Serbia: EU energy harmonization, progress report for power market and market framework

27. January 2015. / SEE Energy News

In the annual Implementation Report, the Energy Community noted that, in recent years, Serbia had shown a high level of commitment and reliability in the energy sector reform, particularly within the field of electricity. The market was opened within the deadline agreed with the Energy Community Secretariat.

On this market, the creation of real competition will require further deregulation of prices. Regarding its importance within the region, the national transmission system operator EMS (The Power Grids of Serbia), cannot stay outside the regional initiatives for capacity allocation any longer. The negotiations with the Kosovo operator KOSST have been finished but the signature of the EMS on the internal TSO agreement is still being expected.

The success of Serbia is diminished by the lack of progress in the gas sector reform, particularly with respect to the restructuring of Serbiagas. The Secretariat expects real reforms within this sphere after the following Ministerial Council.
In the Report, it is noted that the key feature of the Serbian energy sector is the existence of a dominant, vertically integrated public enterprise the Electric Power Industry of Serbia, which has the function of electricity generation, distribution and supply. Only electricity transmission is legally separated – the company EMS, which is also licensed as a market operator. Both the EPS and the EMS are fully owned by the state.

In 2013, 32 licensed suppliers were active on the electricity market, mainly within the field of resale and cross-border trade, whereas end buyers are supplied by six suppliers.
In May 2014, the EMS signed the agreement on the principles of cooperation in the establishment of the SEEPEX electricity market with the company EPEXSPOT, as the first specific step in the establishment of an organized day-ahead market. The agreement envisages the establishment of the company SEEPEX, the owners of which will be the EMS (75%) and the EPEXSPOT (25%).

The efforts to implement a wholesale electricity market have not been accompanied by the parallel steps towards regional market integration. The EMS must quickly adopt the conclusions of the Athens Forum with respect to the regional capacity allocation. Certain progress has been made in the establishment of the SEEPEX exchange, but additional efforts are necessary so as to implement the project. The EMS also has to sign an internal TSO agreement with the Kosovo operator.
In the gas sector, the domination of one market player, owned by the state, who is supplied by one external supplier on the basis of a long-term contract, probably violates the acquis within the field of competition and jeopardizes the general progress of Serbia in the energy sector. In other words, the gas sector is the Achilles heel of the Serbian energy sector. The unjustified refusal to separate activities within Serbiagas illustrates how urgent and how necessary the gas sector reform is. In addition, Serbiagas has a big problem with the over-indebtedness, associated with the high import prices of gas and the low collection rate, so the situation has reached the critical point, as it is stated in the Report.
When it comes to the national regulatory body – The Energy Agency, in accordance with the Third Energy Package, the Agency’s competence must be extended but additional duties must also be undertaken. The Agency must be guaranteed financial independence.

With respect to the legislation within the field of renewable energy resources, Serbia has achieved certain success. However, Serbia is not on the road towards achieving its objective for the year 2020. The Secretariat could request a revision of the National Emission Reduction Plan should there not be any progress towards increasing the production from renewable energy resources.

By the adoption of the Law on Efficient Use of Energy, Serbia has made a significant step in the implementation of the acquis within the field of energy efficiency, but there is still a lot more to be done. The adoption of a set of secondary legislation and the achievement of goals within the field of energy saving are a priority. The second priority is the establishment of a stable and sustainable financial mechanism. The establishment of the budgetary Energy Efficiency Fund is a significant step forward, but the Secretariat is worried because of the issue of this fund’s sustainability.
Serbia has invested significant effort so as to achieve the agreement with the Energy Community acquis within the sphere of environmental protection. It is necessary that the activities towards the implementation of the Large Combustion Plants and Industrial Emissions Directives be continued. In this respect, the adoption of the amendment on limit values of emissions within the Air Pollutants Regulation and the National Emission Reduction Plan is of primary importance, it is concluded in the Report.

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