Sources of Law
The structure of the Serbian regulatory framework in the energy sector is established by the Serbian energy law (the “Energy Law”). The Energy Law was issued in 2004 as a part of the overall reform of the Serbian energy sector. This had the goal of introducing transparency, non-discrimination and competition into the Serbian energy sector. It also aimed at promoting energy efficiency and the utilization of renewable energy sources. The Energy Law regulates all the major energy sectors including electricity, oil, gas, heat and the system of incentives of the renewable energy. General rules prescribed by the Energy Law are elaborated on by a number of regulations issued by the Government in all the sectors of energy that the Energy Law regulates.
In addition to legislation regulating specific energy activities, various aspects of energy activities are regulated by a number of other laws, such as the laws governing the construction, the utilization of natural resources and environmental laws.
In Serbia, the prices of energy can be both regulated and unregulated, depending on whether the energy (including electricity, gas and heat) is supplied to the tariff buyers or to the qualified buyers of energy. A tariff buyer is any buyer who does not qualify as a qualified buyer as defined by the Energy Law. The prices of energy supplied to the tariff buyers are regulated and are established by the supplier (EPS) in accordance with the Energy Law, the tariff system and the methodology for the establishment of tariffs. These are issued by the Energy Agency, with the approval of the Government.
By signing the Energy Community Treaty, Serbia assumed an obligation to grant the status of qualified buyer within the meaning of the European Community Directive Concerning Common Rules for the Internal Market of Electricity3 and the European Community Directive Concerning Common Rules for the Internal Market in Natural Gas.
From 1 January 2008 – to all non-household customers; and
From 1 January 2015 – to all customers.
In 2008, the Energy Agency adopted two resolutions establishing the minimum level of annual consumption of electricity and gas which qualifies the consumer for the status of a qualified buyer. According to these resolutions, non-household consumers may qualify for the status of a qualified buyer irrespectively of their annual consumption of electricity or gas, while the household consumers qualify for this status if their annual consumption exceeds, for electricity 200,000 kWh, and for natural gas – 50,000 m3.
The Energy Law provides that any buyer may obtain the status of a “qualified buyer” if, within the last 12 months, the total energy consumption of that buyer exceeded the defined annual energy threshold set by the Energy Agency.
Given the very low prices of electricity and gas, no company or household in Serbia has had to apply for the status of an eligible buyer.
The promotion and development of renewable energy is high on the list of priorities in the Energy Strategy and the Energy Program. In line with this, the Energy Law lays down the foundations of the regulatory framework which stimulates investment in RES energy, including the rules governing the status of a qualified producer of energy and the list of incentives which should be provided to qualified producers of energy.
- Qualified producers of energy
Investors eligible for the status of qualified producer include:
1. Producers that use RES (RES: is defined by the Regulation on the Terms and Conditions for the Status of the Qualified Producer), or the fuel sources separated from communal waste (depot power plants);
2. Small electric power-plants – electric power plants with an installed power of up to 10 KW; and
3. Combined power plants producing electric energy and heat, once they fulfil the conditions relating to energy efficiency.
The procedure for acquiring the status of a qualified producer involves the filing of a request to the MEM including the submission of evidence of the fulfilment of the Energy Law requirements and the accompanying regulations issued by the Government. The MEM is required to issue a ruling on a request within 30 days of the filing of such a request.
- Incentives for qualified producers
Under the Energy Law, qualified producers are entitled to various incentives aimed at the stimulation of investment in the RES, including special energy prices, tax incentives, customs incentives and other. Except for the general list of incentives which may be granted to the qualified producers, the Energy Law does not provide any further provisions which would regulate in detail the incentive schemes for producers using RES.
Thus far, the only incentive provided to the qualified producers is the feed-in-tariff provided under the long-awaited Government Regulation on the Incentives for Investment in the Production of Energy from Renewable Energy Sources in Combined Heat and Power Plants (the “Incentives Regulation”).
- Feed-in Tariff
Under the Incentives Regulation, qualified producers of energy are entitled to conclude a 12-year contract with a supplier of electric power (i.e. EPS) for the sale of electricity under the fixed prices prescribed by the Incentives Regulation. The Incentives Regulation sets a scale of guaranteed prices for qualified producers, depending on the type and the installed power of the facilities for the production of energy from renewable energy sources.
The electricity supplier, on the other hand, is required to conclude the contract with the qualified producer, at its request, within 30 days of the submission of such a request. Other terms of this contract are not defined by the Incentives Regulation. It seems that the Regulation leaves these obligations to the electricity supplier who should develop a model agreement for use when contracting with qualified producers (presumably to be used for each qualified producer) and then submit it to the MEM for its approval.
On the other hand, the supplier is entitled to the compensation for the costs purchasing the electricity from the qualified producer. These are calculated in accordance with the methodology established by the Incentives Regulation. An EPS is entitled to compensate these costs through the price of electricity to the tariff consumers. This essentially means that the final customers will eventually end up paying for the subsidy.
The regulatory framework for RES is by no means complete. Serbian energy laws and regulations contain no rules which would guarantee it priority over other non RES producing qualified producers in relation to access to the transmission system. Also, while the Energy Law provides for the general possibility that qualified producers be granted incentives which would stimulate investment in this sector of energy (such as tax incentives and other), except for the feed-in-tariff, relevant Serbian laws and regulations provide no other incentives for the producers using RES. In fact, it is not clear from the Energy Law who should provide these incentives and when these incentives should be provides it is also unclear under what terms they should be provided.
Subsidies available under current regulations are available only to producers of electric energy, but there are no incentives for other sectors, such as for example, the production of bio-fuels, which is an obligation which Serbia assumed through the Energy Treaty providing the obligation of the signatory states to implement the EU Directive on the Promotion of the use of biofuels and other renewable fuels for transport. Serbian energy laws and regulations do not provide for a system of minimal mandatory quotas regarding the participation of RES in the total supply of energy by energy producers, nor is there an accompanying system for the issuance of certificates of origin or the so called “Green Certificates”.
Serbia has not yet established a system to identify locations for the production of energy from renewable energy sources. Accordingly, such locations are not included in relevant spatial planning acts. There are no licensing systems for the producers of equipment relating to the production of energy from renewable sources. The incentives for investment in this area are limited only to the feed-in tariff provided by the Incentives Regulation, but there are no incentives such as tax breaks under the Energy Law.