Banks in Serbia receiving lot of requests for grid connection guarantees

Banks in Serbia are receiving numerous requests to issue guarantees for renewable electricity projects requiring grid connection approvals, where most investors, primarily foreign ones, are providing firm collateral instruments, according to speakers at Belgrade Energy Forum. Conference participants pointed out that Elektromreža Srbije (EMS), the state-owned TSO, cleared some of the earlier obstacles with its new rules, filtered out the projects and selected the ones with a greater potential to be built. But some unknowns remain.

The panel on the progress toward fulfilling renewable energy goals also addressed the electricity market design reform that the European Parliament recently adopted. Petar Mitrović, Partner in law firm Karanovic & Partners, moderated the discussion.

Chief Executive Officer of Serbia’s SEEPEX power exchange Miloš Mladenović noted that the marginal pricing model was maintained through the changes and expressed the opinion it is still the best and right way to achieve equilibrium between production and consumption.

“Following a detailed analysis, that system was concluded to be still the most appropriate and that, after all, it is the only concept that can turn on the alarm,” he stated.

In Mladenović’s view, the market design reform was accelerated by the energy crisis and the concerns not only about prices but the availability of energy as well, but it was also a response to inconsistencies in the energy transition process.

“Unfortunately, political and technocratic elites running major corporations don’t grasp further, within the sociological and philosophical realm, than Fukuyama’s thesis on the end of history and the ultimate victory of neoliberal capitalism,” he said and added that following the 1990s the Western world rushed toward the liberalization and the decentralization. The ethical approach toward energy was lost in the process, SEEPEX’s CEO concluded.

Asked about the effects of the long-awaited reform, Mladenović explained that one concerns price predictability both on the side of consumption and in production, primarily through the introduction and legalization of incentives, based solely on auction market models and contracts for difference (CfDs).

The energy crisis and concerns about prices but the availability of energy have accelerated the reform

“We were ahead of our time and we rolled out that model even before the EU formalized it as the only acceptable one,” he said.

Another strategic goal is a more efficient renewables integration, primarily through support to flexibility solutions regarding smart grids and a more active participation on the demand side as well as support for some innovative solutions for decentralization.

“They are the two directions that were formalized, but they are not new,” Mladenović underscored and added that the market itself demonstrated a need for the said solutions.

Lazendić: Collateral requirements are filtering investors

The panel’s main topic was progress toward renewable energy targets at Belgrade Energy Forum. The speakers especially highlighted the new grid connection rules of the Serbian state-owned transmission system operator EMS.

Renewable energy project developer WV-International’s Country Manager Neda Lazendić said they have unclogged the crunch in the grid connection approval process, calling it a good sign and pointing out that investors have waited for two years for any response from the operator.

The 2021 Law on the Use of Renewable Energy Sources provided a framework and attracted investors to the point of requests surpassing 20 GW at one moment, which surpasses the grid capacity by far, she asserted.

The first filter halved the number of requests

She noted that the operator understood the situation and rolled out “filters” including adequacy studies and the most problematic one – the obligation to submit collateral instruments. In her words, the latter is the ultimate filter, showing whether investors are determined to proceed with the materialization of the project.

Lazendić also said the first filter has halved the number of requests.

In her view, the new connection rules solved some of the earlier problems and they are not ideal, but there is a platform for dialogue now and the procedure will only be improved from now.

UniCredit Bank: Number of grid connection requests is large

Head of Specialized Lending in UniCredit Bank Serbia Svetlana Cerović stressed the number of connection requests is large and that they are processed in a serious manner.

Most investors from abroad applying for guarantees are also providing firm collateral instruments, Cerović said and added that the requests include counter-guarantees or counter-guarantees in combination with cash deposits.

Banks will also be open and ready for requests for financing energy storage

She highlighted the positive effect of the new legislation of clearing up projects and determining the ones with a greater potential to be built, but warned there are certain unknowns.

The banking sector will be open and ready for requests for financing energy storage and the banks, but the area still lacks clarity, Cerović asserted. She added that every project is a story for itself.

ProCredit: Not impossible to finance energy storage projects as well

Member of the Management Board of ProCredit Bank Cristoph Beeck said it isn’t impossible that energy storage projects would be financed, arguing that they are financed on the basis of the entire project.

Income predictability and project sustainability are among the main challenges

Reflecting on challenges, he stressed that markets differ but that the issues come down to two aspects.

The first is income predictability and project sustainability, as a model must be created to bring in money in the long term, in his opinion.

The second one is the fact that the process where investors are obtaining documentation, necessary for a bank to approve a project, takes very long, Beeck underscored.

Private sector can’t build power road

Managing Director of Renewable Energy Sources of Croatia (RES Croatia) Maja Pokrovac pointed out that the energy transition carries with it a political transition and that energy mirrors political developments.

She said Croatia recently introduced energy approval as one of the first necessary documents and that after that the investments in solar power grew significantly.

Pokrovac explained that grid connection rules are the biggest issue in her country as well and stressed that the government supported the RES Croatia association’s suggestion for the cost to be zero.

“The private sector can’t build a power road”, she underscored.

General Manager of Green Balancing Group Aleksandar Stefanović said his company has considered several serious projects that include battery storage. Such facilities are necessary and can lower balancing costs, in his words.