At the end of 2009, the Government of Serbia introduced feed-in tariffs, a long awaited support scheme for promoting the production of electricity from renewable energy sources.
The move was made in order to harmonize national energy regulations with those of the EU in accordance with the treaty the establishing an Energy Community signed in 2005 by the European Community and nine contracting parties from Southeast Europe. Up until now, renewable electricity producers in Serbia could only sell renewable electricity at market price. This made investments in the renewables sector unprofitable due to comparatively high costs of electricity production from such sources. It is Serbia’s hope that the introduction of feed-in tariffs, which guarantee the offtake price and accompanying market certainty, will motivate investors to turn out to compete in the Serbian market for electricity from renewable sources.
Feed-in tariffs, as a policy instrument, place the obligation on utility companies to purchase electricity from renewable energy producers at predetermined rates over a guaranteed period of time. Nevertheless, on November 20, 2009, in accordance with the promoted objectives of its energy policy, the Government of Serbia passed the Decree on Feedin Tariffs, which entered into force on January 1, 2010 and will remain in effect until December 31, 2012. The Decree regulates in detail incentive measures for electricity generation using renewable energy sources (hydro, biomass, biogas, landfill, and sewage gas, wind, solar, geothermal and combined heat and power – CHP plants), identifies power plants producing electricity from such sources, and defines basic aspects of the incentive-based off-take agreement. The feed-in tariff rate is guaranteed and determined separately for each renewable energy source in such a way as to ensure profitable operation of the facilities.
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For small hydro power plants, tariffs have been set between 5.9 and 9.7 c€/kWh, for biomass power plants – between 11.4 and 13.6 c€/kWh, for biogas power plants – between 12 and 16 c€/kWh, for fossil fuel fired CHP plants (combined heat and power plants) – between 7.6 and 10.4 c€/ kWh, for waste fired power plants – between 8.5 and 9.2 c€/kWh and for landfill and sewage gas power plants, wind power plants, solar power plants and geothermal power plants – 6.7, 9.5, 23 and 7.5 c€/kWh respectively (regardless of their installed capacity).
Only power plants with a capacity of less than 10 MW (save wind, landfill and sewage gas, solar, and geothermal) can be eligible for the application of feed-in tariffs. Feed-in tariffs relating to CHP plants are pegged to fossil fuel prices. Certain limitations have been placed on the applicability of feed-in tariffs with respect to two renewable energy sources. For power plants using wind energy, feed-in tariffs are applicable only to the sum of installed capacities in all such power plants of 450 MW plus 10% of the sum of new generating capacities built by a utility for power generation, distribution and trade (i.e. Serbian national electric utility – EPS). The guaranteed term of the off-take agreement (power purchase agreement with EPS) under which the feed-in tariffs will be paid is 12 years.
The possibility to extend this term is not regulated. An electricity producer may terminate the off-take agreement by a 30-day written notice. The extra cost produced by feed-in tariffs will be shared among all tariff consumers in Serbia. It also is worthwhile mentioning that high investment security with respect to the guaranteed return is not backed by low administrative and regulatory barriers. The procedures for obtaining certain permits in Serbia have not been sufficiently regulated and leave room for different interpretations.
