Serbia adopts new regulations for second round of RES auctions

Authors: Ivan Gazdić, Partner at Petrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz; Tamara Zejak, Senior Lawyer at Petrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz; Teodora Vujošević, Lawyer at Petrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz

Оn 14 November 2024, the Government of the Republic of Serbia adopted the Decree on the Market Premium and Feed-in Tariff, the Decree on the Quota in the Market Premium System for Wind Power Plants, the Decree on the Quota in the Market Premium System for Solar Power Plants and the Decision on the Maximum Offered Price of Electricity for the Purpose of Auctions in the Market Premium System, thereby rounding off the regulatory framework for the implementation of the second round of auctions for awarding market premiums for power plants that use renewable energy sources (wind and solar).

The Decree on the Quota in the Market Premium System for Wind Power Plants stipulates that the quota for wind power plants with an approved capacity of 3 MW and more is 300 MW, while the Decree on the Quota for Solar Power Plants stipulates a quota of 124.8 MW for solar power plants with an approved capacity of 500 kW and more (the capacity of 24.8 MW that was not distributed in the first auctions was added to the planned quota of 100 MW).

The Decision on the Maximum Offered Price of Electricity for the Purpose of Auctions in the Market Premium System set the maximum offered price for electricity for wind power plants at EUR 79 per MWh and for solar power plants at EUR 72 per MWh (which is lower than the previously set maximum offered prices of EUR 105 per MWh for wind power plants and EUR 90 per MWh for solar power plants).

An additional capacity criterion – the existence of a power purchase agreement

The Decree on the Market Premium and Feed-in Tariff expands and specifies the elements of the public invitation and the conditions for applying for the auction, improves the procedure for submitting documentation – evidence that participants in the auction must attach to the application, and defines more precisely the requirements for participation in the auction. However, the most significant novelties of the Decree concern the provisions that more closely regulate the conduct of an auction with the application of an additional criterion, i.e. the so-called capacity criterion that was introduced as a possibility by last year’s amendments to the Law on the Use of Renewable Energy Sources.

An additional criterion, which will be scoring and not eliminatory, implies the obligation of the auction participant to enter into an agreement with the guaranteed supplier and/or end customer for the purchase of electricity for a certain percentage of the power plant’s capacity. Therefore, in case the auction is conducted applying the above criteria (which will be specified in the public invitation), when ranking the bids of the auction participants and filling the quota, in addition to the offered price, the percentage of the auction participant’s power plant capacity offered to the guaranteed supplier (EPS a.d. Beograd) for the needs of the guaranteed supply in the Republic of Serbia and/or to end customers in the Republic of Serbia through a contract for the purchase of electricity from renewable energy sources (through the so-called corporate PPA) will be taken into account.

As proof that a certain percentage of the power plant’s capacity has been offered to the guaranteed supplier and/or end customers in the Republic of Serbia, the auction participant shall submit a preliminary agreement or an agreement concluded with the said legal persons, with the signatures of the contracting parties certified by the competent certification authority, which shall necessarily contain the following elements:

1. the obligation to deliver electricity from the power plant of the auction participant for which the financial offer was submitted to the guaranteed supplier in the Republic of Serbia and/or final customer in the Republic of Serbia;
2. the term of the agreement for the purchase of electricity from renewable energy sources, which shall not be shorter than three years starting from the day of the start of the delivery of electricity;
3. the percentage of the power plant capacity of the auction participant expressed in power (MW) of the power plant offered to the guaranteed supplier, i.e. the end customer during the term of the contract for the purchase of electricity from renewable energy sources;
4. the obligation of the contracting parties to conclude the contract in all respects in accordance with the terms of the preliminary agreement, and before the auction participant acquires the status of a privileged producer of electricity.
5. if the preliminary agreement or agreement is concluded between the auction participant and the guaranteed supplier it shall be stated that the capacity offered is purchased for the purpose of guaranteed supply in the Republic of Serbia.

For the purpose of ranking the bids and filling the quota, the value of the criterion of the offered capacity to supply end customers in the Republic of Serbia shall depend, inter alia, on the number of total contracts concluded with the guaranteed supplier and/or end customers in the Republic of Serbia, the offered capacity of the power plant to the guaranteed supplier and/or end customer, which for the purpose of calculating the value of the capacity criterion shall amount to a maximum of 30% of the power plant’s capacity, as well as the term of such an electricity purchase contract.

The calculation of the value of the capacity criterion as well as the total number of points of the auction participant (according to which the bids are evaluated) is carried out by applying the formulas prescribed by the Decree.

The Decree provides for monitoring and reporting on the fulfillment of this additional criterion, as well as the obligation of the relevant system operator to provide, at the request of the Ministry of Mining and Energy, during the term of the purchase contract, data on whether this contract is the basis for the delivery of electricity to the system.

The Decree also defines the consequences of the termination or cancellation of the purchase contract before the end of the term specified in the auction participant’s offer.

The auction participant shall not bear any consequences in the event of premature termination of the contract with the guaranteed supplier and/or the end consumer, only provided that it notifies the Ministry of this circumstance in writing within 30 days and concludes and certifies a new contract for the purchase of electricity with the guaranteed supplier and/or the final consumer with the same percentage of the originally offered power plant capacity and with a term equal to the total term of the terminated contract, reduced by the period of validity of the contract already elapsed, within 6 months of the termination of the contract.

If the above conditions are not met, the amount of the bank guarantee for the acquisition of the status of privileged electricity producer may be withdrawn.

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The new regulations provide for the possibility of limiting the total part of the auction quota (in percentage or MW) that can be allocated to auction participants who are considered affiliated persons and/or affiliated market participants, as well as the possibility of limiting the part of the auction quota that can be allocated to an individual auction participant (in relation to one or more power plants for which it has submitted a financial offer), which will be determined by a public invitation.

The deadline for submitting an application to participate in the auction has been extended to a maximum of 120 days (instead of the previously prescribed 60 days), from the date of the start of the deadline for submitting applications, which will be determined by public invitation.

The implementation of the second round of auctions is planned for the end of this year, and as announced, with the application of the aforementioned additional capacity criterion. The procedure of the second round of auctions will be initiated by a public invitation from the Ministry of Mining and Energy.