Serbia opens public consultation on draft law on renewable energy

Serbia’s draft law on renewable energy sources, which will be up for public consultation until February 9, envisages introducing auctions for premiums and feed-in tariffs, adopting a National Energy and Climate Plan (NECP), and regulating the status of prosumers and the registration of energy communities.

The Ministry of Mining and Energy has unveiled the draft law on renewable energy sources as part of a set of new regulations that also includes a draft law on changes and amendments to the Law on energy, a draft law on energy efficiency and the rational use of energy, and a draft law on changes and amendments to the Law on mining and geological research. All these documents will be up for public consultation until February 9.

The draft law on renewable energy sources, drawn up in line with guidelines that the ministry has recently published, stipulates that the mandatory share of energy from renewable sources will be set out in an Integrated National Climate and Energy Plan, a document known in the European Union (EU) and Energy Community Contracting Parties as a National Energy and Climate Plan (NECP), which will be part of the amended Law on energy.

The draft introduces prosumers and energy communities into Serbian legislation

At long last, the draft proposes the introduction of auctions as way to select projects to be subsidized, but it also envisages keeping feed-in tariffs for small hydropower plants. Balancing responsibility will remain on state power utility Elektroprivreda Srbije (EPS), but only until the launch of the intraday electricity market. Major new developments are the introduction of prosumers and energy cooperatives, or communities, into Serbian legislation – two models that the EU has been using for years to speed up the energy transition and reduce environmental pollution.

The draft also introduces the term “green hydrogen,” which has become increasingly important in recent years as a solution for decarbonization.

Incentives: Market premiums and feed-in tariffs

Under the draft law, the Ministry of Mining and Energy shall make public a three-year overview of applicable incentives, a tentative schedule of auctions, the frequency of auctions, the expected new capacities from renewable sources to be included in the incentives scheme, and types of technologies to be supported.

Eligible for incentives are:

1) hydropower plants,

2) biomass power plants,

3) biogas power plants ,

4) wind power plants,

5) solar power plants,

6) geothermal power plants,

7) power plants fired by biodegradable waste,

8) power plants fired by landfill gas,

9) power plants fired by gas from municipal wastewater treatment facilities

10) power plants using other renewable energy sources.

Market premiums

A market premium is an amount added to the market price of electricity that premium beneficiaries supply to the market, and is expressed in eurocents per kWh.

For the purposes of auctions, in which bidders will compete in offering the lowest market premium, the starting price is determined in advance, and it represents the maximum purchase price, which may not be exceeded by bidders in the auction.

An auction may be organized collectively for two or more types of power plants or separately by power plant type. The ministry conducts auctions based on available quotas determined by the Government of Serbia.

The auction process has three phases: qualification, bidding, and the selection of the best bids.

Participants whose bids get selected will gain the status of a temporary privileged electricity producer.

The incentive period lasts until the end of the plant’s amortization period, but no longer than 12 years from the payment date of the first market premium. Auctions and market premiums will be regulated in more detail by the government, at the ministry’s proposal.

Feed-in tariffs

Feed-in tariffs may be awarded to small facilities (under 500 kW, and for wind power plants with a capacity under 3 MW) in accordance with the law and secondary legislation that will be adopted to regulate this area in more detail.

Feed-in tariffs will be awarded by the ministry in auctions and based on available quotas determined by the government

For the purposes of auctions, in which bidders compete in offering the lowest feed-in tariff, the starting price is determined in advance, and it represents the maximum purchase price, which may not be exceeded by bidders in the auction.

The rules for these auctions are similar to the rules for market premiums.

Balancing responsibility

Until an organized intraday market is established, power plants receiving market premiums will be exempt from full balancing responsibility. The market operator will be required to announce the date for establishing an organized intraday market.

Power plants which get a feed-in tariff will remain exempt from balancing responsibility and balancing costs, which will be assumed by the universal supplier.

Market premium and power purchase agreements

The universal supplier, the role currently performed by EPS, is the authorized party which is required to prepare a standardized market premium agreement and sign it at the request of a temporary privileged producer. The same applies to feed-in tariffs, where the two sides will sign a power purchase agreement.

Electricity production for self-consumption: prosumers

The draft law proposes the introduction of prosumers, or the possibility for individuals and legal entities to produce green energy for their own needs, and to sell it on the market.

An end-consumer will have the right to connect a renewable energy power plant to the internal electrical wiring of their own house or building for the purposes of self-consumption, provided that the installed capacity of the power plant does not exceed the approved capacity for the house or building. By connecting the plant to the wiring, the end-consumer gains the status of a prosumer.

Prosumer has the right to:

1) produce electricity for self-consumption,

2) store electricity, and

3) deliver electricity surpluses to the grid in order to sell it.

Prosumers have the right to a reduction of their next electricity bill, or compensation from the electricity supplier, for the surplus electricity fed into the grid.

Renewable energy communities

In the draft, energy communities or cooperatives are referred to as renewable energy communities. That, according to the draft law, is a legal entity registered under the law that regulates the legal status of associations and is based on open and voluntary participation of members.

The primary purpose of establishing such a community is to use renewable energy sources for the needs of its members. A community has the right to produce, consume, store, and sell renewable energy.

The distribution system operator has the obligation to establish a simplified procedure for connecting the power plant of an end-consumer who produces electricity for self-consumption with a capacity of 10.8 kW or less, or equal to the capacity of the connection that is not a three-phase connection.

Heat energy

Heating plants, or energy facilities which produce, distribute, and supply heat energy to customers in an energy-efficient way, can receive incentives if they use:

1) heat pumps,

2) solar energy,

3) geothermal energy,

4) energy from biodegradable waste,

5) biomass;

6) other renewable energy sources.

Local self-government units will keep a registry of such entities and prescribe incentives as well as terms and procedures for obtaining the right to such incentives.

Innovative technologies: green hydrogen

In order to increase the use of energy from renewable sources, incentives may be granted to technologies in early stages of development that use new renewable sources, such as green hydrogen and other fuels.

Green hydrogen may be used in the areas of heat energy, transportation, and natural gas. Incentives for the production, transportation, storage, and use of green hydrogen will be determined by the government, at the ministry’s proposal.

Strategic partners for building renewable energy power plants

The draft law introduces public tendering for the construction of power plants that use renewable energy sources through the selection of a strategic partner. Tendering will be conducted based on the government’s decision in the following cases:

1) if the incentives scheme has failed to ensure enough power plants to meet the mandatory national targets set out in the Integrated National Climate and Energy Plan,

2) when new power generation capacities are necessary for achieving the energy transition goals and meeting international obligations.