What the changes to the Law on RES bring – EMS is satisfied, the industry isn't yet

Key change – Balance between RES and the safety of operation of the power system

Presenting the proposed draft Act on Amendments to the Law on the Use of Renewable Energy Sources, the Ministry said that the exiting Law poses a risk to the EPS and EMS operations. The key change to the Law adopted two years ago will achieve the balance between two equally important public goals: integrating RES into the energy system and ensuring the safe operation of the electric power system, the Ministry told eKapija. According to the Ministry, the amendments to the Law will enable the implementations of the auctions in a way that will integrate investors faster into the market and provide them with the much-needed predictability regarding costs and incentives, with minimal costs for the citizens and the state.

– Additionally, given the large number of requests for connecting variable RES (20 GW) to the power system, the Law will provide a protection mechanism for the energy system in case the analysis on the adequacy of electricity production and the transmission system shows that there is a high chance that the transmission system operator cannot provide the regulating reserve, in which case power plants are subject to the connection limit, MME says and adds that limiting the installed capacity of the buyers-producers sets up conditions for introducing a new concept already in force in the EU, which shall be realized through the next set of amendments to the Energy Law during this year.

Despite some criticism that the adopted amendments will lead to only the biggest RES companies staying on the market, the Ministry refutes these claims. The Law, they note, is neutral when it comes to potential investors and the requirements are the same for everyone.

– Furthermore, the amendments make sure that the small facilities are protected from the unreasonably high obligations. Namely, the amendments propose that the facilities up to 400 kW are not subject to the connection limit. Also, the changes regarding buyers-producers aim for giving that status only to households and small buyers with all the privileges that come with it (the exception from balance responsibility, the obligation to participate in providing additional services, right to priority off-take of electricity, etc.), the Ministry notes.

In the explanation of draft Act on Amendments to the Law, the Ministry stated that the existing solution poses a risk to the EPS public enterprise`s operations and the end-buyers that finance incentives for privileged producers, because it is required to take over the balance responsibility for commercial projects as well.

– The draft Act proposes that only producers in the incentives system can take on balance responsibility. Commercial projects need to solve the issue of balance responsibility on a commercial basis because they are here because they want to maximize their investments. The right to priority off-take of electricity is limited to facilities up to 400 kW, and from January 1, 2026 to facilities up to 200 kW, in line with practice and regulations in the EU, the Ministry told eKapija and added that the majority of regulations that were announced for adoption last year, will be ready for adoption this year, but that their priority at the moment is creating conditions for the first auctions and solving a large number of requests for connections to the power grid.

80 requests for grid connection with the total capacity of 14 GW have been submitted to date

It was the huge number of requests for the connection to the transmission network that was the reason for concern that system operations would be jeopardized. EMS told eKapija that since the Law was adopted in April 2021 up to March 2023, there were 80 requests submitted to connect solar and wind units with the total capacity of 13,658.2 MW to the transmission grid. Out of this number, there are 23 submissions for connecting wind farms with the total capacity of 4413.6 MW, twice as many submission for connecting solar farms with the total power of 9094.6 MW and one request for wind/solar farm with the capacity of 150 MW.

– In order to understand the size of these projects, it should be noted that the current total installed capacity of all power plants in Serbia is 8,000 MW. Due to the exceptional number of submissions, the transmission network operator was forced to suspend processing requests, because if the operator enters into the agreements with all the said projects it would enable the continued realization of projects that use variable renewable energy sources the scope of which would, if they were to be build and opened, jeopardize the safety of operations of the electric power system, the Ministry said in the explanation of the draft Act on amendments to the law.

And just how many connections can EMS actually allow? When asked what the maximum power the EMS can accept at this time is, without risking the transmission system, this operator hasn`t given any conclusive answers. As they told eKapija, when a high percentage of variable renewable energy sources from wind and solar power is being integrated into the system, the problem of balancing the power system, that is, having the adequate regulation reserve in the system needs to be taken into consideration.

– Then there is the problem of balancing the electricity system, that is, continually covering the needs of the domestic public and industry consumption in Serbia with energy from the domestic production, in order to avoid relying on fluctuating prices and the availability of power on the regional and European energy exchanges that are sensitive to external conditions. Additionally, there is an issue with the potential congestion in the power system, EMS notes.

As this organization explains, in Serbia there is a prominent issue of the insufficiently available regulating reserve, that is, the flexibility of the system, meaning the system`s capacity to offset the unwanted deviations in the production of, primarily, intermittent variable renewable energy sources in the conditions of high integration of this type of production.

– We are currently developing the detailed system adequacy analysis as a part of the national ten-year transmission network development plan, after which we will have a better view of our system`s actual capacities, the EMS says.

The previous year was marked with conflict between MME and EMS followed by the Ministry`s remarks that EMS is hindering the Law on the Use of RES and investments. The improvement in cooperation between these two institutions was proven by the fact that in the public hearing that lasted until February 9, the Ministry approved all EMS`s proposed amendments.

– The cooperation between all relevant state institutions is at a desirable level and with the support of the Government of the Republic of Serbia and the President we are working hard to find a balanced and sustainable solution that will enable Serbia to secure energy independence to the fullest extent for years and decades to come, especially in the energy sector, and provide stable and continuous supply of sufficient amount of quality and affordable electricity for domestic public and industry consumption. EMS says.

The operator states that the proposed changes to the law will not slow down the integration of variable RES in the least but that they will continue under controlled and strictly defined technical requirements that are applied in the EU.

– We expect that the proposed changes to the law will guarantee controlled energy transition through the purest forms of energy production as well as the safety and stability of the entire electric power system, which is imperative.

Changes to the law aren`t enough, auctions are pending

Among the 19 organizations that submitted their propositions for amendments to the Law on the Use of Renewable Energy Sources are American Chamber of Commerce Serbia, NALED, RERI, USAID Better Energy project, Energy Agency of the Republic of Serbia and the RES Serbia association.

The Chairman of the Executive Board of RES Serbia, Milos Colic, explains for eKapija that this association has submitted 13 remarks to the draft Act on the Amendments to the Law on the Use of RES, out of which six were accepted.

– The most important remark that was accepted is that the Ministry has given up on the idea of irresponsible prediction of the energy production as the concept for determining producers responsibility in case of suspected violations because such standard could, in practice, lead to legal disputes about what can be considered responsible. We have addressed this considering that the guaranteed supplier has the right to terminate the balance responsibility agreement if the producers` irresponsible activities are determined, Colic explains.

As Colic says, one of the rejected comments, that would`ve been useful to the industry, concerns the suggestion that there should be defined criteria based on which the system operator will determine whether there is a risk to the safety of the system operations, thus deciding whether to delay connecting power plants to the grid.

– We think that, for the sake of legal certainty, it would`ve been better if the Law had defined the basic criteria, Colic is clear.

The latest report from WindEurope warns that in 2022 the EU has invested only EUR 17 billion in new wind farms, the lowest amount since 2009. It`s hard to tell what the situation in Serbia is like. According to Colic, there is currently a large number of requests for connecting wind farms to the network in Serbia, but it`s not realistic to give an estimate of the value of those investments at present time, because the feasibility, realization and the investment capacity of the majority of those requests is questionable.

– One commercial project with the capacity of 100 MW is currently underway in Eastern Serbia. A great number of projects is still waiting for the completion of the regulatory framework for holding auctions when a new investment cycle, bigger than the previous one from 2016 to 2019, is expected. There are great expectations for the three-year auction plan that is yet to be passed. That document is supposed to present the government`s plan for the following three years and the scope of investment is surely going to depend on it. The competent authorities have announced that this year, 400 MW are supposed to be awarded through the auction process, in which case no less than EUR 500-600 million will be assigned for their realization, our interviewee says.

What that is going to look like in practice, we are expected to see soon, because, as MME told eKapija, the public call for the first auctions for wind farms as well as the three-year auction plan will be announced as soon as the National Assembly adopts the amendments to the law. And while the WindEurope report states that the prices will go up, the success of the auctions in Serbia doesn`t only depend on the aforementioned changes to the law, Colic explains.

– It is necessary to bring the most attractive price and the model contract for the transfer of balance responsibility in order for the auction to be carried out. These processes will determine the assessment of the regulatory framework and its bankability, Colic notes.

Marija Dedic