The Serbian Minister for Mining and Energy recently stated that Serbia will manage to fulfill its obligation and reach the target of 27% of total energy consumption from renewables by 2020. The statement followed a stream of positive news in relation to development of several large-scale wind power projects in Serbia, such as Cibuk I, Kovacica, and Alibunar.
However, the latest information from the Energy Community suggests that that optimism may be misplaced. According to the latest progress report on the promotion of renewable energy, Serbia’s share of renewable energy consumption currently stands at approximately 21%, and it should reach between 23.4% and 24.1% by 2020. It is certain that once the current feed-in tariff system expires, at the end of 2018, an entirely new renewables support scheme will need to be developed and put in place in Serbia. In parallel, Serbia’s Ministerial Council of the Energy Community initiated the process to determine the 2030 targets for renewable energy consumption.
Anxious renewable energy developers may already be looking back at the regulatory history of the currently existing support scheme. It took almost seven years of tweaking and negotiating the support scheme between the Serbian Ministry for Mining and Energy and representatives of international finance institutions before the first large project financing schemes for development of renewable energy capacities were put in place.
This time around, however, it seems that the international finance institutions have taken a different approach. Instead of directly negotiating the details of the renewables support scheme for each member country of the Energy Community, the EBRD has teamed up with the Energy Community in an effort to create bankable yet EU-acquis-compliant renewable energy support mechanisms across the region.
The Energy Community is an international organization established by means of a 2005 treaty. Its primary goal is to connect the European Union with its neighbors in the energy sector and create an integrated pan-European energy market. The organization has been working for quite some time on its approach to the renewable energy support mechanisms. Serbia’s Ministerial Council of the Energy Community has set up a Renewable Energy Coordination Group to work on the reform of the support schemes for renewable energy producers so that renewable energy targets can be reached by 2020. In December 2015 the Energy Community Secretariat published Policy Guidelines on Reform of the Support Schemes for Promotion of Energy from Renewable Sources (the “Guidelines”), a document prepared based on the European Commission’s guidance for the design of renewables support schemes.
The Guidelines introduce several principles which member countries are supposed to follow in structuring support schemes, such as having the support schemes approved by state aid enforcement authorities, granting support to renewable energy producers through a competitive bidding process, introducing feed-in premium support schemes (as opposed to feed-in tariffs), establishing a renewable energy operator to manage the support scheme, introducing balance responsibility for large renewable energy producers, and adopting a shallow approach for grid connection fees. The Guidelines are not binding per se but are a good starting point for developing a new regulatory framework.
The Energy Community–EBRD cooperation promises to take the principles elaborated in the Guidelines as a starting point in developing a full set of best practice documents, including draft bidding documentation and contracts which could be readily used by all member countries.
This joint initiative makes sense given that the Energy Community has a track record of supporting member countries in developing their regulatory frameworks in the energy sector and aligning them with EU Energy law.
The question is whether this novel approach will be more efficient, as Serbia has a history of non-compliance with the obligations arising from its membership in the Energy community. One clear example is Serbia’s persistent failure to comply with the requirements of the Third Energy Package – and, for that matter, the Serbian Energy Law – in the gas sector. Therefore, one cannot be certain that the draft support scheme and the best practice documents to be prepared under the auspices of the Energy Community and EBRD will be readily and fully accepted by the Serbian Ministry for Mining and Energy.
By Dragoljub Cibulic, Senior Partner, BDK Advokati
This Article was originally published in Issue 5.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.