Overview
Serbia’s national power utility EPS produces nearly 70 percent of the country’s electricity from coal and nearly 30 percent from hydropower, with a small percentage coming from wind and solar. Serbia heavily subsidizes coal and electricity prices, inhibiting competition. The Serbian government and EPS have announced plans to transition to green energy solutions and reduce Serbia’s dependence on Russian natural gas. However, the transition is going to be long and expensive. The Ministry of Mining and Energy has announced a €7 billion investment plan for the electricity and mining sectors, the bulk of it intended for new hydropower capacity.
The Ministry’s energy-sector development strategy is based on three pillars:
1. Serbia will modernize its existing coal-burning power plants. Serbia is currently investing €320 million for environmental upgrades and will invest a further €1.2 billion over the next ten years.
2. Serbia will increase the use of renewable sources for electricity production. The country missed its target of 27 percent of renewables in its final consumption mix for 2020. On April 20, 2021, Parliament adopted a new Law on Use of Renewable Energy Sources, a Law on Energy Efficiency and Rational Use of Energy, and amendments to the Law on Energy, aligning Serbia with EU legislation and opening the door for a significant presence of U.S. renewable energy companies in the market.
3. Serbia will improve its energy efficiency. The government has established a fund to assist local governments with energy-efficiency projects, and the EU has announced funds for industry and consumers for energy efficiency upgrades.
Leading Sub-Sectors
The main players and investors in the Serbian Energy Sector are:
Elektroprivreda Srbije (EPS) – State owned:
EPS recognizes the need to increase the share of renewable sources in Serbia’s electricity production, even as the country remains largely reliant on lignite coal in the near term. By 2023, Serbia’s commitments to the European Energy Community will require it to begin phasing out coal-fired power plants. EPS’s investment plan for the coming ten years dedicates €3.8 billion to lignite-based generation, including €1 billion for lignite mining, €1.5 billion for new construction and upgrades to thermal power plants, plus €1.3 billion for environmental protection and efficiency improvements in thermal power plants. However, the investment plan also includes €1.3 billion for new construction and upgrades in hydro, wind, and solar electricity production. Likewise, the Ministry of Mining and Energy plans to issue a new energy strategy by the end of 2021, prioritizing renewables and hydropower.
Srbijagas – Public owned:
Serbia is completely dependent on Russia for natural gas. The new (Russia-financed) 13.88 bcm-capacity TurkStream 2 pipeline came online at the end of 2020. However, Srbijagas plans to begin diversifying supplies over the next three to five years. The planned interconnector Bulgaria-Serbia (IBS) and the planned opening of a liquefied natural gas (LNG) terminal at the Greek port of Alexandroupolis could provide opportunities for U.S. suppliers to provide LNG for the Serbian market. It is expected to be completed in 2023. Serbia should also open its internal natural gas market to competition in late 2022.
Renewable Energy - Private Sector:
Serbia has plans to significantly expand its installed hydropower and renewables capacity in the coming years. It currently has a total capacity of approximately 3490 megawatts (MW) of renewables, with 2342 MW in hydropower in 2019 according to the European Energy Community. Serbia announced plans to install new hydropower plants and two existing dams, and to rehabilitate a further 15 existing power plants totaling around 30 MW with EBRD financing. Through its fully subscribed feed-in tariff program (long-term contracts which provide guaranteed pricing to renewable producers), Serbia has contracted 568 MW of wind power plants and approximately 11 MW of solar plants. The government plans to introduce auction-based trading in renewable energy in late 2021 or early 2022.
The major renewable energy companies present in Serbia are Masdar and Fintel Energija (Wind), Nova Commodities (Solar), New Energy Solutions (Wind), and CWP Renewables (Wind, Solar, Biomass). Pressure will mount on the Serbian government to transition to renewable-based electricity generation with the coming introduction of the EU’s Carbon Border Adjustment Mechanism in 2023.
Italy-based Fintel Energija and Serbia’s MK Group have announced the Agrosolar Kula project, a simultaneous production of agricultural crops and electricity from solar energy in the same area. The companies plan to install solar panels with a total installed capacity of 660 MW. Agrosolar Kula envisages an investment of €340 million and will be implemented on the territory of the municipality of Kula in Serbia’s Vojvodina province. Solar panels will be installed on approximately one-third of the total area, and the expected annual production of green energy is about 832 GWh, enough to supply 20,000 households.
Opportunities
Serbia needs to install 5,000 GWh of new generating capacity per year – 15 percent of current production in the next six years to replace outdated production facilities. This equates to additional investments of at least 3 billion euros for the construction of new facilities and rehabilitation of existing power plants; the modernization of coal production; and the reduction of power distribution losses. A substantial portion of this new production will come from renewable energy. Factors driving the renewable trend in Serbia include EU accession-related requirements for Serbia to decrease thermal power generation and Serbia’s commitments under the Energy Community Treaty and the Paris Agreement to reduce greenhouse gas emissions. Serbia’s new Law on Use of Renewable Energy Sources, passed in 2021, defines the renewable energy framework and introduces auction-based trading in renewables-based energy. The new law also allows the government to conclude strategic partnerships for renewable-energy projects. In June 2021, Deputy Prime Minister and Minister of Mining and Energy announced a goal of increasing the share of renewables in Serbia’s electricity production to 40 percent by 2040.
Hydro:
Serbia has the highest installed hydropower capacity in the region. Over two-thirds of this capacity is concentrated near the border with Romania at the Iron Gate 1 and 2 stations (2,116 MW and 540 MW respectively), which are shared with Romania. The country has undeveloped potential of 7,000 GWh focused on the Drina and Danube rivers.
Serbia is interested in a developing a Pumped Storage Hydro (PSH) project at Djerdap. The project is located east of Belgrade on the Danube River bordering with Romania. The project, called Djerdap III, was first conceived in 1974 and was envisaged as a facility capable of daily and seasonal water regulation, with installed capacity of between 1800 and 2400 MW.
Solar:
Serbia has good natural conditions for photovoltaic power plants. Average solar radiation is 30 percent higher than the radiation in Western Europe. The country averages 270 sunny days per year. The average intensity of solar radiation is 1,200 kWh / m2 annually in northeastern Serbia, 1,400 kWh / m2 annually in central Serbia, and 1,550 kWh / m2 annually in southeastern Serbia.
Serbia’s total 11 MW of installed solar capacity (5.34 MW from land installations and 3,476 MW from roof installations in a total of 107 projects) is negligible. According to the International Renewable Energy Agency (IRENA) Serbia has an estimated potential of 3.6 GW.
Wind:
Currently, Serbia’s installed and utilized wind-power capacity is below 500 MW. According to a feasibility study on wind generation potential in Serbia, 1,316 MW (over 5 m/s wind speed) can be installed in wind farms with annual production of 2.3 TWh.
The greatest potential of wind energy in Serbia is in the area of the powerful “košava” winds such as South Banat and East Serbia, as well as on the eastern side of Kopaonik Mountain, Zlatibor, Pester, and mountain passes at altitudes above 800m, as well as in the valleys of the Danube, Sava and Morava. So far, nine wind farms have been built in the country with total capacity of approximately 430 MW, and at least 2.7GW of additional projects are in the pipeline or under construction.
Storage:
Large-scale deployment of variable/intermittent renewable power sources—i.e., wind and solar power—make grid balancing more challenging and can potentially destabilize the grid. The successful execution of these deployment plans requires large-scale, long-duration energy storage. Serbia has long-standing plans to construct reversible pumped-storage hydropower capacity at the Djerdap site on the country’s eastern border with Romania and the Bistrica site on the Bosnian border in the west.
Energy Efficiency:
The level of energy efficiency in Serbia is quite low, as electricity consumption per unit of living space is about 200 kWh in Serbia, compared to an average of about 140 kWh in the EU. Energy efficiency experts estimate that energy efficiency measures could result in energy savings of 30-40 percent. The Ministry of Mining and Energy announced that the government would allocate approximately €200 million for energy efficiency projects in 2022.