Regulatory framework is set for first auction in Serbia – what are the conditions, rules?

Investors will have an option to apply for premiums at auctions for the entire installed capacity of planned power plants or a part of the capacity, according to the decree on market premiums and feed-in tariffs adopted by the Serbian government. The decree envisages two-way premiums, where the state will pay the investor if the winning price from the auction exceeds the benchmark price, but if the winning price is lower than the benchmark price, then the investor pays the difference to the state.

The regulatory framework for the first auctions in Serbia is ready, and the Ministry of Mining and Energy could announce them by December 25. The remaining regulations and decisions were adopted yesterday as the Energy Agency of the Republic of Serbia (AERS) set the maximum premiums for auctions for wind farms, and the Government of Serbia adopted the decree on market premiums and feed-in tariffs and decree on the model for the market premium contract.

AERS set the price at 5.57 eurocents per kilowatt-hour, and the government set a 400 MW quota for the first auction for wind farms.

Balkan Green Energy News brings the details of the decree on market premiums and feed-in tariffs, which defines the premiums, the feed-in tariffs, the benchmark price, the auction procedure, and the status of a temporary privileged producer.

The entire power plant or just one part

In the application for participation in auctions, the participant must set the installed capacity of the power plant and the capacity for which they intend to get premiums. It means that the state would either pay premiums for the total installed capacity of the planned power plant or only for a part of it.

The state set a quota of 400 MW for the first action for wind farms, but the said mechanism allows the installed capacity to be bigger than that when power plants are built.

Conditions for participation in auctions

Some of the most important conditions for participating in auctions are:

• a financial instrument in the form of a bank guarantee or cash deposit,
• the final energy permit,
• valid location conditions or valid building permit,
• the confirmation from the transmission system operator that the connection to the grid is part of the planning documents.

The bank guarantee or cash deposit amount is determined by multiplying the installed power of the offered capacity in kW by EUR 30 for premiums and EUR 10 for feed-in tariffs.

The application for auctions must include a financial offer that contains the offered price that will be valid for the entire incentive period.

Two-way instead of one-way premiums

The premium is the difference between the winning bid in an auction and the benchmark market price for the delivered electricity. The benchmark price is determined according to the price on the day-ahead market of national power exchange SEEPEX.

The premiums are paid to power plant owners only if the winning price is lower than the benchmark price and the difference between the two prices. In the opposite situation, when the benchmark price is higher, the power plant’s owner is obliged to pay the state the difference between the winning and benchmark prices.

The first auction can be announced within 30 days

The Ministry of Mining and Energy announces the start of the auctions 45 to 90 days in advance. But it can publish a public call for the first auction within 30 days from the day AERS set maximum premiums, which happened yesterday, on November 25.

Auctions are conducted electronically; however, they can also be in paper form. The exception refers to the first auction or when there are no technical conditions for the procedure to be conducted electronically.

The status of a temporary privileged producer could be transferred to another entity

The decree also defines the status of a temporary privileged producer, awarded to the winning bidder, primarily in the part that refers to the conditions for the extension of the status. The decree is in line with the solutions from the law on renewables, which envisages the status can last from two to six years.

The transfer of the status to another entity is possible in the event of a termination of the existence of a privileged producer, or due to a legal transaction, the decree reads.

Cash deposit for removing the power plant and remediation of the land

The privileged producer is obliged to pay a monthly cash deposit to remove the power plant and remediate the land on which it was located once its lifetime expires.  The amount ranges from EUR 0.02 to 0.066 per kilowatt of installed capacity.