Prof. Zorana Mihailovic, Minister of Energy, Development and Environmental Protection, It’s high time to put things in order

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I insist on the fact that EPS, as well as any other public enterprise, should become more efficient and productive so that in a few years from now we can be proud of our contribution to the development of electric power industry and energy sector as a whole. – Joint ventures and strategic partnerships are always welcomed bearing in mind a difficult economic situation in both EPS and the country.

The Serbian energy sector has been an obstacle to development for decades. In contrast to that, the energy sector in Serbia, as well as in any other country, must serve as a driving force that will trigger the entire economy, – said in the interview for our magazine prof. Zorana Mihailovic, PhD, Minister of Energy, Development and Environmental Protection. She stresses that it’s about time for us to redefine the relationships within energy sector, to set up clear criteria, to make an accurate diagnosis of the situation which is certainly not good and finally, to take several directions.

What are going to be the most important tasks for your Ministry in the coming period?

The top priorities for the Ministry of Energy, Development and Environmental Protection are related to the improvement of energy efficiency, energy infrastructure construction and change in the way of managing public enterprises within this sector.

EPS is currently confronted with a severe financial situation. How to resolve accumulated problems, unpaid account receivables from state institutions and local governments? Can the Ministry act as a sort of mediator?

The Ministry of Energy, Development and Environmental Protection is responsible for energy sector, strategy, policy and legislative framework and accordingly, as a Minister, I will always insist on changes in management practice in public sector enterprises. EPS as well as any other public enterprise should become more efficient and productive in the sense that, in a few years from now, we can be proud not only of our success in covering the debts, but also of our contribution to the development of the electric power industry and energy sector.

You recently mentioned the possibility of writing off the interest on debt. How to deal with the accumulated debts of citizens?

I always opt for grasping the reality. The fact is that overall electricity debts of companies and citizens account for nearly a billion euros. The former governments and ministries of energy didn’t deal with debt issue in an appropriate manner as they also neglected many other important issues. The management of EPS should have been more accountable for the debt issue. There are a number of propositions, and I think that writing off interest is one possibility, but that the principal debt obligations must be fulfilled and paid. Given the low level of standard of citizens, maybe it would be possible to arrange with banks to provide some help and enable payment of debt in installments. Everybody should understand that electricity bills have to be paid.

Low energy prices have long been considered as one of limiting factors that prevent investment in new power plants; however, for many people even the current price is too high while some others make profit from this price. Is it possible to create a model that would provide that the solvent consumers pay a full economic price of electricity?

As long as we do not have social maps, it will not be easy to negotiate and adopt a market price of electricity. It is clear that in the previous period there was no political will to create such maps. They should have known that it was not possible to speak of electricity and gas market without social maps. Today, we have a very strong will to do so. In addition to social maps, it is necessary to change tariff system as well. I believe that many things related to the energy sector will look much better not later than next year.

You have been often talking about corporatization of EPS. In which manner this change could be implemented and does it involve downsizing?

Of course that it can be done. A few years ago, one of the previous governments agreed to implement this process, but it was interrupted because the politicians in power got anxious about the fact that they would not be able to maintain the power of their political parties without involvement in public enterprises. EPS is entering the corporatization process, which is seen as one of the steps towards market efficiency and profitability.

At the beginning of September, EPS and German electric utilities company RWE signed a Memorandum of understanding and strategic partnership. How do you assess this partnership and a strategic partnership in general as a model for construction of the new facilities?

In Serbia, there wasn’t a single infrastructural energy facility built in the last 27 years. This situation has to change. In the present, the primary consumers of electricity are households, but it is certain that the economy will develop and that electric power consumption will increase at faster pace than in the previous period. In addition to the extensions of the existing capacities, Serbia also needs new facilities. The Memorandum with RWE represents an initial step. It differs from all previously signed memoranda in the way that it was not only adopted by the Ministry of Energy, but also by the Serbian Government. Strategic partnership projects are always welcomed, given a difficult economic situation of both EPS and the country. The interests of Serbia will be brought in focus, and I hope that the stake of Serbia in those projects will account for at least 50%.

According to your opinion, what are the most important strategic projects on which you will insist in the future?

The most significant projects in the electric power sector include the openings of new open-cast mines and power plants – in addition to TENT B3 – the reversible hydropower plant HPP “Bistrica”, power plant on the river Drina as well as hydropower plant HPP “Djerdap 3”. It is also very important to activate heating plants in the cities, by transforming them into cogeneration plants. Serbia has to become a large construction site because it is the only way to energize the other sectors, such as mechanical engineering and construction industry, and to employ a large number of people. The opportunities are endless in oil and gas industry as well, including the gas interconnection Niš-Dimitrovgrad, “South Stream” gas pipeline and the construction of new gas storage.

At the beginning of 2013, the high-voltage electricity market will open up for the customers. Would you announce the electricity market model we aspire to and which would best suit us?

The model is surely known, but before we embark on this process, it is necessary for EPS to take some steps. These comprise estimating the market value of EPS, implementing corporatization process, expanding activities of the Department of Trade, legal unbundling of distribution system operators by changing their status. EPS has to become strong enough to be able to cope with the challenges of an open electricity market and reformed enough to ensure that the households and businesses will not suffer.

When will the new incentive tariffs for the production of electricity from the renewable energy sources be determined and will they be different from the existing ones?

The Ministry of Energy is currently reviewing the amount of incentive tariffs, taking into account the difficult economic situations as well as their level in both Serbia and other European countries. Just to remind you, Germany already reduced the level of tariffs, as well as many other European countries. But Serbia’s priority is to simplify procedures and to enable each company that qualifies to exploit the potential of renewable energy sources. It is unbelievable that this country didn’t manage to build dozens of small hydro power plants. The reason for this is a corruption and a lot of red tape.

Are you planning to add some changes to the existing regulations or to adopt some new laws and if so, which ones?

In addition to amendments to the Energy Law, the Ministry of Energy will soon propose the Law on the Rational Use of Energy, as well as the other missing acts and regulations. The adoption of the Law on Electricity Market is planned in the near future.

The Ministry is also in charge of the environmental protection, and the environmental projects are soon going to be implemented in the energy sector. What are the priorities in this field?

When it comes to this field, unfortunately, the promotional activities prevailed in the previous period. The Ministry of Energy, Development and Environmental Protection will give the priority to raising the level of environmental protection, on the one hand through the construction of new landfills, i.e. primarily those of regional type and recycling centers, and on the other hand through reinforcing the activity of inspection officers, monitoring and repairing of the so-called environmental “black holes” in Serbia – from Bor to the Zajača mine.

A lot of hard work and opportunities

The level of energy efficiency in Serbia is very low. Which measures will be undertaken in order to improve the situation?

In addition to the National Strategy for Energy Efficiency, a new Law on Rational Use of Energy will be adopted and the Energy Efficiency Fund will be defined. The Ministry abolished the existing Energy Efficiency Agency and took control over its former activities. In this way, the tasks will certainly be performed more efficiently. Having in mind the top priority, i.e. the improvement of energy efficiency, the Ministry of Energy will pay special attention to the projects in this field. A lot of work still needs to be done, but there are also many opportunities. It is unacceptable that Serbia consumes five times more energy per unit of GDP than its neighbors.

Source Kwh/Serbia Energy Magazine