The year 2024 saw significant changes in Serbia’s energy sector, although the price of electricity and gas remained stable. The methodology for calculating electricity prices for the economy was modified, while the introduction of “dynamic” tariffs for citizens was outlined as part of a future shift away from the current system of cheap and expensive electricity.
One of the most notable contracts was a €1.9 billion deal for constructing self-balancing solar power plants. However, the future of an even more expensive project—the €2.4 billion investment in the oil refinery in Smederevo—remains unclear. The end of Serbia’s stand-by arrangement with the International Monetary Fund (IMF) led to the implementation of several agreed-upon steps, including the adoption of the Energy Development Strategy until 2040, the new electricity pricing model, and the regular publication of Serbia’s largest electricity debtors list, though no such list has yet been released by Srbijagas.
At the end of the year, the Serbian government made an interesting announcement: it would “assess the possibility” of privatizing the Resavica underground coal mining company.
Assessing the health of Serbia’s energy system
When asked whether Serbia’s energy system was placed on solid footing in 2024, Milojko Arsić, a professor at the Faculty of Economics in Belgrade, pointed out that while the price of electricity has been removed from the agenda—having increased by about 30% over the last two years—questions remain about the management and operation of the state-owned EPS (Electric Power Industry of Serbia).
“It’s crucial to evaluate whether EPS management has been improved and whether the thermal power plants are operating reliably. The Chinese contractors who took over Block 3 at the Kostolac power plant have likely contributed to improved system reliability, but the Obrenovac complex is facing coal shortages and outdated facilities,” Arsić noted.
EPS Director Dušan Tomašević reassured the public that the company was prepared for the upcoming period, with enough electricity to meet the expected consumption levels of approximately 120 gigawatt-hours per day.
Investment in solar power and a new refinery
2024 also saw attention turn to future energy projects, with substantial funds already allocated for them. The Serbian budget’s rebalancing allocated €1.9 billion in guarantees to EPS for contracts with American UGT Renewables and South Korean Hyundai. This project is backed by a Strategic Cooperation Agreement with the U.S. in the energy sector and will add six solar power plants with a combined installed capacity of at least 1,000 megawatts, along with battery storage systems.
Another major investment, much less publicized, is a €2.4 billion project for a new oil refinery in Smederevo, developed in partnership with China Energy International Group. The project is set to be completed within four years of receiving construction permits.
Serbia is also in negotiations with Japan’s International Cooperation Agency (JICA) for financing the Bistrica reversible hydroelectric power plant, a priority project valued at €900 million, which is expected to be included in the 2024 budget.
Nuclear power plants: A new era for Serbia
One of the major discussions in Serbia’s energy landscape was the potential for nuclear power. Following the Serbian president’s announcement in March that the moratorium on nuclear power plant construction would be lifted, formal amendments to the Law on Energy and the Energy Development Strategy until 2040 were passed by the end of November. The first nuclear power plant in Serbia could begin operations before 2050, according to the updated strategy.
This move toward nuclear energy aims to decarbonize the energy sector and prepare for the use of green hydrogen technologies by 2040, allowing for energy transformation and greater environmental sustainability.
Resavica privatization on the horizon?
At the close of 2024, Serbia’s government outlined a new direction for the Resavica coal mining company. The IMF’s fourth and final review of Serbia’s stand-by arrangement flagged the financial situation of the Electricity Distribution Company of Serbia (EDS) as needing urgent attention. The IMF expressed concerns over the fiscal risks posed by insufficient fees for the EDS network and the reliance on development partner loans for large distribution network investments. To address this, the government promised to provide sufficient budgetary support to JP PEU Resavica through subsidies to prevent further debt accumulation.
However, the government also indicated that privatization of Resavica might be a possibility. In the official letter of intent tied to the IMF’s new three-year PCI agreement, the government committed to evaluating the privatization of Resavica or transferring it to management under the new Law on Business Companies Owned by the Republic of Serbia.
Energy transition and local community support
The 2024 Energy Development Strategy highlights Serbia’s approach to transitioning from coal to renewable energy sources. This transition will be financed through a combination of a fund for local communities affected by the energy shift and mechanisms for collecting greenhouse gas emissions under the “polluter pays” principle. The goal is to ensure the continued availability of energy and maintain economic competitiveness during this transition.
Additionally, the strategy outlines plans to use European funds to support the green transition in particularly affected communities in line with the Green Agenda for the Western Balkans.
In summary, Serbia’s energy sector made significant strides in 2024, with new projects, changes in policy, and financial commitments positioning the country for a more sustainable energy future. However, challenges remain, especially in terms of privatization, debt management, and the transition to cleaner energy sources. The coming years will likely be pivotal for the country’s energy development.
