Supported byOwner's Engineer
Clarion Energy banner

Serbia Prioritizes Short-Term Projects Over Energy Transition

Supported byspot_img

According to Branimir Jovanović from the Economic Institute in Vienna, investing in infrastructure is necessary and important, but in this segment, there is less investment in railways and public transport, which are cleaner forms of transportation, and more (at least until recently) in roads.

“When it comes to energy, unfortunately, there is too little investment in it, and investments are mainly directed towards existing thermal power plants, while almost no investment is made in renewable energy sources (OIE). It seems that Serbian authorities and creators of energy policies do not understand the importance of energy for the future, do not recognize that renewable energy will be crucial, and that the entire country’s development strategy can be based on it,” says Jovanović.

Goran Radosavljević, a professor of economics at the FEFA Faculty, agrees with this view. He states that hydroelectric power plants are worn out and at the end of their lifespan, and the state does not plan any serious investments in the next ten years.

Supported by

In the latest plan, as well as in previous years, the construction of the Bistrica and Đerdap 3 hydroelectric power plants has been announced, but it is uncertain how many years will pass before they are realized. Đerdap 3 is also questionable due to its impact on nature.

“Serbia lacks a strategy in any sector of the economy, and the state’s energy strategy continues to be based on coal, while no new investments have been made in coal extraction for the past 40 years. Investments only occur when the Electric Power Industry of Serbia (EPS) is being patched up, and the state does not plan any serious investments in the next ten years, except for that wind farm,” explains the professor.

The plan mentioned by Radosavljević, titled “Basic Principles of the Energy Infrastructure Development Plan until 2028 with Projections until 2030,” was developed by the state last year as a strategic document.

This plan envisions the construction of several important new energy facilities producing electricity from renewable energy sources (wind and solar), with a total installed capacity of 2 GW. The plan also includes the construction of two reversible hydroelectric power plants, with one of them being uncertain. That is all the plan entails in terms of investments in greener forms of energy.

Supported by

President Aleksandar Vučić himself stated back in November 2022 that “we need 16-17 billion euros up to 32-33 billion euros that we must invest in energy infrastructure,” and that “renewable energy sources, the electric grid, and interconnections are the most important part of the reforms.

In this year’s budget, investments are allocated for projects in green energy sources, including 3.5 billion dinars for the wind farm in Kostolac, 106.2 billion dinars for the construction of the Bistrica hydroelectric power plant, and the construction of self-balancing solar power plants with a capacity of 1 GW and wind farms with a capacity of up to 1 GW each, valued at 165.2 billion dinars.

By issuing eight-year bonds solely for the infrastructure project related to EXPO 2027, the state has incurred a debt of 259.06 billion dinars in just the last few months.

This year’s budget reveals no new borrowings for eight-year bonds, but an additional 91.1 billion dinars is allocated for EXPO 2027 to support its realization, new borrowings, and the construction of the national stadium, which is an accompanying facility. According to announcements, the project is expected to cost 18 billion euros.

Given that the pressing issues in the energy sector were the cause of unprecedented inflationary growth and the reason for borrowing two years ago, both in the United Arab Emirates (930 million euros) and with the IMF (2.4 billion euros), the question remains as to why more investment is directed towards short-term projects, lacking clear analyses of profitability.

“EXPO will come and go, but energy is a long-term plan that we lack. Investments are made only when necessary,” says Radosavljević.

The Foreign Investors Council (FIC) noted in its latest report that coal remains the dominant source for electricity production, with over 70% of annual production coming from coal-fired power plants.

“The coal mines are in relatively poor condition and require serious modernization to meet the demand. Some of the largest thermal power plants will need to be gradually shut down or overhauled. It is unclear whether Serbia will have sufficient funds for these investments,” states the report titled “White Paper 2023.

In the energy balance for this year, it is planned that 89% of the total available coal quantity for consumption will be used to generate electricity in thermal power plants. Additionally, there is a plan to increase coal imports by 10% compared to last year.

According to the plan, thermal power plants are expected to contribute the most electricity, accounting for 64%, hydroelectric power plants for 25.9%, and the remainder from wind and solar power plants. However, the domestic production is not expected to cover the entire demand, and there is a plan for a 19% increase in imports compared to last year.

Economist Jovanović also points out the “Inflation Reduction Act” from the United States, which primarily focuses on energy, energy efficiency, renewable energy, and everything related to it.

“Serbia, like the entire Balkan region, has tremendous potential for investments in renewable sources, including hydroenergy, solar energy, and wind energy. These investments are highly profitable and will yield quick returns, contributing not only to financial gains but also to the reduction of CO2 emissions and pollution,” says Jovanović.

Furthermore, the modernization of the energy sector in Serbia, transitioning to green and renewable energy sources, will impact domestic companies and the overall economy of the country. Radosavljević remarks that these companies and the economy are “left to fend for themselves.”

Businesses that are export-oriented, particularly those oriented towards the European Union (EU) as the nearest market, will face challenges. ‘Directives implying penalties for exporters to the EU will come into effect very soon, whether in 2025 or later, remains to be seen,’ notes Radosavljević.

As the Foreign Investors Council (FIC) themselves state in their latest report, the transition to green energy is being postponed ‘until further notice.

Sign up for business updates & specials

Supported by


Supported byClarion Energy
Serbia Energy News
error: Content is protected !!