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Developments in the Serbian Energy Sector

Developments in the Serbian Energy Sector

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The Ministry of Mining and Energy of the Republic of Serbia has recently concluded a period of public debate on a package of amendments to the country’s energy laws. The draft law that has attracted the most attention certainly is the Law on Renewable Energy Sources (the “RES Draft Law”), but there is also a Draft Law on Energy Efficiency and Rational Energy Use (the “EE Draft Law”). Serbia already has laws governing this subject matter– renewable energy sources and rational use of energy – which raises a question about what has influenced the Ministry to propose that these two areas be governed in more detail in the future.

One of the reasons for the Ministry’s actions is that Serbia has failed to reach the goal of having 27% of final gross energy consumption come from RES by 2020. There are several causes for the current failure to meet the goal: (i) current legislation does not provide an adequate level of legal certainty to international financial institutions for financing purposes, which is why investment goals in this sector were not met; (ii) feed-in tariffs as incentives were not effective enough, therefore the RES Draft Law proposes market-premium system as an additional incentive; (iii) inappropriate length and complexity of procedures for construction and connection of RES; (iv) biofuels were not present in the market by 2019, due to late adoption/implementation of regulations related to biofuels; and (v) lack of statistical data in some energy subsectors. The new RES Draft Law (and subordinate legislation – the Ministry deems that as many as 15 subordinate laws will be necessary to ensure the implementation of the new law) should create a stimulating business environment for more dynamic investment in the RES sector in order to achieve goals set under public policy documents by removing these barriers, providing a higher level of transparency, and ensuring the long-term profitability of investment in the RES sector. Once the new law is enacted, it is to be expected that investment in the RES sector, which has been gradually increasing since 2016, will speed up.

Apart from the failure to reach RES goals, another reason for proposing the RES Draft Law is to harmonize Serbian legislation with comprehensive EU legislation, i.e., the Renewable Energy Directive (RED II) and Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018. Amendments to another piece of energy legislation, the Energy Law, introduce an Integrated National Energy and Climate Plan, in accordance with the EU legislation. The NECP is to be adopted by the end of 2021, and it will define the national targets in RES by 2030.

When it comes to the EE Draft Law, its purpose is to increase the competitiveness of the economy, reduce the impact of the energy sector on the environment and climate change, provide a sustainable use of natural and other resources, and harmonize Serbian law in the sector with EU legislation. The good news is that there will be a special government agency in charge of allocating incentives for energy efficiency projects and proposing such projects. In addition to financial incentives for EE projects, there will also be non-financial incentives for highly efficient cogeneration – simultaneously producing thermal and electrical or mechanical energy in the same process – and new participants in the market. In terms of energy efficiency, it should be noted that Serbia has just adopted its first Law on Climate Change.

Both drafts provide for the digitalization of procedures in their respective fields, which should simplify these procedures and allow for the adequate collection of data as well. It seems that, years after introduction of the first energy efficiency law and legislation governing the RES sector, Serbia is finally ready to allocate substantial resources to implement its targets in energy sector, especially the crucial RES sector, which is explicitly defined as a sector of public interest for Serbia.

By Ana Calic Turudija, Partner, and Ana Krstic, Associate, Prica & Partners

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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