Serbia, Can the accumulated problems in the EPS be solved without the help of foreigners?

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Overcoming the problem implies significant investments, and this evokes ideas about the silent handing over of energy sovereignty, along with claims that we cannot run the EPS without foreigners. Serbia has experts who are ready and able to lead it successfully and restore it to its former glory. It is only necessary to let them work without the harmful influence of narrow interest groups in the country and abroad

The renewal of the Expert Council of the Electric Industry of Serbia is a commendable step on the way to preserving the country’s energy sovereignty. In recent months, the domestic profession has been involved in solving the accumulated problems, which has led to a visible improvement in Serbian coal mines and power plants, imports have been significantly reduced, and exports are increasingly being exported. It is the right time to remember that there are domestic professions and sciences, whose integrity and qualifications should be used before reaching out to foreign experts. For decades, energy decisions were made under the influence of other people’s agendas and recommendations that were uncritically accepted and promoted as dogma, while domestic intelligence was marginalized and our long-term interests were often pushed to the background.

For decision-makers, local experts were, as a rule, unwelcome interlocutors who held them back, while well-intentioned advice was often viewed through a political lens. In such conditions, the decision to renew and expand the Expert Council of EPS on December 15, 2022 represents an act of personal courage of the initiators and their commitment to the interests of society as a whole.

Contrary to recent statements that “domestic wisdom has failed to direct the development of Serbian energy for 60 years”, EPS continues to gather experts who achieve top results. Our experts play a very important role in the energy systems of the USA, they are directors of leading research centers and authors of numerous scientific papers and patents. Serbia has experts who are ready and able to successfully lead the EPS and restore it to its former glory. It is only necessary to give them a chance and let them work without the influence of domestic politics and foreign patrons.

Because, no matter how professional he is, no director can successfully lead the electricity industry if he has to fulfill the daily political demands of the politicians who appoint and replace him. Examples of the harmful influence of politics on the energy sector are European experiences and the current energy crisis, as well as recent events in Serbia. If the operation of coal mines and storage lakes is changed in order to increase the displayed value of GDP, the price is paid by EPS, the environment and the population. Due to the influence of politics and the suppression of the domestic profession during the previous ten years, the opportunities to completely restore the old thermal power plants or to replace them with new ones were missed. Due to inappropriate and untimely preparation of the coal mine, there was a significant reduction in production in the Kolubara Basin.

The problems culminated in the overpriced import of electricity, on which more than a billion euros were spent, enough to build a power plant that would completely replace that import. It will take years and a lot of money to rehabilitate and return to normal condition. The root of most of the problems is the appointment of politically loyal, but incompetent and uneducated staff, along with the gradual suppression of experienced and professional experts from integrity and the cessation of training of young professionals who, due to the specifics of EPS, cannot be found on the labor market. Such a situation has lasted too long, and therefore the restoration and development of the EPS must begin with personnel healing, which may take longer than solving technical problems.

One of the problems is the inappropriate attitude towards private investors. In Serbia, the creation of favorable conditions for the construction of solar and wind power plants benefited investors and their mediators, while EPS and the citizens of Serbia got problems. In systems with a large share of solar and wind power plants, the connection of new sources requires the construction of very expensive and environmentally controversial storage facilities and the application of systemic measures that significantly increase the costs of integration. The construction of wind farms is mostly left to private investors who enjoy subsidies, privileges and reap profits, while integration problems burden the electricity industry with significant technical problems and high costs. The population pays a tax on renewable sources, which has increased eightfold in just two years, while renewable sources in Serbia have a more favorable status than in Europe.

The recommendations of the competent EU bodies contain strong suggestions to stop the operation of our coal-fired power plants as soon as possible. It is insufficiently known that the annual CO2 emission per inhabitant in the USA and Canada is close to 14 tons, while in Serbia it is 6.62 tons, which is less than the emissions in Germany and Belgium. Although decarbonization is a universal and unquestionable goal, the above circumstances call into question the correctness of the suggested energy transition steps. Thermal power plants are not the main culprit for the alarmingly high emissions of suspended particles, where the share of their emissions is less than 20 percent. Stopping the operation of thermal power plants and the consequent increase in the price of heat and electricity would complicate the problem of heating for many households, which could lead to greater use of small fireplaces, to the use of inappropriate waste for firewood and to significant and dangerous pollution. The development of the power industry should be planned in such a way as to reduce the overall negative impact on the environment and the population, which includes the suppression of small combustion plants and old cars, but also the construction of modern thermoblocks with a higher degree of useful effect, lower coal consumption and lower emissions. Modernized thermoblocks can ensure the security and availability of supply during the next couple of decades, until the connection of new, environmentally acceptable sources.

Reasonable energy planning would allow us to successfully face serious environmental challenges. At the time of the growing search for increasingly expensive and less available minerals, necessary for the implementation of the European green agenda, Serbia is under strong pressure to accept the multiplication of traditional mines that destroy and poison entire areas, habitats, land, water and air, leaving behind toxic contents that will prevent recovery for centuries. Instead of recommendations on closing thermal power plants and opening mines, Europe should take over the technology of the new German coal-fired power plant Dateln-4, as well as rigorous environmental protection standards that protect Europe from the opening of mines such as are planned and already operating in Serbia.

The listed difficulties are the result of ten years of systematization and transformations that have brought EPS into an unenviable situation. For politicians, he is no longer Aesop’s goose that lays golden eggs, because it can no longer be taken from him, but must be invested. The government refrains from privatizing EPS, but implements its transformation into a joint-stock company.

Numerous experiences of others show that the privatization of the electricity industry has a negative impact on energy security and security of supply, and that it usually leads to an increase in prices. On the other hand, the example of the Czech Republic shows that majority state ownership of the electricity industry is not an obstacle to establishing professional management of the company, suppressing the influence of politics and promoting professional decision-making.

The primary goal of a joint-stock company is profit, which is not in line with the interests of the founders who established electrical companies for the sake of safe and accessible supply. Treating electricity as a commodity is fraught with a number of difficulties that have not yet been resolved. Managing the electricity industry is especially problematic in small countries with underdeveloped institutions, incomplete democracy and endemic corruption. State-owned enterprises are targeted by narrow interest groups whose interests do not coincide with the interests of society. On the other hand, private initiative finds ways to maximize its benefit in all public-private ventures and privatizations, keeping the profits for itself and leaving responsibility, problems and blame to others. In the conditions of competition, investors are instructed to study more closely the influential interest groups and decision makers in the countries in which they operate, and to look at their goals and mutual relations.

They find a way of dealing with representatives of the executive and legislative authorities, the media and regulatory bodies that enables them to do business successfully and make significant profits. Forced by the merciless market competition, investors have no room to worry about the interests of the citizens of Serbia or our environment, they do not manage to consider our needs but offer what is for sale, they do not come to give, but to take, and they cannot promise that they will not leave overnight and leave problems behind. Serbia lacks instruments for engaging and directing private initiative towards solving social challenges, which slows down economic growth and creates numerous risks.

The transformation of EPS into a joint-stock company does not necessarily lead to privatization, but the consequences can be just as bad or worse. If the state keeps the coal mines and thermal power plants and leaves the hydroelectric power plants, renewable sources and nuclear power plants to the strategic partner, the state will bear most of the responsibility for supply, price increases and payment of taxes for CO2 emissions. On the other hand, the strategic partner would enjoy incentives for the construction of renewable sources, subsidies and privileges, taking more and more control over Serbian energy.

The transformation of EPS into a joint-stock company creates the conditions for the next steps, opens the way for the influence of large capital and narrows the space for realizing the interests of the population, industry and consumers. In unfinished societies where public functions are prey, the transformation of public companies into joint-stock companies and public-private initiatives, as a rule, have a negative impact on the interests of citizens, while the positive effects are limited to private partners and their local collaborators. The transformation of the electricity industry is encouraged by the International Monetary Fund, an organization with indisputable declared goals, but with problematic practices that are reflected in severe consequences in many countries that accepted the Fund’s suggestions. By articulating the interests of the founders and big capital, the IMF strives to influence the legislative and executive power of the host country with the aim of facilitating access to the local market and creating conditions for the exploitation of resources and labor under the most favorable conditions in letters, often against the interests of the local population.

Special attention is created by unusual estimates of the value of EPS. While well-founded estimates from 2012 reached 14 billion euros, a much smaller amount was later cited. During 2022, promises that EPS will not be privatized were followed by the transformation of the public company into a joint-stock company. The public was informed about the EPS Supervisory Board’s proposal to transform into a joint-stock company and adopt the corresponding statute. The estimate of basic capital of 365 billion dinars slightly exceeds three billion euros and is significantly less than the previous ones. Differences in assessment may occur due to unintentional omissions, misinterpretation and allocation of Distribution, but the mentioned bidding is certainly not in the interest of the citizens.

EPS needs professionalization more than transformation. The formation of the Expert Council is a step in the right direction, but it is even more important to leave the management of the EPS to top domestic professionals and prevent inappropriate direct political influence, as well as any indirect influence through selected representatives. In the fall of 2022, it was hinted that development planning, supervision, and possibly management of key public enterprises from the energy sector will be entrusted to foreign experts chosen by domestic politicians. The continued influence of politics on professional energy issues is not good news, nor is the circumstance that the expertise of the mentioned Norwegian companies is far from the specific problems of our electricity industry. If the management of EPS had full freedom of action, without undue influence of politics or narrow interest groups in the country and abroad, EPS could ensure a secure supply and generate income sufficient to invest in its own development, NiN writes.

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