Energy Community invites Serbia to amend energy law for renewables support scheme, introduce auctioning

June 13, 2017

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Energy Community invites Serbia to amend energy law for renewables support scheme, introduce auctioning

Amendments to the Energy Law that Energy Community has proposed to Serbia in order to align its legal framework with European Union’s acquis for renewables envisage some fundamental changes whereas introduction of tendering or auctioning process to determine the beneficiaries of the support scheme, elimination of the temporary privileged power producer status, balancing responsibility and introduction of renewable energy operator represent major ones.

Director of Energy Community Secretariat, Janez Kopač has sent a letter to the Serbian Parliamentarians, representatives of the  Committee on the Economy, Regional Development, Trade, Tourism and Energy of the National Assembly of the Republic of Serbia to inform them on the next steps Serbia as a Contracting Party of the Energy Community is to make in order to align its legal framework with the European Union’s acquis. Among them is the Renewable Energy Directive 2009/28/EC and the “Guidelines on State aid for environmental protection and energy 2014- 2020” published by the European Commission.

According to the document sent to Serbian Parliamentarians, current Energy Law, adopted in December 2014, is not completely compliant with EU legal framework since it does not include a new approach for the design of the support schemes for renewable energy.

Energy Community has prepared a draft set of amendments to the Energy Law in line with the Guidelines on State aid for environmental protection and energy 2014-2020 with instructions for Serbia to adopt them as soon as possible.

The similar draft set of amendments has been also prepared for all other Contracting Parties. However, Kopač encouraged Serbia to take the lead in the promotion of new supporting schemes model.

Transitory period until end of 2018

The Energy Community Secretariat has granted Contracting Parties a transitory period until the end of 2018 to move from the existing system of support scheme towards a more market-based one, Kopač said to Balkan Green Energy News portal.

The transitory period is granted given the later implementation of the Renewables Directive in the Energy Community Contracting Parties and in order to avoid a too abrupt change in the support system which could have negative repercussions on the investment climate, he said adding that existing contracts will not be affected.

Temporary privileged power producer status to be abandoned

The proposed RES amendments in the Energy law eliminate the temporary privileged power producer status. Instead of the current incentives scheme based on feed-in-tariffs, the new concept for acquiring the status of privileged electricity producer is to be  based on the competitive bidding procedure (auction or tender), in which the successful bidder profits from the support scheme and signs a contract for difference with the renewable energy operator.

New tendering process for all power producers from renewables

According to the proposal, the tendering process, to determine the beneficiaries of the support scheme, would be open to all power producers from renewable sources, on the basis of clear, transparent and non-discriminatory criteria. The proposal furthermore envisages the situations in which the tendering process would fail – namely in the event when there is only one or a very limited number of eligible projects or sites; when the tendering process could lead to higher support levels; or when a competitive process would result in low project realization rates.

The tender can be limited to specific technologies, in cases when a tendering process open to all producers would lead to a suboptimal result, which cannot be addressed in the process design. The latter takes into consideration the longer-term potential of a new and innovative technology, the need to achieve diversification, network constraints and grid stability, system (integration) costs and/or the need to avoid distortions on the raw material markets from biomass support.

A competitive bidding process would not apply to installations with installed capacity of less than 1 MW or demonstration projects, except for electricity from wind energy where an installed electricity capacity is of up to 6 MW or 6 generation units.

The tendering terms and procedures, as well as cases of restriction of this process, would be proposed by the Minister and approved by a decision of the Government; whereas the proposal regarding support measures are to be prepared in the ministry in consultation with the Energy Agency of the Republic of Serbia and the Energy Community Secretariat.

New incentive measures

According to the proposed amendments, incentive measures for privileged power producers would be given in the form of a premium, calculated as the difference between the price with which the renewable energy producer is declared successful in the competitive tendering process for granting the aid (the strike price) and the market price for electricity (the reference price). The strike price is the final price that the priority producer of electricity would benefit, as a result of being selected as beneficiary of a support scheme in a competitive process – it determines the maximum level of the reward that can be granted to each project of renewable energy. The reference price is the hourly day-ahead market price on the organized electricity market.

A privileged producer would be entitled to incentive measures by the conclusion of a contract for difference with a guaranteed supplier, witha maximum duration of 15 years.

Conditions and procedures for granting the support measures, which include aid from the State Budget, are to be approved by the Government, with the proposal of the Minister. Furthermore, these measures need to be notified to the Commission for State Aid Control before their adoption for their compliance with the legislation on State Aid.

Balancing responsibility

Another important proposed change addresses balancing responsibility, which is transferred to privileged producers of electricity. Producers would become a responsible party for balancing, by signing a contract with the transmission system operator or by signing a contract for the transfer of the balancing responsibility to another responsible balancing party, thus becoming a member of a balancing group, in accordance with the respective Market Rules. As an exemption, privileged producers with installed capacity of less than 500 kW or demonstration projects, as well as wind energy projects with an installed capacity of 3 MW or 3 generation units, would not be responsible for balancing.

Introduction of renewable energy operator

The renewable energy operator is introduced, as a party responsible for invoicing and collecting payments for the renewable energy obligation for all categories of privileged producers, applied to all final customers, in accordance with the respective energy quantity measured and delivered to these customers. The renewable energy operator would be responsible for signing and managing contracts for difference with the privileged producers, including forecasting payments under the support scheme for priority producers.

Status of existing projects

Finally, all privileged producers, temporary privileged producers and/or producers from renewable sources who already acquired their status before the entry into force of these amendments, would have the right to choose to benefit from new support scheme under the contract for difference, in accordance with the new competitive bidding process.