The supervisory board of state-owned power utility Elektroprivreda Srbije (EPS) asked the Ministry of Mining and Energy to introduce a strategic reserve mechanism as a transitional solution to ensure the security of supply in Serbia.
A strategic reserve mechanism is a way to secure the supply to domestic consumers from domestic power plants in situations of market disruption like the current one, with prices soaring in recent months.
The initiative to introduce a strategic reserve mechanism was presented by acting director Milorad Grčić.
The strategic reserve mechanism would be established by the conservation of all power plants that finished their regular operation, Grčić told the supervisor board, adding that they would be ready to go online in case of an energy crisis.
He claimed the goal of the initiative is to provide a stable supply with unchanged prices for the citizens of Serbia.
The capacities for a strategic reserve mechanism will be determined after expert analysis. They would be activated in a crisis similar to the current one when there is a disturbance on the market, or when the price and output of electricity justify their activation, according to a press release by EPS.
Vlaisavljević: The existing law on energy was made commercially
Dragan Vlaisavljević, executive director for electricity trading at EPS, explained that the transitional solution was made according to the model from the European Union.
Some countries, such as Germany, have introduced strategic reserves and are currently activating them, he underscored.
Vlaisavljević claimed the law on energy is based on a trade principle. It means if domestic production is not sufficient to supply domestic consumers, then the necessary electricity is to be purchased on the market.
Petar Stanojević, a member of the supervisory board of EPS, supported the initiative.
“I am in favor of both a strategic reserve and capacity conservation, because this is the first major energy crisis, but I believe it is not the last,” Stanojević said.
What is a strategic reserve?
A strategic reserve mechanism is similar to the capacity mechanism applied in the EU, where it includes old gas or coal power plants.
In times of market disruption, when prices are high, like now, or in case of emergency, such power plants go online. In times when there is no market disruption or emergency, they do not produce energy. Of course, the government must pay their owners to play the role. Also, power plants under the strategic reserve mechanism must meet environmental standards.
The state must decide what is better and cheaper: to rely on a strategic reserve or on the market
In Serbia, coal power plants that must be shut down due to non-compliance with environmental standards could become a strategic reserve, alongside the units that will have to be closed in the next five to ten years because their lifespans would expire. By the end of 2023, Serbia must shut down the Kolubara A and Morava coal-fired power plants.
In order for the proposed mechanism to become implemented, it is necessary to change the law on energy, because it doesn’t envisage the introduction of a strategic reserve. Deficits in the production of electricity in Serbia and of energy to supply the domestic market are covered by imports or procurement on the domestic market. The state would have to choose whether to rely on a strategic reserve or on the market, and both options imply expenses.