New rules for power grid connection in Serbia

The author is Neda Lazendić, a renewable energy expert and Country Manager of WV-International Serbia

After months of ironing out the details, Serbia has started applying new legislation that regulates the procedure for connection to the national power grid. Specifically, the transmission system operator, Elektromreža Srbije (EMS), has acted on renewable energy investors’ requests to sign agreements on the preparation of grid connection study (GCA), submitted after the passage of the Law on the Use of Renewable Energy Sources in April 2021 (Official Gazette of the Republic of Serbia, No. 40/21 and 35 /23).

The requests for connection to Serbia’s transmission system refer to wind power plants with a total capacity of 6.1 GW and solar power plants with a planned capacity of 11.4 GW. In addition to the already submitted requests, the new legislation will also regulate all future procedures for connecting renewable energy power plants to the transmission system.

The Decree on Conditions of Delivery and Supply of Electricity (Official Gazette of the RS, No. 84/2023), which has been in force since last month, defines in detail the new rules for the grid connection procedure, all with the aim of ensuring the stability of the energy system and filtering projects by their preparedness for further development.

Project development at local level will go in parallel with grid connection process

Unlike before, the investor is now required to support the request for concluding an Agreement on preparation of grid  connection study with a decision on the preparation of a relevant planning document, in accordance with the legislation on planning and construction.

The investor is now required to support the request for concluding an Agreement on preparation of grid connection study with a decision on the preparation of a relevant planning document

This means that the investor has already undertaken appropriate activities to define the energy facility in terms of urban planning, thus creating the conditions for the parallel development of the project in terms of planning and construction on the one hand, and the connection of the facility to the grid on the other.

Ensuring capacities for ancillary services of secondary reserve

Prioritizing the stability and security of the energy system, the Law on the Use of Renewable Energy Sources provides for the possibility for the transmission system operator to postpone the connection of a power plant that uses renewable energy sources if the adequacy analysis detects risks to the safe operation of the power system due to lack of balancing reserves.

Postponement of connection to the transmission system does not apply to power plants using intermittent renewable energy sources if the investor:

1) provides a new capacity for the ancillary service of secondary reserve which will be offered to the transmission system operator for the system service of secondary regulation of frequency and power exchange or

2) allocates a new capacity from its own existing production capacities for the provision of the ancillary service of  secondary reserve which will be offered to the transmission system operator for the system service of secondary regulation of frequency and power exchange or

3) ensures that another market participant, on behalf  of the investor, secures a new capacity for providing the ancillary service of secondary reserve which will be offered to the transmission system operator for the system service of secondary regulation of frequency and power exchange.

In this regard, the investor is required to support the request for grid connection study with proof that the subject power plant meets the criteria to avoid grid connection postponement, that is, to decide whether balancing will be provided by building a new battery storage capacity or a new power plant that uses conventional energy sources, or whether the required storage capacity will be provided by another market participant.

If the investor opts for building a battery storage facility, the rules require the engagement of relevant experts in the field from the very beginning of project development.

Introducing mandatory bank guarantee

The most significant new requirement under the new procedure is, of course, the obligation to provide a bank guarantee in the amount of EUR 25,000 per MW of capacity at the connection point determined in the grid connection study.

The investor is oblidged to provide a bank guarantee in the amount of EUR 25,000 per MW

The guarantee must be submitted within 60 days of the delivery of the connection study in the Serbian dinar equivalent at the National Bank of Serbia median exchange rate on the payment date and must be: non-transferable, irrevocable and unconditional, issued in favor of the transmission system operator, without the right to object, payable on first call, issued by a commercial bank that is registered and operates in accordance with the laws of the Republic of Serbia, with a validity period of 37 months.

Cases where the operator collects the bank guarantee

By submitting the guarantee, the investor undertakes to implement the entire project development within the set deadlines. The transmission system operator will collect the bank guarantee as follows:

1) in the amount of 10% of its value if the investor fails to conclude the Agreement on grid connection within 60 days of the day of the submission of the bank guarantee to the transmission system operator

2) if the investor does not submit a request for Approval for the grid connection of the facility within three years of the conclusion of the Agreement on grid connection , the bank guarantee will be collected in the following amounts:

• 10% of its value if the investor obtains a construction permit for the facility within that period;
• 30% if the investor obtains a location permit and an energy permit for the facility within that period, but does not obtain a construction permit;
• 50% if, within that period, the investor obtains a location permit for the facility but does not obtain a construction  permit and an energy permit;
• 80% if only the planning document for the facility is adopted within that period;
• 100% if a planning document for the facility is not adopted within that period;

3) 100% if the validity of the bank guarantee is not extended at least 30 days before its expiration;

4) if, within the validity period of the connection approval, the investor does not build the facility to the stage of functional tests as part the connection procedure, the bank guarantee will be collected in the following amounts:

• 10% if the investor obtains a certificate from a building inspector that the facility is completed in terms of construction;
• 20% if, within that period, the investor obtains a certificate from a building inspector that the foundations of the facility have been completed, but not that the facility is completed in terms of construction;
• 100% if, within that period, the investor does not obtain a certificate from a building inspector that the foundations of the facility have been completed.

If the investor abandons the project within six months from the date of the conclusion of the Agreement on grid connection , 5% of the value of the bank guarantee will be collected. The purpose of all this is to make investors more serious in their project planning and to ensure that the transmission system operator is not overloaded with connection requests that are not fully planned and coordinated both in terms of engineering and in terms of finance.

Given that investors who have been invited to amend their request for concluding an Agreement on preparation of grid connection study have a deadline of 8 days to act and comply with the new procedure for connection to the transmission system, it remains to be seen how many projects will go ahead and at what pace new projects will be initiated.

In any case, the rules for grid connection, as a crucial segment of the project development of any energy facility, are now clear and transparent, which confirms Serbia as an adequate investment environment.