ENERGY AGENCY OF THE REPUBLIC OF Contents

Recent Energy Sector Development z Introduction

and z Recent energy sector development AERS Responsibilities z Development and investment plan

Ljiljana Hadžibabić z AERS* responsibilities Head of the Energy Department z Final remarks/ Conclusion NARUC’ Energy Regulatory Partnership Program AERS – PA PUC 3rd Partnership Activity 1 2 , September 15 – 19, 2008 * - Energy Agency of the Republic of Serbia

Introduction Introduction 7th century - first Serbian states Serbia 11th century - first kingdom z Serbia 1345 - Serbian empire 1389 - the first battle with Ottoman z Historical and geographical basic data empire, at field 1540 -1867 – without independence 1918-1990 (’06) - Yugoslavia z Beginning of electrification and gasification since 2006 - Republic of Serbia

z More than 100 years of electricity usage Land Area - 88,361 sq km (34,116 sq miles) z About 60 years of natural gas usage Population 7.5 Million (without K&M*) The main religion - Christian orthodox Estimated GDP 2008 – US$10, 985 pc (IMF) Capital – Belgrade, - Latitude 44° N

3 - Longitude 21° E 4 - population 1.6 Million * -K&M – Kosovo &

First Power Plant based on AC Tesla’s principles – 1900 ! First gas well - 1949

z 1949 - the first gas well was activated z Source of domestic gas – northern Serbia

HPP Vuce, 1903 (HPP Niagara 1895) 1893 - first public power station, Belgrade 1900 – first HPP based on AC Tesla’s principles, 1903 – first, 17km long-distance power line

1900-1911 –the oldest four HPPs, still in operation5 6

1 Recent Energy Sector Development Historical milestones

z Recent trends z Electricity z Natural gas 10 000 z 1949 – 1979 development based on domestic z Production capacities and demands MW 8 000 sources z Problems in the period 1990-2000 z 1951 - construction of the gas transmission 6 000 system z Reconstruction and key achievement z 1979 - Gas demand based on domestic 4 000 sources reached 1 bcm z 1979 - conection with Hungarian net and the 2 000 HP network development started z Current situation 0 z 2005 - commencement of works on 1970 1980 1990 2004 2005 2006 the Underground Gas Storage Banatski Dvor z Primary energy demand TPP CHP HPP z Dependence on import z Balances z 1947 – commencement of HV networks, HHPs, open-pit mines and TPPs constructing z 1975 – 1985 intensive investment activities z 1990 – 25% surplus of electricity 7 8 z After 1990 – lack of investment, no new generation facilities

Demand trends (1) Demand trends (2) Electricity Consumption Natural gas consumption 34 Milion Cu m TWh 3500 32 3000 30 2500

28 2000

26 1500

24 1000

22 500

20 0 9 10 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '01 '02 '03 '04 '05 '06 '07

'90. '92. '94. '96. '98. '00 '02 '04 '06 2000

Demand trends (3) Problems in the period 1990-2000 Final energy consumption in industrial branches 4500 z International economic sanctions 4000 z Lack of liquid fuels and natural gas z Lack of money for sustainable development 3500 z Lack of financial means and spare parts for maintenance 3000 z Low electricity price 2500 z Deteriorated equipment 2000 1000 toe1000 z TPPs and open-pit mines 1500 z Electricity consumption for household heating 1000 z Damage from NATO AIR STRIKES in 1999 500 z Transmission network and TPPs; 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Iron and Steel Non-ferrous materials Construction materials Chemicals Non-metallic industry Textiles industry Wood industry Food industry Engineering 11 12 Paper industry Energy sector Other industries

2 Problems in the period 1990-2000 (2) Balance of electricity 1990 - 2007 45 mil.USD Annual Maintenance in Electric Power Industry TWh 350 40 35 300 30 250 25

200 20

150 15 10 100 5 50 0 0 '90. '92. '94. '96. '98. '00 '02 '04 '06 TPP TPP-HP HPP Gross Consumption '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '0713 14

International Community Assistance Reconstruction of capacities

Since 2000 450 mil € donations - mostly from EU through EAR

z Transmission network - after bombing Main areas of assistance:

z Electricity imports z TPPs after period of lack of maintenances And bombing z Fuel for heating z Open-pit mines z Spare parts and equipment for PP’s and open-pit mines

z Overhauls of TPP’s

z District heating systems of Belgrade, Novi Sad and Niš

z Reforms, capacity building and technical assistance

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Results achieved 2000 2007/ ’08 Curent situation Insufficient production •Increased production of coal Low efficiency of PP’s and electricity z Primary energy demand Damaged transmission network •Repaired and renewed transmission network z Dependence on import During winter season 2000/01 z Electricity 55 days of power cuts Since winter season 2002/2003 z Structure of Power Generation despite International Community no power cuts Assistance z Transmission infrastructure z Balances New Tariff System & Average final all consumers From August 2008 z Natural gas 0.8 ¢$/KWh 5.5 ¢€ /KWh z Transmission infrastructure z Demand – gas and electricity TPP’s EFOR 34% TPP’s EFOR 12,6% 17 18

3 Primary energy demand – 2007 (1) Primary energy demand – 2007 (2)

Total demand 14,824 M teo Mtoe 9,000 2007 6% 8,000 Imported: 41% Import 13% 7,000 z Oil: 87% dependence increases Coal 6,000 z Gas: 92% Oil Gas 5,000 Hydro z Coal: 11% 4,000 54% Domestic z Electricity: 1.9% of 4 months’ consumption in winter season; 3,000

27% Import exporter on yearly level 2,000

1,000 Import

Domestic Domestic 0,000 Coal Oil Gas Hydro 19 20

Structure of Power Generation Transmission Infrastructure (without K&M) www.ems.rs

7155 MW (+ 1200 MW at K&M) MVA TRANSMISSION NETWORK, Dec 31, 2006 km 8 000 7 000 7 450 TPP 5 833 7 000 55,5% 6 000 Pumped- 6 000 5 882 storage PP 5 000 8,6% 5 000 4 000 4 050 4 000 3 000 3 000 2 170 1 650 2 000 2 000 HPPs vith 1 000 1 000 reservoir 5,2% 0 0 400 / x 220 / x 110 / x 400 kV 220 kV 110 kV Transformers Lines Lignite 2007: Input: 47,884 GWh Withdrawal from Run-of-river HPPs www.eps.rs Output : 46,597 GWh the neighboring systems: 8,905 GWh 25,8% TPP-HP 21 Injection into 22 4,9% Losses rate: 2,69% the neighboring systems: 8,658 GWh

Electricity Balance 2007 (1) Electricity Balance 2007 (1) (without K&M) (without K&M) GWh 2007: 3 500 z Generation 34.4 TWh

z Gross consumption 32.9 TWh 2 700 z Import 1.8 TWh 1 900 z Export 1.8 TWh

1 100 z Lignite production 36,5 mill t 300

z Number of consumers 3.3 mil Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -500 TPP TPP-HP HPP Import Consump. Cons. + Export Exp-Imp 23 24

4 Transit of electricity in 2007 Natural gas – basic infrastructure

z One input point – from Hungary z Operating pressure in input point 43 bar z Natural gas storage - Installed capacity: z I phase 400 mcm z II phase 800 mcm z Transmission lines, total length 2200 km z Compressor station near Belgrade 4400 kW z Distribution pipeline - total lenght 10500km z Number of the main regulatory measurement stations - 152

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Monthly Natural Gas Demand in 2007(1)7 Structure of Natural Gas Demand 2007 (2) mcm 350 4% 1% 7%

300

250 12% 39% 200 Industrial 150 District heating Raw material 100 Residential 17% 50 Commercial Power generation 0 Storage injection Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27 28 20%

Development and investment plan Development and investment plan - Legal framework -

z Government - for Serbia z Legal framework z Energy Law, adopted 2004 z Regional approach and key studies z Energy Strategy until 2015, adopted 2005 z Program of Strategy implementation, adopted z Most important issues 2005

z Industry - for itself z 5 years Development plan - public utilities obligation z Yearly program of investments – obligation for all companies

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5 Development and Investments Development and Investments - Key studies - - Resource (1) - z Regional and national approaches z Studies: z z REBIS:GIS – Regional Infrastructure Study and Domestic resources Generation Investment Study 2005 - 2020 z Lignite z List Cost Investment Plan for Serbia z South East Europe: Regional Gasification Study with z Hydro potential regard to analysis of storage facilities z South East Europe: Regional Gasification Study z Renewable sources z Recommendations for electricity sector: z SEE region will require z Imported resource z 12,700 MW of new capacity z 9,400 MW of rehabilitated capacity - to extend life time z Natural Gas z Serbia will require min z 640 MW of new capacities z 2,800 MW of rehabilitated capacities - to extend life time (mostly accomplished)

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Development and Investments Development and Investments - Resource (2) - - Resource (3) - Lignite Hydro potential

Serbia will have a supply of coal for the next Kovin 50 years (excluding K&M). basin

Kostolac basin Morava Kolubara Drina basin Smal HPP, P < 10 MW Kosovo Reserve: 13.4 Bill.tons basin Total 17300 GWh/year Activated Drim Nonactivated 7100 GWh/year Metohija 7100 basin

Development and Investments Development and Investments - Resource (4) - - Electricity until 2015 - (1)

Renewable sources - Potential Assessment z Electricity demand forecast: 0.9% annually, by Electric Power Industry of Serbia, Development plan 2008 – 2015 z Small Hydro PP z Investment plan, rehabilitation and modernization of z 850 Sites, 450 MW, 1 500 GWh/year existing and construction of new capacities – 9.5 billions € z CADASTRE of Small PP’s (’87) z HPP – 1 056 millions € z Biomass z TPP and environmental protection – 3 840 millions € z Open-pit mines – 2 095 millions € z Wind power plants - farms z Transmission system – 400 millions € z Waste incineration… z Distribution system – 746 millions € z Other – 1323 millions €

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6 Regulator AERS responsibilities Development and Investments regarding development issues - Electricity until 2015 - (2) Element Responsible which impacts on development z The most important rehabilitation projects: Security of supply Ministry z HPP Đerdap, 6x176 MW, 113 millions € Energy Strategy Parliament z HPP Bajina Bašta, 4x91 MW, 56 millions € Program of Strategy Implementation Government z Reconstruction and upgrading Energy balance Government z CHP Novi Sad, 208 MW, 750 millions € Market opening and development AERS z New TPP capacities in the near future: z TPP Kolubara B, 700 MW (2x350 MW) lignite fired power plant, 750 Privilege producers and Renewable sources Ministry millions € Development plan of PU (for 5 years) Government z TPP Nikola Tesla B3, 700 MW lignite fired supercritical power plant, Yearly program of investment AERS’ opinion 900 millions € Energy price methodology for regulated AERS with adequate capacity in Open-pit mines activities Decision of Government 37 Price level 38 based of AERS’ opinion

The most important issues Final remarks / Conclusion regarding energy sector development z Electricity z Possibilities of participation in investment in TPP capacities z The most important issues based on coal at K&M z To reach an economic electricity price z Improving of AERS’ role z Speed of district heating systems development z Usage of electricity for heating z Effects of energy efficiency and rationalisation measures http://www.seea.sr.gov.yu z Incentives for private capital investments z Strategy partners

z Natural gas

z Heavy dependence on imports and poor interconnections z Uncertain price of Russian gas z Russian-Serbian governments agreement 39 40

Improving of AERS’ role ENERGY AGENCY OF THE REPUBLIC OF SERBIA

z The AERS’s role is defined by Energy Law

z Participation in rules improvement: z Energy Law Thank you for your attention! z Secondary legislation z Privileged producers – renewable energy sources act Contact details:

Ljiljana Hadžibabić Energy Agency of the Republic of Serbia, Terazije 5/V , 11000 Belgrade, Serbia Tel: + 381 11 3033829; Fax: + 381 11 3225780 41 42 e-mail: [email protected] , URL: www.aers.rs

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