Evolution of Serbian Energy Legislation – Steps Towards “Greener” Tomorrow

May 13, 2021

Evolution of Serbian Energy Legislation – Steps Towards “Greener” Tomorrow

May 13, 2021

Miroslav Ravić

Miroslav Ravić

Trainee

Aleksandra Čvorović

Aleksandra Čvorović

Trainee

On 30 April 2021, several new energy regulations have been integrated into the national legislative system of the Republic of Serbia. Apart from amendments to the existing Energy Act and Mining and Geological Research Act, a substantial novelty was the adoption of the Renewable Energy Sources Act, aiming to stimulate the renewable energy sector and sustainable consumption of natural resources, while simultaneously reducing the use of fossil fuels and lower the energy sector’s impact on the environment. The main intention behind the new set of provisions is also the integration of the Serbian energy legislation into the EU legal framework, which is a necessary step in the process of Serbia’s EU accession.

 

Amendments to the Energy Act – Liberalization of the Energy Market

 

In line with the EU Directive on common rules for the internal market for electricity of 5 June 2019, Serbian law recognises certain new participants in the energy market, namely, electricity storekeeper and aggregator. Amendments also aim to stimulate investments in the energy sector and improve environmental protection.

Electricity storekeeper, among other things, buys and sells electricity and provides electricity storage services for the needs of other participants on the electricity market. Although it is considered an energy activity, electricity storage does not require an energy license.

Electricity storage facilities are installations for the postponement of the use of electricity in relation to the moment in which the electricity is produced, i.e., installations for the conversion of electricity into other types of energy and storage of such energy for subsequent re-conversion into electricity. Electricity storages are listed as strategic energy projects.

Aggregators perform the function of grouping several actors in order for them to act as a single entity on the energy market. In practice, an aggregator acts as an intermediary between the end-users and small-scale energy producers. Aggregation implies the service of adapting energy consumption according to the supply and demand on the market. This service could be provided by suppliers or entities incorporated for that purpose. Amendments define the aggregator as a legal or a natural person that provides the service of consolidating the consumption and/or production of electricity for the purpose of resale, purchase, or auction on the electricity markets. 

An important novelty is the regulation of electric vehicle charging services, providing the basis for developing infrastructure as a precondition of the integration of electrical transport into the national energy system. Although the Regulation on conditions and the manner of conducting a subsidized purchase of new vehicles with electric and hybrid drives was enacted in 2020, electric transport lacked proper infrastructure.

The legal uncertainty regarding the status of the provider of the aforementioned service is resolved by qualifying this provider as the end customer. Therefore, the provider of this service is not an energy entity performing energy activity and consequently, the license for performing the activity of EV charging is not necessary. Technical specifications for electric vehicle charging stations, obligations of the system operator towards the end customer who provides the service of EV charging, and other issues related to the operation of EV charging stations will be subject to separate regulation.

Furthermore, the Amendments establish the concept of public interest as a legal basis for expropriation and incomplete expropriation of the real estate for the construction of energy facilities. This institute was one of the most debated provisions of the Amendments since its implementation depends on a discretionary decision by the public authorities.

 

Renewable Energy Sources Act – Citizens as Producers of Electricity

 

Energy Resources Act introduces the concept of buyer-producer from renewable sources, enabling the citizens-final consumers to become producers of electricity and participants on the energy market. The buyer-producer has the right to:      

1) produce electricity for their own consumption,

2) store electricity and

3) deliver the surplus of produced electricity to the electric power system for sale.

The buyer-producer has the right to reduce the bill in the next billing period, i.e., to be compensated by the supplier for the excess electricity that he delivers to the electricity system.

The principle of energy efficiency is also reflected in the institute of renewable energy communities. This institute, known as a virtual power plant, aims at achieving efficiency in the energy market. The concept involves a plant that aggregates dispersed sources of energy based on software for the purpose of trading the accumulated energy. Virtual power plants are not only suitable to aggregate the surpluses of produced energy, but also as a platform for the inclusion of small producers on the energy market.

Renewable Energy Communities could be established as:

  • associations, i.e., based on the principle of voluntary participation of its members, or
  • housing communities registered in accordance with the law governing the area of housing and maintenance of buildings in exceptional cases.

A member of the Association can be a natural or legal person, as well as local self-government units and other types of local self-government. However, a company or an entrepreneur may be a member of the Community, provided that the production of electricity from renewable sources does not represent its predominant commercial or professional activity.

As a result, oscillation in production and consumption of electricity will be balanced either by taking over the surpluses of produced electricity by the supplier (in case of citizens in the capacity of producers of electricity from renewable resources) or by renewable energy communities as aggregators of dispersed electricity produced by small entities.

In addition to feed-in tariffs, Renewable Energy Sources Act introduces a new model to stimulate energy production from renewable energy sources based on market premiums. Market premiums constitute a type of operating state aid in the form of a supplement to the market price of electricity that premium users deliver to the market. The market premium system functions on an auction basis, whereby the initial amount of market premium, i.e., the maximum amount of incentive, is determined in advance. The offers at the auction compete based on the principle of lower market premium offered compared to the initial market premium. Bids that pass the qualification and bidding phase are ranked from lowest to the highest amount of market premium and fill the quota in that order. When the sum of installed power plants for ranked bids reaches the level of the prescribed quota, the quota is filled.

 

Amendments to the Mining and Geological Research Act

 

The general intention of introducing the new amendments to the existing Mining and Geological Research Act is to simplify and rationalize administrative procedures before the Ministry of Mining and Energy and to make this commercial sector more accessible for new investors.

The Amendments introduce a new method of correspondence between the investor and the Ministry in the process of obtaining the permit for ore extraction. Namely, all individuals and legal entities who wish to submit documents can do so electronically, using the qualified electronic signature and/or qualified electronic seal. Furthermore, it is not necessary to submit the excerpt of the National Business agency within the administrative procedure. This new method will make proceedings more efficient.

A significant novelty represents the introduction of new security instruments as collaterals for exploration and exploitation projects, namely, promissory notes, bank guarantees, and corporate guarantees. The consequence of not providing agreed security instruments is the withdrawal of the assigned permit. Also, it is mandatory to establish a professional supervision body while performing exploration projects, in order to provide control over the whole process of geological exploration.

Moreover, Amendment on article 4 prescribes that it is necessary to obtain government permission on the previous proposal of the Ministry in order to exploit nickel, cobalt, and uranium. This provision indicates great national interest in the exploitation of mentioned ore.

The Amendments introduce the public contract institute, which anticipates the possibility for regulation of mutual rights and obligations between state and investor. This agreement provides various benefits for investors, both infrastructural and fiscal. The manner of initiating and conducting negotiations for the purpose of concluding an investment contract, essential elements of the contract, as well as other questions of importance for concluding the public contract shall be subject to separate regulation.

Due to the fact that certain provisions of the aforementioned Amendments directly oppose the environmental law, it is most likely that the question of their constitutionality will be challenged in front of the Constitutional Court. For instance, Amendments to the Mining and Geological Research Act provide the basis for circumventing the obligation to submit an Environmental Impact Assessment Study for each project related to the investment plan regarding the exploitation of national resources prescribed by the Environmental Impact Assessment Act.

 

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Radovan Grbović, Partner
radovan.grbovic@sog.rs

Miroslav Ravić, Trainee
miroslav.ravic@sog.rs

Aleksandra Čvorović, Trainee
aleksandra.cvorovic@sog.rs

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