Südosteuropa-Mitteilungen (München) - Issue no.49 (2009) 3-4
S. 123-129 : graph. Darst., ISSN 0340-174X
July 2009.
SERBIA: ENHANCING ENERGY EFFICIENCY AND USE OF RENEWABLE ENERGY SOURCES
Lignite dominates domestic energy production and contributes to relative energy self-sufficiency, while hydropower is the only renewable energy that is widely used in Serbia. Endowment with other types of renewable energy resources is substantial, but realization of these potentials and overcoming the institutional barriers require government action. Therefore, the Serbian government has put in place policies and measures to enhance energy efficiency and promote use of renewable energy sources.
Serbia’s energy infrastructure suffered from the lack of maintenance and management during the 1990s and was extensively damage by the NATO bombing campaign in 1999. The bombings demolished oil refineries in Pancevo and Novi Sad, and caused heavy damage to the electricity networks. The most strategic sub-stations were demolished together with the most important river crossings and entire tank capacity for oil reserves.
Since 2001, Serbia has experienced rapid economic growth with GDP increasing at an average rate of 5.5% per year, one of the highest in the region. Since 2003, Serbia has developed its energy strategy and established a market-based regulatory framework, enforced by an independent regulator.
Lignite dominates domestic energy production and contributes to relative energy self-sufficiency. However, lignite mining and processing has a negative environmental impact and accounts for almost 90% of the emissions of SO2 and NOx, and 65% of CO2 emissions. Therefore, the Serbian government has put in place policies and measures to reduce emissions, an important part of which are energy efficiency measures and use of renewable energy sources.
Energy consumption
Planned primary energy supply in Serbia in 2009 is 17.794 million tons of oil equivalent (toe) - with 45% of energy imported, while the planned final energy supply is equal to 8.915 million toe (see Diagram 1)
Diagram 1: Serbia: Final Energy Supply in 2009
The estimated energy intensity in 2005 was 0.41 toe per thousand USD of GDP, that is some 2.7 times higher than average value for OECD European member countries. By contrast, energy consumption per capita and electricity consumption per capita are 65% of the OECD Europe average. The assessed technical potential for the introduction of energy efficiency measures is around 30%, while economic potential is approximately 20%.
Institutional framework to promote energy efficiency and support utilization of renewables
The Ministry of Mining and Energy is responsible for Serbia’s energy strategy and initiator of the primary legislation for the energy sector. Two new departments were established in 2008 – the Department of Renewable Energy Sources and The Department for Sustainable Development of Energy and Mining Sectors.
The Ministry of Environmental Protection and Spatial Planning (MEPSP) deals with environmental issues, initiates primary legislation in this domain and is generally responsible for the environmental protection.
The Serbian Energy Efficiency Agency (SEEA) was established by the Energy Law in August 2004. The main role of this agency is to promote and enhance the rational use of energy and of Renewable Energy Sources (RES). Among other tasks, the Agency has to “draft proposals for implementing energy efficiency, renewable energy sources exploitation and environmental protection”.
The Energy Agency of the Republic of Serbia (AERS) was established by the Energy Law as a regulatory body “for promoting and directing energy market development based on the principles of non-discrimination and effective competition, monitoring the implementation of regulations and energy systems operation codes, adjusting the activities of energy entities in ensuring regular supply of energy and services to the customers. The Agency issues licenses, secondary legislation in the energy sector, and establishes tariffs in regulated areas.
The use of RES is the special priority of the energy sector according to the “Energy Sector Development Strategy of the Republic of Serbia by 2015” published in 2005.
Beside that, new amendments to the Energy Law are expected during the first half of 2010. The proposed amendments will particularly be dealing with the promotion of renewables. In order to increase the usage of RES, the Ministry of Mining and Energy has prepared a feed-in tariff system for the support of electricity production from RES, and they should be adopted by the Government of Serbia until 1 July 2009.
Serbia has ratified the Kyoto Protocol as a non-Annex 1 Country since 2007. The law entered into force on January 17, 2008, meaning that Serbia is eligible for CDM projects.
Potential of renewable energy sources
The total energy potential of renewable energy sources in Serbia is estimated to 3.83 million toe. While the technical potential for renewable energy is clear, there is insufficient information about the economic potential (just four detailed feasibility studies are existing).
Diagram 2: Serbia: Energy Potential of Renewable Energy Sources
Biomass
Biomass has the largest potential for utilization (about 1 million toe from wood biomass and about 1.4 million toe from agricultural biomass).
The most promising utilization options for biomass are space heating in households and buildings using biomass pellets or briquettes; co-firing of total replacement in district heating plants firing heavy oil or coal in south Serbia, where natural gas is not available yet; production of electricity utilizing agricultural and wood wastes.
There is also significant potential for growing rapeseed for the production of biodiesel, especially in central Serbia. An annual production of 440,000 – 500,000 tones of rapeseed is possible on 200,000 hectares, having in mind the biological maximum in the current structure of agricultural production. Therefore, the potential for the production of biodiesel is estimated to 200,000 tones per year or 10.5% of consumption of diesel fuels in Serbia.
Hydroelectric power
Serbia has important hydro potential. The natural potential is estimated at 25 TWh/year of which 17.5 TWh/year have been identified as economically feasible. Nearly 10 TWh are already been generated by mainly large hydroelectric power plants (2,831 MW).
The technical potential for the generation of electricity from small hydropower plants in Serbia is estimated to 1,500 GWh/year, at 856 locations – according to the Small Hydro Power Plants Cadastre (1987). But, economic potential of these locations is still unclear, given the changes in land use and ownership, as well as changes in hydrology. The biggest part of locations are of a capacity less than 1 MW, 30 locations are of a capacity 2 – 5 MW, and there are nine locations with a capacity larger than 5 MW.
The 1987 survey also indentified 47 medium sized hydro projects between 10 and 100 MW, with a total installed capacity of 1,247 MW, but a re-examination of these projects should be undertaken.
Solar energy
The average yearly insolation in Serbia is about 1,400 kWh/m² and the average daily value is about 3.8 kWh/m². A most promising utilization option for solar energy is the use for sanitary water and space heating. A solar system for a family house in Serbia (4 m² of solar collectors, construction equipment, solar boiler, circulation pump, pump system, expansion vessel, automation) requires an investment of about 2,000 €. Photovoltaic cells are not manufactured in Serbia, but there are several manufacturers of flat solar water collectors.
Geothermal energy
The average geothermal flow density in Serbia is higher than 60 mW/m³, with 160 natural sources of geothermal waters (excluding the Panonian basin) with a temperature above 15ºC. The highest temperatures are recorded in Vranjska spa - 96ºC, Jošanička spa - 78ºC and Sijarinska spa - 72ºC. The total flow rate of geothermal water resources is estimated to 4000 l/sec. The first national evaluation of geothermal potential was completed in 1975, but the use is low compared to its potential – mainly for balneology, sports and recreation. The prospect for expanding geothermal energy for agricultural heat and water heating are reasonably good, but the potential for larger scale geothermal electricity is limited because this requires water temperatures above 100°C.
Wind
The wind potential in Serbia has not yet been properly investigated. However, there are ongoing studies from private investors to assess specific projects. Wind data available from the existing information are based on 10 meter heights above ground level, and extrapolated to 50 meter heights. These assessments suggest that 2,300 GWh could be generated at 1,300 MW of capacity, at sites with average wind speeds of 5 m/s or greater.
Main barriers for the wider use of renewables
The lack of secondary legislation and of appropriate support mechanisms (feed-in tariffs) is the main barrier for low RES deployment despite the country’s favorable potential. This also indicates the necessity to design an appropriate package of economic and fiscal incentives to promote RES deployment. Beside this, the Ministry of Mining and Energy identified the following barriers:
- Lack of experience: There is a need for experience of how a private sector renewable energy project can work in Serbia and an absence of a “first set” of projects.
- Transition Issues: Many industrial companies are in transition – both with regard to structure and ownership; management is not yet ready to consider measures to rationalize energy activities.
- Electricity tariff: The low electricity tariff does not stipulate domestic, commercial and industrial consumers to use renewable energy. The current average price of electricity is around 5 €cents/kWh.
- Absence of technical standards: Despite the existence of manufacturers of heating equipment and biomass fuel (briquettes and pellets), production standards are not regulated. Equipments for biomass energy utilization need clear information about technical specification and performance characteristics.
- Barriers to biomass utilization: Beside the low electricity price, which decreases motivation to install biomass firing boilers, there is no developed market for biomass fuel and biomass utilization facilities.
- Absence of a renewable energy resources inventory: The renewable energy resource inventory needs update and development, especially in the case of the Small Hydro Registry and wind monitoring program with wind speed measurements at 50 meters.
Development of a price support scheme and other incentives for renewables
The Ministry of Mining and Energy has prepared a feed-in tariff system for the support of electricity production from renewables and its adoption is planned in 2009, with the purpose to promote investments in renewable energy projects in Serbia.
The main assumptions for the development of feed-in tariffs are:
- a purchase price of electricity from renewable energy sources, expressed in c€/kWh, will be guaranteed and fixed during a 12-year period. The level of a purchase price is set to provide invested capital returned in 12 years, with covering all operating costs incurred during the same period;
- in case of power plants that have been in operation before the application of feed-in tariffs – proposed feed-in tariffs are valid for a shortened period of time;
- feed-in tariffs for old power plants that have been out of commission for at least five years are separately defined, in order to encourage revitalisation and re-entering in operation of these plants;
- an additional criterion for setting the feed-in tariff is to have the internal rate of return at least 14%, i.e. not below this percentage.
Apart from a feed-in tariff support scheme, some investment incentives are already adopted by the Government of Serbia:
Investment incentives
In case of investments in production facility, Government approve grant between 2000 and 5000 Euros per new job creation, minimal investment value is within the range of 1 and 3 million Euros, whereas the minimal number of new jobs is 50. An investor that invests in fixed assets, i.e. in whose fixed assets other entity invests over 600 million RSD (6.8 million EUR), and uses these assets for conducting business in Serbia and during the investment period additionally recruit at least 100 people - shall be exempted from corporate profit tax payments for the period of 10 years proportionally with the investment made.
Tax credits
A tax payer that made profit in a newly established business unit in an underdeveloped area will receive a corporate profit tax reduction in the duration of two years, proportional to the share of such made profit in total profit of the company.
Accelerated depreciation of fixed assets
This incentive is provided for fixed assets that are used for the prevention of air pollution, water and soil pollution, noise reduction, energy savings, forestation, and collection and utilization of waste for industrial raw materials and fuels.
Foreign investments incentives
The law on foreign investments stipulates free import of goods that are the foreign investor’s nominal capital (founding capital) – providing it fulfils acts regulating environment protection. Import of equipment as the founding capital of a foreign investor, except for passenger motor vehicles and game & gambling machines, is free from customs and other duties. Besides, a foreign investor and a company with foreign founding capital are entitled to tax and customs related deductions in line with the law.
Conclusion
Energy security is a high priority for Serbia and the strategic focus is on diversification of energy sources and imports, product supply, energy technologies and a selective use of renewable energy. Energy efficiency measures and renewable energy sources are important instruments for the achievement of these strategic goals.
Currently, hydropower is the only renewable energy that is widely used for energy production. Endowment with other types of renewable energy resources is substantial but realization of these potentials and overcoming the institutional barriers require government action. The economic potential of renewable energy projects must be demonstrated with more detailed feasibility studies to identify a set of potentially bankable projects.
There is also the need to establish institutional mechanisms to co-ordinate policies (financial, fiscal, spatial planning, technical standards, monetary, labour, poverty reduction etc.) with a focus on energy efficiency. The Government focuses almost exclusively on financial and monetary targets, without properly considering energy efficiency. As a result, industrial energy efficiency and competitiveness remains low.
Policies and actions established to enhance energy efficiency and wider use of renewable energy source has to be adapted in line with the new “20:20:20 Energy Package” of the EU – and realized, in order to achieve a sustainable energy production and creation of a solid energy base for further economic development.
