Minister Mihajlović: Serbia to hold first renewables auction in December

Serbia will hold its first auctions for premiums for electricity from wind power and solar power plants in December, while a three-year schedule of renewable energy auctions will be unveiled by the end of February 2022.

Minister of Mining and Energy Zorana Mihajlović has said that Serbia has initiated the energy transition through a regulatory framework, including the adoption of the law on renewable energy sources. However, the country needs to work on decarbonization faster and more efficiently, regardless of all the pushback and problems which already exist and which will arise in the future given that resistance to change is inevitable, according to her.

It’s not true that an increased share of renewables will make the electric energy system unstable and that Serbia will import more electricity

Claims that more renewables will make the electrical energy system unstable, and that Serbia will import more electricity, are not true, according to her. Serbia has enough potential to cover its own needs and to be an important player in trade in this part of Europe, according to Mihajlović, who was speaking the RES Serbia 2021 conference.

She said that the necessary secondary legislation is being finalized, and that the first auction for premiums for renewable energy power plants will be held in December.

The secondary legislation will be adopted by the end of October

Jovanka Atanacković, state secretary at the Ministry of Mining and Energy, said that all the secondary legislation supporting the recently passed laws will “enter the procedure” next week and that it will be adopted by the end of October.

The ministry is also preparing online auctions, she said, adding that a three-year schedule for future auctions should be unveiled by the end of February, which will attract more investors.

It has yet to be decided whether to pay premiums through two-way or one-way Contracts for Difference (CfD), Atanacković said, adding that she believes two-way contracts are beneficial for both sides. She also announced that Serbia will issue green bonds on Thursday.

The difference between two-way and one-way premiums

A Contract for Difference involves two electricity prices: one that is equal to the winning bid in an auction (where the lowest price wins) and a variable benchmark price determined by the government based on the market price. When the winning price is higher than the benchmark price, then the state pays premium to the investor to compensate for the loss.

However, when the winning price is lower than the benchmark price, the question arises of who gets to keep the difference. That is why there are one-way and two-way premiums.

With one-way premiums, the investor gets compensated by the state if the benchmark price exceeds the winning price, but keeps the difference if the winning price is lower than the benchmark price, which is a kind of windfall.

With two-way premiums, the state pays the investor if the winning price exceeds the benchmark price, but if the winning price is lower than the benchmark price, then the investor pays the difference.to the state.

Energy sector strategy and NECP will “provide a vision of where Serbia should be in 2050”

Minister Zorana Mihajlović said that a third step, following the passage of the law and the adoption the secondary legislation, is the drafting of strategic documents – an energy sector development strategy and a national energy and climate plan (NECP), which should provide a vision of where Serbia should be in 2050.

Both documents should be completed by the end of the year.

“Our vision is for Serbia to get at least 40% of heat from renewable energy sources by 2040. I’m certain it could be even more, but let’s be conservative,” said Mihajlović.