Power policy

Serbia is preparing auctions to replace its feed-in tariff, with the aim to launch them from 2022. Since 2016, Serbia has provided a feed-in tariff to support wind, solar, biomass, biogas, hydro and geothermal. The feed-in tariff has been high enough to trigger capacity additions, but there are technology caps, to curb excessive build-out and ensure a manageable subsidy budget. Serbia's previous feed-in tariff is currently suspended after reaching its capacity and generation caps, but a new feed-in-tariff scheme will be opened to small projects (capacity below 500kW and below 3MW for wind power plants) in the near future, according to regulations approved in April 2021. The FiT includes both capacity and generation caps.

To meet the EU's accession requirements, specifically, adhering to the 'Large Combustion Plants Directive', at least eight coal power plants need to be shut down by 2024. The generation gap is to be replaced by two new coal power plants, a combined heat and power plant, and at least 500MW of wind capacity. Should the pressure to abandon new coal plants increase, this could provide further potential for renewables. Since 2010, peak power demand has been more or less constant.

The country has a net metering scheme, which is applied only to households. The scheme allows for systems with power up to 10.8kW.

Power prices and costs

Commercial, retail and industrial power-price reforms were introduced in 2015. Previously, tariffs were set below the cost-recovery point for the state utility, EPS. The reforms also helped Serbia to align with EU accession requirements. This has led to a steady increase of tariffs for end users. At an average retail price of around $95/MWh, tariffs are, however, still on the cheaper end and residential tariffs are set below industrial and commercial prices.

Power market

In 2020, some 70% of Serbia's generation came from coal, while a quarter came from large hydro. Generation from renewable sources of power, however, has been picking up in recent years. While in 2017, only 1% of generation came from clean energy, it was 3% in 2020.

Serbia has struggled to meet the unbundling requirement under the EU's so-called third energy package. The state-owned TSO, Elektromreža Srbija (EMS), has gained its license to operate and transmit electricity on the transmission system. To satisfy concerns around independent operation — since the government also runs the state utility, Elektroprivreda Srbije (EPS) – EPS and EMS are operated by different ministries. However, generation, retail and distribution fall under the control of the state-owned utility EPS, meaning that the EU Secretariat still deems Serbia non-compliant with the EU requirements for independent transmission system operation. Serbia plans to turn national utility EPS into a joint stock company but has faced delays in doing so.

The day-ahead market has been operating in Serbia since 2016. SEEPEX, the South East European Power Exchange, is partly owned by the Serbian TSO, EMS, and partly owned by the European Power Exchange, EPEX SPOT. The absence of large independent power producers in Serbia means that most trade so far has been conducted between suppliers trading cross-border supply with one of its eight neighbors.

Serbia's import and export balances are sensitive to the country's hydrology for hydro generation, the condition of its aging fossil fuel plants, and demand dynamics from its seven interconnected neighboring countries. As Serbia is not subject to the EU carbon price, unlike its neighboring countries, the country benefits from exporting cheap coal power to EU countries.

Doing business and barriers

There are no obvious barriers to entry for clean energy development in Serbia. Technology capacity caps, as part of the feed-in tariff design, are the biggest challenge facing developers. Since they can secure a preliminary approval (termed 'temporary privileged power producer' status) in the capacity budget, it leaves few opportunities for new developers. The administrative procedures for permitting, construction and licensing remain lengthy and burdensome, despite several simplification rounds. Until the Covid-19 crisis, offtaker risk was low, yet the recent temporary subsidy payment freeze may prove off-putting to developers.

During Covid-19, Serbia has declared a state of emergency, which allowed it to invoke the "force majeure" clause of its PPAs, leading to a temporary lift of the purchase obligation.

Serbia has secured consistent wind investments over the past three years, but other technologies have received little to no financing. Large-scale wind farms have been financed by domestic banks, foreign banks and impact funds. A key investor in Serbia's clean energy sector is MK Fintel – a joint venture between Serbia's MK Group and Italy's Fintel Energia – which is expected to build about 60% of the country's 500MW wind capacity target. Beyond traditional energy players, the country's wind sector has also attracted financing from Masdar, a subsidiary of Abu Dhabi's Mubadal Investment Co., where it bought a 60% stake in the recently commissioned 158MW Cibuk 1 wind farm.

Signing corporate PPAs is legally possible in Serbia, yet there are few known examples of such contracts being signed.

EV market

In 2020, some 1.4% of sold passenger cars sales were electric in Serbia, including plug-in hybrids. The total number of battery-electric and plug-in hybrid passenger vehicles in the country is estimated to be between 3,500 and 4,000 in 2020.

EV policy

Serbia had a clean transport target of 10% of final transport energy consumption to be renewable by 2020. It is unclear whether this target was met.

As of 2021, Serbia has no clean transport target, but a Serbian National Energy and Climate Plan is being drafted and will likely contain a clean transport target.

EV subsidies were introduced in March 2020, but the scheme was suspended in August 2021 as the budget ran out. The scheme may continue in 2022, although it is uncertain as to whether it will receive additional budget.

Serbia has adopted some EU fuel emissions standards, and since 2005, is no longer permitted to import cars below Euro 3 standards into the country.

Buildings market

Some 45% of residential heat in Serbia is produced from biomass, while the second-most popular heating technology is electric heating, providing a quarter of residential heat. District heating, mainly in urban areas, provides another 20%, while natural gas provides 9% of residential heat. Direct burning of coal is slightly more prevalent than gas heating, producing around 11% of household’s heat. These numbers have remained fairly stable from 2010 to 2019.

Natural gas prices for residential consumers in Serbia are in the cheapest third among European countries, at around 3.4 euro-cents per kilowatt-hour. The level is similar to that of Bulgaria and Romania.

Buildings policy

In its 2013 renewable energy action plan, Serbia aims for 30% of final energy consumption in heating and cooling to be from renewable energy by 2020. According to EU obligations, the republic of Serbia set a national indicative target of 9% for reducing final energy consumption by 2018, compared to 2008. However, final energy consumption declined only by around 1% during this time.

New policy could see a reduction in energy consumption in the future, despite the 2018 target not being met. In 2021, Serbia adopted a new law on energy efficiency. Serbian law is partly harmonized with EU Directive 2010/31 / EU on the energy performance of buildings relating to the review of heating and air-conditioning systems, while harmonizing the Planning Act with other parts of the Directive and construction and relevant bylaws.

There is no general boiler scrappage target, although there is a plan to replace boilers using solid fuels (mainly coal) in kindergartens, schools, health centers and households with cleaner sources of heating.

Energy use has been moderately declining in the residential sector, of which heating and cooling of buildings is typically the largest share. In 2018, the final energy consumption in the household sector was 9.2% lower than in 2000.

Serbia’s Ministry of Mining and Energy provides subsidies for energy rehabilitation projects of public and residential buildings. Among others, installing heat pumps is one of the measures applied to projects financed by the Ministry of Mining and Energy. Subsidies are allocated annually on the basis of public calls. Since 2014, seven public calls have been published for energy rehabilitation of public buildings in Serbian municipalities. More than 100 projects have been realized as a result. In 2020, the first public call was published for financing projects of energy rehabilitation of residential buildings, family houses and flats. Projects will be financed by the Ministry, municipalities and citizens. In addition, homeowners taking out loans to make their homes ‘greener’ (including heat pumps) will be able to apply for up to 20% cashback, funded by the European Union.