Serbia: Energy at the crossroads, EU & Russia obligations and reality, the report

Published on 13. November 2013., News Serbia Energy

Serbian Energy is already one foot in Europe thanks to the new energy strategy, the forthcoming amendments to the Energy Law, which will adjust it to the third package of EU directives and to the compliance of obligations undertaken from the Energy Community.

Two events in the energy sector that attracted the attention of experts and media, the conference GazpromNeft sponsored Energy Arena and the Ministerial Council of the Energy Community of South East Europe , were held in October in Belgrade. There were placed the basics of energy development in Serbia and the region, and their harmonization with the European Union. At the Council of Ministers was approved the projects list of regional significance, including the thermal power plant “Kolubara B” and “Nikola Tesla B3”

The accession negotiations between Serbia and the EU in energy sector within “Chapter 15″ deal with one of the most problematic areas in the European regulations. Complex aim – the creation of a single energy market requires a long-term negotiations and compromise of all parties, which is the process that does not always run smoothly. Negotiations between Serbia and the EU in energy sector have aim to regulate the internal energy market, to establish mandatory oil reserves , and deal with the issues of renewable energy sources and energy efficiency.

There are indications that Serbia and the EU could open a “Chapter 15” in the spring of next year and according the announcement soon will be formed two teams to negotiate. Team members will include representatives of government, civil society, universities, SASA and negotiators with the experience from other countries. Minister of Energy, Development and the Environment, prof.dr Zorana Mihajlovic said that the Serbian energy sector already had one foot in Europe thanks to the new energy strategy, the forthcoming amendments to the Energy Law, which would adjust it to the third package of EU directives and to the compliance of obligations undertaken from the Energy Community.

As a contract signatory on the establishing the Energy Community, Serbia has practically began the preparation for the negotiations with the EU in 2006. As a reminder, representatives of Serbia and Montenegro, Croatia , Bosnia and Herzegovina , Macedonia, Bulgaria , Romania, Albania and the UN interim mission for Kosovo signed the contract on establishing the Energy Community of South East Europe countries on 25 October 2005^th  in Athens. Establishing the Energy Community has meant the creation of specific institutions, such as independent regulatory body in the field of energy, but also the implementation of EU directives. This year has been adopted the regulation on energy protected customer by which are provided discounts for gas, electricity and heat for the citizens with the lowest incomes.

However, the Serbian energy sector towards the EU expects much more work. The application mandatory of the Directive on renewable energy sources was taken, with aim that the “green energy” share would be about 27 percent of total consumption by the 2020^th. Previous experience has shown that energy companies’ reform is process that is taken with a lot of frictions so it is realistic to expect that Serbia will also experience similar difficulties. In addition, EU standards realization requires the significant investments, especially in the area of ​​environmental protection and energy efficiency, while making of the required reserves has been postponed until 2023^rd. This long-term investments should be regarded as good investments because the funds invested in achieving energy efficiency will be back through the energy savings. The reserves creation is important because it will contribute to a stable energy supply.

Coal remains the backbone

At the international conference on energy “Energy Arena 2013” held in the “Metropol” hotel, Fabrizio Barbaso, Deputy Director of the General Energy Directorate of the European Commission, said that Serbian legislation in the energy sector largely reflected the EU legislation, but it was important to open the energy market in the greater extent. He said it was necessary to increase competition, in order to avoid situation that one monopolist determined market conditions.

Barbaso said that each EU country had the right of own choice of the energy supply ways, but that the situation in Serbia was unbalanced because it largely depended on the energy produced from coal, and of the only one gas supplier. He expressed his opinion that Serbia had a large coal share in the energy mix and therefore required greater investment in other energy sources.

– Obtaining energy from coal is a fact that cannot be changed overnight, but we encourage Serbia to boost investment in renewable energy sources and infrastructure, which is very important for the energy market – said Barbaso in response to the questions from journalists before the conference started.

This position of mister Barbaso is in accordance with the proposal of the European Commission to encourage the directives application that control pollution by thermal coal power plants – Directive on the Large Combustion Plants and Directive on industrial emissions. Commenting on this directive, the Minister Mihajlovic said that for Serbia was not disputable to gradually reduce the coal share in the energy mix, but it was a process in which the priority was to ensure the energy security of the country.

-We cannot move overnight the coal power plants from the use but we plan to use all of good quality coal. Using all available resources we will increase the strength and stability of the country, and not by thinking how to import energy – said Minister Mihajlovic.

New projects in the energy sector

The Ministerial Council of the Energy Community on its 11^th session, chaired by the Minister Mihajlovic, adopted regional Energy Strategy which includes a list of 35 projects of regional significance, worth about 30 billion EUR. Serbia has a significant participation in selected projects, particularly in the field of electro energy – Serbia proposed seven projects from a total of 14, and their total capacity is 2400 MW. Among the most important projects are the thermal power plant “Kolubara B” and “Nikola Tesla B3” and hydropower plants Upper and Middle Drina.

According to Günther Oettinger, EU Commissioner for energy, these projects will attract much-needed investments in the region. By the 2020^th in the South East Europe region will be necessary almost 40 billion EUR of investment.

-It is worrying lack of progress in the effective market opening to their regional integration. Applying the third package of directives in the energy field is the mean to achieve these objectives and therefore should become a key priority – said Oettinger.

The second decision of the Ministerial Council is related with aforementioned directive on the gradual removal of thermal capacities. Despite the initial requirements that thermal power plant should be removed from service until 1^st January 2018^th it was adopted the conclusion that it is a gradual process whose dynamics varies from country to country. As the deadline for its completion it is determined 2027^th year.

– This does not mean that Serbia will not build a power plant “Stavalj” but it will work on brown coal which is of high quality. It also does not mean that we will close down the power plant “Nikola Tesla”, but we will work on desulphurization and take all necessary measures so that we can talk about the use of clean coal technologies. We must find a way to ensure energy efficiency and a healthy environment – said Minister Mihajlovic after the meeting of the Ministerial Council.

To the objection of representatives of some non-governmental organizations about the high health costs as a result of the coal combustion, Minister Mihajlovic said that with the closure of TENT and mine “Kolubara ” Serbia would lost 50 percent of electricity.

– If the initial decision to close the thermal capacities by 2018^th would be applied, not only that the whole region would have an electricity deficit, but also would not have from where to import it . The other , much better option is to take it easy, with all the environmental protection measures, such as desulfurization and serious inspection, to enable thermal capacities in providing enough electricity – explained Minister Mihajlovic the decision of the Ministerial Council.

She added that every energy resource affected the environment in some way:

– Otherwise, it remains only to open the nuclear power plant. It would provide enough energy and its emission is zero, but then we would have the problem of disposal of nuclear waste. It was necessary to find a halfway solution that will contribute to the energy stability – the Minister concluded.

In the situations when the region faces serious difficulties to provide sufficient energy for their own use, it is justified tendency for energy security and looking for compromise with the EU, which has shown a willingness to grant the postponement of the certain directives implementation, with a rational explanation of why it is needed. Negotiations on the “Chapter 15”, the adoption of the third package of directives, and start the implementation of approved projects in the Energy Community are goals by themselves, but also a potential impetus for new investments.

Flywheel for the new investments

On the list of projects of interest for the Energy Community, which was adopted at a meeting in Belgrade on 24^th October there are 13 Serbian projects with a total value of 15.9 billion EUR. One of the most important projects for the Serbian energy is thermal power plant “Kolubara B” whose value is1.8 billion dollars.

Work on the TPP “Kolubara B” construction were started yet in 1988^th, but were discontinued after more than three years due to the introduction of economic sanctions against to the Federal Republic Yugoslavia. Italian company “Edison” was mentioned last year as a strategic EPS partner in the continued construction with the project financing of Europe Bank for Development and Reconstruction. However, as previously was stated, EBRD no longer considers the project because its development did not progress for more than two years.

Source Serbia Energy