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
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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
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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
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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 ...... 124
4. Annex 1 - Authorisations and Permits (Detailed Description) ...... 126
4.1 Overview ...... 126
4.2 Planning, Information and Exploration Phase ...... 129
4.2.1 Studies (technical documentation) to be prepared by the investor 129
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Table of Contents
4.2.2 Acquiring Information on Specific Location ...... 131
4.2.2.1 General Approach ...... 131
4.2.2.2 Exploring Geothermal Sources ...... 132
4.3 Construction Phase ...... 133
4.3.1 Exploitation of Hydro-Geothermal Resources ...... 133
4.3.1.1 Approval to carry out Mining Works ...... 134
4.3.1.2 Inspection Certificate for Mining Facilities (Permission for Usage of Mining Facilities) ...... 135
4.3.1.3 Approval for Exploitation of Underground Sources ...... 135
4.3.2 Energy Permit...... 136
4.3.3 Location Permit ...... 137
4.3.3.1 Property Rights for Land Use ...... 139
4.3.3.2 Construction Lot ...... 139
4.3.3.3 Data on the Facility (Technical Documentation / General Design) ...... 140
4.3.3.4 Collection of Design Requirements ...... 140
4.3.3.5 Air Traffic Safety Approval (only wind) ...... 142
4.3.4 Construction Permit ...... 142
4.3.4.1 Technical Supervision of the Design Documentation ...... 144
4.3.4.2 Water Approval ...... 145
4.3.4.3 Environmental Impact Assessment ...... 145
4.3.5 Water Permit ...... 148
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Table of Contents
4.3.6 Operating Permit ...... 150
4.3.6.1 Construction ...... 150
4.3.6.2 Technical Inspection ...... 151
4.4 Energy Production (Preparation) Phase...... 151
4.4.1 Acquiring the Right for Energy Generation...... 151
4.4.1.1 Assignment Agreement ...... 151
4.4.1.2 Concession ...... 152
4.4.1.3 Stake holding in (company affiliated to) public company ...... 153
4.4.2 Network Connection ...... 153
4.4.3 Licence for Energy-Related Activity ...... 154
4.5 Commercialisation Phase ...... 155
4.5.1 Acquiring the Status of Privileged Producer ...... 155
4.5.2 Feed-in Tariff Support Scheme ...... 158
4.5.3 Electric Power Purchase Agreement ...... 159
4.5.3.1 Commercial Conditions ...... 159
4.5.3.2 Energy Metering and Payment Settlement Procedure ...... 159
5. References/Websites ...... 160
6. Abbreviations ...... 162
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Executive Summary
The Renewable Energy (RE) Sector Study Serbia, carried out by KEMA Consulting GmbH, has been commissioned by the Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) and the Oesterreichische Entwicklungsbank AG (OeEB). It describes the existing power market and the framework for renewable energy in Serbia, and provides an analysis of the conditions for RE development in Serbia.
This Executive Summary summarises information presented in the Report and provides an assessment of the opportunities and risks facing RE developers in Serbia.
Serbia is one of the larger countries of the Balkans. Its economy, infrastructure and business culture are well developed despite some set-backs caused by the political turmoil and war in the 1990s. The electricity sector of Serbia, long integrated into the UCTE system, is well managed and robust, satisfying the needs of the economy and population for electricity and heat in a reasonably efficient manner. Serbia is one of the founder members of the Energy Community Treaty, and it actively pursues the course towards approximating its energy sector legislation and regulatory framework to the EU. This includes the development of competition, unbundling, transparent network codes, and independent regulation, as well as the setting of targets and the creation of support mechanisms for RE. A New Energy Law, developed over the past several years and about to pass Parliament, would mark a further milestone in the formal compliance of the Serbia‟s energy sector legislation with the EU energy acquis.
At the same time, and despite the formal compliance with the EU acquis, the Serbian energy sector is retaining many features of a more traditional and unreformed past. Unbundling is strictly limited to the separation of the Transmission System Operator, there is only one generator, no functioning wholesale market, and despite nearly 50% of the retail market customers legally allowed to choose their supplier, none of them has ever exercised this right. Government policy towards the sector is concerned with keeping electricity prices down for political reasons, resulting in the lowest electricity prices in the Balkans. This means that the state owned companies EPS (generation, mining, distribution and supply) and EMS (transmission) have some problems funding the necessary replacement or expansion investment, and Serbia is no longer a recognised power exporter, but the situation has not yet become critical. Sweeping market or price reforms, break-up or privatisation of the major players, forceful introduction of competition are not to be expected. The approach is gradual and cautious, prioritising the interests of the established electricity
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sector entities and ever conscious of the immediate effect of any reforms on the customers (voters).
One part of the Report is devoted to understanding the prospective supply and demand balance. Serbia‟s electricity demand, an unusually large share of which is household demand, keeps rising. Household demand is driven by the very low electricity prices, allowing highly inefficient electric space heating and other high energy consuming practices to persist. The revival of industry, to be expected in the coming few years, will further add to the demand. Despite goals and measures formulated in the National Energy Efficiency Action Plan, a slow-down of demand growth in the coming years is unlikely. Serbia has not yet elaborated an Energy Efficiency Law or other legislation which would force consumers (industry, businesses and households) to adhere to strict energy conserving norms.
On the supply side, the research team analysed the existing plans and options for the development of conventional generation sources (including large hydro) owned by the state owned EPS. The publicly available planning documents, such as the Energy Sector Strategy and the respective Implementation Programs are analysed and compared with the actual figures, showing inconsistencies and some unrealistic assumptions. In addition, the expansion and modernisation plans of the conventional electricity sector, publicised by the government and electricity establishment, were critically evaluated with regard to how realistic their implementation is. This part of the study provides unique insider knowledge, based on the research team‟s intimate understanding of the technical and economic determinants of each of the possible (apparently planned) projects. As a result it is concluded that many of the publicised projects are not likely to be implemented, or at least not in the timeframes of the coming 10 years. Bearing in mind the demand situation this means that there is scope for the development of RE projects. In addition to the internal electricity demand in Serbia, there is also the possibility to resume exports of electricity to neighbouring countries, as indeed is the declared aim of the government. Serbia has substantial cross border transfer capacities to all its neighbours and a sound and well managed network.
The second part of the Report deals specifically with the conditions and regulatory framework for RE in Serbia. Based on an established methodology and recognised “good practice” it analyses the main success factors for RE in Serbia, namely: technical endowment, financial support instruments, network connection and system integration, administrative procedures and finance and investment issues.
Serbia has substantial technical potential for developing biomass, biogas, solar, wind and hydro power. Up to now only some of the hydro potential is used, mainly in large facilities. The government is in the process of setting ambitious and legally binding RE development
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targets of 20% by 2020, effectively doubling the current share. The technical potential is relatively well researched, although some of the assessments are outdated (particularly the cadastre for small hydro plants) or incomplete (wind measurements).
In 2009 Serbia adopted a Feed-in-Tariff system, which displays many features of recognised “good design”. The system is currently implemented through secondary legislation (a number of Decrees), but will be enshrined into primary legislation through the New Energy Law. The Feed-in-Tariffs are set at reasonable levels for all types of RE except solar power, and the production of heat (CHP) is taken into account – an advanced feature, absent in most other transition economies. For wind and solar power, however, maximum deployment levels are specified: for example only 450 MW of wind capacity will receive the Feed-in- Tariff, and this does cause certain problems.
The Report explains how the threshold was set and how it is justified by governmental and regulatory authorities. To a certain extent this is an illustration as to how the Serbian policy making in the energy sector works: On the one hand, a reasonable Feed-in-Tariff is calculated, inviting the development of wind power. On the other hand, a somewhat arbitrary and largely political view is being taken with regard to how much wind power could be absorbed into the power system in terms of technical conditions and economics. 450 MW of wind power at the established Feed-in-Tariff is said to lead to an increase of 6% of overall electricity prices and this was seen as the maximum allowable impact by the energy policy makers (the Ministry in charge of energy and the regulator AERS). The calculation, which apparently determined the threshold, was not in the public domain, however. The reason cited for the threshold was “network integration issues”. Yet according to a (recent) consultant‟s study, 900 – 2000 MW of wind power could be integrated into the Serbian power system without sizable network upgrading. Consequently the assessment of the Feed-in-Tariff support system is somewhat mixed: potentially very good, in practice with some problems.
The mixed assessment continues in the area of network access and system integration: There are clear rules in Transmission Grid Code and Distribution Grid Codes (albeit with some need for adjustment) and the procedures for gaining network access are transparent. The connection charging regime actively favours RE generators, by waiving the “deep” connection costs to be paid by other network users. However, network operators still do have an implicit disincentive to connect RE facilities, as they would need to find the funds for the deep network integration of the RE facilities themselves. The network tariff regulation has recently moved to an incentive regulation method, which is good for making network operation more efficient, but the additional costs required at short notice to connect RE facilities are not explicitly considered and may therefore “compete” with other investment needs of the network operators. The problems are less in the methodology and more in its
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implementation, and hence the obstacles RE generators may encounter are subtle: delays, increased focus on formalities of requests and procedures. In addition, Serbia‟s network operators are only starting to learn how to evaluate and manage the necessary changes in system operation that would be required with large scale RE generation.
A relatively substantial part of the Report (including a 30 page Annex) is devoted to explaining the administrative procedures required to build a RE facility, put it into operation and receive the Feed-in-Tariff for electricity generated. Many authorities are involved in this process, regulating both the construction process and the energy production process. The process has rules and maximum response times for administrative authorities are specified, but the number of requests, decisions, papers and permits is quite overwhelming. For the construction process, the main formally required stages are Pre-feasibility Study, Feasibility Study, General Design, Preliminary Design, Main Design, Location Permit, Construction Permit, Operating Permit. For the energy production process, the main stages are Energy Permit, Opinion on Connection, Technical Conditions for Connection, Connection Agreement, Rights to Energy Generation, Licence for Energy Related Activities, Privileged Producer Status, Power Purchase Agreement. Both processes are interrelated, with certain decisions or permits from one process required for gaining the respective next stage on the other process, and they are also interspersed with additional requirements in the area of environmental protection and water issues: For the former the stages are Decision on whether an EIA is required, Decision on the scope of the EIA, Decision on acceptance of EIA results. For the latter there is a need to obtain Water Requirements, a Water Approval and finally a Water Permit. The existing administrative process is cumbersome and it can be considered a major obstacle for RE developers, especially foreign investors. Moreover, there are major sequencing and timing issues. The lack of certainty of receiving the Status of Privileged Producer (who is then entitled to receive the Feed-in-Tariff) at the end of the construction process, despite the developer holding an Energy Permit, is currently the largest hurdle to the development of wind power generation.
Finally, as a transition country with a very recent interest in RE, the financing conditions for Serbia‟s RE developers suffer from the usual issues of lack of trust by banks and financiers, low levels or uncertainty about equity contributions, and lack of experience of businesses in developing good project proposals.
The conclusions from the investigations regarding opportunities and risks for developing RE projects in Serbia can be formulated as follows:
Overall the RE market in Serbia is a very young market, with the associated opportunities and risks.
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There are substantial opportunities for RE projects in Serbia, based on a good physical potential, a well designed Feed-in-Tariff system, ambitious government RE targets, prospects of electricity demand growth with opportunities for export and limited investment in conventional generation, a robust and well managed electricity system and transparent rules for connection and administration.
There are substantial risks for RE projects in Serbia, especially in the short run, due to the immaturity of the RE theme and a large number of “teething” problems related to the implementation of relatively new procedures.
In terms of the “big picture”, the speed at which the opportunities will come to outweigh the risks depends on how government policy will square its (EU directed) ambition to reach ambitious shares of RE with its reluctance to levy voters with the costs of Feed-in-Tariffs, and how those two factors are balanced with the interests of EMS and EPS – the dominating publicly owned electricity companies.
In terms of concrete RE projects, although influenced by the “big picture”, success will depend on the dedication, skill and contacts of the developer (in the administration and in the energy sector), and on picking projects with very good technical characteristics and hence economics, allowing absorption of the additional costs caused by administration, delays and unfavourable financing options.
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1. Introduction
The Renewable Energy (RE) Sector Study Serbia describes the existing power market and the framework for renewable energy in Serbia. The report is based on publicly available information sources as well as a substantial number of meetings, in particular with:
public administration bodies (the Ministry responsible for Energy, the Regulator);
public companies engaged in the electricity sector (Elektroprivreda Srbije (EPS) and Elektromreţa Srbije (EMS));
some private investors and financial institutions.
The work on this report coincided with a turbulent time in the development of Serbia‟s energy sector framework:
A New Energy Law, containing major changes for the power sector and the renewable energy (RE) sector, reached the public consultation process after several years of elaboration;
Administrative responsibilities changed – up to February 2011 the energy sector was under the responsibility of the Ministry of Energy and Mining, while from March 2011 onwards the energy sector will be under the Ministry for Infrastructure and Energy;
The EU and the Ministerial Council issued recommendations on the application and transposition of the EU legislation on renewables (part of the Third Package) into the national legal frameworks of the countries belonging to the Energy Community Treaty, such as Serbia, including the recommendation for the adoption of a firm RE target;
The first investors attracted by the 2009 legislation on privileged producers and Feed-in-Tariffs started to work through the practical procedures, challenging public authorities and dominant public companies.
This report tries to reflect the most recent developments, while presenting also an overview of the existing situation and its background. The report is structured as follows:
Section 2 provides an overview of the Serbian power sector;
Section 3 provides a description and analysis of the framework for RE in Serbia;
Section 4 is an Annex providing details on the permitting system.
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2. Energy Sector of Serbia
2.1 Introduction
The Republic of Serbia is located at the heart of southeast Europe and covers the area of 88,361 km2. Serbia is bordered by Hungary to the north; Romania and Bulgaria to the east; the Republic of Macedonia and Albania to the south; Montenegro to the southwest and Croatia and Bosnia and Herzegovina to the west. The Republic of Serbia was part of the Former Socialist Federal Republic of Yugoslavia until 1992, and the Union of States Serbia & Montenegro until May 2006. Based on the decision for independence made at the referendum in Montenegro, Serbia consequently became an independent state. In February 2008, the parliament of Kosovo unilaterally declared independence from Serbia. Serbia‟s government has not recognised Kosovo‟s independence. Currently, Kosovo and Metohija are under the transitional administration between United Nations Interim Administration Mission in Kosovo (UNMIK) and EU mission EULEX.
The main statistical data for the country are as follows:
Population: 7.32 million (Statistical Office of the Republic of Serbia, for year 20091)
Area: 88,361 km2 (Republic of Serbia) (Statistical Office of the Republic of Serbia, 2010);
Gross domestic product (GDP): 29,882 m€ in nominal terms (National Bank of Serbia (NBS) estimate, 2010)
Real change in GDP: 1.7% (NBS, 2010)
Average exchange rate: 102.94 RSD/€ (NBS, 2010)
GDP per person: 4,082 €
Annual inflation rate (consumer prices): 10.3% (NBS, 2010)
EU membership: NO
UCTE (ENTSO-E) membership: YES (since 1975)
1 http://webrzs.stat.gov.rs/WebSite/
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From June 1992 to October 2004, the power system of Serbia, together with the power systems of Montenegro, Kosovo, part of BiH (Republika Srpska (RS)), Albania, Macedonia, Greece, Romania and Bulgaria, operated in a separate interconnection, called the UCTE second synchronous zone, independent from the main UCTE grid. The separation was caused by the devastation of transmission substations in Croatia and BiH during the war. In October 2004 this regional interconnection was reconnected to the main UCTE. Following the reconnection, the Serbian power system operates as a control area within the UCTE Control block SMM (former JIEL), together with two additional control areas covering the power systems of Macedonia and Montenegro.
Until summer 1999 the power system of Kosovo was an integral part of the power system of Serbia and was operated and coordinated from a single control centre. Since this time the power system of Kosovo, in terms of operational control, has been separated from Serbia, and controlled by the control centre of KOSTT (Transmission System Operator in Kosovo). However, all electrical interconnections between Kosovo and Serbia are still operational and towards UCTE Interconnection they are still considered as a single control area, where Kosovo is a separate zone within this area. Technical and financial aspects of this arrangement are regulated by the temporary agreements between two TSOs. Similarly, power plants in Kosovo are run by KEK (Kosovo Electricity Corporation), with an ongoing ownership dispute between KEK and EPS about power stations and coal mines. As agreed at the beginning of the project with the Clients, this report will relate solely to the energy sector of Serbia (without Kosovo), unless explicitly stated otherwise.
2.2 Progress of the Serbian Electricity Sector towards the EU Acquis
Over the past few years the approximation to the EU and the country‟s ambition to become an EU member have been leading drivers in the development of the energy sector. Serbia is one of the founder members of the Energy Community for Southeast Europe. The Treaty on Establishment of Energy Community of Southeast Europe was signed by Serbia in 2005 and ratified by the Serbian Parliament in July 2006. Countries who have signed the Energy Community Treaty have a legal obligation to comply with most (clearly specified) parts of the EU acquis on energy, the environment, renewable energy and competition, including all the consequent updates of the related legislation.2
According to the 2010 Progress Report of the European Commission, Serbia is “moderately advanced” in the implementation of the Stabilisation and Association Agreement (SAA) and
2 We note that some of the detailed obligations related to the “Third Package” are still under discussion.
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of the European standards in the energy sector. In the context of the internal energy market, some parts of the acquis have been implemented:
The transmission business has been separated from generation, distribution and supply and the electricity transmission system operator has, to a large extent, become financially sustainable. Formal opening-up of the electricity and gas markets to non-household consumers has been completed. The Energy Regulatory Agency (AERS) has been working well, in line with Energy Community Treaty requirements. The government adopted legislation on renewable energy in November 2009, namely on privileged producers of electricity, including incentive measures (feed-in tariffs) for electricity produced from renewable energy sources. The national energy efficiency action plan was adopted in July 2010. The programme for implementing the current Energy Sector Development Strategy 2007-2012 was revised in April 2010.
But several others remain open:
Several competencies and the degree of independence foreseen under the Energy Community Treaty have not been granted to the Regulator. Tariffs are not yet cost-reflective. The separation of distribution and supply in the electricity sector still has to be completed. Network (system) access rules allowing full transparency and non-discrimination are not yet in place. The main elements of the acquis on renewable energy are still to be transposed. Serbia does not have a legislative framework on energy efficiency in place. The law on rational use of energy has not yet been adopted (in progress).
The EC Progress Report notes that deadlines set by the Energy Community Treaty have not been met and that further efforts are needed to achieve unbundling and real market opening together with a pricing policy offering a sustainable tariff reflecting costs.
2.3 Serbian Energy Strategy
There are a number of strategic documents that set out the directions for development of the energy sector and the use of energy in Serbia. The most important documents are the Energy Sector Development Strategy to 2015 (and related documents) and the National
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Energy Efficiency Action Plan, reviewed in more detail in the sections below. Characteristically, these documents do not form a fully coherent or binding set of targets and plans. They have been adopted at different times, and are not fully consistent. Moreover, there are further issues related to the extent to which the plans and strategies are realistic.
2.3.1 The Energy Sector Development Strategy to 2015
The Energy Sector Development Strategy to 2015, adopted by the Ministry of Mining and Energy in 2005, includes the following main objectives:
Basic energy objectives: provide reliability and regularity of supply, encourage harmonisation of the energy production system operation and development with the energy consumption sectors needs, with the target to achieve a “fixed-term” reduction of energy intensity in the industry and transport sectors; Specific technological and environmental objectives: increase the operational safety of the facility and functional reliability of the equipment and vital systems of energy installations; General developmental and strategic objectives: needs for gradual harmonisation of the energy industry development with other real sectors of economy and other activities within the so-called sustainable socio-economic and technological/environmental development of the country, as well as the political commitment of the country to join the EU.
The schedule of reform and priorities of implementation in energy sectors of Serbia, as defined in the Energy Sector Development Strategy, are summarised in the following table.
Table 1: Schedule of priorities implementation in energy sectors of Serbia
Priorities
The First - Basic priority is Programmes of modernisation of technological systems and energy continuous improvement of sources/facilities: technological and operating performance of energy Oil sector sources and facilities Gas sector Coal sector Power sector Thermal energy sector (district heating companies and industrial power plants)
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The Second - Targeted Programmes of economical use and increase of energy efficiency: priority is economical use of energy products and increase Substitution of power for thermal energy services in the in energy efficiency building sector, on the basis of the use of gas Increased operating efficiency of all thermal sources in industry and municipal energy Decreased electrical and thermal losses in district heating systems, industrial processing and buildings Increased introduction of new energy efficient electric appliances and equipment/systems
The Third - Special priority Programme of selective use of renewables and new energy is use of new renewable technologies: energy sources and energy efficient technologies Selective use of biomass, geothermal and wind energy for decentralised production of thermal/power, More efficient use of natural gas by combined energy production (CHP) in municipal/industrial energy system, Introduction of environmentally acceptable coal combustion technologies, Construction of small and mini hydropower plants
The Fourth - Optional Programmes/projects of introduction of new gas technologies: priority is extraordinary investments in new energy A new combined natural gas cycle plant (250MW) located in sources intensive consumption region Projects of local energy sources for CHP –low /medium capacity
The Fifth - Long-term Programmes of capital-intensive and economically effective priority is capital-intensive investments: investments in new energy sources/facilities, and Finalisation of the Thermal Power Plant (TPP) “Kolubara B” participation in the planning of construction, or construction of a new TPP of similar power, new strategic energy sources using lignite or a combined natural gas cycle plant under and facilities new investment models (private /collective) and ownership (Regional/European markets) Construction of new oil pipelines for diversification of supply sources/transport routes Construction of new systems of gas supply/transport, including a natural gas storage facility Construction of trunk/distribution network of natural gas, in central Serbia (individual consumers) Participation in the planning /construction of strategic energy sources; new HPPs on “Border” rivers, including
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construction of new pump-accumulation hydropower plants
Source: Ministry of Mining and Energy (2005)
Concerning the implementation of the Energy Strategy, taking into account that the first half of its duration has expired, we can conclude the following:
The first priority of the strategy related to modernisation of technological systems and energy sources/facilities in various energy sectors has been successfully executed, especially taking into account the difficulties faced by Serbia and most of the world due to the economic crisis. The most significant results have been achieved in the electricity sector with rehabilitation and upgrading of generation facilities and network assets; The second priority set out in the strategy relating to economic use of energy products and increase in energy efficiency was not executed as planned. The incentives were lacking (low electricity prices, no additional state administrative incentives such as tax reductions, loans, etc.) to support this development; The third priority set out in the strategy, namely the use of new renewable energy sources and energy efficient technologies was essentially inactive until the Feed-in- Tariffs were introduced. This incentive, together with overall RES technology improvements and equipment price reduction contributed to increased interest in the development of energy production from RES in Serbia. However, the implementation of RES on a larger scale would possibly require the creation of additional incentives and the removal of administrative barriers; The forth priority of the strategy concerned extraordinary investments in new energy sources. This direction was not implemented in practice, although numerous discussions took place and statements, papers, etc. were prepared. It is not likely that many initiatives will materialise easily in the future; The fifth/long-term priority for capital investments in the energy sector was partly executed (construction of first underground gas storage), while the main projects in the electricity sector remained at the planning stage (or tendering for strategic partnership); also major energy network improvements were below planned volumes.
In general, it can be concluded that the Serbian Energy Strategy was only partly implemented. It must be noted that some targets in the strategy were not realistic even at the time of adopting the strategy. On the other hand, bearing in mind that the period 2005-2010 was very difficult for investments, the failure to achieve more in the area of energy efficiency or RES is not entirely surprising. The decision to start the development of a new energy
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strategy corresponding to the changed regional and global environment is a good signal that decision makers are moving their considerations closer to the reality.
2.3.2 Program for Implementing Energy Sector Development Strategy
The Energy Law prescribes that the Government of Serbia adopts an Implementation Program for the Energy Sector Development Strategy. The Program is adopted for a period of six years and updated in accordance with the actual needs for energy and energy sources, but as a minimum every two years.
The Government of the Republic of Serbia adopted in 2007 the Implementation Program for the Energy Sector Development Strategy for the period 2007-2012 at the proposal of the Ministry in charge of Energy. The Program was updated by the Government Decree in December 2009 and in April 2010. These updates were the result of the analysis of the implementation of the Energy Sector Development Strategy and concluded that there are significant deviations between the actual situation in the energy sector and the defined targets, regardless of the reason, which resulted in significant changes in the overall energy sector (energy market prices, technology improvements, etc.). The update of the Program in December 2009 was due to the inauguration of Feed-in-Tariffs for electricity generation from renewable sources by another Government Decree in November 2009, i.e. with this Program targets regarding RES from the previous Implementation Program for the Energy Sector Development Strategy were updated.
The most recent Implementation Program update, released in April 2010, states that the 2005 Energy Sector Development Strategy does not consider all aspects of energy development, and that it is necessary to review the projections of energy needs and primary energy and to define new scenarios for the development of the energy sector. This update of the Program assessed the strategic decisions of the Serbian energy sector in a number of areas, especially related to the mining, gas and oil industries. In the electricity sector, revisions were introduced in the program for development of new HPPs (introducing new targets in the area of small HPPs, as well as updated plans for rehabilitation of existing big HPPs), thermal power plants (updated programs for the construction of new power plants, reconstruction of existing units and decommissioning of old units), in the area of energy efficiency (setting higher targets in this area and establishing the national Energy Efficiency Fund) and in the area of environmental protection (reflecting requirements from the recently adopted set of environmental laws).
The data in the table below present a comparison between net electricity demand planned in the Energy Strategy 2005-2015, corrections made by Implementation Programs for the
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Energy Sector Development Strategy from 2007 and 2010, and finally the actual net electricity demand. The analyses during the development of the Implementation Programs for the Energy Sector Development Strategy were reflecting actual trends in electricity demand growth. It can also be observed that electricity demand is still growing faster than forecasted in strategic documents, mainly driven by electricity prices which are far below realistic and cost-reflective levels.
Table 2: Comparison of net electricity demand as planned in Energy Strategy and Implementation Programs
GWh 2003 2006 2009 2012 2015
Strategy 25,102 26,400 27,796 29,307 30,820
Actual 25,450 26,873 29,242 - -
Program 2007 - 25,365 27,029 - -
Program 2010 - - 28,601 30,029 -
Source: Government of Serbia, Energy Strategy to 2015, Implementation Programs from 2007 and 2010
Another area where strategic forecasts failed to meet the reality was the reduction in electricity networks losses. The table below shows plans for reduction of electricity losses as presented in the Implementation Programs from 2007 and 2010. It can be observed that during the development of the Implementation Program for 2010, the Ministry was aware that during the previous period losses were not reduced, but increased (see Table 15). Unfortunately, at least so far, the new Implementation Program also failed to be implemented and losses in the distribution network, especially “non-technical” losses, have not been reduced so far.
Table 3: Electricity losses as planned by the Energy Strategy Implementation Programs from 2007 and 2010
Distribution losses Year 2006 2007 2008 2009 2010 2011 2012
Program 2007 % 13.73 13.36 13.04 12.50 11.97
technical GWh 2,463 2,473 2,502 2,471 2,442
non-technical GWh 1,575 1,516 1,469 1,390 1,315
Total GWh 4,038 3,989 3,971 3,861 3,757
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Program 2010 % 14.48 13.60 13.29 12.99 12.70
technical GWh 3,041 2,927 2,899 2,866 2,840
non-technical GWh 1,638 1,576 1,561 1,543 1,529
Total GWh 4,679 4,503 4,460 4,409 4,369
Source: Government of Serbia, Energy Strategy to 2015, Implementation Programs from 2007 and 2010
In the area of electricity generation, some strategic decisions in the TPP sector concerning major overhaul of main coal-fired conventional thermal power plants were executed and the results are observable - a steady increase in the TPP generation of electricity. On the other hand, in the CHP sector, there was no action at all. Concerning HPPs, there were no major revisions and rehabilitations (although they started in 2009 and 2010), so the HPPs contribution to generation output has been lower than planned, despite favourable hydrological conditions. Overall, electricity generation in Serbia is above the levels planned in the Energy Strategy (even if there were no new generation capacities commissioned in the meantime), mainly due to the significant increase in TPP production.
Table 4: Comparison between actual and strategically planned electricity generation
GWh 2003 2006 2009 2012 2015
TPP 20,290 21,950 22,410 22410 27,210
CHP 707 800 800 800 800
HPP 9,874 11,060 11,780 11,810 11,840 StrategyGEN Total 30,871 33,810 34,990 35,020 39,850
GWh 2003 2006 2009 2012 2015
TPP 20,401 23,360 24,880 - -
CHP 606 180 139 - -
HPP 9,118 10,850 11,093 - - Actual GEN Actual
Total 30,125 34,390 36,112 0 0
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Source: Government of Serbia, Energy Strategy to 2015, EPS Annual reports3
Currently, the Ministry has started activities on the development of a new Energy Strategy, in particular by adopting a program for its development, setting targets to be elaborated and starting the analysis of how the existing Energy Strategy was implemented (comparing plans and achieved results). The main factors that have been indicated as inputs for the development of a new Energy Strategy are the following:
1. Disturbances in energy supply, especially during the month of January 2009; 2. The world economic crisis, which started in 2008 and influenced the country‟s economy (it is one of basis parameters for defining consumption levels for the future Energy Strategy); 3. Need for bigger diversification of energy supply sources (construction of South Stream gas pipeline, increase of usage of RES etc.); 4. Need for better security of supply; 5. Need for review of participation of Nuclear Energy in the Energy balance of the Republic of Serbia; 6. Insufficient clearly defined targets related to the increase of Energy Efficiency, especially in the energy consumption sector; 7. Overview of existing and future environmental obligations; 8. Stipulations from the Energy Community Treaty and other internationally accepted commitments; 9. Need for strengthening the regional and international position of the Republic of Serbia.
The new Energy Sector Development Strategy up to 2025, with projections to 2030 is expected to be adopted in 2012. According to sources in the Ministry responsible for Energy it is going to impose very challenging targets for the energy sector in Serbia, in line with EU legislation. In particular, it is expected to determine Serbia‟s RE target at 19% of the overall energy consumption in 2020. This would mean doubling the current share.
2.3.3 National Energy Efficiency Action Plan
Serbia is preparing a Law on rational use of energy, planned to be adopted in 2011. However, a National Energy Efficiency Action Plan was already adopted in July 2010. This
3 The table is composed from two sub-tables: upper sub-table contains forecasted data from Energy Strategy for particular years; lower sub-table contains realised (or actual) data collected from EPS annual reports for the same years
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plan is promoting energy efficiency in Serbia. It sets targets and identifies measures to promote energy efficiency. The overall national targets for energy efficiency in all sectors are savings of 1% or 0.0836 Mtoe (2011) and 6% or 0.50163 Mtoe (2016) compared to 2008.
There are various ongoing initiatives in connection with the National Energy Efficiency Action Plan, such as a “Study for the Introduction of an Energy Management System in Energy Consumption Sectors” financed by the Japan International Cooperation Agency (JICA), the introduction of energy management and energy planning in municipalities, the development of a Model contract for Energy Service Company (ESCO) services, and others.
The National Energy Efficiency Action Plan looks in detail at three different consumption categories: “Industry”, “Transport” and “Other” (contains all other energy consumers)4 and sets out the problems and possible measures to achieve/increase energy efficiency.
In the category “Others” (i.e. residential, commercial and public service sectors) the energy consumption issues mainly relate to heating, and in particular to the high share of electricity used for space heating by households. While the share of district heating for households is high (on average 27 %, but much higher in the biggest cities Belgrade - 50% and Novi Sad - 60%), electricity consumption for space heating still accounts for 65% of the overall electricity consumption of households. The age of the dwellings is high (59% of the dwellings were built before 1962, and only 2% in the period from 2004 to 2008) and the final energy demand for the majority of buildings is very high. Oversized secondary heating installations, especially for old buildings, are a major feature.
According to the National Energy Efficiency Action Plan, the following energy efficiency measures in buildings are envisaged in the period from 2011 to 2016:
1. Substitution of electricity use for heating purposes by natural gas, connection to District Heating System (DHS) and RES utilisation; 2. Replacement of the conventional bulbs with energy efficient bulbs; 3. Individual houses and SME windows replacement and/or thermal insulation; 4. Voluntary agreements on the Research and Development (R&D), design and construction of Zero energy buildings; 5. Adoption of new standards for the design temperatures for heating installation; 6. Application of new tariff systems for heat energy; 7. Energy certification of new buildings undergoing major renovation;
4 The categories “Industry” (34% share) and “Transport” (28% share) are experiencing a certain decline in energy consumption in Serbia, and their share in Total Final Energy Consumption (FEC) is decreasing. On the other hand, the category “Other” (42% share) has a positive trend with an increased share in Total FEC.
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8. Introduction of the building energy management system in public and commercial buildings; 9. Energy efficiency auditing and certification of existing buildings; 10. Introduction of the Energy Efficiency Fund; 11. Introduction of the Energy Efficiency and RES Credit Lines for households, public and commercial buildings.
The National Energy Efficiency Action Plan separately addresses the savings potential in public lighting (accounting for 1.67% of total electrical energy consumption in 2008), expecting that through gradual modernisation savings of up to 98.61 GWh could be accomplished by 2016.
In the category “Industry” demand has been falling since 1990, due to the break-up of Yugoslavia, economic sanctions, NATO intervention and the secession of Kosovo. Measures for improving energy efficiency in this category up to 2016 according to the National Energy Efficiency Action Plan are:
1. Voluntary agreements with industry promoted by the Energy Efficiency Agency of the Republic of Serbia (Agencija za Energetsku Efikasnost Srbije, SEEA), the Network for Energy Efficiency in Industry of Serbia (Mreţa za Energetsku Efikasnost u Industriji Srbije, MEEIS) and Regional Centres for Energy Efficiency of Serbia (Regionalni Centri za Energetsku Efikasnost Srbije, REECs); 2. Introduction of the energy management system for large consumers in the industrial sector; 3. Auditing scheme for industry; 4. High-efficient cogeneration in industrial companies; 5. Introduction of the Energy Efficiency Fund; 6. Introduction of energy efficiency and renewable credit lines for the industrial sector.
In the category “Transport” the National Energy Efficiency Action Plan sets out measures such as:
1. Introduction of European standards for energy efficiency in the transport sector; 2. Creation of an energy efficient transport system; 3. Promotion of eco-driving and low cost energy efficient measures in the transport sector; 4. Introduction of incentive mechanisms for replacement of the existing fleet; 5. Introduction of a road transport fleet management.
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Although the National Energy Efficiency Action Plan is well elaborated, it is doubtful whether the very optimistic goals will be achieved. The responsibility for the realisation of the targets is rather wide, and there are doubts about the willingness of responsible bodies to engage on improving energy efficiency and saving. Moreover some important measures are lagging behind: the Energy Efficiency Fund is not established, and energy and fuel prices remain distorted. Facing very low tariffs, final customers are not incentivised to invest in energy efficiency. Technological advances are adopted relatively slowly, and there is distrust in new technologies. The existing legal framework does not provide for mandatory implementation of challenging norms and standards directed at more efficient energy consumption.
2.4 Legal and Regulatory Framework
2.4.1 Legislation in Force
The basic legal framework relevant for the power sector as a whole in Serbia is incorporated in the Energy Law (2004) which regulates the main aspects of the energy sector: the generation, transmission, distribution and supply of electricity; the establishment and operations of the Serbian Energy Regulatory Agency (AERS); the organisation and functioning of the electricity market; the transportation, distribution, storage, trade and supply of oil products and natural gas and the production and distribution of heat.
The secondary legislation relevant for the electricity sector in Serbia consists of:
Transmission Grid Code - adopted by Public Enterprise “Elektromreţa Srbije” (PE EMS), approved by AERS and published in the Official Gazette of the Republic of Serbia No. 55/2008 Distribution Codes - adopted by the five economic societies for distribution of electricity, founded under the frame of Public Enterprise Electric Power Industry of Serbia (JP EPS), approved by the AERS, and published in the Official Gazette of the Republic of Serbia No. 4/2010, 5/2010 and 8/2010. Set of AERS decrees and documents such as:
o Licensing rules; o Decree on conditions for electricity supply; o Energy permit rules; o Connection pricing methodology; o Transmission tariff methodology; o Distribution tariff methodology;
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o Tariff consumers price methodology.
The legal framework specifically relevant for investments in Renewable Energy Sources – Electricity (RES-E) includes:
Decree on the Requirements for obtaining the Status of the Privileged Power Producer and the Criteria for Assessing Fulfilment of these Requirements (OJ 72/2009) Decree on Feed-in Tariffs for RES-E Model Agreement for the Power Purchase from the Privileged Power Producers (RES-E Installations) Rulebook for the issuance of energy permit (OJ 23/2006 and 113/2008) Regulation on technical and other requirements of liquid bio fuels (OJ Serbia and Montenegro 23/06) – defines technical requirements for bio diesel and bio fuels Construction Law (OJ 72/2009) – defines, among others, the procedure for obtaining construction permit Law on Environmental Protection (OJ 72/2009) Law on Strategic Environmental Assessment (OJ 135/2004) Law on Environmental Impact Assessment (OJ 36/2009) Integrated Pollution Prevention and Control Law (OJ 135/2004) - IPPC licence needed for biomass installations, Law on Waste Management (OJ 36/2009) – use of residue materials for the production of biogas, bio diesel and landfills Law on Air Quality (OJ 36/2009) – limits emissions for the facilities that use biomass as a fuel Law on ratification of Kyoto Protocol (OJ 88/2007 and 38/2009) - established Designated National Authority of the Republic of Serbia (DNA)5; Law on ratification of the Statute of the International Renewable Energy Agency (IRENA) December 2009 (OJ 105/2009)
2.4.2 Legislation under Development
New Energy Law
5 Serbia is non-Annex I country, eligible for Clean Development Mechanism CDM projects
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For several years now, the New Energy Law has been under development. The main reasons for the introduction of the New Energy Law relate to harmonisation with EU legislation and the development of incentives for new investments in the energy sector. Furthermore, the New Energy Law should contribute to a safe and reliable supply of energy to Serbia, provide less dependence on imports and turn Serbia into an energy exporter. In addition, during the implementation of the existing Energy Law, certain issues were recognised that needed to be added or changed. An inventory of these topics has been kept until the development of New Energy Law started, and proposals on many topics were included in the draft text of the New Energy Law.
Recently, the New Energy Law has progressed towards the release of an official draft which was subject to a public hearing which should have been completed by 10 February 2011.
The most important changes proposed in the New Energy Law are the following:
Alignment with EU Legislation: A long-term objective in energy policy is the development of an energy market in Serbia, and its alignment to the regional and internal EU market. This includes the provision of energy activities of public interest, which should contribute to the harmonisation of organisation and operation of the energy sector of the Republic of Serbia and other European countries. Renewable Energy Source (RES) and Incentive Measures: Chapter IV declares the usage of RES and CHP production as in the “interest of the Republic of Serbia” (i.e. public interest) and defines the process for determining activities of public interest. The government will, at a Ministry‟s proposal, determine national objectives, adopt a National Action Plan for the use of RES, adopt an act stipulating incentive measures for energy production by means of RES and pass an act regulating in more detail the compulsory share of bio fuel in the transport sector as well as measures for the accomplishment of this share. Guarantee of Origin: Guarantees of Origin allowing specific attributes to be assigned to particular quantities of electricity produced from RES are introduced. A Guarantee of Origin is defined as a public document issued to the electrical power producer, which uses RES or CHP, certifying that this electrical power is produced from RES or CHP. It will be issued by the Ministry in charge of Energy for a specific time period and quantity of electricity produced in this period. The Guarantee of Origin issued in an EU member state, in line with directives regulating the issuance of the Guarantee of Origin in European Union (foreign guarantees of origin), will also be valid under the reciprocity conditions in the Republic of Serbia. Electricity Market: Three electricity markets are defined: bilateral, balancing and power exchange. Organisation and administration of the electricity market of the
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territory of the Republic of Serbia shall be carried out by the Transmission System Operator, except power exchange administration, which will be carried out by the power exchange operator. Access to cross-border transmission capacities: Access to the transmission system in cross-border electricity exchanges will be carried out on the basis of the rights to cross-border transmission capacity use. Allocation of rights to use the cross- border transmission capacities, as the method of controlling the cross-border electricity exchange congestions, will be carried out in a non-discriminative and transparent manner and in accordance with harmonised technical operation criteria of interconnected transmission systems. Electricity and Natural Gas Supply: A supplier is defined as the energy entity which holds a licence for electricity or natural gas supply activity. A public supplier and the supplier of last resort are determined separately. A change in the electricity or natural gas supplier will be free of charge for the consumer.
Market Rules
The process of developing Market Rules development started in 2007. Since then there have been various incomplete draft documents developed by PE EMS, acting as TSMO (Transmission System and Market Operator), which were discussed and commented on by AERS. The latest draft, which was the first complete and consistent draft of the Market Rules, was submitted in 2010. Currently, there is an on-going dispute between AERS and PE EMS about the legal background for some stipulations proposed in the latest Market Rules draft. In particular, this dispute is caused by the existing Energy Law that does not offer the necessary legal framework for implementation of the Market Rules in accordance with the proposed electricity market model. It is expected that the New Energy Law will facilitate the resolution of the dispute and adoption of the Market Rules.
2.4.3 Legal and Regulatory Authorities
The Ministry in charge of Energy6 is the responsible authority for the energy sector, including the commodities of electricity, oil, gas and liquid hydrocarbons, as well as energy networks. It is in particular responsible for:
The energy balance of the Republic of Serbia, e.g. forecasting the country‟s annual energy needs and assessing the supply sources;
6 Up to March 2011 the Ministry in charge of Energy was the Ministry of Mining and Energy, and from March 2011 it is the Ministry of Infrastructure and Energy.
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Nuclear energy plants which produce power or heating energy and produce/use/deposit radioactive materials; Undertaking measures in order to secure the conditions for the functioning of the public enterprises in the fields within the scope of work of the Ministry; Supervision in the Ministry related fields, as well as other activities prescribed by the law; Preparing the draft (preparing the document, organising industry and public consultations) of the national Energy Strategy and submitting it to the Government, who, after adoption of this document, submits it as a proposal for the Parliament to adopt; Preparing proposals for the plans for execution of the strategy and submitting them to the Government for adoption; Issuing energy permits and approving the status of privileged power producers.
The Energy Regulatory Agency of the Republic of Serbia (AERS) was officially established as an energy regulatory body in June 2005 by the Energy Law and is managed by the Council of the Energy Regulatory Agency. Its main activities and responsibilities are the following (from AERS web site):
1. Price regulation
Under the group of tasks associated with price regulation AERS:
specifies the use of system charging methodologies for electricity transmission and distribution, natural gas transmission, distribution and storage and oil and oil derivatives transportation; specifies pricing methodologies for electricity, natural gas, and heat energy (produced in combined electricity and heat power plants) for tariff customers; adopts tariff systems for charging the use of system for electricity transmission and distribution, natural gas transmission, distribution and storage, oil and oil derivative transportation, and facilities for natural gas storage; adopts tariff systems for electricity and natural gas pricing for tariff customers; specifies the criteria and methods for electricity and natural gas transmission and distribution system connection charging; provides opinion on use of system charges for electricity transmission and distribution, for natural gas transmission, distribution and storage, oil and oil derivative transportation, and for natural gas storage facilities; provides opinion on electricity and natural gas prices for tariff customers; monitors implementation of methodologies and tariff systems; and
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monitors behaviour of energy entities in regard to account separation.
2. Licensing of Energy Entities for Conducting Energy Activities
Licensing of energy entities for conducting energy activities (except activities of distribution and production of heat energy in heating plants) is a group of tasks the Agency carries out as state administrative tasks entrusted to it by primary legislation (entrusted tasks), which include:
issuing of licences for conducting energy activities; revoking of licences; monitoring of compliance with licence conditions; keeping of register of issued and revoked licences.
3. Deciding appeals
AERS carries out entrusted state administration tasks, such as:
deciding appeals against acts of energy entities (system operators) on refusing access to the electricity and natural gas transmission or distribution system, access to natural gas storage, as well as on refusing access to oil and oil derivatives transportation systems; deciding appeals against decisions of energy entities on connection of facilities of producers and customers to the transmission or distribution system for electricity and natural gas, i.e. appeals against failure to adopt a decision on a submitted application for connection.
4. Energy Market Supervision
The group of tasks associated with electricity market supervision include:
approval of the Transmission and Distribution Grid Codes; approval of electricity Market Rules; specification of criteria for acquiring the status of eligible customer (with right to buy electricity/natural gas on the free market); specification of the eligible customer status at customer‟s request; keeping of eligible customer register; monitoring of implementation of Transmission and Distribution Grid Codes and Market Rules.
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5. International Activities and Implementation of International Agreements
An important part of the Agency‟s activities is associated with the implementation of international agreements ratified by the Republic of Serbia.7 Above all, this relates to the participation of the Agency in the work of the institutions of the Energy Community. By signing the international legally binding “Energy Community Treaty” on October 25, 2005 in Athens, the South-East European and EU countries have started a process of creating the Energy Community with the goal to expand the EU internal energy market onto the South- East Europe region. The Agency participates in the work of the Energy Community Regulatory Board (advisory body of the Ministerial Council of the Energy Community with possible executive functions), and in the work of the Electricity, Natural Gas and Social Forums.
The Agency also contributes to the implementation of other international obligations (associated with energy and regional integrations) which the Republic of Serbia took over as part of the European Partnership and Stabilisation and Accession process. The Agency is a fully empowered member of the Energy Regulators Regional Association (ERRA), a specialised association of regulators with the aim of improving collaboration, experience exchange, and capacity building of member regulators.
The Serbian Energy Efficiency Agency (SEEA) is a non-profit organisation that was founded in May 2002 by the Decree of the Government of the Republic of Serbia with the financial support of the EU. The Energy Law changed the legal status of the SEEA in August 2004, so SEEA became a special republic organisation. In the future SEEA has the potential to become a Public Agency (Lilić, 2009).
The establishment of the SEEA aims at improving conditions for energy and energy products conservation, as well as efficiency increases in energy conservation in all sectors of consumption. The Agency's mission is to promote and encourage rational use of energy within all consumption sectors and the use of renewable energy sources. SEEA is financed through the budget of Serbia, by EU donations and others. There are four regional centres for Energy Efficiency:
Provincial Energy Efficiency Centre Novi Sad Regional Energy Efficiency Centre Belgrade Regional Energy Efficiency Centre Kragujevac Regional Energy Efficiency Centre Niš
7 http://www.aers.rs/Index.asp?l=2&a=95&ted=&ed=&tp=
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2.5 Electricity Sector Organisation
2.5.1 Overview
In 2005, after the adoption of the Energy Law, the Serbian electricity sector was partially unbundled. The main drivers for changes were the transition process and reforms in surrounding countries, obligations taken on by membership in the SEE Energy Community arising from the Energy Community Treaty, and obligations arising from the road map for acquiring EU candidate status and membership in the Union.
According to the obligations assumed by Serbia, the TSO was separated from the vertically integrated company, creating the company Public Enterprise Elektromreţa Srbije (PE EMS), functioning as transmission, system and market operator. However, this was the only unbundling step taken. All electricity generation, distribution and supply remains within a single holding company: Public Enterprise Elektroprivreda Srbije (PE EPS), consisting of 11 Economic Associations for coal mining, electricity generation and distribution. The New Energy Law envisages further unbundling, namely of distribution and supply, but no changes in the structure or ownership of the generation assets. In the view of the government and most parts of the sector, it is assumed that the privatisation of the electricity generation sector would not be in the interest of citizens, since a state monopoly would be replaced by a private monopoly, with uncertain changes in electricity prices, security of supply, etc. Instead, the state strategy is to develop strategic partnerships with foreign investor(s) on new generation infrastructure and modernisation of distribution networks. Companies like EDF (Électricité de France) or ČEZ (largest utility and biggest public company in Central and Eastern Europe) or RWE (Rheinisch-Westfälisches Elektrizitätswerk AG), with strong generation capabilities and active investments all over the SEE region, are considered as ideal strategic partners for the future.
2.5.2 Generation, Distribution, Supply - EPS
PE Elektroprivreda Srbije (EPS) is the largest company in the country (it employs around 32.000 employees, as of December 2010). EPS is 100% state owned and holds licences for the following business portfolio:
coal production electricity generation, electricity trade, electricity supply,
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distribution of electricity.
EPS is a holding company and consists of 11 subsidiary companies:
Six production companies: one produces coal only, one produces coal and electricity, one is purely thermal electricity generation, one is CHP generation and two are hydro generation companies, Five distribution/supply companies (covering the low and medium voltage network, parts of the 110kV high voltage network, telecommunication and information systems and other infrastructural assets, as well as supply. The area covered by each distribution company in Serbia is shown in Figure 10 on page 55. Within the EPS Holding there is also a division for operational control (with the dispatch centre that controls generation facilities of EPS) and an electricity trading department. The latter is not a trading department in the usual sense. Instead it is the entity designed to balance the EPS portfolio, i.e. to buy lacking quantities and to sell surplus quantities of electricity. Furthermore, it is the place where the wholesale generation price applicable to tariff customers is regulated. There are limitations for EPS Trading concerning daily electricity trades, coming from the Law on public procurement that is mandatory for public enterprises. Therefore, EPS Trading is limited to buying electricity using a public tendering process, which is very slow, inefficient and commercially inadequate, while for selling it has the opportunity to sell electricity on a daily and even intra-daily basis using public invitation and direct offers by interested buyers.
After adoption of the New Energy Law the EPS Trading department will be transformed into a special type of supplier – called the “supplier to whom the government has entrusted the responsibility of wholesale supply to suppliers serving captive customers”. This special supplier will act as a kind of Single Buyer for all regulated wholesale generation sales, and this provision is significant for RES producers. The special supplier will become the supplier entrusted with the public service obligation to buy electricity from RES. We will analyse this aspect further in the context of the off-take obligation in Chapter 3.
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Figure 1: Organisational structure of PE EPS
Source: EPS
2.5.3 Transmission Operation - EMS
PE Elektromreza Srbije (EMS), 100% owned by the state, is the transmission system operator (TSO). It owns the transmission network and it is in charge of the transmission system operation. Moreover, EMS is envisaged as a System and Market Operator (TSMO) and would be in charge of the organisation of the electricity market, if this market would become operational. According to the Energy Law, EMS is responsible for the electricity market organisation and should perform the following tasks in a transparent and non- discriminatory way, as well as ensuring data confidentiality:
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Organisation of the wholesale market on the territory of the Republic of Serbia; Maintaining records of all contracts either directly between market players or on the electricity market; Transmission capacity allocation on the interconnections to other countries Development of the market; Preparation of the Electricity Market Rules
Currently, there are no Market Rules, and consequently some of the tasks are performed based on temporary market-based rules (allocating of cross-border capacity8) or by bilateral arrangements (acquisition of balancing energy and other power system ancillary services). While cross-border transmission capacity allocation is functioning in a very transparent and non-discriminatory manner, the acquisition of balancing energy and power system ancillary services is at this stage based on a regulated bilateral contract with EPS.
2.5.4 Independent Operators
In Serbia there are no generation units independent from EPS connected to the transmission network. There were some emergency plants in the city of Belgrade (ownership of local district heating company), but they have been decommissioned. There are some small generation units connected to the distribution grid, but at very low scale and insignificant for this assessment.
Similarly, concerning transmission and distribution networks, there are no private electrical network operators. While there are some transmission and distribution network facilities (substations, short lines, transformers, compensation equipment, etc.) owned by big industrial plants, they are all more or less controlled, operated and even maintained by the publicly owned network companies.
2.5.5 Electricity Wholesale Market
There is no approved wholesale electricity market legislation and no operational electricity market in Serbia. Draft Market Rules have been written and they have undergone a certain consultation process over the past 3 years. The rules are based on a common European market design – i.e. based on bilateral contracts, a power exchange and a balancing market.
8 For allocation of cross-border capacities EMS is using a transparent and non-discriminatory auctioning mechanism, which is based on market principles but not organised exactly as a market structure.
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However, for a variety of reasons, the process of adopting Market Rules has stalled. One reason is the perception that liquidity of the electricity market in Serbia, regardless of the implemented organisational platform, will be insufficient for the current turnover in the electricity sector.
In the absence of a document of comprehensive rules AERS has regulated separately certain aspects of the electricity market, and those parts are operational – namely a framework for customer eligibility, allocation of cross-border transmission capacity, bilateral electricity trading (without any operational market platform) and individual electricity supply contracts.
2.5.6 Electricity Trade
The right to import and export energy is subject to the condition that traders acquire sufficient transmission capacity from EMS on the interconnection to neighbouring countries to which their trades refer. Looking at the number of licences issued by the AERS for electricity trading (46), it seems there are a lot of electricity trading activities in Serbia. In reality, all these licences are obtained due to the fact that the Serbian TSO (EMS) does not allow bidders who are not registered and licensed in Serbia to participate in the auction for cross-border transmission capacity. Therefore, any trading company willing to acquire cross- border capacity over the Serbian transmission grid must establish a company and obtain a licence from AERS. When you take into account that Serbia has 8 electrical borders with neighbouring countries (some of them exporting and the others importing electricity, which makes the Serbian network an important electricity transfer corridor in the region), it is obvious that a large number of traders use their licence for transits rather than trade within Serbia.
2.5.7 Electricity Retail Market
In Serbia, the electricity market has been opened up gradually. A start was made by the Energy Law (2004), which initially set the minimum annual energy consumption requirements for the eligible consumer status to 25 GWh. This status grants the right to the customer to freely choose its supplier. Lastly, in 2008 the Council of AERS passed a decision by which all non-household customers could obtain eligibility regardless of annual consumption, and also large households consuming more than 200,000 kWh/year. This went further than the requirements imposed by the Energy Community Treaty resulting in a potential market opening of 47%. This means that total consumption of eligible customers, who can buy energy for own needs in the open market, is 47% from total Serbian electricity
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demand9. However, up to now no eligible customer has exercised its right to change supplier.
Non-eligible customers and effectively all eligible customers who did not choose to switch suppliers (which is in fact everybody) are supplied with electricity at regulated prices by the regional public electricity supplier – one of the distribution/supply companies of EPS.
2.5.8 Future Market Development
Figure 2: Serbian electricity market model
Source: Trhulj AERS (2008a) http://www.aers.rs/g/sajt/TE/Eng/Trziste-EE.gif
The figure above presents the officially stated model for the organisation and operation of the wholesale and retail electricity market in Serbia. This model, as was pointed out above, has not been implemented so far. Moreover, considering the size and structure of the electricity sector in Serbia, and bearing in mind the experience from other countries in Europe and elsewhere in the world, it is not likely that there could be an operational electricity market in Serbia, as depicted in Figure 2, in the near future.
9 Official AERS web site http://www.aers.rs/Index.asp?l=2&a=41&ted=&ed=&tp=TEEE
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The total size of the electricity sector and turnover in the electricity business are insufficient to justify the establishment and support the facilitation of liquidity in such an electricity market. Even if EPS was restructured and certain parts of it privatised (e.g. distribution companies, certain generation companies, etc.), and if expected developments in generation sector occurred as planned (new thermal coal-fired generation plants, new large hydro power plants, wind power plants), the total turnover would still remain small, making it difficult to allow competition in the wholesale electricity market and especially the balancing market. There is still significant inconsistency in the opinions of policy makers in Serbia with regard to the future market framework. While the New Energy Law anticipates the wholesale electricity market structure based on bilateral contracts, power exchange and a balancing market, the government also pursues its strategy of maintaining the generation-distribution-supply holding intact, inviting some new investments and “strategic partnerships”. It is conceivable that Serbia may join the example of other countries in the region in establishing a “formal” electricity market (Croatia, Montenegro, Macedonia) where the legal framework is adopted, market operators are appointed and formally established, but there are no traces of competition or actual market transactions. The existing cross-border transmission facilities in the region do not support electricity market operations on a larger scale, since there are still serious congestions at most of the electricity transfer corridors. Most of the countries in the SEE region are still regular importers of electricity, so there is not enough surplus electricity in the region that could be traded in so many markets.
In reality, the only real opportunity for developing a functioning electricity market appears to be through the creation of a regional market. This idea initiated through the Athens Forum and later developed into the association Energy Community of SEE. It has however not received consistent and practical support from most of the EC SEE member states.
2.6 Prices
2.6.1 Price Regulation
All retail prices and all components of the electricity retail prices for eligible customers and for non-eligible customers that do not switch (i.e. currently all customers) are regulated by
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AERS, although the final approval of tariffs is within the responsibility of the Ministry of Mining and Energy.10
According to AERS‟ Methodology for Setting Tariff Elements for Calculating Electricity Prices for Tariff Customers of Serbia, the maximum allowed revenue of an energy entity carrying out the retailing activity is calculated according to the following formula:
MOPt = OTt + At + NEEt + TPt + TDt + NRPt + KEt where: t regulatory period,
MOPt maximum allowed revenue for carrying out of the activity of electricity retailing in the period t (dinars),
OTt operating costs of the retailer in the period t (dinars),
At depreciation costs of the retailer in the period t (dinars),
NEEt costs of electricity procurement in the period t (dinars),
TPt costs of use of the transmission system in the period t (dinars),
TDt costs of use of the distribution system in the period t (dinars),
NRPt charge for the collection risk in the period t (dinars),
KEt correction factor in the period t (dinars).
With this formula, the costs of the regulated retailer are determined on an annual basis based on the data on planned sales.
The largest items in the formula are NEEt (costs of electricity procurement in the period t), TPt (costs of use of the transmission system in the period t), and TDt (costs of use of the distribution system in the period t). These elements in turn are separately regulated: the transmission and distribution use of system tariffs are currently being transferred to a modern incentive regulation.
10 This restriction of regulatory authority and independence has been criticised in EU benchmarking reports. The New Energy Law may transfer tariff setting authority fully to AERS.
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NEEt, the generation component, is established through annual agreements between EPS generators, EPS wholesale trading department and retailers for supply of captive customers, i.e. distribution companies. The method of setting this price is notionally cost-plus, however the costs are restricted to below economic cost levels by way of calculating capital costs on the basis of a regulated asset base determined as historic cost (rather than replacement value or similar). The capital costs recovered through the generation component include some costs for new investments. Medium-term investment plans for EPS are submitted to AERS and commented on, and then approved by the Ministry of Mining and Industry. The idea is that the allowed tariffs would cover the current operation plus planned investments, but there is no direct link which would ensure this. According to AERS, other costs that are not fully recovered include some maintenance costs (which are not being activated), as well as costs for improved metering.
The generation component NEEt is the major determinant in the overall end customer price formula. Limiting the raise of this component as described above means to limit the raise in end customer tariffs. Indeed, this quasi regulation of the generation component is the major way the government of Serbia “manages” electricity prices, i.e. keeps them at a “socially acceptable” level. There is some understanding shared by AERS and the Ministry in charge of Energy that the electricity prices need to raise. According to AERS an increase of about 15% is anticipated soon, followed by a further gradual planned increase to fully cost-covering levels. It is not clear over what period the cost covering level should be achieved. It appears that the price increases are restricted by the government in accordance with some notion of “affordability”, although it is doubtful whether any recognised methods of “affordability analysis” are being undertaken.
As of 1 March 2010 applicable prices for electricity sale to tariff customers are shown in the table below:
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Table 5: Electricity prices for tariff customer in Serbia as of March 2010
Source: AERS website
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2.6.2 Household Tariffs/Subsidisation
In Serbia there is no explicit social tariff which is directly aimed at poorer customers. However, there is a block structure of the electricity tariff, with a substantially cheaper first block. The block structure is said to have the objective of providing an incentive for the efficient use of energy, in particular, to discourage the use of electricity for heating. In addition to paying differentiated time of day charges, household consumers are charged different prices for consumption within the following colour-coded consumption zones. These are shown in the table below. There are two consumption tariffs for households, depending on consumption time of day. Lower (or night) tariff is applied for consumption from 00 - 08 hours and higher (or daily) tariff is applied for consumption for the rest of the day. Objective of two tariff system is to provide incentive for moving household consumption to low tariff period. These tariffs are combined with colour coded consumption zones – blocks. At the time the block system was introduced, the price charged for the third block was approximately 3.6 times higher than consumption in the first block. However, in the next few years, the block tariff structure “flattened”, apparently in order for the tariffs to reach “cost- reflective levels”.
Serbia‟s current block tariff system as specified in Article 19 and 20 of the Tariff System for electricity settlement for tariff buyers (dated 5 Jan 2007) is as follows:
Table 6: Serbia - Three-tier Block Tariff
Zone Consumption Zones
Green Zone (rational consumption) up to 350 kWh per month from 351 kWh to 1,600 kWh Blue Zone (moderate consumption) per month from 1,601 kWh upwards per Red Zone (High consumption) month
Source: Tariff System, AERS
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Figure 3: Serbia - Three-tier Block Tariff
AERS claims that the block tariff currently offered in Serbia is not to be regarded as a social tariff as this tariff is offered to all domestic customers. It is not explicitly directed at a certain group of people e.g. „poorer‟ customers. The aim of the block tariff system in Serbia is to incentivise consumers to use electricity more efficiently. AERS further says that the current block tariff in Serbia involves no cross-subsidisation by other household customers through the tariff offered in the second or third block. According to the model for calculating the end- user tariffs in Serbia the electricity produced in the first block (green zone) is generated by base load power plants, which are cheaper. These costs are apparently reflected in the first green zone. 11
Serbia has two main subsidy mechanisms which are offered to customers to assist with electricity bills. These consist of:
1. Material Support to families (MOP) - have 30% discount for 450kWh per month; these are customers receiving financial/welfare support
2. “Social” group of families - have 30% discount for 300kWh per month:
11 This notion is of course flawed. Cheaper base-load generation costs should account for the load of customers who are also base-load, i.e. customers with a less peaky consumption profile. Household customers do not usually belong to this category.
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Pensioners with the lowest pensions
Handicapped citizens or those being cared for by others
Foster families
Families that receive financial support for the third and fourth child
This energy related support is offered as part of Serbia‟s general social welfare policy.
2.6.3 Price Developments
Prices for electricity in Serbia have risen over the past 10 years, but without any logical and reasonable algorithm behind their actual value. It has always been considered as a serious political issue: electricity prices are seen to be responsible for inflation increases and are a significant social factor. Therefore, each electricity price increase so far started with the calculation of costs for public enterprises from the electricity sector and ended with bargaining between ruling political parties and opposition. The table below shows the development of electricity prices for different categories of consumers during the period 2000 – 2009, expressed in €c/kWh.
Table 7: Electricity price development in Serbia in €c/kWh, 2000-2009
YEAR Consumption category 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
110 KV 0.55 1.00 1.75 2.13 2.31 2.37 3.08 3.59 3.87 3.55
35 KV 0.57 1.20 2.05 2.56 2.58 2.55 3.10 3.68 4.49 4.13 10 KV 0.86 1.45 2.41 2.92 2.96 2.86 3.36 4.05 4.92 4.62
High Voltage 0.74 1.30 2.19 2.66 2.72 2.67 3.24 3.87 4.54 4.25
0,4 KV I step 0.99 1.94 3.28 3.79 3.88 3.94 4.74 5.78 7.09 6.68
0,4 KV II step 1.25 3.03 5.60 5.66 5.26 4.85 5.22 6.08 6.90 6.37
Households 1.00 1.83 3.08 3.44 3.53 3.47 3.88 4.59 5.06 4.67
Public lighting 0.98 1.45 2.55 3.18 3.26 3.13 3.66 4.40 5.12 4.73 Low Voltage 1.03 1.97 3.36 3.71 3.74 3.66 4.13 4.91 5.57 5.15
Average price 0.95 1.79 3.04 3.44 3.46 3.39 3.88 4.62 5.28 4.91 Source: AERS
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Average retail prices, including all customer groups, have increased in all Balkan countries over the last 5 years, including Serbia. However, there are still substantial differences between Serbia and other countries, as can be seen from the figure below. Compared to other countries in the region electricity prices are still very low in Serbia.12 Prices in Serbia have increased significantly, but are still the lowest among all countries in the region. In 2009, they were approximately 50% as high as prices in the most expensive country, Croatia, and some 75% as high as prices prevailing in countries with medium-level prices, like Bosnia and Albania. It should be noted that variations in the exchange rate have a substantial effect on prices. For instance, the net value of electricity prices in Serbia expressed in Euro apparently decreased from 2008 and 2009. The reason is that exchange rates changed more than prices increased.
Figure 4: Average electricity prices for all customers in SEE countries
Source: “Electricity Prices and Tariffs in the Energy Community 2008-2009”, Energy Community Regulatory Board, 2010.
Despite the nominal price differences, the split of revenues into the main supply chain elements is similar in all countries, except for Albania. Generation dominates with a share of 40-60%, followed by distribution/supply, whereas the share of revenues gained on the transmission level do not exceed 10%.
12 Information presented hereafter taken from “Electricity Prices and Tariffs in the Energy Community 2008-2009”, Energy Community Regulatory Board, 2010.
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Figure 5: Revenue breakdown of electricity prices in Serbia in 2009
Source: “Electricity Prices and Tariffs in the Energy Community 2008-2009”, Energy Community Regulatory Board, 2010.
Decomposing retail prices by customer groups allows for further insight into electricity prices in Balkan countries. Common to most of the countries, the prices for industrial customers and residential customers increased between 2007 and 2009, while price increase for commercial customers was moderate or small. In all customer categories, Serbian prices are (among) the lowest. Moreover, commercial customers tend to pay the highest prices in all countries, as can be seen in the following graph.
Figure 6: Average electricity prices by customer type in EC SEE countries in 2009
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Source: “Electricity Prices and Tariffs in the Energy Community 2008-2009”, Energy Community Regulatory Board, 2010.
2.7 Electricity Production
2.7.1 Generation Capacities
The main primary energy sources for electricity generation in Serbia are water (small and large hydro power) and domestic lignite coal. A minor share of the generation capacities is powered with liquid fuel and gas. Among the thermal power plants, pure electricity generation clearly dominates over combined heat and power generation (CHP).
The installed generation capacity in Serbia is 7,144 MW, where 3,936 MW is in electricity- only TPPs, 353 MW in CHPs and 2,831 MW in HPPs. Also, there are 13 mini hydro power plants with a total installed capacity of 24 MW. In 2009, EPS‟s power plants generated 36,112 GWh of electricity, where 24,880 GWh were from electricity-only TPPs, 139 GWh from CHPs13 and 11,093 GWh from both large and small HPPs (44.6 GWh from mHPPs).
Table 8: EPS’s electric power generation structure (2009)
Installed Capacity Generated Electricity Power Plant MW (%) GWh (%)
Thermal power plants* 3,936 55.1 24,880 68.9
Combined Heat and Power plants 353 4.9 139 0.38
Hydroelectric power plants (incl. mHPP) 2,855 40 11,093 30.72
Total 7,144 100 36,112 100 Source: http://www.eps.rs/publikacije/annualreports.htm
Figure 7 shows the locations of existing power plants and coalmines in the territory of Serbia and those under construction. Electricity generation sites are mainly located to the east and west of the Belgrade region next to coalmines and large run-of-river water reservoirs.
13 Usually they produce more, but during 2009 two plants were under major refurbishment.
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Figure 7: EPS - power plants, coalmines and distribution companies
Source: Annual Report EPS (2009)
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From Table 8 above it can be seen that the total share of generated electricity from TPPs is much higher than their actual share in the installed capacities, which is logical taking into account the technological parameters of different generation plants and strong dependency of hydro power generation from the variable hydrological conditions. The average ratio of electricity generation between thermal and hydro power plants in Serbia is 70%:30%, respectively, with minor annual deviations subject to the hydrological conditions.
Figure 8 shows the amount of available electricity from EPS generation assets (representing almost all Serbian capacity) for each month of 2009, expressed in GWh. The production from hydropower mainly relies on run-of-river hydro power plants that clearly show a seasonal profile as a result of precipitation and availability of flowing waters. Thermal power plants, the pillar of Serbian electricity generation, have an all-year stable base production of some 1,500-2,000 GWh, but varies by season adapting to changes in consumption (higher in winter than in summer) and variable production scales in run-of-river hydro plants. The same function has energy procurement by imports. Reservoir hydropower is the least important source and balances short-term imbalances between generation and consumption without a seasonal profile.
Figure 8: Monthly profile of available energy in 2009 including generation and imports
Source: EPS 2009
2.7.2 Rehabilitation and Upgrading of Existing Capacities
Throughout 2009 and 2010 EPS has started numerous activities on rehabilitation and modernisation of existing TPP and HPP plants. Works that have already been completed have resulted in minor increases of generation capacity, while other works are foreseen to
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start by 2012. The list below presents major modernisation activities for EPS electricity generation facilities:
Rehabilitation of HPP Bajina Basta, with the purpose of a life time extension by another 30-40 years and a power upgrade from 91 MW to 104 MW (currently rehabilitation of unit No. 1 is complete, unit No.2 should go for rehabilitation in June); Rehabilitation of HPP Djerdap 1 aiming at a capacity increase of all six units from 176 to 205 MW (currently rehabilitation of unit No. 6 is completed, it is under testing and will be ready to return to operation by June 2011 when unit No.5 should go for rehabilitation – the plan is to rehabilitate one unit each year); Rehabilitation of HPP Zvornik, with the purpose of a life time extension by another 20-30 years and a power upgrade for an additional 25 MW (in the best case works will start by the end of 2012, while 2013/2014 is entirely realistic); Rehabilitation and modernisation of TPP Kostolac B2, with the increase of power output for 20-30MW (started in June 2010). Various repair works including ecological improvements: TPP Nikola Tesla B2, TPP Kolubara A3, TPP Kolubara A5, TPP Nikola Tesla A3, A4, A5 and TPP Kostolac A. Modernisation program of existing mini HPPs owned by EPS (some of them are over 100 years old, but still operational).
The majority of the projects will be realised in cooperation with international funding institutions, private/public foreign investors and with the assistance, where appropriate, of foreign companies and technical experts.
2.7.3 Generation Development Plans up to 2020
Generation infrastructure development plans for Serbia are difficult to assess due to a number of data inconsistencies. Some announced plans and reported statements appear unrealistic and not well founded. There are two main streams of information on plans and new generation infrastructure: one is public, represented by EPS and the Ministry of Energy and Mining, and the other one is private, represented by private foreign and/or local investors. Both information streams are determined by vested interests: in the public sector statements are frequently politically driven and can be unrealistic14, serving usually short term populist political goals. In the private sector, some serious investors are giving serious
14 Such as, for example, the statement by the Minister of Energy and Mining on Serbia‟s participation in the construction of NPP Belene in Bulgaria.
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statements, but others release false statements on generation development trying to sell their licences or acquired land property.
Below we have listed the existing (formal, official) plans for new generation infrastructure, together with an assessment (in bold, italics) based on our contacts and best knowledge of the Serbian electricity sector, presenting a realistic view of the expected development of electricity generation in Serbia:
Construction of two coal-fired TPPs, Kolubara B (2 units, 350 MW each) and unit No. 3 at power plant Nikola Tesla B (700MW). The tenders for selection of a strategic partner for these developments were underway during April and May 2011, however in our opinion, these projects are not realistic in the near future. In the best case, one of those two planned TPPs may be constructed, but definitely not before the year 2020. Construction of 10 HPPs with total installed power of 103 MW on the Ibar river. An agreement for the development of analyses and a pre-feasibility study was signed with the Italian company Seci Energia S.p.A. In our opinion, this project is not realistic in the near future. The Italian partner will invest in this project only if they can export their share of HPP generation to Italy, which is only feasible if the submarine cable between Montenegro and Italy is built, associated 400kV OHLs inside Montenegro and between Serbia and Montenegro, and if the Italian TSO TERNA is granted certain capacity in these transmission infrastructure. Otherwise, the price of electricity in Serbia would be too low to guarantee return of investment. Construction of 5 run-of-river HPPs on the Morava river, with total installed power of 150 MW. The German company RWE Innogy (responsible for the planning and construction of HPPs in the RWE Group and for operation of around 90 plants in six countries) and Elektroprivreda Srbije (EPS) formed on May 24th 2011 a joint venture company "Moravske hidroelektrane d.o.o.“, in which RWE Innogy has a stake of 51 % and the share of EPS is 49 %. The Construction of the first power plant should start in 2014, after the positive outcome of feasibility studies and completion of the planning process. The expected annual generation of all cascade HPPs is 650 GWh. The deal between RWE Innogy and EPS came as surprise, the construction of new HPPs on Morava river had not been in the discussion since . The deal was concluded very recently, and it is too early to form an opinion. Developments should be followed-up. Modernisation and extension of existing CHP Novi Sad. This project is to be executed by the new company Energija Novi Sad (ENS), a joint venture between EPS and the City of Novi Sad, and it aims to attract a strategic partner for the
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investment in the 450 MW/350 MW CHP unit at the location of the existing plant. The tender for this strategic partnership is still open. In our opinion, this is a realistic and feasible project, but the timing is uncertain at the moment. This CHP should be constructed by 2020. Construction of a new unit B3 at TPP Kostolac B by EPS together with the Chinese National Energy Corporation, with estimated power of 350MW (or more). This project includes the rehabilitation of filters at TPPs Kostolac B1 and B2, as well as extension of coal mining capacities. In our opinion, this is a realistic and feasible project, expected to be completed by 2020. Construction of 3 x 150 MW HPPs on middle Drina with EPRS (power Utility of the Republic of Srpska) and with Seci Energia S.p.A. This should be a follow-up project if construction of HPPs on Ibar river is finished successfully. Accordingly, it is not feasible in the near future. Construction of HPP Buk Bijela on the upper Drina with EPRS. This is a very controversial project linked with numerous water utilisation rights and other open issues between three involved countries (Serbia, BiH and Montenegro), so even if it is technically feasible, it is unlikely to be completed before 2020 (with huge uncertainty even for the later period). Construction of RHPP Bistrica 4 x 180MW. Currently this is just a plan in EPS, without further elaboration. Additional generation unit No. 5 in the existing HPP Bajina Basta. This is a realistic option, expected to be completed by 2016-2017. Additional generation unit number 5 in the existing HPP Zvornik. This is a realistic option, expected to be completed by 2018-2019. Construction of new HPP, TPP and renewable sources15 under the Strategy Implementations Programme and through strategic partnerships in the region.
As presented above, most of the new generation development projects that exist in the official plans of EPS are not realistic or may become operational much later than planned. The main problem is the lack of financing capabilities of EPS and insufficient investment opportunities in the country for attracting foreign investors, as electricity prices are very low. The country is still suffering from corruption, and the decision making process in all structures of the society is very slow. The only projects which may be executed before 2020 are new generation units in existing HPPs in Bajina Basta and in Zvornik, the new CHP (replacing existing two units 105 MW each) in Novi Sad and a new generation unit in TPP Kostolac B. All other developments, even if they happen, will be seriously delayed.
15 Generation development plans from RES are indicated in Chapter 3.
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This situation is cause for serious concern. EPS‟s generation assets on average are of a considerable age. Currently, EPS thermal power plants have been operating for 187,000 hours, or 31 years16 on average, while hydro power plants have an average age of 35 years. Although considerable rehabilitation works have been done in the last decade and have contributed to more efficient electricity generation and security of supply, the most ancient TPPs, such as Kolubara A1, A2 and A4, are planned to be decommissioned after 2012 due to environmental and operational cost reasons17, although it is more likely that their decommissioning will be postponed until a new TPP unit is commissioned and starts the generation of electricity.
The only entirely private (no EPS or any other private enterprise involved) investment in conventional electricity generation facilities (RES are elaborated in Chapter 3) is a plan for the construction of the power plants at the Lim river near the city of Brodarevo (HPPs Brodarevo 1 with 23 MW and Brodarevo 2 with 25 MW), by the Canadian company Reservoir Capital Corporation from Vancouver (BC) Canada. The current status is that a consortium for the development of a feasibility study has been established and the study is due to be completed by August 2011.
2.8 Transmission
The Serbian electricity sector has been a member of the European power system/transmission network associations (ENTSO-E, former UCTE, former UCPTE) since 1974 when actual parallel operation with the pan-European electricity interconnection started. From June 1999 to October 2004, the power system of Serbia, together with the power systems of Montenegro, Kosovo, part of Bosnia & Herzegovina (BiH), Albania, Macedonia, Greece, Romania and Bulgaria, operated in a separate interconnection, called the UCTE18 Second Synchronous Zone, independently from the main UCTE grid called First Synchronous Zone (see Figure 9 below). The separation was caused by the devastation of transmission substations in Croatia and BiH during the war. By 2004, Serbia‟s electricity transmission network had been sufficiently rebuilt to play a key role in the reconnection between zones 1 and 2 of the UCTE network.
16 This is estimated, based on the statistical average of 6500 operating hours per calendar year for Serbian TPPs. 17 EPS annual report 2009, p.26, and Security Supply Statement 2009, p. 8. In contrast, while for instance a lignite TPP‟s life time may be assumed to be limited to some 40 years of operation, HPPs in general are able to operate much longer, e.g. 100 years, although subject to significant modernisation and maintenance. 18 Union for the Coordination of Transmission of Electricity, association of European transmission system operators, which was absorbed by the new European Network of Transmission System Operators for Electricity association from July 2009.
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Figure 9: The reconnection between zones 1 and 2 of the UCTE (in 2004)
Source: Eurelectric-UCTE WG Systint (2007)
2.8.1 Technical Characteristics of the Transmission Network
Within the Serbian control area there are two sub-areas, the Kosovo region and the rest of Serbia without Kosovo. The total length of EMS‟ power transmission lines of different voltage levels is 8,828.8 km. Figure 10 below shows the Serbian electricity transmission network as well as respective interconnections.
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Figure 10: Transmission system map
Source: EMS website (2010)
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Table 9: Transmission losses in Serbia for the period 2006 – 2010 (estimation)
Transmission losses Year GWh % 2006 1,295 2.75 2007 1,278 2.67 2008 1,224 2.79 2009 1,106 2.68 2010 est. 2.70
Source: EPS, Annual reports
Electricity losses in the Serbian transmission network are relatively low and at the level of reasonably developed, properly maintained and efficiently operated transmission networks in the world. Taking into account significant transnational electricity transmits over the Serbia transmission network, it may be concluded that the share of electricity losses caused by internal electricity flows is rather low.
Due to its geographical position, the Serbian power system has strong connections with its neighbouring countries, namely 11 tie lines at 400 kV and 220 kV levels on 8 borders. There are also a number of 1x110kV links to some neighbouring countries, but they are not in parallel operation and normally are used only in emergencies. Table 10 shows the existing cross-border interconnection lines in the Republic of Serbia.
Table 10: Existing interconnections
Voltage Transmission From To level (kV) capacity (MVA)
Djerdap HPP Portile De Fier (Romania) 400 1,100
Niš Sofia West (Bulgaria) 400 1,330
Kosovo B TPP Ribarevina (Montenegro) 400 1,330
Kosovo B TPP Skopje (FYR of Macedonia) 400 1,330
Sremska Mitrovica Ernestinovo (Croatia) 400 1,330
Sremska Mitrovica Ugljevik (BiH/RS) 400 1,330
Subotica Sandorfalva (Hungary) 400 1,330
Prizren (Kosovo) Fierza (Albania) 220 347
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Poţega Pljevlja (Montenegro) 220 347
Poţega Višegrad (BiH/RS) 220 347
Bajina Bašta Pljevlja (Montenegro) 220 347
Source: Eurelectric-UCTE WG Systint (2007)
2.8.2 Cross-Border Flows
Serbia has considerable amounts of electricity transits, imports and exports. Traditionally, Serbia imports mainly from northern and western countries, namely Hungary, Romania and Bulgaria, and exports to eastern and southern countries such as Croatia, Bosnia- Herzegovina, Montenegro, Albania and Macedonia. Imports used to exceed exports and covered energy imbalance especially during winter periods with high consumption. However, compared to former times the import and export account diminished considerably in 2009. On the interconnection lines to adjacent countries, usually congestions are recorded in the electricity transfer directions Bulgaria - Serbia, Romania - Serbia, as well as in the directions Serbia - Croatia, Serbia – Bosnia & Herzegovina, Serbia – Macedonia and Serbia - Montenegro. In the opposite directions there were no congestions on any borders.
Table 11: Serbian cross-border exchanges of electricity (GWh)
RS-HR RS-BA RS-ME RS-AL RS-BG RS-RO RS-HU RS-MK TOTAL
2005 4,136 516 1,210 -417 -2,756 -2,470 -1,677 1,989 531
2006 2,974 1,624 1,048 -381 -2,837 -3,259 -1,467 2,126 -173
2007 1,791 2,039 1,362 231 -2,002 -2,733 -3,430 2,467 -275
2008 2,061 2,120 850 -26 -2,381 -3,205 -2,650 2,669 -562
2009 1,707 1,210 -41 -322 -1,138 -1,593 -1,290 2,327 860
2010 1,537 957 -260 -898 -1,736 -1,894 152 2,309 427
Source: UCTE, ENTSO-E Statistics, EMS, EPS
The Serbian transmission network is a major link in both north-south and east-west power transfer corridors in the SEE region (“+” is delivery and “-” is receipt of energy). Also, from this table it is obvious that the energy portfolio in Serbia is almost in balance at annual level, albeit with significant seasonal deviations.
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The available transfer capacity (ATC) at the borders of the Serbia control area is determined together with the TSOs from the neighbouring countries in compliance with the recommendations and rules established by ENTSO-E and Serbian Transmission Grid Code. This ATC is split between neighbouring TSOs for each direction over each border, and allocated at separate auctions. In Serbia, calculated ATC is published and allocated at yearly, monthly and weekly auctions organised by EMS. The rules for cross-border capacity allocation are temporary, updated each year and applied until the Market Rules are adopted.
Starting from 1 January 2011, EMS started to organise common explicit ATC auctions with Hungarian TSO MAVIR. The actual scenario is that annual and monthly auctions are organised by EMS while daily auctions are organised by MAVIR.
2.8.3 Transmission Network /Interconnection Expansion Plans
In accordance with the Transmission Grid Code, EMS prepares yearly development plans specifying the construction schedule of new transmission network facilities and the modernisation of existing ones, including plans for new interconnection lines towards neighbouring transmission grids (Table 12). Plans for new interconnection lines are synchronised with relevant cross-border partners (neighbouring TSOs) and also coordinated at pan-European level through ENTSO-E TYNDP (Ten Years Network Development Plan) in order to avoid duplication of activities and maximise the effects of new infrastructure developments.
Table 12: Interconnection expansion plans
Interconnection Expected Project Expected effects Status to date
Under Eliminate congestions 400kV single OHL Nis construction in RS Macedonia in the North – South 2012 - 2013 – Štip (220km) and design & corridor of SEE region permitting in MK
Feasibility study is 400kV double OHL (in Increase security, completed on both the first phase single) increase NTC and Romania sides. Design and 2015 Pančevo – Resita facilitate RES permits are (150km) generation development underway.
Bosnia- Upgrading of existing Increase NTC between Pre-feasibility 2020 Herzegovina 220kV OHL to 400kV two TSOs and security study completed.
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of the entire Feasibility study interconnection under preparation.
Sources: UCTE TYNDP (2010), EMS, KEMA’s view on feasibility
2.9 Distribution Network
2.9.1 Overview
In Serbia, the distribution network is dominantly covering medium and low voltage. From the high voltage lines, there are only some 110kV lines that are connecting different distribution substations, or distribution substation to the nearest transmission network substation (or power plant). Electricity distribution activities in EPS are organised by five affiliated distribution companies with regional coverage shown in the Figure 10. The table below presents the summarised technical assets of Serbian distribution networks, i.e. distribution lines (overhead lines and cables) and distribution transformers at various voltage levels.
Table 13: Distribution network assets by voltage levels
Voltage level 110 35 20 10 0.4 TOTAL
Length of distribution lines 496 6,855 8,235 30,566 96,044 142,195 (km)
Voltage level 110 35 20 10 0,4 TOTAL
35 1,374 - - - -
20 2,431 - - - - Installed capacity of distribution 10 1,546 6,160 - - - transformers 0.4 - - 2,794 8,985 - (MVA) 110/X/Y19 1,197 - - - -
Total 24,487
Source: EPS annual Report 2009.
19 A transformer which has three windings: primary (110 kV), secondary (marked as X) and tertiary (marked as Y); only present at transformers with 110 kV voltage primary winding.
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Table 14 presents figures for electricity taken over from the transmission grid by each distribution company. Since distributed generation in Serbia is still negligible, these figures are equivalent to the consumption of electricity in each distribution area (company). In a way, consumption coincides with the industrial development and urban level of each area, and accordingly the technical and operational level of each distribution company.
Table 14: Electricity taken over from transmission grid by distribution companies
Electricity
Distribution Company GWh %
Elektrovojvodina 8,799 27.48
Elektrodistribucija Beograd 7,963 24.87
Elektrosrbija 7,387 23.07
Jugoistok 4,889 15.26
Centar 2,985 9.32
Total 32,023 100
Source: EPS annual Report 2009.
2.9.2 Technical Condition
Most of the distribution network assets in Serbia are in reasonably good technical condition. This means that they are regularly tested, controlled and maintained, and that their performance may be considered satisfactory. A certain share of distribution network assets is rather old and technologically out of date, but from the operational point of view still reliable and safe for operation. Looking at the distribution companies, the most advanced in terms of technology/resources/quality are the distribution companies ElektroVojvodina and Belgrade Distribution, followed by ElektroSrbija. The remaining two distribution companies are slightly behind due to significantly lower number of consumers (turnover and profit are also less which impacts investment capability) and domination of rural over urban areas.
Currently, there is a large on-going program of distribution network upgrading, which is going to significantly improve the technical condition and performance within the coming 5-6 years. On top of this, EPS recently signed the contract for acquisition of almost 500.000 intelligent meters equipped for remote reading and control of consumption. EPS also established a “smart grids” division with the aim of following the most recent trends in this area and facilitating the expected development of RES at distribution level.
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Table 15: Distribution losses in Serbia for the period 2006 – 2010 (estimation)
Distribution losses Year GWh %
2006 4,298 13.3
2007 4,205 14
2008 4,035 13.6
2009 4,318 15.19
2010 est. - 13.9 Source: EPS Annual Reports
Losses in distribution networks are one of the major challenges for distribution companies in the future, especially the so-called “commercial” losses that are actually theft of electricity (illegal connections, meter by-passes, etc.). The existing legislation (although very explicit in determining illegal and incorrect electricity connections as legal offences) is not strong enough and incentives for EPS not sufficient to finally resolve this issue. There are some results in fighting electricity theft and some reductions in “commercial” losses, but this issue is still present. Technical losses are normally higher in rural than in urban grids, and with all planned distribution network improvements, including new electricity meters, the reasonable target is to reduce these losses to below 9%.
2.9.3 Distribution Network Development
According to EPS information, the following works and activities on the distribution network are foreseen:20
Revitalisation or replacement of existing obsolete equipment in the distribution network, Accomplishment of the construction already started of 12 distribution transformer substations with voltage of 110/35 kV and 110/x kV, 8 distribution transformer substations with voltage of 35/10 kV, as well as the extension of existing transformer substations, Construction and reconstruction of power lines in distribution network,
20 EPS website
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Construction of the network of lower voltage levels, in accordance with local growth in electricity consumption and development of transmission capacities, and also in accordance with the need to increase the level of quality of supply Improvement of consumers‟ metering equipment and further development and introduction of automated reading system Decrease of technical and economical losses in the distribution network and an increase in the level of collection for delivered electric energy Continued development of distribution systems of management.
A part of investment activities refers to the project of constructing a transformer substation 110/x kV financed by the World Bank and refers to the construction of transformer substation Mačvanska Mitrovica and Arilje (phase I) and transformer substation Nis 8, transformer substation Jagodina 3, transformer substation Mosna (phase II). Means for these facilities shall be engaged by EPS, and the accompanying 110 kV power lines shall be within the competence of JP EMS, and also financed from these resources.
2.10 Supply and Demand
Serbia had a significant surplus of energy supply until the early 1990s, but by the end of the 1990s the country ended up importing power regularly during winter periods. The main reasons were high inflation, lagged adjustment of final consumer prices for social reasons and a lack of proper maintenance and investments in generation facilities caused by poor financial conditions. Today, the country‟s energy policy envisages converting Serbia once again into a net exporter of energy, relying on the enlargement of the existing generation capacity by new conventional and renewable sources and strong interconnection to the European market.
2.10.1 Electricity Consumption Structure
The total electricity demand in Serbia is driven by numerous factors. The major consumer group is households and demand behaviour over years is difficult to predict (for example, during economic crisis when electricity consumption in most of the countries was dropping, Serbia recorded an increase in electricity consumption.) The average electricity demand growth over the last 10 years was 1.58% with significantly different annual figures, as presented in Table 16 below.
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Table 16: Annual gross electricity demand in Serbia in 21st century
Year Demand Growth
2000 29,939 n/a 2001 30,821 2.95 2002 30,245 -1.87 2003 30,951 2.33 2004 31,110 0.51 2005 31,482 1.20 2006 32,466 3.13 2007 33,263 2.45 2008 34,038 2.33 2009 34,666 1.84 2010 est 35,000 0.96
Source: EPS Annual Reports
As shown in the table below, the share of household customers in the distributions companies‟ supply profile is high in terms of customer number and consumption. Households consumed some 53% of total energy supplied.
Table 17: Electricity sales structure by customer type, voltage level and supply company
High/medium voltage Low voltage
High Medium Region Other Consumer spending Total voltage voltage Public 10(20) 0.4 kV 0.4 kV lighting 110 kV 35kV Households kV I level II level
Elektrovojvodina 311 81 1,778 709 555 4,016 133 7,583
Elektrodistribucija Beograd 74 140 1,101 1,106 512 3,711 104 6,747
Electricity Elektrosrbija 635 150 851 752 449 3,298 120 6,256 supplied (GWh) Jugoistok 171 356 518 371 279 2,220 74 3,989
Centar 861 2 149 206 149 1,167 49 2,583
Total 2,052 729 4,397 3,144 1,944 14,412 479 27,158
Electricity supplied (%) 7.56 2.69 16.19 11.58 7.16 53.07 1.76 100
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Number of Customers/ Measuring 32 158 3,946 45,956 302,095 3,092,470 23,736 3,468,393 Points Average consumption per customer 64,130 4,610 1,110 68.41 6.44 4.66 20.18 7.83 (GWh)
Source: EPS Annual Report 2009
Moreover, the table above and the figure below indicate that household customers, who are by default connected to low voltage networks, represent the largest demand in all areas, often followed by customers connected to 20kV, 10 kV or 0.4kV. Large customers connected to the 110kV network, mainly industrial sites, have a considerable portion of total consumption only in the Centar and the Elektrosrbija region. Moreover, the order in which regions are listed coincides with the magnitude of consumption in that region, i.e. the Elektrovojvodina region is listed first and has the highest consumption among all regions. This also indicates a profile from north to south, with exception of the Centar region: the more south the region is located, the lower total consumption and consumption of customers connected to networks of 20kV or lower tends to be. Moreover, large customers who are connected to the 110kV or 35kV networks reside circularly around the Belgrade region.
Figure 11: Structure of electricity consumption by distribution companies and types of consumers
GWh 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Elektrovojvodina Elektrodistribucija Elektrosrbija Jugoistok Centar Beograd
110 kV 35kV 10/20kV 0.4 kV 0.4 kV Households Public I level II level lighting
Source: EPS Annual Report 2009
In 2009, net electricity consumption amounted to 27,158 GWh. According to EPS, Russia‟s cancellation of the gas supply to European countries was the main reason for the record- breaking figures of electricity consumption in 2009. The reason for the discrepancy between
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the energy taken over by distribution companies from the transmission network and the electricity actually delivered to customers is that EPS‟s supply activities were strained by a high degree of technical and economical losses, totalling more than 15%. EPS treats losses from irregularities in power consumption metering, registration and misuse as economic losses and has set up in 2009 a loss reduction program for better customer control.
The figure below shows the consumption split by categories of customers in 2009.
Figure 12: Electricity consumption structure in Serbia in 2009
Transport Construction Other Agriculture 2% 1% 18% 1% Industry 24%
Households 54%
Note: Industry excludes energy sector related consumption, like coal transformation and mines, district heating plants and refineries, though with negligible impact on the above consumption profile.
Source: “Balance of Electricity in 2009”, Statistical Office of the Republic of Serbia, 2010;
Electricity demand in Serbia is strongly dominated by the consumption of households, whereas industrial consumption ranks behind. This is contrary to other countries where industrial developments and activities are much stronger and accordingly the electricity demands from industrial, transport and services sectors are dominant.21 The reasons for high shares of household consumption are, on the one hand a significant reduction in industrial production in the mid 90‟s as a consequence of the international sanctions imposed on Serbia at the time (from which the economy still cannot recover), and on the other hand the relatively low electricity prices, especially in comparison with other primary energy sources, so that households still significantly use electricity for heating purposes.
Figure 13 below documents a) the change in overall generation and consumption in the last decade and b) Serbia‟s monthly electricity consumption profile in 2009. Similar to other countries, winter is characterised by significantly higher consumption than summer, which
21 One effect is that the current economic crisis will not hit economic, especially industrial, activity and make the electricity demand in Serbia decline to the extent as experienced by other more industrialised countries.
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can be explained by the high proportion of household consumption in total consumption and the extensive use of electricity for heating purposes.
Figure 13: Annual (left) and monthly (right) electricity consumption in Serbia in 2009
Source: a) Annual Report EPS, b) EMS web site
2.10.2 Future Consumption Forecasts (Outlook 2020)
The official demand forecast by EPS states that electricity consumption in 2020 should be 13% higher than in 2010. Growth should be approximately linear until 2015 with average annual increase in demand of 0.9%, and from 2015 to 2020 with average annual demand growth of 1.7%.
Table 18: Gross electricity demand forecast for Serbia in the period 2010 - 2020
Year Demand Growth 2010 35,000 n/a 2011 35,315 0.90 2012 35,633 0.90 2013 35,954 0.90 2014 36,277 0.90 2015 36,604 0.90 2016 37,226 1.70 2017 37,859 1.70 2018 38,502 1.70
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2019 39,157 1.70 2020 39,823 1.70
Source: EPS, presentation of General Manager at the workshop “Energy mix and outlook options for Serbia and the region”, Belgrade – September 27th & 28th, 2010.
During this period it is also expected that the unusual balance between industrial and household consumption shares will be reduced, since the growth in industrial consumption is expected at a higher annual rate. This forecast is based on estimated macroeconomic parameters of the Serbian economic development for the following decade, taking into account the effects of measures for rationalisation of consumption (e.g. reduction in electricity distribution losses, stimulations of usage of energy saving devices and materials, correction of disparities in the prices of energy).
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3. Renewable Energies
This section will assess the framework for RE in Serbia. We have structured it in accordance with our experience of the fundamental cornerstones of the RE framework, and how these impact on the development of RE in a specific country. To a certain extent the structure follows the analysis provided by other authors, most prominently the OPTRES Report22.
The following factors fundamentally determine the successful development of RE in any country:
Technical potential Government strategy and targets Financial support framework Connection and grid integration issues Administrative issues Finance and investment issues
We will consider them in turn. In each section we will provide an explanation of the issues and specify “success factors” or “good practice”, describe the situation in Serbia and provide an assessment.
3.1 Technical Potential
3.1.1 Success Factors
The technical potential for the use of RE in a country determines to a large extent how many and which type of projects can be pursued. Of course, the technical potential differs from country to country based on the natural endowment, which is a “given” and this makes a discussion of success factors less meaningful.
However, there are aspects related to the technical potential which can be influenced by the country (governments, regulators) – namely the degree to which the technical potential is made transparent for potential RE investors. Quicker progress with RE projects can be made
22Ragwitz, Resch, Faber, Haas, Huber, Morthorst, Coenraads, Voogt, Reece, Konstantinavicuite, Hyder “Assessment of optimisation of Renewable Energy Support Schemes in the European Electricity Market. Final Report. OPTRES”, with the support of the European Commission, 2007
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if the government has already undertaken (commissioned) work in the area of wind measurements, studies of hydrological conditions for hydro power, and clear (sustainability) standards for biomass energy.
3.1.2 Situation in Serbia
Serbia has substantial potential for renewable energy sources, with biomass and hydropower leading the list. The potential for primary energy production from RES is estimated at 4.3 Mtoe – about a quarter of primary energy demand. To date, renewable energy sources (RES) in Serbia play only a minor role, and what is utilised in electricity generation is almost entirely in the large HPPs (installed power over 10 MW).
3.1.2.1 Hydro
Today, domestic hydro power sources play an integral part in securing supply of electricity and meeting Serbia‟s energy demand. In recent years, hydro power accounted for 10,000 – 11,000 GWh – almost all is supplied from large installations. 39 small hydro power plants (sHPPs) operate with a total installed capacity of 49MW. Of these sHPPs 24 MW (48 GWh of electricity production) were controlled by EPS. There are several dozen more sHPPs said to be out of operation because of poor condition.
The total technical potential for electricity from water resources is estimated at some 17,000 GWh, i.e. current use makes up not more than 60% of the technical generation potential. There are some differences between authors23, but the additional potential of some 6,000- 7,000 GWh seems to be located approximately as follows:
Morava river (large plants): 2,300 GWh Drina and Lim river (large plants): 1,900 GWh Danube river (large plants): 1,000 GWh Various locations, about 900 sites (sHPP) – 1,500 - 1,800 GWh (500 MW installed capacity) either from new construction, extension or revitalisation.24 The overwhelming majority has a capacity below 1MW and only some 90 sites are in the range of 1 – 10 MW. The revitalisation and modernisation concerns about 30 existing plants which are either old or out of operation. Some new sites would use existing water reservoirs.
23 The main sources are [Bogunovic 2009] and [EPS 2010]; the way of aggregating the potential from different resources is not always fully plausible, and information sources not disclosed. 24 [Karakosta et al.] citing other sources of information.
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Under EU definitions, large hydro plants are not considered within the context of publicly supported renewable energy. Consequently the current study will focus on the small HPP (sHPP) sector, in some sources defined as mini HPP or for the smallest installations micro HPP. There are substantial uncertainties related to the estimation of the sHPP potential in Serbia. The figure of around 900 potential sites comes from the Cadastre of sHPP of central Serbia, which was the outcome of a hydro-energy study carried out by the local engineering company Energoprojekt Hidroinţenjering on behalf of EPS in the 1980s. The Cadastre, available in the Serbian language at the Ministry in charge of Energy website, provides a precise description of 853 potential sites. A separate Cadastre, containing 13 potential sites, exists for the northern Serbian region of Vojvodina.
Based on the data from the 1980 Cadastre the following figures depict the geographic and size distribution of the potential in sHPP. They show that most of the potential is in western, eastern and south eastern provinces and that most sites are relatively small (between 100- 200 kW).
Figure 14: Small hydro power plant potential (geographical distribution)
Source: Naumov, cited in [Bogunovic 2009], p.23.
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Figure 15: Small hydro power plant potential (size distribution)
Source: [EnMin 2010b]
The data derived from the Cadastre are no longer reliable without prior additional investigation, since there were significant migrations and developments in certain areas and it is expected that registered sites may no longer be available, or their capacities may have changed. Accordingly, the total capacity for electricity generation from sHPPs may differ from the values presented above.
It is recognised that the Cadastre is outdated, yet it does remain one of the major sources of information and is significant for the approval process for investors. To get around some of the issues, a 2009 Government Decree allowed the construction of sHPPs at sites not registered in the Cadastre upon approval by the Ministry in charge of Energy and other authorities, if the project developer proves that the entire energy potential of the resource will be exploited. Amendment to the usage profile for a given location determined by the Cadastre is also possible if external conditions to the hydro power resource make it difficult or impossible to stick to the original usage profile. Amendment is then possible such that the Ministry may approve construction of the power plant or different units of the same plant elsewhere on the same watercourse, if maximum resource exploitation can be secured.
In the latest development, the Law on Spatial Plan of Serbia (OJ 88/2010) stipulates that data from the Cadastre frequently do not correspond to the actual situation on the ground
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and should not be strictly applied in today‟s conditions without technical, economic and especially environmental evaluation including optimal utilisation of available potential of watercourses. The Cadastres should be used as a documentation base for preparation of sHPP construction with necessary preliminary analysis of hydrology and usage of space.
Since the approval of Feed-In-Tariffs (FiTs) in 2009, there has been increased activity in the area of sHPP. One indication for the uptake of the larger sHPP opportunities is the list of the energy permits issued or the status of privileged producers being obtained.25 These lists are published on the Ministry in charge of Energy‟s website. As of August 201026 only 11 sHPPs have received the privileged producer status.
3.1.2.2 Biomass
Biomass resources represent a significant renewable energy potential for Serbia. About 63% of the total potential of renewable energy sources in Serbia is thought to lie in biomass utilisation. Forests cover nearly a third of the territory and approximately 55 % is arable land. According to the Ministry in charge of Energy, Serbia has a vast waste resource from agriculture and forestry in the range of 2.6 million tonnes of oil equivalent (1.6 million toe from agricultural wastes, i.e. corn, and 1 million toe wood biomass). The biomass energy potential in cattle farming, which is suitable for biogas production is estimated at 42,000 toe. The table below shows Serbia‟s biomass energy potential:
Table 19: Biomass energy potential in Serbia
Biomass source Potential (toe)
Wood biomass 1,527,678*
- Fuel wood 1,150,000
- Forest residue 163,760
- Wood processing residue 179,563
- Wood from trees outside forest 34,335
Agricultural biomass 1,670,240
- Crop residue 1,023,000
25 It should be noted that for the development of sHPP with an installed power below 1 MW an energy permit is not required. However, to achieve the FiT, the status of privileged producer needs to be obtained by facilities of any size. 26 Latest update of Ministry of Energy and Mining (MEM) website
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- Residue from fruit growing, viniculture and fruit processing 605.000
- Liquid manure (for biogas production) 42,240
Biofuels for transport 191,305
Without transportation fuel 3,197,918 Total Biomass With transportation fuel 3,389,223
( * ) - according to the last investigation of wood biomass using FAO methodology Source: TCP/YUG/3201 (D) - Wood energy for sustainable rural development27
Wood biomass (fuel wood)
An area of 1.98 million ha in the Republic of Serbia (25.6 %) is covered with forests. The forest area is mainly in the south. About two thirds of the forests are property of state owned public companies, the rest privately owned. About half of all forests are pure deciduous tree forests (mainly beech and peak), with only 5% pure coniferous tree forests (mainly spruce).
Wood-stock in Serbian forests amounts to about 204.6 mil. m3. Registered wood felling in forests is about 2.585 million m3 that represents 49.4% of the annual increase of wood-stock in forests of about 5.228 million m3. With improvement in forest managing, upgrading the state of existing forests and development of forest roads, there is a possibility for increased annual wood felling, based on the existing wood-stock. In addition, there is a national plan to increase the area covered by forests to 41.4% up to the year 2050. These two measures, increasing the afforested area and wood stock and improvement of forest utilisation, will contribute to the increased energy potential of forest biomass.
Table 20: Main parameters of forest wood resources in Serbia in 2007
Total wood Annual volume Wood cutting Cutting increase Resource volume increase (mil. m3) (mil. m3/year) (mil. m3/year) (%) Beech* 80.35 1.832 1.009 55.1 Oak* 30.81 0.821 0.249 30.3 Poplar* 1.39 0.094 0.42 448 Spruce* 4.51 0.108 0.038 35.2 Black pine* 4.09 0.085 0.044 51.9
27 FAO supported project for Ministry of Agriculture, Forestry and Water Management; project lasted from September 2008 to July 2010
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Other 83.46 2.288 0.825 36.1 TOTAL 204.6 5.228 2.585 49.4 ( * ) only pure strands of species
Source: Feasibility study on wood waste utilisation in Serbia – USAID, 2008
According to statistical data about 1.2·million m3 or about 50% of production of forest assortments represents fuel wood. The remaining assortments are wood pulp for pulp and paper industry, saw-logs for cutting and wood for different technical purposes. Annual energy value of the fuel wood presently used is 239,000 toe.
Wood biomass (residues)
There are different kinds of biomass residues associated with tree felling in forests and with the processing of wood. About 58% of the total mass of the tree are different wood assortments used for the market, for industry, different technical purposes, and for heating as fuel wood. The remaining 42% of the total mass of the tree are different biomass residues which do not have any value in the timber market. Among these biomass residues there are: bark, small branches, tree stumps. The estimation is that these biomass residues in forests account for about 2.9·mil. m3, which has an energy value of 549,500 toe. These residues have different characteristics and are usually dispersed in forests. Their collection requires some energy for transportation vehicles. Depending on the terrain, collecting of residues can be easy or near impossible. In some cases, due to the present state of forest roads and machinery, residue collection cannot practically be carried out.
Residues may arise from wood processing in saw mills for the production of veneer, boards, and furniture, or from the pulp and paper industry. They consist of small and large pieces, like shavings, chips, cutting edge and bark. Estimated annual yield of these wood residues is about 0.35·mil. m3, with an energy value of 66,900 toe. Total wood cutting in 2006 in Serbia was around 2.61 mil. m3. According to the present utilisation of forests, forest tree felling and wood processing, the total annual energy potential of different kind of wood residues, together with registered consumption of fuel wood, accounts for about 1.02 Mtoe. This value of energy potential can be increased by the utilisation of presently unused forests, because it is estimated that almost 30% of forests are currently not utilised.
At the moment the market for wood residue-based fuels is very poor, since use of briquettes and pellets for heating (and especially for combined heat and power generation) is still too expensive in comparison with other primary fuel sources. Therefore, the entire production of briquettes and pellets, which is regularly growing, is used for export.
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Agricultural biomass
A substantial part of the Serbian economy is based on agricultural production and agriculture related industry. The northern part of Serbia, the province Vojvodina together with territories along the rivers Sava and Danube, is a flat and pure agricultural area. This region is also the main source of agricultural products and biomass waste, especially waste from crop farming. In addition, wheat and corn production is present in hilly regions from the north to the south of Serbia. The agricultural biomass wastes come from cereals, mostly wheat, barley and corn, and from industrial crops mostly sun flower, soya, and rape seed.
Fruit growing and vine culture are also present in agricultural areas, with fruit growth mainly concentrated in the hilly region in the south, where the main types of fruit grown are plums, apples, cherries, peaches, and grapes. The main activity in fruit growing and viniculture is the pruning of small branches, and these cut small branches can be available for energy purposes. The total number of registered fruit trees is about 94 million. Half of these are plum trees, about 20% are apple trees and almost 15% are cherry trees.
Table 21: Energy potential of biomass residues deriving from fruit cultivation and processing
Number of Fruit Type of Biomass Biomass Annual energy Species trees production residue residues equivalent (100 ha) (t/year) (t) (TOE) Plum 50,630 382,400 Pruning, stones 393,500 132,600 Apple 17,570 198,400 Pruning, peel 36,200 10,900 Cherries 12,280 99,950 Pruning, stones 55,000 16,500 Pear 7,080 70,000 Pruning, peel 14,000 4,300 Peach 4,450 44,400 Pruning, stones 35,100 11,700 Apricot 1,900 27,500 Pruning, stones 15,500 4,100 Walnuts 2,100 21,500 Pruning, shell 55,000 14,100 Grape 77,390 213,000 Pruning, peel, seeds 515,000 166,300 TOTAL 360,500
Source: Original scientific paper: The state of biomass energy in Serbia – Authors: Mladen Ilić, Borislav Grubor and Miloš Tešić, year 200428
28 UDC: 662.636/.638, BIBLID: 0354-9836, 8 (2004), 2, 5-19; http://thermalscience.vinca.rs/2004/2/1
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An additional source of biomass residues in fruit growing and viticulture is the replacement of old trees with new ones. This replacement occurs each 10 to 25 years, depending on the fruit types cultivated. This activity is carried out regularly in well organised and maintained orchards. The annual energy potential of fruit trees and vines that are extracted with roots is about 245,000 toe. The overall energy potential of biomass residues from fruit growing, viniculture and fruit processing is about 605,000 toe.
Figure 16: Biomass resources in Serbia
Source: Picture left: The Study of Energy Potential and Characteristics of Biomass Residues, and Technologies for Their Preparation and Energy Utilisation in Serbia, Study of Ministry of Science, Development and Technology, 2002; Picture right: Statistical Yearbook of Yugoslavia (in Serbian), Federal Statistical Office, Belgrade, 2001
Despite its large potential, the utilisation of biomass has been limited in Serbia so far. In July 2010 the Government of Serbia adopted the Biomass Action Plan (BAP) 2010-2012 (OJ 56/2010). The aim of the BAP is to define a strategy for biomass utilisation as RES within the framework of actual potentials, current national strategies, national and European directives.
The BAP for Serbia was drafted in accordance with the Energy Community Treaty, EU recommendation (COM/2005/628) and in the spirit of Directive 2009/28/EC. At the same time, one of the most important tasks of the BAP was to identify the problems/bottlenecks in the process of biomass utilisation as well as the actions required to overcome them. The
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BAP is focused on short term activities (to the end of 2012), but some recommendations for long term actions are also laid out.
According to some recent studies, the most promising options for biomass utilisation in Serbia are:
space heating in households and buildings using biomass pellets or briquettes, co-firing or total replacement in district heating plants that currently burn heavy oil or coal, production of electricity utilising agricultural and wood residues and production of biofuels for transport.
Wood pellets and briquettes
The wood pellet market in Serbia has been in development since 200629. An increase in oil derivate prices and the fact that pellets can be produced in Serbia without expected high investment cost provides a good basis and perspective for this domain. The first significant contribution to an increase in pellet consumption came from Belgrade Power Plants in the heating season 2008/2009. In two plants 10,000 tons of pellets are used instead of fuel oil.
At the moment30 there are six31 factories for the production of wood pellets in Serbia, with capacities ranging between 5,000 and 35,000 tons/annually. Total production capacity is about 100,000 tons/annually32.
29 Source: Newspaper article (http://www.naslovi.net/2008-11-30/pink/u-srbiji-cetiri-fabrike-proizvode- pelet/936247) in Serbian 30 Presentation at Regional Conference: Harmonisation of methodologies for estimation and sustainable incorporation of biomass and other RES in municipal and national strategies for energy development”, Skopje, Macedonia 4 November 2010 (http://www.eu-bee.com/GetItem.asp?item=digistorefile;244556;837¶ms=open;gallery) 31 Two factories from Bajina Bašta (city) "Zelena Drina" and "O3", as well as "Bio Energy Point" (http://www.bioenergy-point.rs/en/wood-pellets ) and "Biotherm" (http://bio-therm.net/home.html?&L=1). Two more factories have been opened since the end of 2008. 32 Other sources provide other estimations/results: Feasibility study on wood waste utilisation in Serbia - 2009 (http://pdf.usaid.gov/pdf_docs/PNADS215.pdf) - estimated production for 2010 is 250,000 tons (seems exaggerated, also having in mind newspaper sources).
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Figure 17: Biomass energy resource in Serbia
Source: Prof. Dr Branko Glavonjić, ecc Ljiljana Pajović from University of Belgrade Faculty of Forestry – Presentation at Regional Conference: “Harmonisation of methodologies for estimation and sustainable incorporation of biomass and other RES in municipal and national strategies for energy development”, Skopje 2010.
More than 90% of the total pellet production is exported. This is mainly due to a lack of information for domestic consumers and incomplete and weak offers (from producers and importers) of furnaces and boilers for pellet combustion. However, due to the significant potential of wood waste in Serbia, interest from domestic and foreign companies in pellet production is still high.33
Estimations34 indicate that present potential for annual production is around 500,000 tons of wood pellets, with an expected income of between 80 and 100 million €.
Production of wood briquettes in Serbia is carried out by many companies but only three of these are specialised – wood briquette production is their main field of activity. Other companies in this business consider briquette production as a by-product. Annual production
33Press statement published at 30th November 2008 from Mr. Dejan Stojadinović (assistant (for RES) of Serbian Minster in charge for Energy). 34 Press statement from former Minister in charge of Energy, Petar Škundrić, October 4th 2010.
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in Serbia is about 30,000 tons, of which over 60% are produced in three specialised factories35.
3.1.2.3 Biogas potential and activities
The Ministry of Energy and Mining of Serbia estimates that the available quantities of liquid animal waste on mid-sized and large chicken and cattle farms may be sufficient to produce some 42,200 toe of biogas energy per year. In combination with residual amounts of biomass from agriculture, a total installed electrical capacity of 80MW may be built to process the corresponding residues.36
These figures correspond to a scientific estimation carried out in 2004, the results of which are shown in the table below.37
Table 22: Energy potential in live stock manure from medium-size and large farms
However, some authors declare that the energy policy has failed to carry out an expert analysis of the country‟s technical potential for energy generation in agriculture and cite this as one of the main obstacles for better use of energy from these renewable sources.
The following table38 summarises the main characteristics of potential biogas production in Serbia based on liquid manner quantities from animal breeding according to World Bank
35 Presentation at Regional Conference: “Harmonisation of methodologies for estimation and sustainable incorporation of biomass and other RES in municipal and national strategies for energy development”, Skopje, Macedonia 4 November 2010 36 Renewable Energy in Serbia, Ministry of Energy and Mining, 2011. 37 Information taken from “Analysis of Renewable Energy and Its Impact on Rural Development in Serbia”, Bogunovic/Bogdanov, 2009 (deliverable under European Commission 7th Framework Programme "AgriPolicy" project).
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sources. It indicates why there is a potential lack of detailed knowledge on the biogas energy potential or why energy policy might overestimate the biogas potential stated above: namely the spatial dispersion of farms. Most of the farms have only a small number of livestock. Pig breeding takes place on flat terrains, while cattle are evenly distributed over hilly and flat regions. Complex terrain and the large spatial dispersion of farms complicate manure collection, which is indispensable for biogas production to be economically feasible. Hence, the table below neglects manure quantities from small farms due to the considerable transportation required. Although biogas potential per head rises compared to the former table, it can be concluded that total energy production from biogas may be considerably below the values stated above, provided that only large farms are considered for biogas generation.
Table 23: Estimate of entire biogas production potential
Exploring the country‟s potential, Serbia has to start from zero, although back in the 1980s nine biogas facilities were constructed on large pig and cow farms. However, eventually these facilities were not put into operation or were abandoned in the early 1990s due to considerable commercial and technical problems. Reconstructing and renewing these sites might be a good start. But this would not provide considerable advantage to entirely new construction, as the existing equipment installed is considered out of date and may not be modified or re-used. It is expected that future investments, e.g. in the Vojvodina region which is assumed to have considerable potential for biogas production and where seven of the nine former installations were located, will concentrate on the largest cattle and pig farms for biogas production from manure, corn silage, slaughter residues, sugar production and food production from various sites in the farms‟ proximity.39
In recent history, the Ministry of Agriculture, Forestry and Water Management (MAFWM) initiated information campaigns to inform farmers, eager to retrieve new income sources,
38 Ditto. 39 “Biogas in Vojvodina – Stand und Perspektiven”, Tesic et al., 2005, excerpt from “Landtechnik in den Ackerbaugebieten in Ungarn, Slowakei und Österreich“.
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about energy generation possibilities. Moreover, investors have provided signals of their willingness to re-establish the former biogas production sites mentioned above and construct new installations at other sites. In addition some activities and plans have been recently announced.
In early 2011, EnviTec Biogas AG claimed that its affiliated EnviTec Biogas South East Europe was to sign a contract for the construction of a biogas installation on a dairy cattle farm in Curug (province of Vojvodina) with the aim of processing liquid manure and corn silage to produce heat and electricity. The installation will have an electrical capacity of 635 kW. The project was assigned by farm operator Velvet Farm, subordinated to the animal feed producing company Global Seeds. According to EnviTec there are some 20 other farms with similar prospects and conditions for biogas generation.40
The Serbian service provider for the real estate sector YU Kapital plans to build in 2011 and 2012 two of its own biogas plants and construct an additional three or four for potential clients, preferably in the range of 1MW or smaller.41 Planned overall investments in 2011 are 10 million €. It is estimated that plants will directly employ five people each, and indirectly a larger number of workers will be employed by the suppliers of necessary materials. The location of the first plant is expected to be in Padej, Čoka municipality in the province of Vojvodina. The estimated cost of a 1 MW plant is between 4.5 and 5 million €.42
The German entity Hager & Elsässer announced in late 2008 that it would build a waste water treatment plant at the yeast production company Alltech Fermin in the Serbian municipality of Senta. Province administration of Vojvodina will take part in the project as co- investor. The plant will improve the treatment of waste water from barn production, processing it to biogas and then producing electricity and heat, partially for self-supply. The 43 plant will have a capacity of 2500 cubic meter of waste water per day or 1.4 MWel. This plant has already been operating in a test period44 for several months, and is producing electricity, biogas and fertiliser at the same time. The test period will finish on 5 July 2011, when regular operation should commence. Administrative activities for obtaining approval for the production of electricity are completed and the status of privileged producer has been obtained. Expected annual production of the plant is around 10 GWh whilst the entire annual
40 Press release by EnviTec Biogas AG, 27 January, 2011, available under www.envitec-biogas.de. 41 See http://www.yukapital.com/biogas-projects.php, http://www.ekapija.com/website/sr/page/322926_de 42 http://biogasenergy.rs/index_en.html 43http://www.hager-elsaesser.com/news-termine/news-detail/article/125/Grundsteinlegung-fuer- Abwasseraufbereitung-in-Serbien.html 44 http://www.blic.rs/Vesti/Vojvodina/250544/Zelena-struja-od-biogasa
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consumption of Alltech factory is around 30 GWh. Income from selling generated electricity should be sufficient to cover 2/3 of Alltech‟s annual demand.
In February 2011 a contract was signed between Lazar Dairy, located in Blace, southern Serbia, and GHD Inc. Company, an American firm in the business of biogas digester construction. The value of this investment is 1.5 million $. It is expected that the digester will be fully operational in September 2011.45
3.1.2.4 Biofuels
Conditions for the production of biofuels (bioethanol and biodiesel) are present in Serbia.
Bioethanol
Current production of ethanol in the Republic of Serbia is based on molasses (around 50%) and crops (around 50%). The available amount of molasses does not meet current needs for bioethanol production, since molasses are used in sugar production. The Republic of Serbia is obliged to pursue the objectives of the directive 2003/30/EC,46 so the current amount of bioethanol production is deemed as insufficient for the projected47 substitution of motor oil.
The total capacity in existing sugar factories produce approximately 200,000 tons of molasses per year, of which 50,000 tons are used, and the remaining 150,000 tons can be used for other purposes, such as bioethanol production. Accordingly, this quantity of molasses is insufficient for the production of bioethanol, which indicates that import is required. However, in current circumstances in the world market, characterised by great fluctuations in prices and available amounts, other options need to be investigated.
Crop farming in Serbia is fairly well developed, and as a consequence the amounts of crops produced fully meet and exceed domestic demand for human and animal consumption. This fact enables consideration of the possibility of producing bioethanol from crops. It is estimated that for the production of 100,000 tons of bioethanol, 330,000 tons of crops are needed, which represents one third of the market crop surplus, or 2 - 4% of total crop production in Serbia.
45 http://www.ekapija.rs/website/sr/page/399999_en 46 On the promotion of the use of biofuels or other renewable fuels for transport 47 5.75% calculated on the basis of energy content, of all petrol and diesel for transport purposes placed on their (member states) markets by 31 December 2010.
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Alternative raw materials which are suitable for the production of bioethanol and can be farmed in Serbia are: sorghum, Jerusalem artichoke (topinambur) and potatoes. According to estimates, there are around 100,000 hectares of marginal land that can be used for the harvesting of sorghum and Jerusalem artichoke, which could result in an annual production of around three million tons of bioethanol.
Biodiesel
Appropriate materials suitable for biodiesel production in Serbia are raw materials, such as oilseed (made from sunflowers, soya beans and turnips) and edible oil waste. The total surface area of oilseed crops is estimated to be approximately 668,800 ha, from which the growing of oilseed crops used for the biodiesel production could be achieved on a surface area of 350,000 ha. The following table presents the average biodiesel production from oilseed crops which can be grown in the Republic of Serbia.
Table 24: Production of biodiesel from oilseed
Oilseed Average grain Oil content Biodiesel production yield (t/ha) per grain (%) (kg/ha) (l/ha) Sunflower 1.79 40 716 816 Soya 2.25 18 405 460 Rapeseed 1.69 36 608 690
Source: Ministry in charge for Energy web site;48
Depending on the type of oilseed crop being farmed, potential quantities of produced biodiesel on available land (350,000 ha) are shown bellow.
Table 25: Potential biodiesel production
Harvest structure Potential biodiesel production (t) 100 % Rapeseed 212,800 70 % Rapeseed + 30 % sunflower 224,140 50 % Rapeseed + 50 % sunflower 231,700 30 % Rapeseed + 70 % sunflower 239,260 100 % sunflower 250,600 100 % soya 141,750
Source: Ministry in charge for Energy web site49
48 http://www.mre.gov.rs/navigacija.php?IDSP=307&jezik=eng
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The consumption of edible oil in the Republic of Serbia is around 16 litres per capita, which leads to the conclusion that 10,000 litres of edible oil waste could be used for the annual production of biodiesel in the Republic of Serbia.
3.1.2.5 Solar
Serbia has good potential for solar, based on an average annual solar radiation of around 1,200 kWh/m2 in the north-west, 1,400 kWh/m2 in central areas and 1,550 kWh/m2 in the south-east with some 1,500-2,200 sunny hours per year. The following picture shows the profile of average daily energy from global radiation on the horizontal surface in winter (left) and summer (right) in Serbia. As can be seen from the map, the radiation profile reflects the country‟s alignment in a northern or north-western direction.
It is officially estimated that the technical potential of the solar energy amounts to 0.6 Mtoe per annum.
Figure 18: The average daily energy of global radiation on horizontal surface in January and July in Serbia
49 Ditto
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Source: found in [Bogunovic 2009], p.22; originally from World Bank study (2007): “Serbia: Analysis of Policies to Increase Renewable Energy Use” funded by ESMAP
According to the Ministry in charge of Energy, the most promising options for the use of solar energy are sanitary water heating and space heating. It estimates that if each of the 2.5 million housing units (2002 census) installed a solar collector size of 4 m2, a potential annual energy saving equivalent to 1,720 GWh of electricity could be achieved.50
In practice, solar energy has been utilised only for heat generation. For instance, in 1998, around 28,000 solar thermal units were in operation, replacing the equivalent of 140 GWh of fossil fuel derived energy. However, neither a profound potential estimate nor a systematic documentation of the existing installations is available.51
There is even less literature and less scientific investigation results available on the usage of solar energy for electricity production. Several studies are planned or ongoing - the Energy Efficiency Agency of Serbia is looking into possibilities for a wider use of solar energy in Serbia. Under the project “Capacity building for the promotion and use of solar energy in Serbia” funded by the Spanish government, the Serbian Energy Saving Group and Spanish NIP S.A. aim to strengthen the institutional capacities of Serbia in using renewable energy sources and promote projects using solar energy.52 Under the same project the potential to produce electricity from solar panels is estimated at 1,200 kWh per panel square meter annually.53
Very few projects have been announced concerning solar power. So far no energy permits have been issued.
3.1.2.6 Wind
In general, the wind power potential in Serbia is mediocre. The wind speed and number of windy days per year are not as favourable as in Bosnia and Herzegovina or Croatia, and accordingly the potential (and interest of the investors) for wind generation is less. According to official Serbian government documents, the estimated “technologically justified” wind potential is around 0.2 Mtoe, i.e. around 5% of total RES potential. Based on existing and procurable analyses and studies, the realistic wind energy potential in the Republic of Serbia
50 [EnMin 2010b] 51 [Bogunovic 2009],p. 21f 52 http://www.esg.rs/ongoing.html; 53 Energo Week, 2010 edition, week 48, p. 8
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is estimated at an installed power of 1,300 MW with generation of 2,300 GWh/year.54 Regions in Serbia with locations potentially suitable for the construction of wind generators are:
Eastern part of Serbia - Stara Planina, Vlasina, Ozren, Rtanj, Deli Jovan, Crni Vrh, etc., with locations where average wind speed exceeds 6 m/s. Western part of Serbia - Zlatibor, Kopaonik, Divčibare are mountain areas where measurements could prove favourable micro locations for wind generator construction. Panonska nizija (Panonska plain), north and northeast from the Danube is also rich in wind potential. This area covers around 2,000 km² and is suitable for wind turbine construction due to a relatively meshed road infrastructure and reasonably good power grid infrastructure. Large power consumers are also located in the surrounding areas.
There have been a number of studies and projects realised in Serbia in the past 10 years related to wind potential assessment. The main ones are:
1. The first study of its kind in Serbia, was the EPS Study: Putnik R., et al., “Possibility of electricity production from wind energy” (2002). During the preparation of the study a large number of measurements from 1991-2000, recorded in 20 meteorological stations, were used and analysed. 2. Study: P.Gburčik et al., “Potential of solar and wind energy in Serbia” (2005), realised within the national program of energy efficiency at the Serbian Ministry of science and environment, produced maps of wind potential in Serbia. Maps were generated by using the methodology of the European wind atlas and standard meteorological data from 1971-1990. 3. Study: “Wind Atlas of Vojvodina” (2008), Faculty of Technical Sciences at University of Novi Sad (financed by the Regional Government of Vojvodina), analysed wind conditions in the northern Serbian region of Vojvodina with regards to wind speed and energy potential. The analyses used data on wind speeds and directions from eight main meteorological stations in Vojvodina for 2000-2007 period.
Following the findings of the wind potential studies, a number of measuring masts were placed in northern and eastern Serbia by potential investors and research institutions (including EPS). Based on the results of wind potential measuring, several investors decided
54 Presented 5% or 0.2 Mtoe refers to share of wind potential in the estimated total energy potential of RES in Serbia (1 Mtoe = 11,630 GWh, 0.2 Mtoe = 2,300 GWh).
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to obtain energy permits for the construction of wind farms, mostly in the area of South Banat (east of Belgrade, north of river Danube).
The following figures, presented in some of the studies, show wind energy resource maps of Serbia with average wind power.
Figure 19: Typical seasonal wind energy maps of Serbia
Source: the Institute for Multidisciplinary Research, Serbia 2009
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Source: World Bank (2007): “Serbia: Analysis of Policies to Increase Renewable Energy Use” - Study funded by ESMAP
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As may be concluded from the maps, in January, maximal values of wind power occur in the lower Danube area and Eastern Serbia: the area within the 300 W/m2 iso line includes South Banat, the south bank of the Danube from Belgrade to Negotin, and the Timok river valley with surrounding mountains. In July, the patterns of regional variation are generally similar, but the intensities are lower. In general, the following conclusions on the distribution of Serbia‟s wind potential apply:
Large regional discrepancies, even at small distances Paradox of higher potential at lower altitudes, explained by the tendency of wind speeds to increase in descending direction.
The low lands of northern Serbia are suitable in terms of possible use of wind power, such as cheap transport of equipment via the Danube river, accessible terrain, and low building/construction cost or low probability of lightning strikes.
In the process of determining wind farm location, particular attention has to be paid to environmental risks (noise, impact on birds, bats and landscape) and acceptability assessment of those risks based on Serbian regulations in the area of environmental protection, primarily the Law on the Protection of Nature and European standards and experiences in wind farm construction - the Social Impact Assessment (SIA) and Environmental Impact Assessment (EIA), specially applied for protected and ecologically significant areas.
As with the small hydro power plants, the Ministry in charge of Energy publishes on its website the existing energy permit holders for the construction of wind farms (see table below). This record can be seen as an indicator of future projects likely to be commissioned in the near future. In total the Ministry has so far issued nine energy permits for the construction of wind power plants to the extent of a total installed capacity of 1,390 MW.
Table 26: List of issued energy permits for wind farm construction
Energy Date of No Investor permit Wind farm data Location issuance valid until 1. Wellbury Wind 24.04.2009 14.05.2011. Wind farm Municipality Kovin, location - villages Energy Belgrade "Bavaništansko Bavanište, Deliblato, Mramorak and polje”, 188 MW Dolovo 2. Windtim 03.08.2009. 19.08.2011 Wind farm "Sušara", Municipalities Vršac and Bela Crkva, Belgrade 60 MW KP Izbište and KP Uljma KP Grebenac 3. Еnergowind 07.10.2009. 16.10.2011. Wind farm "Vršac – Municipalities Vršac, Alibunar and Vršac Alibunar-Plandište", Plandište
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400 MW 4. Vetroelektrane 16.10.2009. 30.10.2011. Wind farm "Čibuk", Municipality Kovin, KP Mramorak Balkana Belgrade 300 MW 5. Zad Mk-Fintel 15.04.2010. 24.04.2012. Wind farm "Košava", Municipality Vršac, villages – Uljma, Wind Belgrade 117 MW Izbište, Zagajica, Parta 6. Zad Mk-Fintel 02.06.2010. 02.06.2012. Wind farm "La Municipality Vršac Wind Belgrade Picollina", 5 MW 7. Ivicom Energy 25.06.2010. 25.06.2012. Wind farm Municipality Golubac and Kucevo Ţagubica „Krivaća“,112.8 MW 8. Vetropark 06.07.2010. 06.07.2012. Wind farm „Indjija“, Municipality Indjija Indjija 20 MW
Source: Energy Ministry website
So far, the Serbian transmission system operator EMS has issued only opinions on the possibility of network connection for the projects in Vršac, Bela Crkva, Čibuk, Košava, Bavaništansko Polje and Sušara. All of these projects are located in the northern Serbian province of Vojvodina. A wind power integration study for the Serbian Transmission network was completed in March 2011. Results were presented to PE EMS on 5 April 2011 in Belgrade. The study was undertaken by Vattenfall Europe PowerConsult GmbH (Germany) and the Electricity Coordinating Center Ltd. (Serbia). This study determines the maximum wind power penetration in the existing and future (time horizon is 2015 year) Serbian power system, taking into account the transmission network capacity and power system control issues (balancing, voltage control, security etc.). Additionally, the study reviews requirements for network reinforcements, modifications of network elements and investment. The total installed wind power analysed was 2,576 MW, distributed over 16 wind parks (with the largest single wind park having a capacity of 400 MW).
The transmission network analysis concludes that from a transmission capacity point of view, 2,000 MW of coincident wind power production would require only a few reinforcement and extensions measures. These measures would relate mainly to the 110 kV network (OHL cross section upgrades, construction of two new OHLs) and to the construction of single new substation 400/110 kV. It is estimated that the connection of 2,000 MW of wind power production in Serbia would increase total energy price by 1.7 c€/kWh until 2020.
From the system reserve point of view, the Serbian power system could sustain maximum 900 MW of wind power production, without changes in unit commitment and using the full potential of load dispatching among existing generators. This scenario would not require TPPs to be turned off to contain wind power production, but pump storage HPPs would need to be used to a maximum possible degree. We note that both mentioned capacity values (2000 MW and 900 MW) are substantially higher than the 450 MW limit set by the Serbian government through the FiT system (see section 3.3.2).
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3.1.2.7 Geothermal55
Geothermal energy is the heat accumulated and stored in subsurface dry rocks and fluids. It results from the continuous radiation of heat energy from the earth‟s core and disintegration processes. Geothermal energy may be provided as hydro-geothermal energy from fluids (water and gases) and petro-geothermal energy stored in hot rocks. Geothermal energy is considered renewable as long as the extent of exploitation of these sources does not exceed the source‟s capacity to recover its heat energy potential. Geothermal energy may have different applications, including direct use of hot water, e.g. for balneology, or for heat and electricity generation.
Currently, Serbia makes use of its geothermal energy sources for diverse applications, primarily balneology (60 spas), horticulture and space heating via heat exchangers and heat pumps. The total installed thermal capacity amounts to some 80 MW, while approximately half of it corresponds to balneological use. In total, more than eighty low enthalpy hydro geothermal systems are exploited with a temperature between 15°C to approximately 100°C, most frequently 40°C-60°C. The following table shows the magnitude of the use of geothermal thermal energy by usage function.
Table 27: Exploitation of hydro geothermal resources, according to function type
Installed Thermal Produced Heat Function Power (MW) (TJ/year) Residential and Commercial areas (direct use) 18,5 575 Spas and Recreation 36 1,150 Grain Drying 0,7 22 Greenhouses 8,4 256 Fishing and Cattle Breeding 6,4 211 Industrial Processes 3,9 121 Heat Pump Heating 12 80 Total 86 2,415 Source: found in [Karakosta 2011]. p.8 (secondary reference)
The geothermal potential is located in four geothermal provinces. The most important ones are located in the Pannonia basin in the Vojvodina region in the southern edge of Serbian territory, as can be seen from the geothermal resources map shown below.
55 [Karakosta 2011] and [Bogunovic 2009], relying on different papers and studies.
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Figure 20: Distribution of geothermal resources
Source: found in [Bogunovic 2009], p.24; originally from World Bank study (2007): “Serbia: Analysis of Policies to Increase Renewable Energy Use” funded by ESMAP.
Based on data on some 160 geothermal springs which has been collected up to date, the geothermal potential in Serbia is considerable. Moreover, some additional 70 geothermal resources at different distances from the surface are still under investigation. The total potential is estimated at 0.2 - 0.4 Mtoe, equivalent to some 2.2-4.4 TWh from both heat and electricity supply. Out of the 160 springs some 50 have a potential of over 1 MW each. It is further estimated that the exploitation of resources might substitute more than 500,000 tons of imported fuel equivalent to some 10% of current energy use for heating.
One of the locations where considerable geothermal resources are found is Macva, which could provide district heating supply to a population of some 150,000 inhabitants in surrounding municipalities, but exploitation was abandoned during the economic blockade. There are various other reasons and examples for the limited use of existing potentials and facilities, implying that there is potential not only at new sites but also from the exploitation of existing sources to maximum extent. For instance, the Ministry in charge of Energy assumes
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that the utilisation of existing thermal water springs would need the installation of production capacity equivalent to some 216 MW, which is far above current levels.56
It should be noted that electricity production from geothermal sources using best-available technologies such as Organic Rankine Cycle technology requires water temperatures of 100°C or more. These temperatures are currently not present. Therefore the resources are more appropriate for heat supply than electricity. Higher temperatures might be achieved in the future, however at considerable and costly increase of drilling efforts and drilling depths.
Table 28: Geothermal energy exploration projects currently active in Serbia
Project size Project Investor/ Latest project Project Other type: Location Financing developer status details information new/ m€ MW GWh refurbished
Exploration Hot water licence 17.5sq. Reservoir aquifers of Vranjska km/ two drilling Capital n.a some 125°C n.a. n.a. new Banja sites with Corp. / SEE at different exploitation depths permit Hot water Three aquifers of Reservoir Vojvodina exploration various Capital – various permits n.a n.a. n.a. new temperatures Corp. / SEE locations covering over at different 50 sq. km depths Source: own research57
3.1.3 Assessment
The technical potential for RE in Serbia is significant and relatively well researched. However, there are substantial inconsistencies in the assessment between authors and studies, and the official versions also remain confusing. This is especially true for the two major sources wind energy and small hydro.
On sHPP - despite the published lists of nearly 900 sHPP sites from the 1980s Cadastre, which continues to be the major basis for permits, based on 15 pre-
56 [EnMin 2010a] 57 Based on http://www.reservoircapitalcorp.com/s/Vranjska_Banja.asp and http://www.reservoircapitalcorp.com/s/Vojvodina.asp
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feasibility studies for the construction of sHPP, made during the past few years, the Ministry in charge of Energy concluded that in the current market conditions it is realistic to construct only 5 – 10 % of the sHPPs anticipated by the Cadastre.
On wind – the results of wind potential studies are somewhat conflicting, but it appears that wind potential measurements from the past few years (generally not publicly available) are convincing enough for potential foreign investors who have obtained energy permits.
The biomass potential, while considerable, is not yet well researched in terms of a detailed market study, which would consider the actual application of biomass energy technologies in specific regions and localities and the realistic costs of making biomass available for energy production.
The government of Serbia itself admits that there are insufficiently reliable data on the RES potential. Until 1990, RES potential was researched by various state institutions in a relatively organised fashion, but this activity stopped during the transition period. After the year 2000, studies and research started again resulting in various potential estimates, with some of them having conflicting results. More comprehensive and detailed studies on the potential for energy from renewable sources are necessary. There is an additional issue of breaking down the studies on the technological potential to a more regional level and researching the possibilities related to environmental issues. Such studies would form the basis for a system of spatial planning that would provide (reserve) locations for RES in advance.
3.2 Targets, Strategy
3.2.1 Success Factors
The analysis of experience with RE development has found that the formulation of clear targets and government strategies for RE development are major factors determining the attractiveness of a country to RE developers.
Serbia‟s energy strategy is determined to a substantial extent by the demands arising from the EU, and hence the most recent targets for the Serbian energy sector in this area relate to
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the set of recommendations of the Ministerial Council of the Energy Community Treaty58 related to the RES development. The Ministerial Council decided on the following actions:
Make an assessment of the available potential for the development of domestic renewable energy sources by June 2011 using tables 1, 3 and 10 of the template of the National Renewable Action Plans as adopted under Directive 2009/1281 EC as a structure to summarise the main findings. Ensure the increase in the renewable energy share through the introduction of incentive measures based on best practices from EU Member States such as investment aid, tax exemptions or reductions, tax refunds, direct price support schemes including feed-in tariffs and premium payments. Carry out by 31 December 2011 an overview of national rules concerning the authorisation, certification and licensing procedures that are applied to plants and associated transmission and distribution network infrastructures for the production of electricity, heating or cooling from renewable energy sources. Identify by 31 December 2011 the rules and procedures that could be simplified or improved in this context; develop a list of rules and requirements that will be changed and submit it to the EC SEE Secretariat. Ensure by 30 June 2012, in relation to national rules that are applied to plants and associated transmission and distribution network infrastructures for the production of electricity, heating or cooling from renewable energy sources, and to the process of transformation of biomass into biofuels or other energy products that:
a) the respective responsibilities of national, regional and local administrative bodies for authorisation, certification and licensing procedures including spatial planning are clearly coordinated and defined, with transparent timetables for determining planning and building applications; b) comprehensive information on the processing of authorisation, certification and licensing applications for renewable energy installations and on available assistance to applicants are made available; c) rules governing authorisation, certification and licensing are objective, transparent, proportionate, do not discriminate between applicants and take fully into account the particularities of individual renewable energy technologies;
58 See RECOMMENDATION OF THE MINISTERIAL COUNCIL Recommendation No. 201 0/01 /MC-EnC of 24 September 2010 on the promotion of the use of energy from renewable sources (document available at Energy Community web site - www.energy-community.org/pls/portal/docs/724189.PDF).
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d) administrative charges paid by consumers, planners, architects, builders and equipment and system installers and suppliers are transparent and cost- related; and e) review where simplified and less burdensome authorisation procedures, including through simple notification are established for smaller projects and for decentralised devices for producing energy from renewable sources are appropriate.
Take steps by 31 December 2011 for transmission and distribution grid infrastructure (including interconnection capacity, intelligent networks and storage facilities) to allow the secure operation of the electricity system as it accommodates the further development of electricity production from renewable energy sources, and submit a plan to the EC SEE Secretariat. Review by 31 December 2011 the authorisation procedures for grid infrastructure and accelerate these where possible, including ensuring the coordinate approval of grid infrastructure with administrative and planning procedures. Ensure by 31 December 2012 that appropriate grid and market-related operational measures are taken in order to minimise the curtailment of electricity produced from renewable energy sources. Ensure by 30 June 2011 that transmission system operators and distribution system operators set up and make public their standard rules relating to the bearing and sharing of costs of technical adaptations, such as grid connections and grid reinforcements, improved operation of the grid and rules on the implementation of the grid codes. Require the transmission system operators and distribution system operators to provide any new producer of energy from renewable sources wishing to be connected to the system with the comprehensive and necessary information required, including:
a) a comprehensive and detailed estimate of the costs associated with the connection; b) a reasonable and precise timetable for receiving and processing the request for grid connection; c) a reasonable indicative timetable for any proposed grid connection.
Ensure that the charging of transmission and distribution tariffs does not discriminate against electricity from renewable energy sources, including in particular electricity from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density.
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Set up a mechanism by 30 June 2012 through which economic operators using biofuels and bioliquids can show their compliance with the sustainability regime set out in Article 17 and 18 of the Directive by using proof from a voluntary scheme that has been recognised by the Commission. Set up by 31 December 2012 a body that supervises the issuance, transfer and cancellation of guarantees of origin in accordance with the requirements of the Directive. Ensure by 30 June 2011 that information on support measures is made available to all relevant actors, such as consumers, builders, installers, architects, and suppliers of heating, cooling and electricity equipment and systems and of vehicles compatible with the use of energy from renewable sources.
The intention of the recommendation of the Ministerial Council is to ensure that the EC SEE countries adopt binding targets, as the EU countries have done, for the use of renewable energy. There is a commitment from the Ministerial Council to this effect, stating that after reliable and accurate data on current renewable energy consumption, in particular biomass, has been established, a Decision on the implementation of Directive 2009/1281 EC will be taken and that this Decision should establish mandatory national targets that respect the principle of equivalent ambition of the targets for Contracting Parties compared to the targets of EU-Member States. The Decision should also provide sufficient guarantees that the application in the Contracting Parties of the provisions on cooperation will not put the achievement of the Directive objectives at risk.
3.2.2 Situation in Serbia
Utilising RES was established as the third priority of the Energy Policy of Serbia in the Energy Sector Development Strategy of Serbia up to 2015 of Serbia (adopted in 2005). The Program for Implementation of the Energy Sector Development Strategy for the period 2007- 2012, adopted in 2007, updated in 2009/2010, includes a plan for the utilisation of biomass, geothermal, solar, wind power and hydroelectric sources. According to this Program the share of electric energy produced from renewable energy sources, except large hydro, should increase by 2.2% by the end of 2012.
Currently, the Ministry in charge of Energy is preparing the new “Energy Sector Development Strategy of Serbia up to 2025” which is expected to be completed in 2012. It has emerged that the RES target set in this document will be substantial – 19%, doubling the current share.
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The New Energy Law is expected to be adopted by the Serbian National Assembly during the summer of 2011. The Official Draft of the New Energy Law stipulates that the Government, based on the proposal of the Ministry in charge of Energy:
determines national targets (at least until 2020) concerning the share of energy from RES in the total final energy consumption, and adopts a national action plan for the use of RES and measures the activities for achieving the national goals.
These provisions would serve to transpose the most fundamental principles of the new EU Renewable Directive into Serbian legislation. There has as yet not been a decision with regard to the full applicability of the new EU Renewable Directive but it might be expected that Serbia would strive to fulfil the actions determined by the Ministerial Council of the Energy Community Treaty related to RES development.
3.2.3 Assessment
In the past few years, Serbia has been developing a strategy towards the increased use of RES. Energy production from RES has been declared a priority and efforts are being made to establish a clear institutional and regulatory framework, to raise awareness of environmental issues and use of renewable energy sources in Serbia, both with the professionals in the energy sector (aiming to minimise or eliminate prejudices concerning reliability of generation from renewable sources) and the general public.
At the same time it appears that a lot of the RES strategy is in the early stages of development and has a somewhat declarative character. The declared targets and measures are not consistently followed through in terms of formulating precise actions to be taken by government agencies, regional authorities or public companies.
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3.3 Financial Support Mechanism
3.3.1 Success Factors
The OPTRES report notes that there is no single European methodology for establishing the financial support framework. Countries are free to employ their own methods, and various experiences have been made.
However, the analysis is very clear with regard to some of the criteria for success of support frameworks:
An acceptable level of financial support is important – roughly at a level slightly exceeding average costs of efficient RES electricity production of the respective technology; Arguably even more important than the level of support is long-term certainty – achieved through a well grounded legal basis and a sound methodology (achieving viability and sustainability of the support scheme); Another commonly accepted factor for the success of a financial support framework is that the RES sector needs to be embedded in an unbundled and competitive electricity market, based on the equal rights of participation of investors and on transparency.
Serbia has chosen to use the system of so-called Feed-in-Tariffs (or FiTs) as the main method of supporting electricity generation from RES.59 This is a sound choice, as FiTs have been shown in practice (although not in theory) to be more successful in increasing the utilisation of RES than other available systems (Tradable Green Certificates, investment grants, etc.). A FiT system provides support to RES usually in two aspects, enabling:
Electricity produced from RES to be sold in the market. This is often, although not always, achieved through establishing a so-called off-take obligation: a specific entity (or entities) is (are) by law obliged to take off all the power produced from RES, and also by law a mechanism is established to cover the costs of these purchases from some source – either from the general budget, or from the customers of this entity, or even from all national customers through a system of transfer payments. Electricity produced from RES to be sold at a price which allows the RES producers to cover their costs. This is achieved through a FiT design which appropriately
59 There are also other methods of support available, and they might be important for the viability of certain specific projects. However, we consider the FiT system the dominant support method, and hence this section concentrates on them. We provide a description of other financial support measures in Annex 1.
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considers the costs of RES (different technologies), the timeframe over which the FiT needs to be paid and the appropriate remuneration for the risks related to the RES utilisation in the specific country.
There are many technicalities and hence options of how a country can set the support system for each of the two aspects. These may be called “design aspects”. In addition, not only the design of a support system is important for its success, but this design must also be
a) established in clear, transparent and binding legislation, and b) sustainable, and seen to be sustainable, for a relatively long period.
Finally, there is an additional aspect of the financial support system for RES which needs to be looked at – namely the link with the heat market and heat tariffs. For RES facilities which produce heat only, the methods of setting heat prices are the decisive factor determining the viability of the projects. For RES projects which employ combined heat and power production, the methods of allocating costs to heat and power respectively, and the reflection of this in the method used for determining the FiTs, determine their viability.
The key design factors for FiTs are:60
The FIT needs to be technology specific, well designed (calculated), continuous and long-term (not stop and go), supporting the full basket of available technologies; Good FITs should, in addition, o employ some digression mechanism in order to provide incentives for cost reductions over time; o apply a differentiation to reflect different power generation costs within the same technology (stepped design); o provide extra premiums for additional features required to reach certain policy goals.
The key design factors for the off-take obligation, including its sustainability and clear legal basis are:
A specific entity must be legally obliged to purchase the electricity from RES; The funding source for the FiT must be made explicit;
60 See OPTRES Report - “Assessment of optimisation of Renewable Energy Support Schemes in the European Electricity Market, with the support of the European Commission, 2007 – p. 99, Chapter 7: Best practice example of design criteria for feed-in systems.
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If the funding source is the State Budget, the respective funds must be approved; if the funding source is a cross-subsidy from the electricity customers, the tariff regulation must allow the FiT as an undisputable pass-through item. For the system to be sustainable, the following criteria must be met: the FiT for any RES facility must be known with a large degree of certainty for the whole support period at the point of commissioning (or approval of project documentation by the authorities). This means that the FiT must be set at the beginning of the support period for the whole support period as an annuity-type payment in nominal or real terms61; Re-setting of FiTs for facilities to be built in the future should follow a transparent methodology, a predictable timeframe and stakeholder involvement; The economic impact of the support system on customers and the economy has been assessed and an affordability analysis has been undertaken, based on several scenarios for the development of RES; The technical and economic impact of the support system on the other entities of the energy sector (notably networks) has been assessed and a feasibility analysis and affordability analysis has been undertaken, based on several scenarios of the development of RES.
In the area of heat tariff regulation the following criteria could be applied:
If heat prices are regulated, established methods of economic regulation should be applied (using rate of return regulation or incentive regulation as appropriate for the state of development of the sector); If both heat and electricity prices are regulated, then the allocation of costs to heat and power in the CHPs should take into account the prices and price regulation methods applied for electricity and heat prices respectively, including any special support schemes for electricity produced from RES, which in turn should be compatible with the policy objectives set by the government. In practical terms this may mean adjusting the cost allocation method (for example switching between the so-called “physical method” and the “reduced exergy method” leads to a different cost allocation and hence different regulated prices for heat and power respectively). It could also be advantageous to allow flexibility for the business entities in use of cost allocation method. It is necessary to be realistic about the volume and price at which heat from CHP can be sold. Sometimes it can be justified to establish dedicated district heating areas in
61 If it is set in nominal terms in the country currency, then the investor carries the inflation and exchange rate risk. However, these risks can be built into the required costs of capital. If the FiT is set in nominal terms in Euros, the investor only carries Euro inflation risk.
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the spatial planning procedures to ensure that all available heat demand in a particular location can be “captured” by the CHP.
3.3.2 Situation in Serbia
3.3.2.1 FiT System
In 2009, Serbia introduced a FiT system through secondary legislative documents, namely:
Government Decree on Privileged Electric Power Producers (OJ 72/2009) and Government Decree on Incentives Measures (Feed-in tariffs) for Electricity Generation using RES and for CHP Generation (OJ 99/2009) – valid until 31 December 2012.
The Decree On Incentive Measures For Electricity Generation Using Renewable Energy Sources And For Combined Heat And Power (CHP) Generation (hereafter: Feed-in Tariff Decree) prescribes the conditions for granting the feed-in tariff and the commercial and procedural provisions for processing electricity feed-in from renewables sources. More specifically, the Feed-in Tariff Decree:
Defines the renewable sources and their installation size eligible for receiving the feed-in tariff, Sets the feed-in tariff as a function of the aforementioned eligibility criteria Prescribes the feed-in tariff application process Specifies the feed-in tariff disbursement procedure based on a specific contract between the electricity producer and the buyer, Determines the procedure for the electricity purchaser to recover the cost of renewable energy purchases and balancing
Under specific eligibility conditions the Feed-in Tariff Decree grants a feed-in tariff to various renewable sources, co-firing plants and for combined-heat-and-power plants using fossil fuels such as coal, oil or gas. Renewable sources include energy from water flows, wind, non-concentrating solar, biomass including bio fuels, biogas and biogenic waste fractions, geothermal and other gases (landfill, sewage treatment, synthetic) and non-hazardous waste waters from food and wood processing. For electricity from hydro, biomass or co-firing of biomass and other fuels with a minimum portion of biomass of 80%, CHP and biodegradable waste, a maximum installation size of 10 MW of electrical capacity applies. For other sources no size limits for granting the tariff apply. Moreover, the feed-in tariff is not restricted to new installations but encompasses existing hydro power and CHP plants, however also restricted to a maximum capacity of 10 MW.
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A special feature of the Serbian FiT system is the cap on the overall solar and wind power installations allowed to receive the FiT. For solar energy this limit is 5 MW. For wind power the limit is equal to the sum of 450 MW plus 10% of the sum of new generating capacities built by the public enterprise for power generation, distribution and trade, i.e. EPS, while the Decree is in force (i.e. until 2012). These limits are said to represent a technical system reliability constraint for connection of intermittent solar and wind power to the network.62
The feed-in tariff is granted to privileged power producers for 12 years. For the purpose of providing a stable income and mitigating inflation risks of domestic currency, the tariff is fixed in terms of Eurocents per kWh of electricity fed into the network, but will be paid in local currency after conversion at the exchange rate set by the National Bank of Serbia.
Finally, the Feed-in Tariff Decree stipulates that the producer is not liable for expenses for electricity meter reading, for invoicing and payment of tariffs, nor does it have to bear the cost of balancing deviations between forecasted and actual production from renewable sources. This is important for electricity production from intermittent sources due to changes in weather conditions as well as unforeseen disturbance of operation in general.
Table 29 shows the feed-in tariff which is staggered according to technology, installation size or whether the installation in question is new or refurbished.
62 This explanation should not be taken at face value. As already noted in the section above on wind power, there are alternative calculations suggesting that the network might cope with higher amounts of wind power. In addition, some inside information suggests that not the network capabilities, but the affordability of the FiT was the deciding factor in establishing the cap. It was suggested that for the FiTs to be paid for electricity production from 450 MW of wind power would equal about a 6% increase in electricity price, which was considered the maximum bearable amount, especially for tariff customers.
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Table 29: Feed-in-tariffs for generation of electricity from RES in Serbia
Item Type of Power Plant Installed capacity (MW) Feed In Tariff (c€/kWh)
1. Hydro power plants 1.1 up to 0.5 MW 9.7 1.2 from 0.5 MW to 2 MW 10.316 – 1.233*Pa) 1.3 from 2 MW to 10 MW 7.85 1.4 On existing infrastructure up to 2 MW 7.35 1.5 On existing infrastructure from 2 MW to 10 MW 5.9 2. Biomass power plants 2.1 up to 0.5 MW 13.6 2.2 from 0.5 MW to 5 MW 13.845 – 0.489* Pa) 2.3 from 5 MW to 10 MW 11.4 3. Biogas power plants 3.1 up to 0.2 MW 16.0 3.2 from 0.2 MW to 2 MW 16.444 – 2.222* Pa) 3.3 over 2 MW 12.0 4. Landfill/ sewage gas power plants 6.7 5. Wind power plants 9.5 6. Solar power plants 23 7. Geothermal power plant 7.5 8. Fossil fuel fired CHP plants b) 8.1 up to 0.2 MW C0 =10.4 b) a) 8.2 from 0.2 MW to 2 MW C0 = 10.667–1.333* P b) 8.3 from 2 MW to 10 MW C0 = 8.2 b) 8.4 On existing infrastructure up to 10 MW C0 = 7.6 9. Waste fired power plants 9.1 up to 1 MW 9.2 9.2 from 1 MW to 10 MW 8.5 a) P installed capacity MW. b) Correction of purchase price for C = Co *(0.7* G/27.83 + 0.3) natural gas fired CHP plants C – new purchase price of electricity Co – reference purchase price of 27.83 dinar/m3, specified for enterprises performing retail activities for tariff customers, which does not include expenses for use of transportation system of PU ‟‟Srbijagas‟‟ Novi Sad, according to the tariff element ‟‟energy carrier‟‟, G (dinar/m3 ) – new natural gas price specified for enterprises performing retail activities for tariff customers, which does not include expenses for use of transportation system of PU ‟‟Srbijagas‟‟ Novi Sad, according to the tariff element ‟‟energy carrier‟‟.
Source: Serbian Ministry of Energy and Mining
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3.3.2.2 Off-take Obligation
Currently, the off-take obligation for electricity produced from RES under the FiT scheme is clear. The EPS Trade and Control division acts as guaranteed buyer of renewable electricity. The respective sales contract offers an in-or-out-without-return option to the producer, which means that the producer may terminate the contract at any time during the contract duration of 12 years, but once the contract terminates (either prior to or at maturity) it may not be concluded again. It is implemented through the obligation of the buyer to enter into a power purchase agreement which takes the provisions of the Feed-in Tariff Decree into consideration, and the obligation of the producer to supply all energy produced to the buyer. In order to conclude this agreement, the producer has to confirm to the EPS Trade and Control division that it is entitled as privileged producer. The buyer is obliged to conclude the written agreement within 30 days of request by the producer. Equivalently, the contract terminates 30 days after written confirmation of the producer‟s cancellation of contract by the buyer.
The electric power purchase agreement is a standard agreement approved by the Ministry in charge of Energy. It governs the rights, obligations and responsibilities of the power producer and the default buyer with regards to the purchase of power produced in the aforementioned installations. Moreover, it states provisions on:
production planning and forecasting, regular plant operation according to the Transmission Grid Code and the Distribution Grid Code, and handling of planned and unplanned production halts, metering of the electricity quantity provided to the electricity network commercial conditions comprising price calculation, calculation of payments, invoicing and payment premature or regular contract termination
The contract has a duration of 12 years and expires thereafter. Producers do not have the right to arrange sale of parts of their energy produced independently of the feed-in tariff regime, unless they cancel the agreement prematurely without the option of agreeing on a new contract.63
The buyer is obliged to pay to the producer the administrative feed-in tariff which corresponds to the installation type according to and under the conditions of the Feed-in Tariff Decree in force at the time the producer asks for the feed-in tariff. Payments are made
63 For instance, in Germany producers may decide each month again on what share of their planned production they want to sell outside the feed-in tariff regime, subject to bilateral contracts or directly on the wholesale market and at corresponding prices, while the residual share still appears under the feed-in tariff regime at corresponding administrative tariffs.
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on a monthly basis. They refer to the electricity supplied by the producer to the buyer within one month, multiplied by the set feed-in tariff. The total amount is calculated in Euro but is disbursed in local currency. Therefore, the sum is converted at the average exchange rate of the National Bank of Serbia valid on the date of issuance of the invoice by the power producer with value added tax on top of it.
The Feed-in Tariff Decree contains provisions on how the default buyer of electricity from renewable sources may recover the costs incurred for power purchase and balancing. For each year the actual costs are settled with planned costs estimated before the year starts; the resulting deviation is carried forward and is recovered via regulated price for tariff customers set for the following period.
Given that the EPS Trading division is the designated buyer of renewable energy and has to pay the RES operators, the additional costs arising from the FiT are absorbed into the average wholesale power price for tariff customers (currently all customers) and recovered eventually through the retail prices. It can be expected that the additional costs EPS incurs from the RES purchases are passed through to the retail prices automatically.
3.3.2.3 Other financial incentives
In addition to, and before the FiT system took effect, Serbia‟s government has implemented a number of financial incentives including one-time subsidies, tax reduction and tax exemption. They partially link energy policy, employment policy and regional development. Support is given to investors who develop greenfield and/or brownfield projects in devastated areas or in areas of special interest for the state (mainly the most undeveloped areas in the country). Possibilities for financial support in Serbia, other than FiTs, are the following:
Governmental investment grants – investors in new generation capacity may apply for the governmental support of 2,000 to 5,000 Euro for every new created job, if the minimum investment value is 1 million Euro and at least 50 new jobs are created; these financial support measures are based on the Serbian Government Decree On terms and conditions for attracting direct investment from 2010; interested investors should apply for this grant to the Serbia Investment and Export Promotion Agency (SIEPA). Companies may be exempt from Corporate Income Tax for a period of 10 years, starting from the year in which they report taxable profit for the first time. Exemptions apply under the following conditions:
o Investment in fixed assets exceeds RSD 800 million (approx. 8 million Euro),
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o The company contracts more than 100 additional full-time employees during the investment period.64
Tax credits - A tax payer that made profit in a newly established business unit in an underdeveloped area will receive a corporate profit tax reduction for a duration of two years, proportional to the share of this profit in the company‟s total profit. Accelerated depreciation of fixed assets applies to assets that are used for the prevention of air pollution, water and soil pollution, noise reduction, energy savings, forestation, and collection and utilisation of waste for industrial raw materials and fuels. Foreign investments incentives - The law on foreign investments stipulates free import of goods that are the foreign investor‟s nominal capital (founding capital) – providing it fulfils acts regulating environment protection. The import of equipment as the founding capital of a foreign investor, except for passenger motor vehicles and game and gambling machines, is free from customs and other duties. Furthermore, a foreign investor and a company with foreign founding capital are entitled to tax and customs related deductions in line with the law.
Serbia ratified the Kyoto Protocol as a Non-Annex I country and will be eligible for clean development mechanism (CDM) projects over the commitment period 2008-12. Due to the fact that the energy sector is the biggest emitter of CO2 and, at the same time, most of the CDM projects can be implemented in both energy supply and energy demand areas, the Government has decided that the implementation of any CDM projects in the energy sector should take place within the framework of a strategy addressing issues related to energy efficiency, renewable energy sources, fuel switching and CHP. The Government of Norway has provided financial funds to support the development of the Energy Sector CDM Strategy. This project coincided with the establishment of the Designed National Authority (DNA).
The DNA was established by Governmental Decision (No 02-2099/2008-1) on 5 June 2008. The Agreement on the Establishment of the DNA for implementation of projects under the CDM of the Kyoto Protocol as the DNA of the Republic of Serbia was signed by relevant Ministers on 30 July 2008 (Bozanic, 2008).
64 Not really an incentive for the development of RES.
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3.3.3 Assessment
3.3.3.1 FiT Design and Sustainability
Serbia‟s FiTs were calculated in a comprehensive calculation exercise, commissioned by the Ministry of Mining and Energy using local and international consultants. According to the officials involved in the process, the FiTs were determined based on the estimated overall investments in individual technological solutions for generation of electricity from RES, with an aim to enable a return on investment within 12 years at an annual rate of return of 14%. Based on the sources from the Serbian Ministry in charge of Energy, FiTs were designed with respect to the potentially difficult and demanding RES infrastructure developments.
Before approval, proposed values were also discussed and assessed further by different governmental authorities, for example AERS. In some cases substantial adjustments were made. For example, the first proposed FiT for wind emerging from the calculation exercise was reported to be 11.3 c€/kWh. Based on feedback and consultation within different government branches, this tariff was then lowered to the 9.5 c€/kWh, approved by the Feed- in Tariff Decree.
The Serbian FiTs show a number of positive design features:
they are differentiated by technology and size; they contain special elements for CHP components; they are long-term and predictable (12 years, fixed in Euros); their level corresponds to some extent to FiTs used in other countries in Europe and across the region, although this is with the exception of solar (Serbian FiTs are very low), landfill gas (slightly on the low side) and traditional geothermal energy (also slightly on the low side).
Some other features are less favourable:
there could be more differentiation of FiTs within one technology and the use of degression factors could have been explored; the calculation method for the cap on wind and solar power is not made transparent and may be flawed; it has not been made clear whether a sustainability and affordability analysis has been undertaken.
Overall, the FiT system appears sound. Moreover, with the expected adoption of the New Energy Law, the financial support system for RES is going to be entrenched in primary legislation. The Official Draft of the New Energy Law:
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stipulates that the Government adopts regulation concerning Privileged Electric Power Producers; defines Privileged Electric Power Producers as producers of electricity:
o that use RES in power plants of net power up to 10 MW o that use wind power regardless of installed power o in CHP plants of total net power up to 10 MW, under the condition of fulfilling criteria concerning energy efficiency and environmental protection
stipulates that the Government adopts regulation that prescribes incentive measures for energy generation by using RES, at the proposal of the Ministry in charge of Energy, stipulates that the Ministry in charge of Energy issues the Guarantee of Origin which represents official proof that electricity is produced from RES. The Guarantee is issued for the exact time period and amount of electricity produced during that period. The Guarantee for electricity produced from RES contains data on the source of energy, power of the plant and time and place of production. The Ministry issues the Rulebook on contents and procedure of issuing. The Guarantees issued in the EU, according to relevant directives, are valid in Serbia under the conditions of reciprocity. Recognition issues concerning foreign Guarantees are the subject of bilateral state agreements.
There is remarkable continuity in terms of FiT between the system brought in with the secondary legislation in 2009 and the draft New Energy Law.
3.3.3.2 Off-take Obligation
At the moment the off-take obligation in Serbia is well designed, within the existing electricity sector framework, and hence appears sound.
However, there are some issues related to the rigidity of PPA design and the lack of choice for the RES operators to market the renewable energy themselves at certain points over the lifetime of the project.
An additional, and possibly more important, issue is the lack of clarity about the off-take obligation introduced in the New Energy Law. The New Energy Law changes the way electricity supply is organised in Serbia. The EU demands unbundling and the pro-active introduction of retail competition, while the Serbian policy-makers are keen to preserve a very protected and regulated market structure. The situation appears “messy” and this has been noted by RES stakeholders during the public consultation process. A consensus is emerging that one of the suppliers, who will be dedicated to providing regulated wholesale power for all retailers serving captive customers, should also absorb the role of off-taker of
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power from RES operators. The problem with this arrangement is, however, that in this case only the captive customers would pay for the financial support system for RES. A remedy for this, currently being discussed, is that a special levy is put on the transmission tariff, allowing the recovery of RES costs proportionally from all customers in Serbia.
3.4 Network Connection and System Integration
3.4.1 Good Practice
The OPTRES report provides extensive analysis of connection and system integration issues. It stresses that these issues are vital aspects of a framework for RES. The report also notes the many problems encountered by developers across Europe.
In the area of connection charging, issues relate to the need to apply transparent and non discriminatory pricing rules and to consider the potentially positive effect distributed generators can have for the network. In the area of connection process, the issues relate to the clear responsibilities, especially of the connecting entity, and to the specified timeframes for responses etc. System integration of RES producers usually has two aspects: a technical aspect and a commercial aspect.
The technical issues relate to the technical features of the RES plant and how it interacts with the system and network operation. The commercial integration issues relate to how RES producers function in a competitive electricity market, where usually exact schedules have to be announced in advance, all imbalances paid for, and where most plants should contribute to the ancillary services market.
The EU Directive and national legislation of the member state concerned provide a clear framework of responsibilities, but some of the barriers in this area are quite subtle, because the system operators and network owners can and must exercise discretion in interpreting rules which require them to fulfil system interests (reliability, network stability etc.).
Nevertheless, a set of requirements or good practice can be formulated, with the main points being as follows:
The connection costs and the Use-of-System tariffs need to be fair and non- discriminatory, and RES facilities could benefit from preferential (lower) tariffs reflecting the benefits distributed generation provides to the network; The connection process needs to be relatively fast (or at least predictable), with clear responsibilities, and administratively manageable, even for small developers;
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RES facilities need to benefit from preferential dispatch so that the use of RES is maximised, even though this may impose increased balancing costs for the system operator and other market participants; RES facilities need adapted rules with regard to technical operational requirements as they may not be able to fulfil all the technical requirements which the electricity system is accustomed to demand from generators. Some RES generators have specific operating features, and a successful development of RES-E is only possible if these issues are properly understood and clearly regulated. At the beginning of RES utilisation a large number of misconceptions about the actual issues and their severity exist. The lack of knowledge about possible effects of RES facilities for the system and the ways to manage them may result in reluctance of network and dispatch personnel and companies to engage with RES developers. It is therefore one aspect of good practice to conduct the respective training and development programmes for network and dispatch personnel. This includes also specifically the acquisition of specific skills by some of the network and dispatch personnel allowing them to manage the technical processes under the conditions of increased diversity of generation sources and increased uncertainty. In some countries special wind dispatch centres have evolved, where people are trained in the utilisation of complicated wind forecasting models. Another aspect of good practice is to undertake network studies in the process of determining network development plans in order to:
o Determine and make available to interested parties a list of preferential RES connection sites;
o Determine critical values for the country and for specific regions for the amount of RES plants which could be connected without major network expansion;
o Determine and calculate through scenarios for the parallel process of network development and RES utilisation development.
Finally, technical requirements for RES producers should be determined in such a way as to reflect modern technology, allowing easier system integration, while at the same time keeping the costs for the RES developers manageable. These requirements should be laid down in transparent and public documents, approved by a regulator (usually including special chapters about grid code, distribution code and separate Wind Power Code).
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3.4.2 Situation in Serbia
3.4.2.1 Technical Rules
Concerning network connections of RES based generation facilities and their integration into the power system, the Serbian electricity sector was in significant delay compared to most of the European power systems, including some neighbouring power systems.65 While the Distribution Grid Codes, adopted separately by each distribution company from EPS (future DSOs), already contain very detailed and precise conditions and stipulations regarding connection and operation of distributed generation facilities (including strategic and operational planning), the existing Transmission Grid Code contains detailed specific requirements for conventional generators, but only some determinations for RES generation, in particular wind power plants.
It has been recognised that this situation needs to change, as the general provisions concerning generation facilities do not reflect the specifics of RES. During 2010 a number of activities were undertaken and they resulted in an initial proposal for the revision of the existing Transmission Grid Code (by the EMS coordinated Grid Code review committee). This revision of the Grid Code is planned to coincide with the revisions resulting from the New Energy Law and with the implementation of the results from the Wind Integration Study.
The revision of the Serbian Transmission Grid Code should also be seen in the context of the efforts of the European association of TSOs (ENTSO-E) in developing common pan- European technical rules (that should be mandatory) for the connection of wind generation, aiming to cope with the tremendous increase in wind generation capacities all over Europe. As was mentioned above, Vattenfall completed the Wind Integration Study for the power system of Serbia. This study provided and estimate for the capacity of wind generation that can be connected to the transmission network in Serbia, and also elaborated specific issues such as power system control, security and reliability at different levels of wind generation penetration into the power system.
Once these activities are all completed and the regulatory framework synchronised, Serbia should have a coherent, complete, reliable and supportive legislative and technical framework for the connection and operation of the RES based generation units in the Serbian power system (regardless of whether they are connected to the transmission or to the distribution network).
65 The reason for this “inertia” of authorities in the electricity sector and the network operators was the fact that until late 2009 there were no feed-in-tariffs and consequently no interest for the development of generation from RES (as indicated earlier, prices of electricity are too low to incentivise investment in RES generation without additional incentive schemes).
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3.4.2.2 Connection Charges
The connection charging methodologies are issued pursuant to Article 15 of the current Energy Law, which provides that AERS “determines criteria and methods for determining costs of connection to the energy transmission, transportation and distribution system.” Article 55 of the Energy Law (relevant to the connection costs methodologies only) provides, among other things, that the energy entities determine the connection tariffs in accordance with the methodology for defining connection tariffs passed by the Agency. This methodology (shall) define the method and detailed criteria for calculating connection tariffs depending on the approved installed capacity, connection point, necessity for execution of works or installing necessary equipment and other objective criteria.
The connection charging methodology employed in Serbia has the following main features:
Connections are separated, mainly on the basis of installed capacity, into two basic types: “standard” and “customised”. Electricity producers are in the “customised” category. The connection tariff has effectively two components:
o Shallow, to cover the shallow costs of the connection. For standard connections, this has a fixed part and a variable part. The fixed part is the same sum for all connections, while the variable part is different depending on the distance the new user is from the existing network. For customised connections, the approach to calculating the shallow component is not specified; and
o Deep, to cover “part of system costs incurred by connecting…” This is calculated from a standardised cost/unit of capacity (i.e. kW or m3/hr), which in turn is calculated using the approach set out in the methodologies. The same formula is used for standard and customised connections;
Deep connection pricing is applied to all connections, except for electricity producers who pay shallow connection charges.
The New Energy Law will maintain the existing system. Article 125 (corresponding to the existing Article 55) stipulates that the connection costs shall be determined by the transmission/ distribution operator, in line with the methodology for determination of connection costs adopted by the Regulatory Agency. This methodology should determine the method and more detailed criteria for calculating the connection costs, depending on the approved power, i.e. capacity, the connection point, the need for works execution or the need for necessary equipment installation or other objective criteria.
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3.4.2.3 Connection Process
The connection process for a new RES generation facility to the transmission network is very similar to the process for connection to the distribution network.66 The procedure is based on the stipulations of the Energy Law and secondary technical legislation (Transmission Grid Code and Distribution Codes) and it includes the following steps:
the potential investor inquires with the relevant network operator about possibilities for network connection at the future generation infrastructure development site, the network operator, upon necessary technical assessments, issues an opinion about possibilities for network connection for which it charges 115,811.53 RSD (including VAT) or approximate 1,160 € according to EMS services price book No. 6/2011; this opinion explains if there are technical possibilities (in principle), or if there will be technical possibilities (after completion of certain network development plans) for connection of new generation infrastructure at a certain connection point; if there are no possibilities for connection to the requested connection point, the network operator may recommend another connection point or advise the potential investor to take into consideration certain investments in the electricity transmission/distribution infrastructure that would facilitate planned development, based on the opinion from the network operator, the investor applies for the connection, the network operator issues an analysis of the optimal connection to the requested connection point, if there are technical possibilities to do so, with details of all the equipment to be provided by the investor, technical requirements to be fulfilled by the investor‟s equipment, a list of tests that shall be applied, and connection charges that are applicable for the concerned facility (generation unit and associated equipment) at that connection point, once the investor completes all acquisitions, installations and commissioning, i.e. when his plant at the connection point is ready for testing, he applies for connection approval, the network operator conducts all necessary tests, and if the results are satisfactory, issues a connection approval within a maximum of 60 days from the day of application, based on the connection approval, the network operator and investor conclude the connection agreement/contract; this contract, besides the elements determined by the contract law, contains the following:
66 Technical requirements, required parameters of the unit, technical limitations, etc. are different, but the process from the initial inquiry up to the connection agreement is practically the same.
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o technical conditions for connection of the systems and the connection point; o method of metering the delivered electricity; o system connection costs and o deadline for system connection.
within a maximum of 15 days after the connection approval, physical connection of the facility to the electrical network must be completed.
3.4.2.4 System Integration
RES facilities raise a number of issues concerning power system control, and these issues may in turn influence the degree of utilisation of the RES facilities. This concerns strategic long-term planning, operational planning, operational control, frequency control, voltage control, system defence and restoration, etc. These issues are quite specific and quite different for big generation plants connected to the transmission grid and for small distributed generation units operating in the distribution network.
The rules related to system integration for all generators are covered in the Transmission Grid Code and the Distribution Grid Codes. Currently, there are no “special conditions” related to RES generators. They have the same responsibilities, for example based on the expected duration and reasons for plant overhaul, the producers must agree with the system operator at the beginning of the planned production halt. Moreover, they need the approval from the corresponding transmission or distribution system operator, depending on the network level where the installation is connected to. Within the review of the Transmission Grid Code, mentioned above in the section on technical connection rules, some changes are foreseen to reflect the RES specifics.
3.4.3 Assessment
At the general and formal level it appears that the connection of RES producers to the network in Serbia and their integration to the grid would be relatively straightforward:
Connection rules are established, and while not yet catering specifically for RES facilities, a review of the technical codes is in progress to provide additional clarity;
Connection charges for RES generators in Serbia enjoy a priority treatment compared to consumer connections, with only the shallow costs needing to be recovered. The charging methodology, established by the regulator, seems to provide a basis for fair and transparent connection costs;
The connection process is well understood and follows clear steps;
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Rules for system integration are established and may be adapted in the future for specifics of RES generators;
A network study for the integration of RES generators is in progress;
Energy sector personnel are being trained in the specifics of RES integration into the system.
However, as in many other countries in the region, the connection of RES facilities to the network in Serbia suffers from a multitude of small and somewhat hidden issues. Observers speak of DNOs finding “millions of excuses for not connecting facilities to the grid”.
There may be many reasons for this behaviour, but the main one inevitably relates to the financing of connection costs. While it is laudable to allow the RES facilities to pay only shallow connection costs, the deep costs still have to be funded by the network company. However, the use-of-system tariff methodology does not automatically allow the recovery of the necessary investments. Following the incentive regulation approach, network tariffs are capped at a certain level for a long term period (3-5 years). When setting the allowed revenue for this capped tariff, the necessary investment in network infrastructure should have been taken into account. Indeed 5 year network investment plans, approved by the Ministry and the regulator, are one of the inputs into the tariff calculation.67 However, the implementation of this mechanism poses many problems. Investment plans may not have been sufficient, or economies may have been assumed which cannot be realised by the companies. The necessary investment into the network expansion related to RES generation connections has almost certainly not been fully taken into account. As a result the necessary investments in the network caused by RES connections “compete” against the other investments that were planned by the network company. This results in reluctance from the network companies to engage with the RES investor.
The draft New Energy Law seems to cause additional obstacles for RES facilities. Article 125 stipulates that all generation units, regardless of their size and connection point (network they are connected to), have to contractually regulate their balance responsibility. This is in anticipation of the new wholesale market framework. We note that this provision would be almost impossible to fulfil for small distributed generation connected to the distribution network.68
67 There are also yearly investment planning “rounds” for each network company in the Ministry, leading to the approval of short, medium and long-term investment plans. The full relationship of this planning process to the tariff regulation process is not made transparent. 68 There are some more or less practical solutions to this issue. The RES generator could conclude a balance responsibility contract with the DSO operating the distribution network it is trying to be connected to, but in reality
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3.5 Administrative Issues
3.5.1 Issues and Good Practice
The OPTRES report has looked at the impact of administrative aspects on the development of RES and has found that they play a major role. The main administrative barriers identified in the OPTRES study were:
High number of authorities involved; and lack of co-ordination between different authorities; Long lead times and unclear procedures to obtain necessary permits; RES are insufficiently taken into account in spatial planning; and low awareness of benefits of RES at local and regional authorities
By their nature the administrative issues are very country and even locality specific and it is difficult to define good practice and to compare procedures in different countries. Some general characteristics for good practice can be formulated as follows:
Responsible authorities and co-ordination: It is preferable if the number of authorities responsible for issuing permits and specifying support systems is limited. According to the OPTRES report, project developers rate highly those cases where one administrative body has been made responsible for the co-ordination of several administrative procedures. In addition, project developers appreciate standard administrative requirements and application forms. Permits: clear guidelines for authorisation procedures are highly recommended, including obligatory response periods. Land lease: Processes to obtain land leases for RES development are clear and transparent and RES development is taken into account in the special planning process. Local authorities are well informed about environmental, social and economic benefits of RES.
this would not be practical. The better solution, applied in many other countries, would be to release from balance responsibility all generation units below a certain installed capacity, for example 1 MW (e.g. in Serbia these units do not require a licence from the Regulator nor an energy permit from MEM), and to provide some regulatory incentives to network operators for additional balancing of its network portfolio.
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3.5.2 Situation in Serbia
3.5.2.1 Administrative Responsibilities
The following authorities are major parties in the administrative process for RE facilities:
The Government of Serbia is responsible for setting the overall strategy and targets, including adopting the Implementation Program of Energy Development Strategy The Ministry in charge of Energy is responsible for the calculation of FiTs, the approval of privileged producers status, the approval of the standard PPA, issuing of energy permits The Ministry in charge of Spatial Planning and Construction (MinSPC) or Autonomous Region is responsible for issuing Location permits and Construction permits for RES projects that are in jurisdiction of the state The Local Self-Government Units (LSU) are responsible for issuing Location Permits and Construction Permits for RES projects that are not in jurisdiction of the state The regulator, AERS, is responsible for issuing licences for energy related activities
Additional administrative bodies are engaged in specific aspects, for example:
The Ministry in charge of Mining The Republic Geodetic Authority The Ministry in charge of Water Management The Ministry in charge of Environmental Protection The Republic Hydro-meteorological Service The Serbia and Montenegro Air Traffic Services Agency
None of the authorities plays a co-ordinating role, or functions as a “one-stop-shop”.
3.5.2.2 Permitting System
The permitting system for RE producers in Serbia is complex. We provide a summary in this section, and a more detailed description is contained in Annex 1. The procedures are elaborated in substantial detail in the Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia available for biomass, small hydro power, wind and geothermal sources.69
69 [Branislava Lepotić Kovačević et al.; Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia available for biomass, small hydro power, wind and geothermal sources; GTZ/ USAID funded project; available at the permits and licences for renewables section at the Ministry of Mining and Energy website ; 2010]
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Fundamentally, the permit and administrative process consists of two parts:
Some permits and administration requirements relate to the construction process – they would apply to any construction project and are governed by the respective general laws of special planning, construction, technical supervision etc. They are administered by the Local Self-Government Units (LSU) for projects under 10 MW, and by the Ministry of Environment and Spatial Planning for projects above 10 MW or for sHHP and wind project near National Parks. Other permits and administrative requirements relate specifically to the energy characteristics of the RES projects, they are governed by energy sector legislation and administered by the Ministry on charge of Energy and the Energy regulatory Agency. Some of these processes are only applied to RES facilities above 1 MW.
The complexity of the Serbian administrative system for RES investors arises from the following factors:
The administrative requirements for construction processes are relatively detailed, elaborate and rigid; The interaction between the construction related and the energy related administration processes poses difficult timing and sequencing issues. Approvals and documents from one process are required as inputs to the other process, but there is essentially no co-ordination between the two (except by the developer himself), as they are performed by very different authorities.
We will try to illustrate the main steps of the overall process and the interactions between construction and energy related issues. We will abstract from the specific issues of geo- thermal projects (which involve additional complexities).
1. The preparation of the RES investment starts with a Pre-Feasibility Study in conjunction with the General Design followed by the Feasibility Study in conjunction with the Preliminary Design and/or the Main Design (depending on the size of the facility). The content of these documents is prescribed by legislation, and they must include, for example, an elaboration of several options and justification for the preferred solution. During the preparation of these documents, the developer also has his first contact with the energy related authorities – he has to request an Opinion from the relevant network operator as to the feasibility and main conditions for network connection. In the context of developing these studies, the investor also has to acquire the necessary information about the specific location and, in some cases, undertake (commission or make use of) hydro-geological surveys. Moreover, an energy generation facility can, as a rule, only be constructed at a site where the Spatial Planning Document foresees the construction of an energy producing facility (or at least does not rule this out).
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2. Also in the early stages of the project development and if the planned facility is above 1 MW, the developer needs to obtain an Energy Permit issued by the Ministry in charge of Energy. The Energy Permit has the function to “reserve” the development of an energy source (for example water or wind) at a specific location for the particular investor. During the validity period of the Energy Permit the permit holder has the sole right to develop the energy source at this location. The Energy Permit is valid for 2 years and may be extended for 1 further year, effectively putting a time limit of 2 – 3 years on the construction to start. A requirement for issuing the Energy Permit is the Pre-Feasibility Study (which already integrated the Opinion from the relevant network operator), as well as a range of other specified documents about the developer and the planned facility.
3. As a result of the preparation of the technical project documentation as described above under item 1. and some additional actions, the developer is then aiming to obtain the first permit relevant for the construction process - the Location Permit. The Location Permit gives the permit holder the right to apply for a Construction Permit within a 2 year period, so its function is essentially to reserve a specific plot of land for this specific investment, as described in the Main Design. In order to receive the Location Permit the developer already must have an Energy Permit, must have obtained (bought, leased) the required land, must have a decision on Water Requirements, and relevant approvals related to other environmental (cultural, social, historic) protection issues. Establishing the Water Requirements has the aim of setting the technical or other requirements that have to be met by the facility in relation to water. The decision is taken by the Ministry in charge of Water Management, and it is only valid for 2 years. By that time the developer must have filed the request for the issuance of the Water Approval.
4. Construction may start only upon obtaining of a Construction Permit (and it must start no later than 2 years after receiving it). The Construction Permit is issued by the LSU (up to 10 MW) or MinSPC (above 10 MW). In some cases, particularly for any sHHP which deviate from the cadastre, the Ministry in charge of Energy has to issue an approval for the construction. In order to obtain the Construction Permit the investor has to file the technical project design documentation – particularly the Main Design (item 1 above) which must have undergone the legally prescribed technical supervision process. In addition, the Main Design has to be presented and approved by other institutions according to the requirements specified in the Location Permit, and most particularly the Water Approval must have been granted by the Ministry in charge of Water upon receiving the confirmation that the Main Design conforms to all aspects of the Water Requirements. An additional pre-requisite for the Construction Permit is the Environmental Impact Assessment (EIA). EIA is required for wind power above 10 MW, sHPP above 2 MW, biomass above 1 MW, geothermal above 1 MW and in some additional cases. The investor first submits a request to decide on the necessity of an EIA to the responsible authority (LSU or Ministry of Environmental Protection), and then a request to stipulate the scope and content of the EIA. Having
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received the authority‟s Decision on the scope of the EIA, the developer must carry out the EIA within 1 year. The developer then files the request for approval of the EIA and receives the Approval of the EIA, which is valid for 2 years.
5. Upon completion of construction and a positive result of the technical acceptance test, the developer requests the Water Permit from the Ministry in charge of Water and the Operating Permit from the same authority that granted the Construction Permit. The technical acceptance test is performed by the Technical Inspection (a part of the LSU or MinSPC), who checks if the actual construction corresponds to the design and is fit for regular use.
6. Obtaining of the Operating Permit completes the administrative process related to construction, but there are also processes related to the energy production. In particular, the developer needs to acquire the Right to Energy Generation. The need to obtain the Right to Energy Generation seems to arise from the general legislation which treats energy production as a public interest activity which is vested with the Ministry in charge of Energy and which can be performed by other entities only after a formal assignment. This formal assignment usually happens in the form of an Assignment Agreement or a Concession. In addition, the developer needs to obtain the Approval of Connection from the network operator, as well as a formal Licence for energy-related activities (if above 1 MW) from the AERS.
7. Finally, the developer needs to acquire the Status of Privileged Producer in order to be granted the Feed-in-Tariff. The status is granted by the Ministry in charge of Energy. A Power Purchase Agreement then needs to be concluded (this is a regulated standard agreement).
3.5.2.3 Land Lease
There are three options for the potential investor to gain access to the land which will be utilised for various aspects of the generation facility development:
The first option is to buy/lease the land from the owner, which is the quickest, most simple but potentially the most expensive option; there are neither regulations nor regulated prices in this regard – it is an absolutely free arrangement between the investor and the land owner; It may be used only in the case of private ownership, i.e. if the owner is a public entity or the state, only the second option applies; The second option is to obtain a so-called “right of use” defined by the law, which can be based on the contract/agreement between the investor and the land owner, where the land owner can be any private person or public entity. This right allows the
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investor to pass over the land, bury in the ground, use the land during construction and even lease the land for permanent structures70 such as machines, houses, pipelines, etc. Contract arrangements also provide for compensation that should be paid to the land owner for “right of use”. The third option is used in cases where there is no possibility to sign a contract to buy/lease/use land with a private person. In this case the investor must go to court with the claim against the land owner (private persons mainly, since public entities are obliged to provide “right of use” at the investor‟s request, unless there are serious obstacles that need to be properly documented, and this is the only case when the investor may bring a public entity to court for denying his “right of use”). In this case the ''right to use'' is declared by the court's decision including compensation for the owner.
The advantage of the right of use process is that, in case of disputes and if the investor and land owner cannot reach an agreement on compensation for the use of land and/or potential damages, the construction process can still commence, because legally a dispute is not supposed to block implementation of the “right of use”.
3.5.3 Assessment
There are substantial administrative barriers to RES development. On the basis of the description above we note that the procedures are complex and time consuming. The procedures may be known and transparent, and maximum response times for authorities are often specified, but they are very formalised and contain many intermediate requests to be filed and decisions to be obtained.
In addition, the sequencing of permitting and other procedures seems a major problem.
Currently the most serious problem mentioned by potential investors concerns the sequencing of permits and licences related to wind generation. According to the existing legislation, FiT will be granted only at the end of the process, once construction is completed. However, there is a cap on wind facilities that are able to receive the FiT (450 MW). This means that for any given wind project, the FiT is actually not guaranteed at the starting point of the project. Consequently, banks or other financial institutions are not approving any credit arrangements for the development of wind generation in Serbia at the moment. It is expected that foreseen and on-going changes in the Serbian legislative framework should solve this issue.
70 In fact, this right is currently under discussion in the Serbian parliament as part of the Construction Law amendments.
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Even if the sequencing issue with regard to wind power is solved, the administrative process remains extremely cumbersome.
3.6 Finance and Investment Issues
3.6.1 Issues
The OPTRES Report notes two main types of finance and investment issues that often constitute a barrier for RE developers: lack of trust among bankers and investors and low predictability of cash flows and subsidies. The first factor can lead to a lack of available funds and high risk premiums. The second factor means that even if the Feed-in-Tariff system is clearly specified and secure, with uncertain energy yields of the specific facility (for example due to uncertainty of wind speeds) the expected revenue stream is still uncertain.
Additional factors identified for many transition economies include:
Short loan times of local commercial banks (in some countries the maximum lending period is 5 years and lower); Project developers often are Small-medium enterprises (SME) with limited liquid assets, capital and other reserves; Local businessmen, who are generally interested in investment in RE, do not have the necessary expertise and often do not acquire the necessary advice from Consultants, for the development of an appropriate technical concept and documents required for financing. In many case the “chicken and egg” problem is apparent: i.e. potential investors are reluctant to spend money on the development of the necessary project documents as long as they do not see a realistic chance to getting finance, while potential financiers require exactly such documents for their decision on financing; It is often not fully clear what the relationships between the various parties of a project are, and who will ultimately provide the necessary equity to the project; potential investors often claim that they would be in a position to provide funds from affiliate companies or from additional investors, but it is difficult to assess how realistic such claims are; “Wishful thinking” about potential financiers is common.
Increased maturity of the RE market is required to overcome these issues.
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3.6.2 Situation in Serbia
The situation in Serbia is being assessed as part of the interview and information gathering exercise for Phase 2 of the project.
Conversations with some Donors (for example EBRD) and investors suggest that the above mentioned financing problems are all present in Serbia. EBRD mentioned the lack of equity of developers and the uncertainty about where the equity capital is coming from. Nearly all investors express dissatisfaction with the attitude of commercial banks in Serbia. Investors in Serbia usually negotiate project financing with several commercial Banks, trying to get the best offer possible. They report that banks “do not have experience in RE sector”, which is manifested by several issues:
Banks are not offering as good conditions for financing for RE projects as for other projects. RE projects compete with investment options in other areas (tourism, industry, agriculture, etc…) which avoid the uncertainty and all the (perceived) problems related to RES development. After the contract is agreed between the bank and investor, the bank requires at least 6 to 9 month until the contract can become operational; Some RES projects (for example sHPPs in the range of 1.5 till 2 million €) are small, so the banks are not very interested in financing them. The banks argue that for such projects due diligence and other activities cost as much as for large projects, which additionally deteriorates financing situation. Commercial banks show more interest for larger projects or for portfolio of projects (for example a cascade of sHPPs) on a longer term.
3.6.3 Assessment
Investors in RE projects are (or should be) aware of Serbia‟s strong advantage compared to neighbouring countries. For building RE power plants concessions are not required, which means that the constructed power plant is the property of the investor and could be sold anytime71, like any other construction object. Similarly, the PPA with EPS is transferable and is related to the location, not to the investor‟s identity.
71 This statement holds independent from the assignment of Rights to Energy Production, which may be by a form of concession (see Annex 1), but this is not a concession in the usual sense. Such concession, which is transferable, only refers to the right of energy production, it does not refer to the ownership of the facility. In any case, the more common method of obtaining the Rights to Energy Production is via Assignment Agreement.
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The immaturity of the RE market, the country‟s credit rating and the uncertainty related to many aspects of doing business in Serbia, and in the RE sector in particular, are causing banks to take a cautious approach. Investors are expecting this attitude to change once the market for RE projects becomes more mature.
In our continuing talks with concrete investors we will acquire additional and more concrete information, which we will add to this Report at the end of the project.
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4. Annex 1 - Authorisations and Permits (Detailed Description)
The information provided under this sub-chapter is mainly taken from the Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia available for biomass, small hydro power, wind and geothermal sources.72 These guides to investments in renewable energy, disclosed at the website of the Ministry in charge of Energy, explain the licensing process for developing projects using the above cited sources. They describe administrative procedures and identify relevant institutions and necessary planning and design documents needed for investors, especially for those relevant to becoming a privileged power producer and receiving a feed-in tariff for electricity generation. The guides‟ presentation technique relies on sequential diagrams, which we have transferred into a rather text-based form amended by our own comments and explanations derived from reconsideration of the most relevant legal documents.
This section is limited to those installations which fulfil the requirements for privileged power producers and apply for the feed-in tariff according to the feed-in tariff regime from 2009. Therefore, other installations have been considered as out of scope, such as large hydro power projects.
Corresponding information on the implementation of solar power projects has been derived from the relevant legal regulations.
4.1 Overview
The construction of an installation using renewable sources requires a multitude of permits, approvals and studies (technical documentation) and involves various authorities and institutions. Moreover, compliance with a set of legal provisions is imperative.
The most important permits are shown in the following figure, though each of the permits may require different scales of documentation including subordinate permits, approvals and studies. Moreover they are interrelated and therefore require a specific course of action.
Generally speaking, the investors have to obtain permission for construction and the right to engage in power generation. Apart from this the investor has to follow a specific procedure
72 [Branislava Lepotić Kovačević et al.; Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia available for biomass, small hydro power, wind and geothermal sources; GTZ/ USAID funded project; available at the permits and licences for renewables section at the Ministry of Mining and Energy website ; 2010]
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and acquire additional approvals to benefit from administrative, promotional feed-in tariffs for electricity. Specific to geothermal sources the investor also has to acquire the right to explore soil and to exploit geothermal resources.
Figure 21: Preview of necessary documentation for RES generation development
Studies to be Permits for construction: Permits for energy Permits for energy sale: prepared by generation: investor: • Land use/ property right • Preferential Producer • Energy Permit • Energy Generation Permit status • Preliminary • Location Permit • Energy Activity License • Feed-in tariff approval feasibility study • Construction Permit • Network connection • Electric Power Purchase • Feasibility study • Environmental Impact Agreement • Preliminary Design Assessment Approval • General Design • Water Permit • Main Design • Operating Permit • Geothermal sources exploitation permit
Source: own presentation
A set of legal provisions specifies which permits are indispensable and what the procedures are for obtaining them. The most relevant ones are listed below, though in specific cases other laws and subordinate pieces of legislation may be relevant, as well:
The Energy Law (Official Gazette of the RoS, No. 84/04) The Mining Law (Official Gazette of the RoS, No. 44/95, 85/05-superseding law, 101/05- 85/05-superseding law, 34/06, and 104/09) The Law on Geological Surveys (Official Gazette of the RoS, No. 44/95) The Law on Mineral Resource Reserve Establishing and Classification and Presentation of Geological Survey Data (Official Gazette of the FRY, Nos. 12/98 and 13/98) The Law on Planning and Construction (Official Gazette of the RoS, Nos. 72/09, 81/09 and 24/11) The Law on Environmental Protection (Official Gazette of the RoS, Nos. 135/04 and 36/09) The Law on Environmental Impact Assessment (Official Gazette of the RoS, Nos. 135/04 and 36/09) The Law on Protection of Nature (Official Gazette of the RoS, Nos. 36/09 and 88/10) The Law on Waters (Official Gazette of the RoS, No. 30/10) The Law on Concessions (Official Gazette of the RoS, No. 55/03)
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The Law on Public Companies and Performing Activities of Public Interest (Official Gazette of the RoS, Nos. 25/00, 25/02, 107/05, and 108/05) The Law on Public Utility Companies (Official Gazette of the RoS, Nos.16/97 and 42/98)
Moreover, in the following list are the most relevant competent institutions in charge of granting specific permits:
The Ministry in charge of Energy – EnMin The Ministry in charge of Mining - MiMin A Local Self-Government Unit - LSU The Serbian Energy Regulatory Agency- AERS The Republic Geodetic Authority - RGA The Ministry in charge of Water Management - MinWM The Ministry in charge of Environmental Protection – MinEP The Ministry in charge of Spatial Planning and Construction - MinSPC The Republic Hydro-meteorological Service - RHMS The Electric Grid of Serbia - EMS The Electric Power Industry of Serbia – EPS The Serbia and Montenegro Air Traffic Services Agency The competent secretariats of the Autonomous Province
Figure 22: Structure of issuing bodies and their responsibility for most important permits and licences for renewable facilities
Source: [EnMin 2010]
There is an exception concerning the construction permit. When the facility is constructed within a national park or within the boundaries of a protected natural or cultural asset of outstanding significance, or it is 50 m or more in height, it is within the jurisdiction of the
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Ministry in charge of Spatial Planning and Construction (MinSPC), or the Autonomous Province if the facility is located in the territory of the Autonomous Province. Equivalent to the above figure, this section classifies the permits and documentation requirements according to four phases:
Planning, Information and Exploration Phase including:
o a) Studies to be prepared by the investor and o b) Acquiring information on specific location (e.g. exploring the geothermal potential)
Construction Phase Energy Generation Phase Commercialisation Phase according to legal provisions on economic support
4.2 Planning, Information and Exploration Phase
4.2.1 Studies (technical documentation) to be prepared by the investor
During the approval procedure, the investor has to disclose information to the authorities about the project in accordance with the requirements formulated in the Law on Planning and Construction. The complexity of this information increases as the project proceeds, especially in the period prior to construction. The following table gives an overview of the studies (documentation) to be prepared by the investor.
Table 30: Meaning of different documents to be created by the investor
Notion Meaning and components
Shall define, in particular, spatial, environmental, social, financial, market, and economic justification of the investment for possible alternative solutions Pre-Feasibility Study defined in the General Design, which will serve for decision-making on justification of the investment - in preliminary works for the Preliminary and the Main Design. Specifies the spatial, environmental, social, financial, market and economic justifiability of the investment for the selected solution defined in the Feasibility Study Preliminary Design, based on which a decision on the justifiability of the investment should be made. Requirements for preparation of technical documentation set by relevant Design Requirements organisations (natural protection, water management, infrastructure, seismology, network connection, historical monuments, civil aviation
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directorate, fire protection etc.). Necessary for Location Permit.
Shall include, in particular, the data on macro location of the facility, general layout, technical-technological concept, provision of infrastructure, possible variants of spatial and technical solutions, environmental conditions, environmental impact assessment, engineering, geological and soil- General Design mechanics features of the terrain from the aspect of a general concept and feasibility of construction, site investigation works for preparation of the Preliminary Design, protection of natural and immovable cultural assets, functionality and cost-effectiveness of the solution. Defines: the use, layout, shape, capacity, technical-technological and functional features of the facility, organisational components of the facility and its appearance. The Preliminary Design includes the General Layout and data on:
1) Micro-location of the facility; 2) Functional, structural, and form-relevant characteristics of the structure; 3) Technical, technological, and exploitation characteristics of the structure; 4) Engineering, geological, and geotechnical characteristics of the terrain and soil 5) including the preliminary analysis of stability and safety of the structure; 6) Design of the foundation of the structure; Preliminary Design 7) Technical, technological, and organisational elements of the construction of the structure; 8) Measures for prevention or mitigation of negative impact on the environment; 9) Conceptual design of the infrastructure; 10) Comparative analysis of the alternative technical solutions from the aspect of properties of the soil; 11) Functionality; 12) Stability; 13) Assessment of the impact on the environment; 14) Natural and immovable cultural assets; 15) Rationality of construction and exploitation; 16) The costs of construction, transportation, maintenance, provisions for energy, and other costs.
Specifies civil engineering, technical and technological exploitation features of the facility, including the equipment and installations, technical- Main Design technological and organisational solutions for construction of the facility, cost of the investment and requirements to maintain the facility.
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Source: Guides for Investors - Branislava Lepotić Kovačević et al.; Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia available for biomass, small hydro power, wind and geothermal sources; GTZ/ USAID funded project; available at the permits and licences for renewables section at the Ministry of Mining and Energy website ; 2010
In cases where the Construction Permit is issued by MinSPC:
All aforementioned technical documentation is mandatory Prefeasibility Study with General Design and Feasibility Study with Preliminary Design are subject to review by the Revision Commission of the MinSPC. It is not mandatory to develop the Prefeasibility Study with General Design if a Location Permit can be issued for energy facility in question, based on a valid Planning Document.
In cases where the Construction Permit is issued by LSU, the Main Design is mandatory, while a Preliminary Design is recommended.
4.2.2 Acquiring Information on Specific Location
4.2.2.1 General Approach
Information on the Location is the official document issued by LSU or MinSPC (depending on jurisdiction). Subsequent or prior to the investor‟s selection of a specific location for its renewable energy project, the investor may want to acquire additional and more detailed Information on the location. The most important information sources are the Cadastre of sHPPs and official Planning Documents.
More precisely, a precondition for project realisation is that the existing Planning Document envisages the construction of a power facility at the location in question. The Planning Document covers not only the status quo of planned energy production at different sites, but also compiles comprehensive information on the intended or planned usage of the location for energy production. In case future power generation at the site is taken into consideration by the Planning Document, additional information may be obtained, including:
Lot plan including a list of lot owners, provided by the real estate cadastre Site-specific Information on the Location, provided by the Local Self-Government Unit or MinSPC within eight days of the request, comprising: o Data on Planning Document; o Zone; o Land Use; o Alignment and building boundaries;
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o Construction Codes; o Requirements for access to infrastructure facilities; o Request for preparation of a detailed Urban Planning Document or Urban Planning Design; o Data on the Cadastre lot, whether it meets the requirements for a building plot, guidelines on the procedure for forming of a building plot; o Engineering and geological requirements; o List of the requirements included under special and technical design requirements.
4.2.2.2 Exploring Geothermal Sources
Generally speaking, hydro-geological surveys aim at investigating the heat energy potential inherent to underground sources. This is because the potential for energy generation is unknown ex ante and heavily depends on the natural underground conditions. The survey often builds upon existing data from scientific research or undertaken for public interest, often financed from state budgets. In doing so, deeper investigation requires a limitation of research efforts to small areas where considerable potential is assumed or proven.
More comprehensive research requires in situ measuring, test drilling, field tests, collecting and analysing soil specimens etc. For such field investigation approval for survey is imperative and has to be asked for at the:
State or Regional Institute for Protection of Cultural Monuments Institute for Nature Conservation of Serbia
The approval stipulates deadlines for commencement and completion of the survey. After survey completion the survey results have to be documented with respect to both the geological and the ground water conditions. More precisely, the documentation has to elaborate on the following issues:
Presentation and evaluation of former surveys Aim and method of investigation A systematic presentation of data obtained in field investigations Presentation and explanation of survey results Presentation of reserves of mineral resources, conditions for exploitation and measures for protection of the environment Techno-economic assessment of survey results
The party carrying out the survey must provide the information derived from the survey to the authority that initially issued the approval for investigation. According to the Law, results from
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all the explorations like geological surveys, river or sea bed explorations, mining explorations, if carried out by private companies, have to be shared with relevant state institutions and the data are considered archive materials which means that they have to be kept permanently under the conditions defined by the relevant regulations. Moreover, every fifth year the study on ground water reserves has to be provided to the Ministry in charge of Geology, or to the competent authority of the Autonomous Province.
4.3 Construction Phase
In general, under the construction phase issuance of permits for small installations up to 10 MW are within the responsibility of Local Self Government Unit (LSU), whereas larger projects are administered by the Ministry in charge of Spatial Planning and Construction, or the Autonomous Province (Law on Planning and Construction Article 133). Correspondingly, the Pre-Feasibility study and the Feasibility study including the General design and Preliminary design are reviewed by a Review Committee subordinate to the Ministry in charge of Spatial Planning and Construction.
In particular, the Ministry in charge of Spatial Planning and Construction is in charge of administering the implementation of sHPP and wind power projects to be constructed in the proximity of a national park or natural areas of outstanding public / state interest, or in the case of mounting wind turbines above 50m.
4.3.1 Exploitation of Hydro-Geothermal Resources
The difference between geothermal energy and other renewable sources is that resources reside underground and therefore exploitation of these resources requires not only above the ground installations but also subsurface installations, especially tubes and pipes.
This makes it imperative for the investor to obtain a permit to exploit the hydro-geothermal potential bringing hot water to the surface. The permit requires the supporting documents shown in the following figure.
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Figure 23: Supporting documents for permit to exploit the hydro-geothermal potential
Permit for Exploitation of Hydro-Geothermal Sources
Inspection Approval for Approval to Certificate for Exploitation of Carry Out Water Permit Mining Underground Mining Works Facilities Sources
Source: own presentation following the graph depicted in the Guides for Investors consulted
4.3.1.1 Approval to carry out Mining Works
The mining activities can be started upon once permission has been granted by the Ministry in charge of Mining or the Secretariat in charge for Mineral Resources for the area of Autonomous Province, in accordance with the Law on Mining. The request for granting permission for mining activities includes:
The Mining Design: certification and a report on the technical review of the design; an investor‟s approval of the design; and a certificate issued by the relevant organisation that the Mining Design complies with the planning document; Water Approval on the Mining Design, if the mining activities have an impact on the water regime; Land Remediation Design, made in compliance with regulations; Certificate of verified balance reserves, issued in compliance with regulations related to geological explorations; Authentication on rights of property or usage, i.e. servitude on property that is marked for exploitation of mineral resources area included in the project; Agreement issued by the relevant organisation for environmental protection about the compatibility of the project with conditions for environmental protection and improvement; Agreement of the water management projects, if the mining activities have an impact on water regime; Plan (design) for the re-cultivation of land, Concluded agreement of exploitation of mineral resources.
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4.3.1.2 Inspection Certificate for Mining Facilities (Permission for Usage of Mining Facilities)
The inspection certificate for mining facilities is an administrative document issued by the Ministry in charge of Mining, which approves the use of a mining facility or of a part thereof. A mining facility may only be used after the permission for usage has been issued according to the Law on Mining.
On request of the investors, the usage permission will be issued by the Ministry in charge of mining (or Secretariat for Mineral Resources for the area of Autonomous Province of Vojvodina) within eight days of receiving the report stating that the facility is suitable for usage. According to the Law on Mining, the permission of usage will be issued if:
The mining facility or its part is constructed in compliance with the mining project design documentation for which the permission for performing of mining activities was granted, and in compliance with technical rules, normatives and standards the implementation of which is obligatory on the mining facilities construction; All prescribed conditions are fulfilled in terms of protection measures in the workplace, water protection, fire protection, environmental protection and other prescribed conditions for construction and usage of that type of facility.
The fulfilment of these conditions is assessed by a technical review of the mining facility according to the Law on Mining.
The technical review of the mining facility includes, depending on the mining facility type, a technical review of mining, mechanical and construction activities, power plant (equipment and installation) and plant for environmental protection, as well as a technical review of the mining equipment and plants. The cost of technical review is covered by the investor.
4.3.1.3 Approval for Exploitation of Underground Sources
Approval is issued by the Ministry in charge of Mining. Approval for Exploitation is issued upon the application of the mineral raw materials investigator or user of certification of balance of ore reserves, in the area where mining of this raw material will be performed. The request for issuing Approval for exploitation includes:
The situation map in a scale of 1:25,000 or in another scale with drafted boundaries of the exploitation field, public infrastructure and other facilities that are located on the area. The situation map should indicate the type of mineral resource to be exploited, the municipalities on which the exploitation field is located and the starting date of the exploitation activities;
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Certification of balance of ore reserves issued in accordance with performed exploration and in compliance with valid regulations on classification and sorting of ore reserves; Feasibility Study of exploitation of mineral resources deposits with a description of conditions and modalities of exploitation, preparation and placement of mineral resources, protection measures and remediation of environment and influence on social community, necessary costs and number of employees; Remediation Design of the degraded land; Document of the relevant organisation for urban planning in terms of compliance of mineral resources exploitation with relevant planning document; Approval of the Ministry in charge of Agriculture and Forestry if exploitation will be performed on agricultural or forestry land; Approval of the Ministry in charge of Environmental Protection; Approval of the Ministry in charge of Water Management, if exploitation of mineral resources has an impact on the water regime
4.3.2 Energy Permit
The Energy Permit is one of the necessary preconditions for the Construction Permit. The Energy Permit reserves the right of an investor to utilising an energy source at a specific location and for the permit validity period, during which the construction of the energy facility should start. The Energy Permit is valid for two years and may be extended for one year if requested.
The Energy Permit is only required for energy facilities with an electrical capacity beyond 1MW. The Ministry in charge of Energy is responsible for issuing energy permits in line with the procedure described in the Rulebook for the issuance of energy permit (OJ 23/2006 and 113/2008). Together with the request for obtaining the Energy Permit the applicant has to submit additional information and use a specific request format as function of the electrical capacity and whether the plant will also produce heat (relevant for biomass and geothermal). In general, the following information is required:
The Information on the Location (if available). Feasibility Study on Construction (recommendation: General Design, including Pre- feasibility Study), with separate analysis of possible impacts on the environment, including proposed protection measures. Statement of a bank confirming its readiness to support the financing of the construction. Opinion of the transmission/distribution system operator concerning the possibilities for connection of the facility to the system.
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Data on the applicant; Data on the facility/structure such as lifespan of the facility, etc Budgetary cost of the investment; The applicant‟s financial standing (Bank‟s Statement of Applicant‟s solvency),
In order to receive a qualified opinion from the network system operator to which the project developer wants to connect the power plant, the investor has to present a request for opinion and attach as many of the following pieces of information as possible:
General information on the applicant and the facility; Main characteristics of the generating units and the whole plant (apparent and active power, designated voltage and power, initial power, power factor, maximum power to be supplied to the DES, maximum power to be taken over from the transmission or distribution network (DES)) Power plant mode of operation with respect to the DES; Planned date of connecting to the DES; Proof of the applicant‟s ID; Layout Plan at a scale of 1:500(1000) on a copy of the lot from the Cadastre, including an excerpt from the Cadastre of installations in the ground; Copy of a plan of a broader area; Description and possibilities for regulating the power plant; Technical parameters such as flicker coefficient, higher harmonics of the current, etc.
For electricity-only generation the Ministry in charge of Energy is the competent authority to decide on the application, whereas in the case of CHP production a local self government unit is involved in the decision process. The request is to be answered within 30 days, providing to the applicant the right to appeal within 7-8 days after receipt of the decision.
4.3.3 Location Permit
The Location Permit gives the permit holder the right to apply for a Construction Permit during the two years after the Location Permit approval. After two years this right is lost. The Location Permit takes into consideration all requisites for preparing the technical documentation and the Main Design, in accordance with the valid Planning Document. The information package required includes the information shown in the following figure.
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Figure 24: Information necessary for location permit
Location Permit
Technical Construction Collection of Property documentation Only Wind: lot Design Requirements rights issues of facility Air traffic (allotment/ re- resolved (data, General safety allotment) Design) Water approval requirements
Requirements for network connection other
Source: own presentation following the graph depicted in the Guides for Investors consulted
For sHPP as well as wind power, geothermal and biomass installations of up to 10 MW electrical capacity, the urban planning authority of the LSU is the competent authority for granting the location permit on request. For other installations the Ministry in charge of Spatial Planning and Construction or the Autonomous Province is in charge. To obtain the permit the project developer has to enclose the information shown in the former graph, namely:
Copy of the lot plan (the date stamp: max. 6 months old), Excerpt from the cadastre of installations laid in the ground; Evidence of ownership rights, or of lease on the construction land; Data on the facility (in practice – General Design); Collected special and technical requirements.
If the submitted documentation is incomplete the authority in charge of the procedure will notify the applicant within 8 days and write to the competent authority for the necessary data. The decision on the Location Permit contains the following specifications:
Data on the investor; Number and square area of the cadastral lot; Data on the existing buildings on the cadastral lot that should be removed; Defined access to a public traffic route; Use of the facility; Building lines; Codes of construction;
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Requirements for service connection to the infrastructure; Possible and mandatory stages in implementation of the project; List of mandatory components of the Main Design, Name of the planning document that served as the basis for the decision, etc.
If the planning documents do not include all the Design Requirements for the preparation of the technical documentation, the responsible authority (LSU or MinSPC) will acquire them in the line of duty, at the expense of the Investor. Agencies, i.e. organisations authorised to issue such requirements are obliged to act within 30 days following the request of the responsible authority.
The responsible authority is obliged to issue a Location Permit within 15 days from the submission date of a regular application, i.e. from the gathering of design requirements which it gathers in the line of duty. An appeal can be filed at the Ministry in charge of Spatial Planning and Construction or relevant authority of Autonomous Province, against the resolution on the location permit issued by the LSU, within eight days. An administrative dispute can be filed against the resolution on the Location Permit issued by the Ministry, i.e. Autonomous Province.
In the following text we will comment on the information to be provided with the request for Location Permit.
4.3.3.1 Property Rights for Land Use
Establishing proper property rights requires resolving the following two issues:
Agreeing with the lots owner upon a sale / lease contract, Agreeing with PWMC Srbijavode, PWMC Vode Vojvodine or Water Directorate upon the use of land including water resources, water facilities and other services.
4.3.3.2 Construction Lot
In order to form a construction lot, the project developer has to set up an allotment / re- allotment plan including a Geodetic Survey Benchmarking to be prepared by a well- established (licensed company, legal entity, entrepreneur) urban planning architect. The (re-) allotment plan has to be submitted to the competent urban planning authority at the local self-government unit which verifies the plan and notifies upon the plan‟s accordance with the Planning Document within 10 days. If the decision is negative, an objection can be placed at the Municipal Council within another three days. Together with evidence on resolved property rights, the request is passed to the Republic Geodetic Affairs, which is the body in
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charge of state survey and cadastre affairs. It will make a decision on forming cadastral lot(s) within 30-60 days, appealable within another 15 days.
4.3.3.3 Data on the Facility (Technical Documentation / General Design)
The request for issuing a Location Permit must contain data on the facility to be built, and especially on the planned layout, type and purpose of the facility, technical characteristics, etc.
4.3.3.4 Collection of Design Requirements
Collecting the Design Requirements, including the requirement on network connection, water requirements and other, is an indispensable element for the Location Permit. Some Design Requirements require submitting a Main Design for Approval to the organisations who issued these requirements. These approvals are mandatory by the legal regulations.
Requirements for network connection
In order to have a detailed description of the connection requirements, the developer has to submit a request for information to the network operator to which the developer‟s plant is to be connected to. The developer‟s request shall contain the following items:
Information on the investor; Energy Permit for the power plants exceeding 1MW; Copy of the plan - broader plan, if necessary; Evidence on regulated property-rights issues; Description of the types and method of operation of the main power drive, generators and method of connection to the network; Technical Report - Single-pole diagram of the facility (wind farm, sHPP); Description of the main protection equipment; Evidence on the fee paid for issuance of the requirements
The network operator‟s answer is due within 30-60 days and consists of a technical report stating whether power and technical conditions are in place for possible future connection of the facility according to the submitted application, and the technical requirements for connection needed for preparation of the technical documentation. The network operator‟s answer is appealable within 15 days for geothermal energy, but not in the case of sHPP and wind power.
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Water Requirements
The establishment of Water Requirements aims to set the technical and other requirements to be met within the technical documentation for construction of facilities and execution of works that may permanently, temporarily or sometimes influence water regimes and the environment. The decision on these requirements is made by the Ministry in charge of Water Management, based upon the project developer‟s request and relying on information provided by the developer and the opinion of two other stakeholders, namely the Republic organisation in charge of hydro-meteorological affairs (RHMS) and the public water management enterprise (PMC Srbijavode / PMC Vode Vojvodine). The validity of the Water Requirements expires if the request for Water Approval is not submitted within a period of two years.
At first, the project developer has to subsequently place applications at the two institutions for opinion. This means that asking the public water management enterprise for opinion requires the developer to also submit the opinion received from the Republic organisation in charge of hydro-meteorological affairs (RHMS). This procedure results not only in a written statement from the two institutions, but also in an agreement on the use of water-covered soil and water facilities and as other services, which is to be agreed upon with the public water management company or the Ministry in charge of Water Management.
Then, together with the following pieces of information, the developer applies for the water permit at the aforementioned Ministry:
Main data on the location; Data on purpose and size of the facility; If required, Prefeasibility Studies and General Design (Preliminary Design) for better assessment of the impact of the facility on the water regime Opinion of the RHMS, Opinion of PWMC Srbijavode / Vode Vojvodine, Copy of the plan, including plotted position of the facility; Excerpt from the land registry (for the cadastral lot on which the facility will be constructed; Certificate of resolved property-rights issues; Approval by the Public Water Management Company if the facility of public interest is to be constructed on the waterway; Plan of use for the area (issued by the competent town-planning department of the LSU).
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In order to conclude on the Water Requirements, the Ministry may consult the opinion of other entities such as the Ministry in charge of Environmental Protection, the Ministry in charge of Tourism Affairs or a specialised scientific institution.
As both obtaining the opinion of the Republic organisation in charge of hydro-meteorological affairs (RHMS) and the public water management enterprise and the water requirements decision by the Ministry in charge of Water Management each require 30-60 days, a total of some 90-180 days has to be taken into account, not considering further delay due to seeking further opinion from other stakeholders as mentioned above.
Other
Other design requirements may comprise conditions on environmental protection, protection of cultural monuments, access to infrastructure facilities, etc and are provided in the Information on the Location.
4.3.3.5 Air Traffic Safety Approval (only wind)
The competent authority for approval with respect to air traffic safety, relevant for wind power installations only, is the Serbia and Montenegro Air Traffic Services Agency. Although no specific form has been prescribed, the request should precisely describe the reasons for submission and the facility to be built with specific indication of its position, height and shape.
4.3.4 Construction Permit
The request for the Construction Permit must be submitted to the competent authority in the local self-government unit upon completion of the Preliminary Design or the technical supervision of the Main Design and the affirmative technical supervision report.
However, in specific cases the Ministry in charge of Energy is responsible for issuing the approval for constructing small hydro power plants.73 This is relevant if a) such a plant is not considered in the existing cadastre of small hydro power plants or b) if changes in hydro- geological conditions, already constructed buildings or other significant changes which came about occupying and using the area arise and these changes render the construction of a sHPP impossible, or c) the expected power falls short of the values anticipated in the cadastre.
73 set in the Decree on Amendments and Supplements to the Decree on Program for the Realisation of the Energy Sector Development Strategy of the Republic of Serbia until 2015 for the Period 2007 -2012 (OJ 99/2009).
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The draft of the New Energy Law stipulates that, for the construction of sHPP of installed power 0,5-1 MW, it is necessary to obtain an opinion from the Ministry in charge of Energy that construction of such sHPP is in accordance with its strategy and program.
Figure 25: Information necessary for construction permit
Construction Permit
Technical supervision Environmental of the design documentation Impact Assessment (EIA)
Feasibility Water Study Approval
Preliminary Main Design Design
Source: own presentation following the graph depicted in the Guides for Investors consulted
The request for the Construction Permit has to include the following documents:
Location Permit; Three copies of the Main Design as well as a report on completed technical review of the design (the review is must be undertaken by a certified design company – a different one from the company that developed the Main Design) Approvals on the Main Design demanded by the Design Requirements within the Location Permit (Water Approval, Fire Protection Approval etc.) – in case of submitting the Main Design Evidence on the ownership right, or the right to lease the construction land; Evidence on settled relations regarding payment of the fee for the land development; Evidence of payment of the administrative fee; Energy Permit (for the power plants exceeding 1 MW) Approval on the Environmental Impact Assessment Study (in case of submitting the Main Design) Revision Committee Report (if MinSPC issues Construction Permit)
In case that the MinSPC issues the Construction Permit, it is mandatory to submit the Main Design including the Report on completed technical review of the design.
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In case of submitting the Preliminary Design with the Request for Construction Permit, it is mandatory for the investor to provide the Main Design (with technical supervision completed) and Approval on EIA Study prior to the Registration of Works.
As indicated before, the request for the Construction Permit is placed at the relevant Urban Planning Authority of the LSU for installations below 10 MW or at the Ministry in charge of Spatial Planning and Construction or to the Autonomous Province for any other installation.
If the presented Main Design is not in line with the Location Permit, the investor is informed within one week and shall amend the information presented within an additional 30 days. As soon as no objections are made to the (potentially amended) Main Design presented, the affirmative decision on the Construction Permit is made within eight days and the construction of the facility may start. A negative decision may be appealed within eight days.
The Construction Permit expires if the construction of the facility is not started within two years from the validity date of the decision by which the Construction Permit was issued.
4.3.4.1 Technical Supervision of the Design Documentation
Technical supervision of the design documentation refers to the review of the final layout plan for constructing the facility (Main Design) and obtaining the Water Approval and other Approvals. Moreover, the Main Design is checked by various institutions requiring their approval and thus terminating the technical supervision procedure.
As previously stated, the Main Design specifies civil engineering, technical and technological exploitation features of the facility, including the equipment and installations, technical- technological and organisational solutions for construction of the facility, cost of the investment and requirements to maintain the facility. It represents the final design documentation according to which construction is planned.
In cases where the MinSPC or an Autonomous Province issues the Construction Permit, the Main Design is prepared by the investor and results from the Feasibility Study together with the Preliminary Design are amended by additional requirements imposed by the Revision Committee. The Main Design shall comply with the conditions, complaints or requirements the committee may have with respect to the preliminary design. The committee‟s requirements are included in a report.
In cases where the LSU issues the Construction Permit, the Main Design is prepared by the investor and results from the Preliminary Design. A Feasibility Study is not obligatory. The Main Design has to be presented and approved by other institutions according to the requirements specified in the location permit.
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4.3.4.2 Water Approval
The request for Water Approval at the Ministry in charge of Water Management requires the following information:
General information about investor, facility and planning documents; Decision on issuance of Water Requirements; Location Permit; Main Design with the Licence of the Responsible Designer; Excerpt from the Main Design that refers to the hydro-technical part of the design and facilities influencing water regime Report on the Technical Review of the Main Design with Licence of Responsible Designer in charge of technical review;
The Water Approval on the Main Design means that all the technical conditions set by the Water Requirements have been met in the Main Design. It is valid for two years, during which the Construction Permit must be applied for. It also marks the end of the technical supervision of the facility construction design.
4.3.4.3 Environmental Impact Assessment
The Environmental Impact Assessment shall reveal deeper insight into the implications and risks of project implementation on the environment, not necessarily restricted to the vicinity of the planned installation. The involvement of and interaction with authorities in preparation of the EIA is rather complex and shall provide answers to whether an EIA is required, what environmental risks and implications are expected to come into play and require deeper analysis, and whether the EIA investigation conducted has the necessary (scientific) quality to provide answers to the study scope determined beforehand. As the investor has to apply for the cited concerns to be answered by the qualified authorities, the EIA may be split up into three steps, namely:
Application to establish if the EIA Study is required or not Application to establish the scope and contents of the EIA Study Study preparation Obtaining approval for the study prepared
The Decree on List of projects that requires EIA and List of projects that may require EIA (OJ 114/08) defines types of projects and facilities for which EIA is obligatory or may be required. For projects listed in the Decree, if their construction is planned within a protected natural or historical area or other special purpose area, it is mandatory to submit an application to establish if the EIA Study is required or not.
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In the following text we will describe these steps.
Decision on Need for EIA
As negative implications are assumed to be more probable, the size of the installation is the key parameter to determine whether the EIA study is necessary or not. The following thresholds per energy source apply whereby exceeding the thresholds may require an EIA study to be conducted:
Wind: 10 MW sHPP: 2 MW Biomass 1 MW Geothermal 1 MW
Moreover, preparation of an EIA study may be asked for in specific cases and is more likely the bigger the project is. For instance, according to the aforementioned Decree, geothermal and biomass power plants between 1-50 MW may be required to make a EIA study, whereas projects beyond 50 MW are obliged to do so.
In general, for small-scale installations of up to 10 MW the relevant environmental authority at LSU level is in charge of evaluating the need to assess the environmental impact, whereas this responsibility is transferred to the Ministry in charge of Environmental Protection or to the Autonomous Province for larger installations. In order to evaluate the impact, the corresponding authority relies on:
a) information provided by the project developer and b) opinions from interested authorities and the public after notification of the case
The request for the need to assess the environmental impact has to be filed in a separate form including the following items:
Data on the investor; Description of the location; Description of characteristic features of the facility Summary of considered variants; Description of environmental factors that may be exposed to the impact; Description of major detrimental impacts; Description of the measures for prevention and mitigation of detrimental impacts. Information on the location or approved urban design (issued within maximum 1 year/the date stamp: max. 1 year old) General Design (Conceptual Design) or Preliminary Design (Excerpt),
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Graphical presentation of the micro- and macro-location; Requirements and approvals by other competent authorities and organisations; Evidence of the fee paid; Any other type of evidence, if requested.
Taking into account the right of interested authorities and the public to submit an opinion on the project‟s environmental impact, the corresponding authority makes a decision on the necessity of a EIA study and notifies the project developer within approximately one calendar month after obtaining the developer‟s request for decision with respect of this issue.
If the decision confirms the need for an EIA, the scope and contents of the EIA Study may (but do not need to) be stipulated in the Decision. If they are not stipulated, the request for stipulating the scope and contents of the EIA Study must be filed. If an EIA is not required, the decision may stipulate the minimum measures for environmental protection as set by the competent authority.
The project developer has the right to object to this decision, and the second instance authority has to respond to the appeal within 30 days.
Decision on EIA Scope
The request for determining the scope and content of the EIA Study must be submitted via a prescribed form, but, in principle, requires the project developer to provide similar/ the same information as for determining the need to assess the environmental impact as described above.
Moreover, the process, time frame and the competent authority‟s information basis for decision are identical to the decision process described above. The result of this process is the authority‟s decision on the scope of the EIA study to be carried out by the project developer or procured from experts.
Carrying out the EIA study
According to the decision on the EIA study scope, the project developer must carry out the study within one year after receipt of the decision on the study scope.
Decision on EIA Approval
The request for the approval for the Environmental Impact Assessment Study has to be presented at the competent authority as mentioned above, enclosing
Environmental Impact Assessment Study (3 hard copies plus 1 copy in electronic format),
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Decision on the scope and contents of the EIA Study
In order to evaluate the EIA study‟s results and compliance with the decision on the study scope, the relevant environmental authority sticks to the procedure shown in the following figure.
Figure 26: Decision making process for the approval of EIS study
5 10 days Relevant environmental authority Decision on (Ministry or LSU level) approval or declined 1a 30 days request for approval 7 days: 4 Informs the public on the time and Evaluation Report of the 10 days EIA Study and place of public access, presentation 1b and public debate on the EIA Study Nomination recommendation of the decision
Technical Committee Other stakeholders for review of the EIA Study
2 3 3 days 20 days Report, including Public hearing on summary of statements the EIA Study (opinions) of various stakeholders
Source: own (KEMA) presentation on the basis of Guide to Investors
The basis for the relevant environmental authority‟s decision is
The information provided by the developer Public hearing and summary of opinions expressed by other stakeholders and the public Evaluation report from a Technical Committee nominated by the relevant environmental authority
The Approval is valid for two years within which the project developer must start construction, while the decline of the Approval may be refuted at the Ministry in charge of Environmental Protection within eight days of the decision.
4.3.5 Water Permit
The Water Permit is issued according to the Law on Waters. The Water Permit defines the manner, conditions and extent of water use and wastewater discharge, the method and conditions for the storage and discharge of hazardous and other substances which may pollute water and the conditions for other activities which affect the water regime.
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The Water Permit is issued for a limited period of time not exceeding 15 years. The Water Permit may only be granted on the basis of a completed technical inspection and is the precondition for obtaining the Operating Permit. The Water Permit is only issued if a Water Approval had been obtained.
The application for the Water Permit is placed at the competent authority which has issued Water Approval with the following information attached:
Decision on Water Approval; Report of the Committee in charge of technical inspection of the constructed facility; Report of the public water-management company on fulfilment of conditions from Water Approval; Main Design or As-Built Design Excerpt from the Main Design or As-Built Design
The Water Permit is issued for a period not exceeding 15 years with possibility for extension.
The Water Permit expires in following cases:
upon expiration of the period for which the Water Permit was granted; if the holder of the Water Permit relinquishes the right conferred by the Water Permit; if the right granted by the Water Permit is not exercised without a valid reason for a period of more than two years; in case of bankruptcy or liquidation of the holder of the Water Permit; and in case of disrespecting the terms set by the Water Permit.
A certificate of termination of the Water Permit is issued by the same authority which issued the Water Permit.
A Water Permit renewal application should be submitted no later than two months prior to the expiration date of the Water Permit.
The right granted in the Water Permit may not be assigned to a different beneficiary, unless authorisation is given by the authority which issued the Water Permit.
The Operating Permit for an installation or plant may not be granted if a Water Permit has not already been obtained.
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4.3.6 Operating Permit
The Operating Permit is the prerequisite for using the facility. The Operating Permit has to be requested at the authority that issued the Construction Permit.
It is necessary to submit the As-Built Design during the process of obtaining the Operating Permit. The authority in charge of issuing the Construction Permit issues, by decision, the Operating Permit, within seven days from the date of the findings of the commission for the technical inspection, by which it is determined that the facility is suitable for use.
The Operating Permit certifies the positive result of the technical acceptance test called the technical inspection of the construction, but requires the Water Permit as an interim stage between passing the technical acceptance and obtaining the Operating Permit, as can be seen in the figure below.
Figure 27: Information necessary for operating permit
Operating Permit
Water Permit
Technical inspection of the construction
As-built Construction design
Source: own presentation following the graph depicted in the Guides for Investors consulted
In the following text we will describe the different stages of the procedure for granting the permit.
4.3.6.1 Construction
Prior to commencement of the construction, the imminent start of works has to be registered at the institution that issued the Construction Permit and the construction agent must be nominated.
Apart from the general responsibility of the investor for ensuring safety and supervising works during construction time, most importantly the main documents such as the
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Construction Permit and the Main Design have to be kept on site at all times during construction.
4.3.6.2 Technical Inspection
The technical inspection determines the fitness of the facility for regular usage. The inspection matches the as-built design of the facility with the actual construction. It is charged to the investor. It must be requested at the competent authority, generally the urban planning authority at LSU level except for the cases cited at the Ministry (MinSPC). The authority forms a committee for the technical inspection.
The inspection has to be finished within 30 days. During inspection the committee verifies the fulfilment of the requirements for issuing the Operating Permit in situ, matches the actual construction and the as-built design may require a test operation and propose recommendations to the design. The inspection results are summarised in the committee‟s report which is a main requirement for the Water Permit and the Operating Permit.
4.4 Energy Production (Preparation) Phase
4.4.1 Acquiring the Right for Energy Generation
In order to perform energy generation it is necessary to acquire the right to engage in electricity (or heat) generation (in the earlier sections also called Energy Generation Permit). For acquisition of such a right three different methods exist – Assignment Agreement, Concession and Stakeholding - and they will be explained in the following sections.
We note that acquiring the right to engage in electricity generation is different from obtaining the licence for energy-related activity. In fact, the right to perform energy generation is a pre- requisite for acquiring a licence for energy related activities by a generator.
4.4.1.1 Assignment Agreement
The most frequently used option for acquiring the right to energy generation is the conclusion of the Assignment Agreement for public interest activities with the Ministry in charge of Energy (for electricity) or the LSU (for heat generation). The Agreement may only be concluded with respect to facilities which have been already constructed and subject to the fulfilment of the following conditions:
Adequate technical prerequisites (ownership or the right to use the facility that had been constructed in compliance with the Law, technical and other regulations);
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Staff capacity (that persons working at the facility have the necessary qualifications and other prescribed skills); Implementation of the prescribed safety at work Implementation of the prescribed requirements and methods of protection and improvement of the environment.
Subject to the fulfilment of the abovementioned conditions, the Agreement will set the following provisions:
Operation and business of the economic operator to whom the activity is assigned; Rights and obligations concerning the use of state-owned assets for conducting an activity of public interest, as provided for under the Law; Obligations of the economic operator to provide the conditions to efficiently and effectively meet the needs of the users of the products and services; Mutual rights and obligations of the parties to the Agreement in the case economic and other conditions for pursuing the activity of public interest are not provided; Rights and obligations in case of a disruption in business operations of the economic operator; Other rights and obligations and issues of importance to pursue and protect the public interest.
4.4.1.2 Concession
Compared to the Assignment Agreement the activity of granting a concession is initiated by official authorities. Concession approval follows a predetermined procedure. The procedure includes the adoption of a concession deed, the disclosure of the possibility to acquire a concession, the assignment of a concession via public invitation to tender and the conclusion of a Concession Agreement between the Government and the grantee. Finally, the concession grantee is obliged to set up a new concessionary enterprise.
In the following text the typical Concession Agreement provisions are listed:
The parties to the Agreement, the subject matter of the concession, including the description of the facility and equipment Duration of the concession period and conditions under which such terms may be extended Manner of and deadlines for securing the funds for financing the concession business (the financial plan) and the time line of their employment, the amount and method of providing guarantees for fulfilment of the concessionary obligation The requirements for conducting the concessionary business Standards of products and services, technology transfer
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Criteria for setting the end-user prices-tariffs for products and services The concession fee (the amount, deadlines, conditions, and the method of payment) Rights and obligations concerning the undertaking of measures to ensure general Safety, protection of health and protection of the environment as well as liabilities for Compensation of damage caused by jeopardizing general safety and protection of the environment The rights to transfer the concession The time and method of handing over the assets, the facility, equipment or plants and the condition in which they must be handed over Conditions for amendments or termination of the agreement and their consequences, changed circumstances and force majeure The method of settling disputes and enforcement of applicable law, control, etc.
4.4.1.3 Stake holding in (company affiliated to) public company
This third method of acquiring the right to energy generation is based on the intention to acquire shares in an affiliated company of a public enterprise. It is rather a theoretical option, as it may provoke the reluctance of the holding company or the public authorities as its owner. Moreover, the investor is exposed to the latter‟s power and influence on the affiliated company.
4.4.2 Network Connection
In order to establish a network connection from the power plant installed to the network nearby, the plant operator has to request the issuing of Permission for Network Connection. This is distinct from requests for opinion and information on technical requirements, which had to be made during early stages of communication with the respective network operator.
The following information has to be provided together with the request:
Data on the owner of the facility, or the holder of the right to use the facility (for a physical person: name and place of residence, personal ID number; for a legal entity or entrepreneur: business name or title, head office, PIB (Tax Identification) number, individual identification number, number of the account and authorised person); Data on the facility for which the approval for connection is requested (address, type, location of the facility and its use); Estimated time for connecting the facility; Data on overall installed power of the facility, number and power of generating units, generators voltage and block transformer; Estimated average annual and monthly production;
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Protection and measuring equipment; Energy Permit and Licence for energy-related activities for facilities exceeding the capacity of 1 MW. For constructed facilities: o Construction Permit, o Evidence on ownership of the facility or on the assigned right for use of the facility.
The network operator‟s considerations are presented in a technical report. Further specifications on network connection to electricity grids can be found in the Grid Code. For connection to the district heating network the facility has to meet the requirements stipulated under the law and other provisions on the connection and exploitation of relevant installations.
Based on the technical report on issuance of the Approval for the connection to the grid, the network operator will derive a decision and inform the applicant within 30 days. The applicant may raise an appeal at the Energy Agency within 15 days after the network operator‟s decision. The approval of a network connection is valid for two years.
4.4.3 Licence for Energy-Related Activity
The licence for energy-related activities is obligatory for all installations above 1MW electrical capacity and which supply energy to a customer (i.e. do not only use the energy for self consumption). The Licence is issued by the Energy Agency of the Republic of Serbia. The Licence is valid for 10 years.
When applying for the Licence the following documents have to be delivered:
Inscription in the Register of Business Entities; Compliance with necessary technical requirements (concerning power generation, fire protection, environmental protection) and settled property rights or use of the facility; Staff qualifications; Available financial resources (evidence on solvency, balance sheet);
The Energy Agency replies to the application within 30 days with the right to appeal within another 15 days. Issuance of the Licence is also subject to a singular fee and recurring annual fees.
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4.5 Commercialisation Phase
The following figure summarises the interrelationship of processes and stakeholders relevant for granting financial support for electricity from renewable sources based on the feed-in tariff regime.
Figure 28: Market model for electricity from renewable sources
Source: [EnMin 2010]
The set of processes embraces the following milestones:
The Privileged Power Producer status Approval for receiving/ granting the promotional feed-in tariff Power Purchase Agreement
Notably, the feed-in tariff is restricted to installations with a specific size and fuel mix restrictions.
4.5.1 Acquiring the Status of Privileged Producer
The Decree on the Requirements for Obtaining the Status of the Privileged Electric Power Producer and the Criteria for Assessing Fulfilment of these Requirements (OJ 72/09) sets
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broad eligibility criteria for achieving the privileged status by a power producer. It also specifies the application procedure and criteria for fulfilment of necessary requirements. It also specifies the application procedure and criteria for fulfilment of these requirements.
First, the scope of the Decree is specified with regards to different renewable energy sources and their meaning. The Decree embraces the same renewable sources as the Feed-in Tariff Decree. Moreover, it makes the notion of biomass more concrete by including a list of biomass fuels and a second list of fuels which are not considered as biomass. Furthermore, biogas is considered as obtained by means of anaerobic procedures, whereas synthetic gas means pyrolithic degradation of biomass and separation of communal waste fractions. Finally, for the definition of waste and communal waste reference is given to the legal provisions regulating waste management.
Interestingly, the Feed-in Tariff Decree narrows down the notion of renewable sources installations eligible for granting the status of privileged power producer. The difference in scope between the two Decrees is shown in the following table.
Table 31: Review of differences between FiT Decree and Decree on privileged producer
Source Decree on privileged producer Feed in tariff decree
Hydro No limitation ≤ 10MW
Renewable energy value portion ≥ 80% Renewable energy value portion ≥ Biomass No size limitation 80% ≤ 10MW Conventional waste Waste energy value portion ≥ 80% See Other renewables and co-firing Biodegradable See Conventional waste ≤ 10MW waste
portion of fossil fuel energy value ≥ 20% CHP ≤ 10MW ≤ 10MW Minimum efficiency requirement depending RES, fossil fuel or co-firing on installation size and fossil fuel portion Renewable energy value portion ≥ 90% Renewable energy value portion ≥ Other renewables Residual 10% energy value other sources: 90% and co-firing fossil fuels or waste Residual 10% energy value fossil fuel, waste, biomass Source: own presentation
With regards to combined heat and power plants using fossil fuels or a mixture of renewable and fossil fuels, installations have to achieve a minimum total annual efficiency of energy production as presented in the table below.
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Table 32: Minimum total annual efficiency level for cogeneration plants
Fossil fuel share in the consumed fuel energy value (%) Installed capacity (MW) 20% – 40% 40% – 60% 60% – 80% 80% – 100%
<1 45% 50% 55% 60% 1-10 55% 60% 65% 70% Source: own presentation
Interpreting the table above reveals that the efficiency requirements for co-generation grows with the share of non-renewable fuel in the total amount of fuels, and also grows with the installed capacity of the plant. The status of privileged producer refers to the power plant and not to the plant operating entity. Therefore, the producer has to submit a separate application for the status of privileged producer for each of its plants, if the producer operates more than one of such installations. However, one plant may be composed of various production facilities (presumably at the same location).
The status of privileged producer is granted by the Ministry responsible for the energy sector upon application. The application procedure requires applicants to account for the following in order to gain the status:
installation of measuring devices and measuring points for measuring net electricity and heat output as well as primary fuel input consumption licence for energy related activities, if the power plant capacity is 1 MW or higher, or contract with the licence holder, if the power plant capacity is 1 MW or higher, and the producer is not the licence holder; a power plant as-built design, contract on the connection to distribution network (which follows after the Permission for connection has been granted) or the transmission system for power plants that have special characteristics, including cogeneration and a copy of the contract for the connection and the supply of heat with the competent operator; an Operating Permit; information on the individual responsible for the operation of the power plant, including name, position, phone number, fax number and e-mail. documentation of the expected annual production of heat with monthly dynamics, and expected values of the total annual efficiency level (only applicable to co- generation plants using a fuel mix with fossil fuels above 20% of total primary energy consumption).
For more information on the specific calculation method of the consumption and output energy terms used above, please refer to the Decree Article 10 to Article 14. The Ministry in
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charge of Energy lists the privileged power producers on its website. As of March 201174, eleven small hydro power plants with a total installed capacity of 2877 kW are recorded.
Table 33: List of Privileged Power Producers
Installed Type of Power No Location Capacity Owner Date Plant (kW) sHPP „Grčki River Toplica / Zanatska radnja „Elektro 09.02.2010. 1 75 kW mlin“ Munic. Prokuplje ĐorĎević“, Prokuplje sHPP River Toplica / PD Hidroenergija d.o.o, 05.03.2010. 2 350 kW „Kuršumlija“ Munic. Kuršumlija Raška sHPP Radošićska reka / SZR MHC Radošićska 25.01.2010. 3 37 kW „Radošićska reka“ Munic. Raška reka, Radošiće - Raška sHPP „Munja“ River Vrla / Munic. Samostalna proizvodna 25.02.2010. 4 Vladičin Han 30 kW radnja „Munja“, ŢitoraĎe – Vladičin Han sHPP „Bovan“ Bovan / Munic. DV Technologies d.o.o, 26.01.2010. 5 250 kW Aleksinac Beograd sHPP „Elektro River Trgoviški Timok SZR „Elektro Slavica“, 16.03.2010. 6 50 kW Slavica“ / Munic. Knjaţevac Knjaţevac sHPP River Crni Timok / Preduzetnik 05.03.2010. 7 „Hidroelektrana Munic. Zaječar 95 kW „Hidroelektrana Jevtić“, Jevtić“ selo Zvezdan - Zaječar sHPP „Vrutci“ Vrutci / Munic. Uţice DV Technologies d.o.o, 23.03.2010. 8 400 kW Beograd sHPP River Vlasina / ECO ENERGO GROUP 14.04.2010. 9 640 kW „Tegošnica“ Munic. Crna Trava DOO Beograd sHPP „Poštica“ River Vlasina / HDROWATT doo Beograd 25.06.2010. 10 700 kW Munic. Vlasotince sHPP „Prohor River Pčinja/ Munic. HIDROISTEL d.o.o Klenike 09.08.2010. 11 250 kW Pčinjski“ Bujanovac Source: List of privileged power producers – EnMin web site
4.5.2 Feed-in Tariff Support Scheme
A precondition for granting the feed-in tariff to renewable sources is that the installation in question is recognised as privileged power producer according to the corresponding Decree.
The buyer is obliged to conclude the written agreement within 30 days of request by the producer. Equivalently, the contract terminates 30 days after the written confirmation of the producer‟s cancellation of the contract by the default buyer. All the details about Feed-in- Tariffs are explained in the section 3.3.2 and about off-take obligation in section 3.3.3.2.
74 Latest data on MEM site are from August 2010, but in direct contacts we discovered that there have not been any changes to this list since then.
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4.5.3 Electric Power Purchase Agreement
The electric power purchase agreement is the standard agreement for the commercial integration into the electricity market of electricity from renewable sources, CHP and co- generation under the feed-in tariff regime. The contract became obligatory under the feed-in tariff regime which mandates the default buyer of electricity from the above cited sources, EPS division for electricity trading, to design the model contract. The model contract was finally approved by the Ministry in charge of Energy and it may be found on the websites of EnMin and EPS.
Building upon the Energy Law, the Feed-In Tariff Decree and the Decree for gaining the privileged producer status, it governs the rights, obligations and responsibilities of the power producer and the default buyer with regards to the purchase of power produced in the aforementioned installations. Moreover, it states provisions on:
production planning and forecasting, regular plant operation according to the Transmission Grid cod and the Distribution Grid Code, and handling of planned and unplanned production halts, metering of the electricity quantity provided to the electricity network commercial conditions comprising price calculation, calculation of payments, invoicing and payment premature or regular contract termination
4.5.3.1 Commercial Conditions
They have been described in Chapter 3.
4.5.3.2 Energy Metering and Payment Settlement Procedure
The settlement of payments is based on monthly reading of electricity produced and supplied to the power system. This requires the involvement of the system operator (either transmission or distribution system operator) as the responsible party for meter reading. The following graph depicts the metering and payment procedure described in Article 11 to Article 19 of the contract.
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5. References/Websites
Bank Watch (2007), “Balkan Energy Future”, Bank Watch, Prague, http://bankwatch.org/ Bio Energy Point company in pellet production business (Serbia). http://www.bioenergy-point.rs/en/wood-pellets Biomass Energy Europe. http://www.eu-bee.com/ Biotherm Company in pellet production business (Serbia). http://bio- therm.net/home.html?&L=1 Bogunovic Aleksandar and Bogdanov Natalija, 7th Framework Programme AgriPolicy Project (2009) "Analysis of renewable energy and its impact on rural development in Serbia" Branislava Lepotić Kovačević et al "Guide For Investors on Construction Of Plants And Electricity/Heat Generation In The Republic Of Serbia" - available for biomass, small hydro power, wind and geothermal sources; GTZ/ USAID funded project; available at the permits and licences for renewables section at the (2010). http://www.mre.gov.rs/navigacija.php?IDSP=378 Charikleia Karakosta, Haris Doukas, Maria Flouri, Stamatia Dimopoulou, Alexandra G. Papadopoulou, John Psarras (2011) "Review and analysis of renewable energy perspectives in Serbia" Electric Power Industry of Serbia (EPS) (September 27th & 28th, 2010) General Manager presentation at the workshop “Energy mix and outlook options for Serbia and the region”, Belgrade Electric Power Industry of Serbia (EPS) Annual Reports. http://www.eps.rs/publikacije/annualreports.htm Electric Power Industry of Serbia (EPS) web site www.eps.rs Elektromreţa Srbije (EMS) web site. http://www.ems.rs/eng/index.htm Energo Week 2010 edition week 48 p. 8 Energy Agency of the Republic of Serbia (AERS) web site. http://www.aers.org.rs/Index.asp?l=2 Energy Community Regulatory Board (ECRB) (2008), “National Report – Serbia” Ref:ECRB-S- Version 5, September 2008. Energy Community Regulatory Board (ERCB) (2010), "Electricity Prices and Tariffs in the Energy Community 2008-2009” Energy Community web site "Recommendation of the Ministerial Council - Recommendation No. 201 0/01 /MC-EnC of 24 September 2010 on the promotion of the use of energy from renewable sources". www.energy- community.org/pls/portal/docs/724189.PDF
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Energy Saving Group (2008) "Feasibility study on wood waste utilisation in Serbia – USAID". http://pdf.usaid.gov/pdf_docs/PNADS215.pdf ENTSO-E Statistics. https://www.entsoe.eu/resources/publications/entso-e/ ESMAP - World Bank (2007) "Analysis of Policies to promote Low Carbon Energy Alternatives" Eurelectric-UCTE WG Systint (2007), “European, CIS and Mediterranean Interconnection: State of Play 2006 – 3rd Systint Report”, April 2007, Ref: 2007-030- 0428. European Commission (2008), “Serbia 2008 Progress Report Communication from the Commission to the European Parliament and the Council. Enlargement Strategy and Main challenges 2008-2009”, November 2008. European Commission (EC) Enlargement web site. http://ec.europa.eu/enlargement/. European Commission (EC) Third package for Electricity & Gas markets. http://ec.europa.eu/energy/gas_electricity/legislation/third_legislative_package_en.ht m International Energy Agency (IEA) web site. http://www.iea.org/ Ministry of Agriculture, Forestry and Water Management (2010) "Wood energy for sustainable rural development" Ministry of Mining and Energy (2005), “Energy Sector Development Strategy of the Republic of Serbia by 2015”, Belgrade, May 2005. Ministry of Mining and Energy (2007), "Implementation Programs for the Energy Sector Development Strategy from 2007 and 2010" Ministry of Mining and Energy (2009), "Security of Supply Statement of the Republic of Serbia" Ministry of Mining and Energy web site. http://www.mem.gov.rs Ministry of Science, Development and Technology (2002) "The Study of Energy Potential and Characteristics of Biomass Residues, and Technologies for Their Preparation and Energy Utilisation in Serbia" Mladen Ilić, Borislav Grubor and Miloš Tešić (2004) Original scientific paper: "The state of biomass energy in Serbia" OPTRES Report, with support of European Commission (2007) "Assessment of optimisation of Renewable Energy Support Schemes in the European Electricity Market" Press release by Biogas Energy company. http://biogasenergy.rs/index_en.html Press release by Blic news (Serbian Language). http://www.blic.rs/Vesti/Vojvodina/250544/Zelena-struja-od-biogasa Press release by E-Kapija news portal. http://www.ekapija.com/website/sr/page/322926_de and http://www.ekapija.rs/website/sr/page/399999_en Press release by EnviTec Biogas AG (January 27th 2011). www.envitec-biogas.de
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Press release by Hager & Elsässer company. http://www.hager-elsaesser.com/news- termine/news-detail/article/125/Grundsteinlegung-fuer-Abwasseraufbereitung-in- Serbien.html Press release by YU Kapital company. http://www.yukapital.com/biogas-projects.php Press release Naslovi news (Serbian language). http://www.naslovi.net Prof. Dr Branko Glavonjić, ecc Ljiljana Pajović (November 4th 2010) Regional Conference: "Harmonisation of methodologies for estimation and sustainable incorporation of biomass and other RES in municipal and national strategies for energy development”, Skopje, Macedonia R. Naumov (2005), "Creating an Enabling Framework for Renewable Energy Scale up: The Case of Small Hydro Power in Serbia" Reservoir Capital Corp. web site (2011) http://www.reservoircapitalcorp.com/s/Vranjska_Banja.asp and http://www.reservoircapitalcorp.com/s/Vojvodina.asp Serbia Energy web site. http://serbia-energy.com/ Serbian Institute for Multidisciplinary Research (2009) South East Europe (Seenergy) web site. http://www.seenergy.org/ Statistical Office of Kosovo web site. http://esk.rks-gov.net/eng/ Statistical Office of the Republic of Serbia (2008, 2010), “Statistical yearbook of Serbia”, http://webrzs.stat.gov.rs/WebSite/ Tesic et al. (2005) “Biogas in Vojvodina – Stand und Perspektiven” excerpt from “Landtechnik in den Ackerbaugebieten in Ungarn, Slowakei und Österreich“ Vattenfall Europe Power Consult GmbH and Electricity Coordinating Center Ltd. (2011) Study: "Power network analysis for wind power integration in Serbia".
6. Abbreviations
AERS "Agencija za energetiku Republike Srbije" - Energy Regulatory Agency of the Republic of Serbia ATC Available Transfer Capacity BAP Biomass Action Plan BiH Bosnia and Herzegovina CDM Clean Development Mechanism České Energetické Závody - a Czech company involved in generation, CEZ distribution and trade CHP Combined Heat and Power Plant DES Transmission or Distribution Network
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DHS District Heating System DISCO Distribution Company Designed National Authority for implementation of projects under the DNA Clean Development Mechanism of the Kyoto Protocol DNO Distribution Network Operator DSO Distribution System Operator EA Energy Associations EC Energy Community ECRB Energy Community Regulatory Board Électricité de France - one of the world's largest producers of electricity, EDF headquartered in Paris, France EIA Environmental Impact Assessment EMS “Elektromreţa Srbije” - Serbian TSO; public utility for electric energy transmission and transmission system operation on the territory of the Republic of Serbia EnMin Ministry in charge of Energy European Network of Transmission System Operators for Electricity ENTSO-E (absorbed UCTE) EPS "Elektroprivreda Srbije" - Electric Power Industry of Serbia; public utility for production, distribution and trade of electricity and for coal processing and transport ERRA Energy Regulators Regional Association Energy Serving Company - a commercial business providing a broad range of comprehensive energy solutions including designs and implementation of energy savings projects, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk ESCO management. Energy Sector Management Assistance Program - a global, multi donor technical assistance trust fund administered by the World Bank and ESMAP cosponsored by 13 official bilateral donors EU European Union EULEX European Union Rule of Law Mission in Kosovo FEC Final Energy Consumption FiT Feed-in Tariff Federal Republic of Yugoslavia - established in 1992 as a federation between Serbia and Montenegro; in 2003, it was reconstituted as a FRY political union called the State Union of Serbia and Montenegro GDP Gross Domestic Product GENCO Generation Company GWh Gigawatt hour - unit of energy produced
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(s)HPP (Small) Hydro Power Plant Japan International Cooperation Agency - an independent governmental agency that coordinates official development assistance for the JICA government of Japan. Former control block consists of Serbia, Macedonia and Montenegro JIEL (current SMM control block) JP "Javno Preduzeće" - Public Enterprise "Korporata Energjetike e Kosovës" - Kosovo Energy Corporation, a joint- stock company in business of coal mining and electricity production, KEK distribution and supply KOSTT Kosovo Transmission System Operator kV Kilovolt - unit of voltage kW Kilowatt - unit of power LSU Local Self-Government Unit MAVIR Hungarian Transmission System Operator "Mreţa za Energetsku Efikasnost u Industriji Srbije" - Network for Energy MEEIS Efficiency in Industry of Serbia MEM Ministry of Energy and Mining MiMin Ministry in charge of Mining MinEP Ministry in charge of Environmental Protection MinSPC Ministry in charge of Spatial Planning and Construction MinWM Ministry in charge of Water Management Mega tons of oil equivalent - unit of energy, the amount of energy Mtoe released by burning million tonnes of crude oil MVA Megavoltamper - unit of apparent power in an electrical circuit MW Megawatt - unit of installed energy generation capacity MWe / MWt Megawatt electrical / thermal capacity NATO North Atlantic Treaty Organisation No. Number Nos. Numbers OHL Overhead Line OJ Official Journal Assessment and optimisation of renewable support schemes in the OPTRES European electricity market Report PE Public Enterprise PIB "Poreski Identifikacioni Broj" - Tax Identification Number PLC Public Limited Company
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PMC Pubic Management Company PPA Power Purchase Agreement PWMC Public Water Management Company R&D Research and Development RE(S) Renewable Energy (Source/s) "Regionalni Centri za Energetsku Efikasnost Srbije" - Regional Centres REEC for Energy Efficiency of Serbia RES-E Electricity from Renewable Energy Sources RGA Republic Geodetic Authority Republic Hydro-Meteorological Service - a republic organisation in charge RHMS of hydro-meteorological affairs RoS Republic of Serbia RS Republic of Srpska, entity in Bosnia and Herzegovina RSD Serbian Dinar - Serbian National Currency Rheinisch-Westfälisches Elektrizitätswerk AG - a German electric power RWE and natural gas public utility company based in Essen SAA Stabilisation and Association Agreement SEE South Eastern European "Agencija za Energetsku Efikasnost Srbije" - Energy Efficiency Agency of SEEA the Republic of Serbia SIEPA Serbia Investment and Export Promotion Agency SME Small and medium enterprises Control block consists of Serbia, Macedonia and Montenegro (former SMM JIEL control block) TERNA Italian Transmission System Operator ton of oil equivalent - a unit of energy, the amount of energy released by toe burning one tonne of crude oil TPP Thermal Power Plant TSMO Transmission System and Market Operator TSO Transmission System Operator TYNDP Ten Years Network Development Plan UCTE Union for the Coordination of Transmission of Electricity (former UCPTE) UNMIK United Nations Interim Administration Mission in Kosovo United States Agency for International Development - a government USAID agency providing U.S. economic and humanitarian assistance worldwide VAT Value Added Tax
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1011 Vienna, Austria Strauchgasse 3 Tel. +43 1 533 12 00-0 Fax +43 1 533 12 00-5262
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