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Bankwatch urges Serbia to halt subsidies for small hydropower in new law on renewables

bankwatch law on renewables serbia

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Published

January 15, 2021

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Published:

January 15, 2021

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Given the negligible contribution of small hydropower plants to energy generation in Serbia (0.7% of the country’s electricity production), and the negative experience so far with enforcing environmental legislation, Bankwatch Network advocates scrapping incentives for these facilities.

Serbia’s Ministry of Energy and Mining has recently published the guidelines for the draft law and invited the public to submit suggestions. The guidelines include maintaining feed-in tariffs for small facilities (under 500 kW) which means for small hydropower plants as well.

In a blog posted on its website, Bankwatch examines the main points of Serbia’s draft law on renewable energy.

The Bankwatch says that among other things, the law aims to bring Serbia’s renewables incentives scheme into line with the EU’s Energy and Environment State Aid Guidelines. Under these guidelines, feed-in tariffs would still be allowed for hydropower facilities of 500 kW or lower.

One option would be to decrease this threshold to below 100 kW, but Bankwatch proposes the incentives to be halted altogether.

Serbia’s existing support scheme is becoming increasingly expensive

According to the blog written by Pippa Gallop, Southeast Europe energy advisor at Bankwatch, Serbia’s existing support scheme is becoming increasingly expensive, as reflected in the fact that the ministry recently announced a five-fold increase in the fee paid by consumers to incentivize renewable energy.

The scarce resources available need to be directed at those technologies which still need a boost but whose prices may still fall – mainly solar and wind farms, she said, adding that mature and environmentally destructive technologies such as hydropower and waste-to-energy must not be subsidized anymore.

Projects receiving incentives must be in line with EU environmental law

According to the Bankwatch, the EU’s Energy and Environment State Aid Guidelines state that all projects receiving incentives must be in line with EU environmental law, and Serbia’s new law on renewable energy needs to explicitly incorporate this requirement.

Auction criteria should exclude plants in protected or otherwise environmentally sensitive areas, and the auctions should only be held after the plants have received all relevant permits, in order to ensure a high realization rate, Gallop wrote.

Bankwatch warns that the proposal to delegate approval of incentives for small plants to local authorities is not good.

Review of existing contracts needed

The network also proposes all the existing contracts to be reviewed to double-check whether the plants have been permitted and built in line with Serbian legislation.

For those which are not, the power purchase contracts need to be annulled. This is an essential step to build public confidence in the incentives system, Gallop said.

Impression of the ministry not being entirely sincere

Bankwatch also warns that the public consultation held in the extremely short time period, from December 31, 2020 to January 12, 2021, with the Orthodox Christmas holiday right in the middle, prevented many stakeholders from taking part and gave an unfortunate impression of the ministry not being entirely sincere in its invitation for comments.

“We hope that further consultations on the Law will allow much more time and be much better advertised, and we also advocate for more public participation during the process of awarding incentives, in order to allow any concerns to be raised at an early stage,” Gallop said.

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