Renewables

Regulatory framework, electricity price highlighted as impediments to greening region’s energy mix

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November 30, 2018

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Published:

November 30, 2018

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The Western Balkans, and Serbia in particular, should continue implementing regulations to help green the energy mix and fight climate change, according to panelists at the 11th Balkan Energy Finance Forum. They also raised the issues of how the low regulated electricity price is affecting investments in the energy sector overall and how third countries are thwarting coal phase-out plans.

Speaking at the panel on the way forward for attracting investment in the renewable energy sector in South-East Europe (SEE), sustainable energy expert Maja Turković recalled that it is understood that the Serbian government is preparing the framework to introduce renewables auctions.

Turković, co-founder and board member at the Association for Sustainable Development (ASOR), said that it is important for auctions to follow industry trends, as the feed-in quota for wind and solar projects, which has been filled, was designed for projects from seven to ten years ago.

It is also important for the process of introducing auctions to be transparent, so that investors can be aware of the upcoming developments, she said, recalling that the extended feed-in tariff regime is good news for small projects in terms of bankability.

Head of the European Investment Bank’s (EIB) Regional Representation for the Western Balkans Dubravka Negre discussed barriers for investors used to Western Europe standards to invest more in the Western Balkan region.

Matters that require improvement in the region include the level of regulatory alignment with the EU acquis in terms of environmental and social impact, particularly concerning large hydropower projects, according to Negre, who noted that in Bosnia and Herzegovina (BiH) in particular, issues include the award of concessions – how transparent and straightforward the process is – as well as the environmental due diligence.

Negre also said that not enough countries in the region are working on energy efficiency and smart metering, as well as that there is still “a cloud around coal-fired power plants” in the region, which should be phased out, but are attracting third-country investors, in Serbia and BiH in particular.

Low electricity price affecting development of new energy projects

Negre also raised the issue of how the low regulated electricity price is affecting the energy market and the development of new projects overall.

Turković agreed that this is the right question, noting that the government’s concern of how renewables will affect the end-user electricity price is the rationale of setting quotas – which have already been filled up – for wind and solar.

Turković also noted that all coal-fired power plants that have not been investing in compliance with environmental standards will face shutdown “sooner or later,” albeit some stakeholders may be in denial on the matter.

“Serbia committed 13 years ago to close old, fossil fuel-powered, polluting power plants by 2023, and we shouldn’t be surprised now that 2023 is in four years,” she said.

Milica Pešterić, senior associate at law firm Bojović Drašković Popović & Partners, discussed the impact of the legal framework on investment certainty, recalling that the power purchase agreement (PPA) package provided a consistent, comprehensive and, at least on the face of it, a bankable set of regulations to govern the renewable sector in Serbia.

There is, however, room for improvement, she said, noting that there is a need to adopt more developed rules to govern certain aspects of the change-in-law procedure, as well as to tighten penalties for the offtaker failing to fulfill its obligations under the incentive decree.

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