Serbia urged by Bankwatch to abolish SHPPs incentives

, News Serbia Energy

According to data from Serbian Energy Regulatory Agency AERS, in 2019 state-owned power utility EPS collected only 59 million euros from RES incentives, while it paid out 106.7 million euros. In addition, new wind farms started work in 2019 and 2020, so it is clear that the costs of the scheme are increasing and the income from consumers has not kept up.

In its report, CEE Bankwatch Network noted that Serbian Ministry of Mining and Energy has recently held a public consultation on the main points of its planned new Law on Renewable Energy. Among other things, this law aims to bring Serbia’s renewables incentives scheme into line with the EU’s Energy and Environment State Aid Guidelines. The EBRD has already been assisting Serbia to move away from feed-in tariffs towards auctions for wind and solar incentives, but in order to become a reality, the country needs to change its legislation. Moving away from feed-in tariffs is a much needed move from both the environmental and financial point of view, as Serbia’s existing support scheme is becoming increasingly expensive. The Ministry recently announced a five-fold increase in the fee paid by consumers to incentivize renewable energy in Serbia.

Bill increases are highly controversial in a context where people are struggling to meet daily costs, but particularly because part of the money is used to incentivize small hydropower plants (SHPP) which have caused widespread protests across Serbia. Despite the fact that there were more than 100 SHPPs operating in Serbia in 2019, according to AERS, they only generated around 0.7 % of the country’s electricity. Their construction destroys swathes of forests for access roads, increasing erosion, and their operation causes countless mountain streams to run dry.

In fact, Serbia’s current Law on Energy is also the only in the Western Balkan region which allows feed-in tariffs for hydropower plants up to 30 MW. In reality, no plants over 10 MW have been built while the Law has been in force, and most of the controversy has been aimed at small plants. However, larger plants are also controversial, and subsidizing these would bring even higher consumer costs and more protests.

Under the EU Energy and Environment State Aid Guidelines, feed-in tariffs would still be allowed for hydropower under 500 kW or lower. Given the controversy about small hydropower plants, including those under 500 kW, one option would be to decrease this threshold to below 100 kW. However, given their minimal contribution to energy generation capacity, and the negative experience so far with enforcing environmental legislation at such dispersed plants, Bankwatch advocates for a halt to hydropower incentives altogether.

These controversial uses of consumers’ money threaten to undermine public support for energy transition as a whole and make it imperative that Serbia, like any other country, brings its renewables support costs down to a minimum and only supports those technologies which can significantly contribute to energy generation and which are the most environmentally acceptable, Bankwatch concludes.