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Renewable Energy Sector Study Serbia Prepared for OeEB and DEG by KEMA Consulting GmbH Bonn, August 2011 Renewable Energy Sector Study Serbia Submitted to: DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (Programmfinanzierung/ Special Programs) / OeEB – Oesterreichische Entwicklungsbank AG (Advisory Programmes) Submitted by: KEMA Consulting GmbH, Kurt-Schumacher-Str. 8, 53113 Bonn, Germany The project was financed by DEG with public funds of the Ministry for Economic Development and Cooperation and by OeEB Advisory Programmes Bonn, August 2011 Table of Contents Executive Summary ............................................................................................................ 7 1. Introduction ................................................................................................................ 12 2. Energy Sector of Serbia ............................................................................................. 13 2.1 Introduction ................................................................................................ 13 2.2 Progress of the Serbian Electricity Sector towards the EU Acquis ....... 14 2.3 Serbian Energy Strategy ........................................................................... 15 2.3.1 The Energy Sector Development Strategy to 2015 ............................. 16 2.3.2 Program for Implementing Energy Sector Development Strategy .... 19 2.3.3 National Energy Efficiency Action Plan ............................................... 22 2.4 Legal and Regulatory Framework ............................................................. 25 2.4.1 Legislation in Force .............................................................................. 25 2.4.2 Legislation under Development ........................................................... 26 2.4.3 Legal and Regulatory Authorities ........................................................ 28 2.5 Electricity Sector Organisation ................................................................. 32 2.5.1 Overview ................................................................................................ 32 2.5.2 Generation, Distribution, Supply - EPS ............................................... 32 2.5.3 Transmission Operation - EMS ............................................................ 34 2.5.4 Independent Operators ......................................................................... 35 2.5.5 Electricity Wholesale Market ................................................................ 35 2.5.6 Electricity Trade .................................................................................... 36 2.5.7 Electricity Retail Market ........................................................................ 36 2.5.8 Future Market Development ................................................................. 37 2.6 Prices .......................................................................................................... 38 DEG/ OeEB: Serbia RES Study i August 2011 Table of Contents 2.6.1 Price Regulation .................................................................................... 38 2.6.2 Household Tariffs/Subsidisation ......................................................... 42 2.6.3 Price Developments .............................................................................. 44 2.7 Electricity Production ................................................................................ 47 2.7.1 Generation Capacities .......................................................................... 47 2.7.2 Rehabilitation and Upgrading of Existing Capacities ......................... 49 2.7.3 Generation Development Plans up to 2020 ......................................... 50 2.8 Transmission ............................................................................................. 53 2.8.1 Technical Characteristics of the Transmission Network ................... 54 2.8.2 Cross-Border Flows .............................................................................. 57 2.8.3 Transmission Network /Interconnection Expansion Plans ................ 58 2.9 Distribution Network .................................................................................. 59 2.9.1 Overview ................................................................................................ 59 2.9.2 Technical Condition .............................................................................. 60 2.9.3 Distribution Network Development ...................................................... 61 2.10 Supply and Demand .................................................................................. 62 2.10.1 Electricity Consumption Structure ...................................................... 62 2.10.2 Future Consumption Forecasts (Outlook 2020) .................................. 66 3. Renewable Energies .................................................................................................. 68 3.1 Technical Potential .................................................................................... 68 3.1.1 Success Factors ................................................................................... 68 3.1.2 Situation in Serbia ................................................................................ 69 3.1.2.1 Hydro ........................................................................................ 69 DEG/ OeEB: Serbia RES Study ii August 2011 Table of Contents 3.1.2.2 Biomass .................................................................................... 72 3.1.2.3 Biogas potential and activities ................................................... 79 3.1.2.4 Biofuels ..................................................................................... 82 3.1.2.5 Solar .......................................................................................... 84 3.1.2.6 Wind .......................................................................................... 85 3.1.2.7 Geothermal ............................................................................... 91 3.1.3 Assessment ........................................................................................... 93 3.2 Targets, Strategy ........................................................................................ 94 3.2.1 Success Factors ................................................................................... 94 3.2.2 Situation in Serbia ................................................................................ 97 3.2.3 Assessment ........................................................................................... 98 3.3 Financial Support Mechanism .................................................................. 99 3.3.1 Success Factors ................................................................................... 99 3.3.2 Situation in Serbia .............................................................................. 102 3.3.2.1 FiT System .............................................................................. 102 3.3.2.2 Off-take Obligation................................................................... 105 3.3.2.3 Other financial incentives......................................................... 106 3.3.3 Assessment ......................................................................................... 108 3.3.3.1 FiT Design and Sustainability .................................................. 108 3.3.3.2 Off-take Obligation................................................................... 109 3.4 Network Connection and System Integration ........................................ 110 DEG/ OeEB: Serbia RES Study iii August 2011 Table of Contents 3.4.1 Good Practice...................................................................................... 110 3.4.2 Situation in Serbia .............................................................................. 112 3.4.2.1 Technical Rules ....................................................................... 112 3.4.2.2 Connection Charges ................................................................ 113 3.4.2.3 Connection Process ................................................................ 114 3.4.2.4 System Integration................................................................... 115 3.4.3 Assessment ......................................................................................... 115 3.5 Administrative Issues .............................................................................. 117 3.5.1 Issues and Good Practice .................................................................. 117 3.5.2 Situation in Serbia .............................................................................. 118 3.5.2.1 Administrative Responsibilities ................................................ 118 3.5.2.2 Permitting System ................................................................... 118 3.5.2.3 Land Lease ............................................................................. 121 3.5.3 Assessment ......................................................................................... 122 3.6 Finance and Investment Issues .............................................................. 123 3.6.1 Issues .................................................................................................. 123 3.6.2 Situation in Serbia .............................................................................. 124 3.6.3 Assessment ........................................................................................