.
Notable novelties refer to the capacities of prosumers (limits for households and other end customers are defined in a way that will reconcile the interests of the stability of the power system and the interests of prosumers). Households will be able to install solar panels up to 10.8 kW, and other customers up to 150 kW, maintaining priority access to the system, without balance responsibility. The adoption of the Amendments to the Law also considered the transitional period, so it is possible for the industry to install solar panels up to 5 MW by 1 July 2024, in accordance with the provisions of the Law, and accordingly, the abovementioned limits are not applied to such projects. In this way, the concept of prosumer is oriented towards households and small businesses, while large industry will exercise its rights to self-supply through the concept of an active buyer after the amendments to the Energy Act (a institute yet to be defined).
The Government of Republic of Serbia adopted the Plan for the incentive system for the use of renewable energy sources for the period 2023-2025. The total capacity eligible for market premium incentives over the next three years is 1,000 MW for wind power technology and 300 MW for solar technology.
In the upcoming period, the adoption of various bylaws is expected (Regulations on the conditions of delivery and supply of electricity, Rules for connecting facilities to the transmission system, Rules on the operation of the transmission system and Procedures for connecting facilities to the transmission system) which would enable the implementation of new legal solutions.
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