International institutions urge Serbia not to delay implementation of renewable energy law

The World Bank, European Bank for Reconstruction and Development and Energy Community Secretariat warned that Serbia may disappoint investors if it delays or alters the Law on the Use of Renewable Energy Sources. The letter is a reaction to demands from state-owned power utilities EPS and EMS, which claim the electricity system wouldn’t be able to take in the planned capacities and that the balancing responsibility has to be passed on to producers.

Government-controlled firms Elektroprivreda Srbije (EPS), the dominant producer of coal and electricity in Serbia, and Elektromreža Srbije (EMS), the country’s transmission system operator, recently caused a commotion in the market by asking the Ministry of Mining and Energy to alter the Law on the Use of Renewable Sources and halt activities on enabling renewable energy subsidies.

Amid the ongoing turmoil, the World Bank, European Bank for Reconstruction and Development and Energy Community Secretariat urged Prime Minister Ana Brnabić and Deputy Prime Minister Zorana Mihajlović in a joint memorandum not to scrap the “well-balanced piece of legislation.”

Accepting the requests for a delay in implementing or amending the act may be perceived as reneging on the achievements made and “chill investor confidence” in the renewable energy sector in Serbia, the international institutions stressed. They noted that they participated in the process of drafting the law together with EMS and EPS.

Support to dialogue

“We consider it quite natural that in the course of drafting the necessary bylaws for implementing the new legislation, different stakeholders formulate different interests which need to be reconciled. Concerns about system stability and reserves, and the allocation of balancing responsibility are not unique to the Republic of Serbia, but have been raised and solved in many countries before,” the institutions added in the letter and offered technical and impartial support for discussing the most appropriate approach to the concerns raised.

Deputy Director of the Energy Community Secretariat Dirk Buschle told Balkan Green Energy News the dispute should be resolved within the framework of the existing law. “It is important that everybody stays committed to the implementation process. The three institutions offered input and to moderate the discussion for solving the issues raised by EPS and EMS,” he stressed.

Public calls to step back can have a very negative impact on investor confidence, Buschle asserted. “The discussion on whether the law should be significantly amended or even repealed is unfortunate,” in his words.

Allowing producers to assume balancing responsibility requires the establishment of a liquid intraday market, as stipulated by law

The argument that in well developed electricity markets, balancing responsibility can and should be borne by the producers and not the offtaker has merit, the World Bank, EBRD and the Energy Community Secretariat pointed out. They added, however, that according to European standards it implies the establishment of a liquid intraday market and that it is already envisaged by the Law on Energy.

Responsibility for transmission network development lies on EMS

The Law on the Use of Renewable Energy Sources follows recommended European and global standards and stands out among Energy Community contracting parties, which has been confirmed by the interest of domestic and foreign investors and their support, the memo reads.

“Moreover, balancing costs can be lowered through better forecasting and regional reserve cooperation… Investments in the network needed to comply with national legislation are the responsibility of the transmission system operator and subject to cost-reflective tariffs and connection charges set by the regulatory authority,” the document adds.