1.1.1 Energy is one of the largest sectors of the Serbian economy, accounting for more than 10% of Serbia’s GDP.
1.1.2 The electricity market in Serbia is still dominated by state-owned public companies and is mainly characterised by the lack of full liberalisation, as well as the absence of significant participation by private companies. Furthermore, the existing infrastructure is generally old and outdated, thus vitally requiring modernisation.
1.1.3 Recently, the electricity wholesale market has been formally opened to competition for all consumers with the exception of domestic customers who will be entitled to choose their supplier from 1 January 2015. Transmission operations have been unbundled from other activities within the electricity market. However, the separation of the distribution and supply sectors has not yet been accomplished.
1.1.4 The vast majority of electricity is generated by thermal generating stations, while hydro power generates roughly one-fourth of the electricity presently produced by thermal power1. The transmission system is made up of 9,500km of power lines of 400kV, 220kV and 110kV and accompanying transformer stations and is interconnected with all the neighbouring countries. The distribution network consists of the low-voltage network spread throughout all major consumer centres.
1.1.5 Serbia is currently witnessing a steady increase in investments in the renewable energy sector. The main renewable energy source is hydro; other renewable energy sources include solar power, wind power and biogas.
1.2 Structure of electricity market
1.2.1 The vast majority of Serbian energy infrastructure is state-owned and is operated by public enterprises that have been established by the state to manage various domestic energy sectors. As mentioned above, the energy infrastructure is generally old and outdated and thus much of the existing infrastructure is awaiting modernisation, requiring significant investment from both the public and private sectors.
1.2.2 Since 2005, the operation of the transmission system and the electricity wholesale market has been under the responsibility of the public enterprise Elektromreža Srbije, the Serbian Transmission System and Market Operator (EMS). The remaining functions (generation, distribution and supply) are performed by the vertically integrated public company Elektroprivreda Srbije – Electricity Industry of Serbia (EPS). In accordance with the new Energy Law adopted in July 20112 (Energy Law), EPS is required to complete legal unbundling of its distribution and supply and this is expected to be done once the Serbian government appoints a Public Supplier. Under the Energy Law, it was required to appoint the Public Supplier by 1 October 2012 but that has happened only recently, i.e. on 4 June 2013 the Government appointed newly founded EPS’ fully owned subsidiary “EPS Snabdevanje” d.o.o. Belgrade as the Public Supplier and the said company has been granted the energy licence on 1 July 2013. Currently, due to the persistence of regulated prices set at levels below the market price, ESP holds a de facto monopoly in these areas.
1.2.3 Since February 2008, the qualified buyers (as explained in more detail in the paragraph 2.5.8 below) could have opted for new electricity to be supplied either under market prices or under regulated tariffs. Since regulated tariffs are currently lower than the market prices, consumers have generally chosen supply under regulated tariffs. With increased market liberalisation over the coming years, qualified buyers are expected to lose their entitlement to supply under regulated prices. The Energy Law has now established a framework for the effective liberalisation of the market, which has included the introduction of certain milestones triggering the obligation on various classes of consumers to purchase electricity at market prices and, in particular, that qualified buyers are subjected to market prices only (i.e. not to regulated prices any longer) as of 1 January 2014.
1.2.4 As at 1 January 2013, approximately 30 corporate customers previously connected to the transmission grid lost their right to the public supply of electricity (i.e. to supply under regulated tariffs). For the first time, consumers in Serbia are to be supplied electricity at market prices by a non-state-owned supplier. As indicated in the previous paragraph, consumers, including qualified buyers, connected to the distribution grid (other than small consumers and domestic consumers) are expected lose their right to public supply from 1 January 2014, when the supply market is expected to fully open up to competition.
1.2.5 The unbundling requirements in Serbia have largely been implemented pursuant to the Second Energy Package, but the requirements of the Third Energy Package have not been implemented, as yet. The Energy Law prescribes that the system operator, which is part of a vertically or horizontally integrated company, must have functional independence from activities unrelated to the management of transmission or distribution systems. In contrast, the ownership of the transmission or distribution assets does not have to be separated from the vertically integrated undertaking.
1.2.6 The Energy Law provides further measures to safeguard the independence of the system operator such as:
- restrictions on the management of the system operator participating in the administrative bodies of companies directly or indirectly responsible for the generation or supply activity or the activities of other system operators;
- obligations on those in charge of the system operator to uphold an independent decision making process; and
- the system operator’s ability to independently decide on what resources are required to provide system management, maintenance and development.
1.2.7 Where the system operator is part of a vertically integrated undertaking, the parent company may approve its annual financial plans and establish the limits of its indebtedness. However, the parent company may not direct the daily operations of the system operator.
1.2.8 The Energy Law also prohibits financial assistance between regulated and unregulated business activities.
1.2.9 Further, the Energy Law stipulates the separation of accounts between entities performing one or more energy activity with regulated prices and other energy related but unregulated activities. These measures aim to prevent discrimination, financial assistance and anti-competitive behaviour as well as to reflect each individual activity in the annual balance sheet and trading account.
1.3 Key players
1.3.1 The Serbian electricity market is dominated by the state-owned public companies EPS, EMS and their subsidiaries (see paragraphs 2.1.1, 2.2.1 and 2.3.1 below). However, some private companies are active in the electricity wholesale market, including the import and export of electricity.
1.3.2 The supply sector is effectively made up of two subsectors: (i) public supply (i.e. supply under regulated prices); and (ii) supply to qualified consumers (i.e. under market prices). The Energy Law requires that the public supply under regulated price tariffs is to be performed by a separate public entity, a Public Supplier appointed by the government of the Republic of Serbia.
1.3.3 The government was required to appoint a Public Supplier by 1 October 2012. However, this happened in June 2013 (see paragraph 1.2.2 above).
1.3.4 There are approximately 60, mostly privately owned, companies currently engaged in the wholesale trade of electricity. These companies are entitled to supply qualified consumers on the market but as the market prices currently significantly exceed the regulated ones there has been little activity in this area to date.
1.4 Current issues and drivers
1.4.1 Serbia’s current energy strategy is outlined in the 2005 Energy Sector Development Strategy and is being implemented through the 2007 and 2010 Implementation Plans. Further to this, the Energy Law anticipates the development of a new energy strategy for at least a fifteen year period.
1.4.2 The Energy Law also expects to see stronger powers for the Energy Agency of the Republic of Serbia (AERS), particularly in relation to the definition of tariffs, the oversight of the liberalisation process, market rules, allocation rules and network development plans. Under the Energy Law, the tasks and powers of the AERS are principally in line with the Second Energy Package, although certain changes are needed to reinforce the administrative capacity of AERS to ensure the effective implementation and enforcement of its legal obligations in the energy sector.
1.4.3 Even though there is little competition in the Serbian generation, transmission and distribution markets, there is currently some progression towards market liberalisation being undertaken. As of 1 January 2013, the distribution and trading of electricity is separated out at the DSO level. Accordingly, all five EPS subsidiaries engaged in distribution are to be divided into two operational divisions, one dealing with trade and the second with distribution of electricity. Moreover, the Energy Law prescribes specific rules imposing legal and accounting separation of some of the sector’s functions in accordance with the unbundling requirements of the Third Energy Package.
1.4.4 Serbia has implemented an Independent Transmission Operator model under the Third Package. Further liberalisation of the electricity market was set to begin on 1 January 2013 in order to be fully implemented by 1 January 2015.
1.4.5 Through the formation of an energy exchange as well as bilateral and balancing energy markets, it is expected that this will encourage an open electricity market. However, electricity transmission and distribution are currently expected to remain substantially protected from competition.
1.4.6 The government is currently working on new policy documents, notably the Energy Development Strategy for the period to 2025 and the National Renewables Action Plan. These policy documents will provide the main guidelines to the expected policies in the Serbian electricity sector (see paragraph 3.5 below for more details regarding upcoming regulatory changes).
1.4.7 The modernisation of the Serbian generating stations is currently seen as an urgent priority. To address these challenges, the applicable public policy acts envisage: (i) the utilisation of the available hydro potentials and the construction of new hydro generating stations; (ii) the construction of new thermal generating stations which will use available domestic reserves of coal in the Kolubara and Kostolac basins (including the opening of new mines to facilitate the supply of coal to new TPPs); (iii) cogeneration projects to facilitate the conversion of local heating companies into facilities for the combined production of both heat and electricity; and (iv) further investments into the modernisation, revitalisation and improvement of the (currently outdated) transmission grid.
2. Sector Analysis
Structure of generation sector
2.1.1 Almost the entire generation of electricity is concentrated in the vertically integrated company, EPS. Through six of its fully-owned subsidiaries, EPS operates the entire national infrastructure for electricity generation. EPS’s fully-owned subsidiaries are:
- Nikola Tesla – TENT (Obrenovac) – thermal generating station;
- Kostolac (Kostolac) – thermal generating station and coal mining basin;
- Pannonian electric generating stations (Novi Sad) - combined heat and power station;
- Djerdap (Kladovo) – hydro generating station;
- Drinsko-Limske – hydro generating stations; and
- Kolubara (Lazarevac) – coal mining basin.
2.1.2 The amount of electricity generated in Serbia totals 7,120MW. This generation comes primarily from the eight lignite-fuelled thermal generating stations with an installed power of 3,936MW (two of these are located in Kosovo) and 9 hydro plants (a total installed power of 2,831MW). In addition to this there are mazut and natural gas operated thermal generating stations operated by district heating companies (total installed power of 353MW).
2.1.3 In February 2013, the Government launched a public tender for the construction of small hydro generating stations on 317 locations throughout Serbia. There are also strategic partnerships and cooperation between both EPS and RWE, on investments in Serbia’s hydro potential and thermal generating stations, and EPS and Hitachi Power Europe, on the improvement of boilers in existing EPS’s thermal generating stations (and the decrease of its nitrate and sulphur-oxide emissions), as well as in future thermal power projects (including TENT B3, Obrenovac) related to renewables (notably, wind generating stations and solar generating stations).
Structure of transmission sector
2.2.1 The entire Serbian transmission system is managed by EMS3. The Energy Law defines the transmission system as a “network of 400 kV and 220 kV lines, 110 kV external fields, transmission fields of 110 kV along with bus bars in transformer stations x/110 kV and 110 kV transmission lines as of tightening the chain on the portal transformer station 110 / x kV, measuring devices at all points of delivery the transmission system, the telecommunications infrastructure in transmission facilities, information and control systems and other infrastructure necessary for the operation of the transmission system”4. In its capacity as the operator of the transmission grid, EMS regulates third-party access and connection to the transmission grid. It is also responsible for the allocation of the cross-border transmission capacities.
2.2.2 EMS is regulated by the Energy Law and related secondary regulations. In addition, EMS is obliged to apply rules on operations provided for by the international association of transmission system operators, ENTSO-E, of which EMS is a member.
2.2.3 Pursuant to the Energy Law, only entities that hold a licence for the transmission of electricity and the operation of the transmission system can construct new transmission networks. Hence why in practice only EMS, as the sole holder of a transmission licence, can construct new transmission networks. Generators and qualified consumers may construct direct transmission lines but only if EMS has refused them access to the existing grid.
2.2.4 The main obligations of EMS as the transmission system operator (TSO) include: (i) maintenance and development of the transmission grid; (ii) provision of non-discriminatory access of third parties to the grid; (iii) issuance of a grid code and rules on the awarding of interconnection capacities; (iv) issuance of a ten-year plan for development of the transmission grid; (v) acquiring sufficient energy for covering the losses in the transmission grid; (vi) establishing fees for connection and access to the transmission grid; (vii) complying with technical regulations; and (viii) implementation of appropriate health and safety measures within the transmission system.
2.2.5 A grid code containing regulation on the access to transmission grid, the grid’s operations, as well as the operation and maintenance of the relevant transmission facilities was issued by EMS in 2008 and was updated in 2012 (Grid Code).5 In 2014, the new Grid Code was adopted.6
Cross border issues
2.2.6 Serbia has interconnections with all of its eight neighbouring countries. For six of these interconnections, EMS individually awards 50% of the available capacity whilst the remaining 50% of the capacity is awarded by the other relevant neighbouring country. For interconnections with Hungary and Romania, EMS organises auctions alongside Hungarian and Romanian operators.
Structure of the distribution sector
2.3.1 The distribution network is managed by EPS, which operates the national distribution grid through its fully-owned subsidiaries for five regional centres including Belgrade, Novi Sad, Kragujevac, Kraljevo and Niš. EPS’s subsidiaries are:
- Elektrovojvodina (Novi Sad);
- Elektrodistribucija Beograd (Belgrade);
- Elektrosrbija (Kraljevo) joined with Electrodistribution Uzice;
- Jugoistok, which consists of Electrodistribution Niš, Electrodistribution Leskovac, Electrodistribution Vranje and Elektrotimok (Zaječar); and
- Centar, which consists of Elektromorava (Požarevac) and Elektrošumadija (Kragujevac).
2.3.2 Under the Energy Law, a licence is required for the distribution of electricity and the operation of a distribution system. In accordance with the requirements of the Third Energy Package, the distribution system operators (DSOs), which are part of vertically integrated undertakings, must be organised under separate legal entities and have an independent decision making mechanism (see paragraph 1.2.5 above on unbundling).
2.3.3 The main obligations of the DSOs include: (i) the maintenance and development of the distribution system; (ii) the provision of non-discriminatory third-party access to the distribution system; (iii) the issuance of a distribution grid code; (iv) the issuance of a ten-year plan for the development of the distribution grid; (v) acquiring sufficient energy to cover any losses in the distribution grid; (vi) establishing fees for connection and access to the distribution grid; and (vii) the implementation of appropriate health and safety measures within the distribution system.
2.3.4 Each DSO has its own distribution grid code, although all five grid codes are essentially the same.7
Structure of supply sector
2.4.1 The supply sector consists of the two subsectors: (i) public supply, i.e. the supply to tariff buyers under regulated prices; and (ii) supply to qualified consumers, i.e. under market prices (see paragraph 1.3.2 above). In relation to public supply, until a “public supplier” is appointed by the government (which only happened in 2013 and the public supplier has become fully operational only recently – see paragraph 1.2.2 above), customers are supplied by the state-owned distribution companies (subsidiaries of EPS). For supply to qualified consumers, because market prices are currently significantly higher than the regulated prices, few private companies currently operate in this subsector. This is expected to change with the gradual opening of the market and eventual phasing out of supply under regulated prices.
2.4.2 According to the Energy Balance for 20148, the estimated consumption of electricity in Serbia for 2014 is 27.387GWh. This is a high estimate and is partly as a result of: (i) the majority of Serbian households using electricity for heating; (ii) very low levels of energy efficiency; and (iii) the price of electricity that is charged to the consumer being subsidised below the cost of its generation. The average annual generation of electricity is still, for the most part, sufficient to satisfy national consumption but certain quantities are imported, usually during winter when demand is highest. Planned imports of electricity in 2014 amount to 7179GWh, which is 86% higher than estimated imports for 20913, and exports 4548GWh, which is 25% lower than estimated exports for 2013.
2.5 Energy exchange / trading
Structure of trading market
2.5.1 EMS operates the trading market for governing the trade units.
2.5.2 Given how recently the opening up of the Serbian energy sector began, the energy market is still largely dominated by public enterprises and is mostly limited to the wholesale import/export of electricity. There are 59 licensed entities (including the state incumbent EPS and various private companies) currently able to trade electricity on the wholesale market. The retail market is underdeveloped, given the de facto monopoly of state incumbents in the generation (EPS), distribution (EPS) and transmission (EMS) of electricity.
2.5.3 The liberalisation of the energy market and planned integration of the Serbian market into the EU energy market has resulted in increased attention from international energy companies looking to invest in Serbia’s energy sector with some of them having entered into arrangements with the government of the Republic of Serbia and/or state-owned public enterprises regarding investments in major energy infrastructure projects. For example, German energy giant RWE has recently signed a memorandum on joint energy projects with EPS worth more than EUR 2bn for the overhaul, extension and operation of the hydro generating stations on the Drina and Danube rivers (which have a combined capacity of 920MW) as well as the expansion of the 1,240MW Nikola Tesla (TENT) coal fired generating station.
2.5.4 Under the Energy Law, the participants who are principally entitled to trade on the Serbian electricity market are:
- power producers;
- public supplier;
- end purchaser;
- the transmission system operator;
- distribution system operators; and
- the market operator.
2.5.5 The Energy Law envisages that the electricity markets in Serbia are to be made up of both bilateral as well as market operator-organised electricity markets and balanced markets (where the TSO buys and sells electricity from market participants for the purposes of system maintenance and balance under bilateral agreements).
2.5.6 In any case, market participants are required to regulate their balance responsibility by entering into an agreement on such with the TSO.
2.5.7 The regulation of energy prices depends on whether the energy (including electricity) is supplied to consumers at the regulated tariff or to the qualified buyers at the market price. Tariff buyers are those who are not qualified buyers as defined by the Energy Law. The price of energy supplied to the tariff buyers is regulated and set by EPS as the supplier. The methodology for the establishment of tariffs is issued by AERS, with the approval of the government.
2.5.8 Serbia has assumed the obligation to grant the status of qualified buyer within the meaning of EC Directive 2003/54 to all non-household customers as of 1 January 2008 and all customers as of 1 January 2015.
2.5.9 In 2008, the AERS adopted a by-law establishing the minimum level of annual consumption of electricity required to qualify the consumer for the status of qualified buyer. Non-domestic consumers may qualify for the status of a qualified buyer irrespective of their annual consumption, whereas domestic consumers will qualify if their annual consumption exceeds 200,000kWh. As a result of this, 47% of the electricity market is currently potentially open.
2.5.10 Although under the Energy Law any buyer who has within the last 12 months an energy consumption exceeding the defined annual energy threshold set by the AERS will qualify as a qualified buyer, the low prices for energy have so far meant that no company or household in Serbia has yet had to apply for the status of qualified buyer. Moreover, as noted in the paragraph 1.2.3 above, the qualified buyers will lose that status as of 1 January 2014, after which date they will be entitled to be supplied under market prices only.
3.1.1 The Serbian electricity sector is primarily regulated by the Ministry of Energy, Development and Environmental Protection (Ministry) and the AERS.
3.1.2 The National Assembly of the Republic of Serbia (National Assembly) is responsible for the adoption of the National Energy Sector Development Strategy (Strategy), the main strategic act to be enacted for a period of at least 15 years, which, includes:
- long term goals for generation capacity development that serve to ensure safe supply;
- transmission and distribution system development courses;
- electricity market development courses;
- sources and manner of providing the required quantities of energy and energy sources;
- development course for using energy from renewable sources and improving energy efficiency; and
- finance estimates necessary for the Strategy’s implementation.
3.1.3 The National Assembly is also in charge of approving annual reports on the realisation of the Strategy and related documents (notably the Implementation Plan) as well as annual reports on the work carried out by the AERS Council.
3.1.4 The government is actively involved in setting the direction of the electricity sector. It prepares the Strategy, approves the Strategy’s Implementation Plan and the annual Energy Balance. The Government supervises the energy pricing policy and approves the price of energy as set by the energy generators and additionally:
- prescribes terms and conditions for electricity supply and as well as the measures which are applied in case of endangered electricity supply to the customers due to energy system operations disruptions or market disruptions;
- enacts national action plans;
- enacts conditions for acquiring the status of privileged electricity generator and therefore the entitlement to receive state subsidies (see, for example, paragraph 3.4, Renewable Supplier Schemes).
- sets the incentive measures for renewable energy electricity generation;
- prescribes criteria, protection mode, conditions, deadlines and procedure for the establishment of protected energy consumer status9;
- replaces energy operators in case a licence is revoked;
- adopts measures on electricity shortage; and
- decides on public tenders for the construction of electricity generating stations.
3.1.5 The Ministry is responsible for implementing the energy policy as set by the government and the National Assembly and performs related administrative, regulatory and supervisory functions.
3.1.6 The Ministry prepares the Strategy’s Implementation Plan and the annual Energy Balance as well as drafting proposals for and enacting the regulations necessary for the implementation of energy laws. The Ministry is also in charge of issuing the energy permits required to comply with environmental protection regulation, as well as to construct new generating stations.
3.1.7 The Ministry monitors compliance with energy regulations through the Energy Inspectorate of the Republic of Serbia and supervises the design, construction and maintenance of the electricity generating stations as well as the quality of the electricity supply.
3.1.8 AERS is the key regulator and is responsible, amongst other things, for issuing licences, establishing tariff systems for the electricity prices and monitoring the application of these tariff systems. AERS also regulates the operation of the transmission and distribution networks including deciding on disputes in relation to third party access to such networks.
3.2 Key legislation
3.2.1 The electricity sector in Serbia is principally regulated by the Energy Law as supported by the legislation relating to real estate development (notably the Law on Planning and Construction10) and environment (notably, the Law on Environmental Protection11).
3.3 Regulatory framework
3.3.1 A licence is required from AERS for the generation, transmission, distribution and supply of electricity as well as for electricity trading. In relation to the generation of electricity, where the total installed capacity is no more than 1MW and such generation is for personal use, it is exempt from the licensing requirements.
3.3.2 Failing to obtain a licence is a misdemeanour subject to an administrative penalty. All licences are issued for a period of ten years except for the generation licenses which are issued for a period of 30 years. These may be renewed an unlimited number of times, provided that the request is submitted to AERS at least 30 days prior to the expiration of the current licence. The licence is not transferable.
3.3.3 To obtain a licence, an applicant must demonstrate that: (i) it is registered with the official commercial registry to carry out the relevant activity; (ii) it has sufficient funds or is capable of documenting its ability to acquire such funds; (iii) it possesses the technical capabilities guaranteeing the proper conduct of activities; (iv) its employees have the proper qualifications (as specified by the Energy Law); and (v) to the extent applicable, it has fully complied with relevant real estate, environmental and energy efficiency regulations. AERS may also require the applicant to provide security for third party claims due to improper performance under the licence including any environmental liabilities. Specific documents to be submitted are listed on AERS’s website.
3.3.4 Generally, the licence would be issued shortly before commercial operations commence i.e. when all real estate, environmental and regulatory requirements have been met. In principle, the licence should be granted within 30 days of application unless the legal or factual information in the application is incorrect, invalid or if such data has materially changed. Appeals in relation to licensing may be made to the Ministry and following this the applicant may initiate an administrative dispute before the court.
3.3.5 The AERS may amend or withdraw a licence upon its own or the Ministry’s initiative for reasons related to, for example, state security/defence or in the event of the licensee’s material breach of applicable regulations and/or licence obligations. The AERS must withdraw the licence if:
- the given enterprise has failed to undertake the activity within a specified period, despite being requested to do so, or has permanently discontinued the licensed activity or a court issues a final decision prohibiting the licensee to engage in the licensed activity; or
- a court issues a final decision prohibiting the licensee to engage in the licensed activity; or
- the licensee grossly violates the terms of a licence.
3.3.6 Real estate permits for the operation of the facility are usually needed from the Ministry and can generally be summarised in the categories set out in Table 1.
Table 1: Real estate permits
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3.3.7 In addition to the generation licence, a permit for the construction and ongoing operation of generating stations with a total installed capacity of more than 1MW (Energy Permit) is also required from the Ministry. The application for an Energy Permit must be accompanied by evidence demonstrating the applicant’s compliance with the following requirements:
- reliable and safe operation of the energy system;
- fulfilment of the energy efficiency standards;
- safety at work and protection of people and property; and
- environmental protection.
3.3.8 The Energy Permit is usually issued within 30 days of application and is valid for up to three years. The Energy Permit specifies certain terms and conditions to be met by the permit holder and its contractors throughout the construction/installation period as well as once the generation facility is up and running. The Energy Permit is not transferable.
3.3.9 The government may approve construction of a particular generating station outside the licensing regime if, in accordance with the Strategy and other policy acts, it considers that secure and continuous supply of electricity may not be achieved. In such a case, the government may acquire new generation by way of public tender specifying the location where the generating station is to be constructed, the type of generation, the manner of electricity transmission and any other relevant parameters.
3.3.10 The Commission for Protection of Competition (Commission) is responsible for all competition related matters in Serbia. As a general rule of Serbian competition law, the acquisition of the direct/indirect or sole/joint control of one market participant over another market participant represents a concentration in competition law terminology and must be notified to the Commission, provided that the turnover thresholds are met.
3.3.11 In particular, the concentration must be notified to the Commission if:
- the combined aggregate annual turnover of all parties to the concentration made on the worldwide market in the preceding year is above EUR 100m, provided that at least one party to the concentration has a turnover on the market of the Republic of Serbia of more than EUR 10m; or
- the combined aggregate annual turnover of at least two parties to the concentration made on the market of the Republic of Serbia in the preceding year is higher than EUR 20m, provided that at least two parties to the concentration have a turnover on the market of the Republic of Serbia of more than EUR 1m each.
3.3.12 The Commission must be notified within 15 days of: (i) conclusion of the agreement; (ii) announcement of the takeover bid; or (iii) acquisition of control, whichever the earliest. Activities in relation to the proposed merger would have to be suspended while the Commission examines the proposals.
3.3.13 Thus very few cases arise where energy companies are obliged to seek concentration approval, mainly due to the absence of a significant presence of private companies. Consequently, the relevant cases which arise are most frequently situations where the foreign energy companies have been subject to direct concentration outside of Serbia and, as a result of having subsidiaries in Serbia, have had an obligation to file for approval in Serbia as well12.
3.4 Support schemes
3.4.1 Serbia has significant potential to generate electricity from renewable energy sources (RES) consisting of 63% of biomass, 14% of hydro, 14% of solar, 5% of wind and 4% of geothermal energy. However, RES are not systematically and frequently used in Serbia at present. With a minimal number of generation stations for RES exploitation and insignificant annual production, Serbia is still struggling to realise its potentials.
3.4.2 However, to promote wider usage of RES in Serbia the Energy Law envisages categories of privileged electricity and heat generators including RES generators. So far, the relevant implementing regulations allowing for the application of state-subsidised mechanisms favouring RES generators have been adopted with respect to electricity generation.
3.4.3 RES generators that qualify for eligible generator status become entitled to feed-in-tariffs which are ultimately passed down to consumers. In order to benefit from the feed-in-tariff, the generator must enter into a power-purchase agreement with EPS as the buyer. The agreement is normally for a twelve year period although it may be unilaterally terminated by the generator on 30-days’ notice.
3.4.4 Current feed-in-tariff support levels range from 12.40 eurocents per kWh for hydro generating stations (up to 0.2MW) and 7.38 eurocents per kWh (from 10MW to 30MW), to 15.66 eurocents per kWh for biogas generating stations (up to 0.2MW) and 12.31 eurocents per kWh (over 1MW), to 9.20 eurocents per kWh for wind generating stations. Also, certain upper limits for using these incentives are legally set (i.e. the incentive measures apply until the total installed capacity reaches the value of (i) 10MW for solar generating stations, and (ii) 500MW for wind generating stations).
3.4.5 In addition, RES generators benefit from certain rights facilitating construction and operation of the generating station (e.g. no licence requirements for the construction of temporary structures to investigate the possibility of installing and using RES facilities, legal servitudes related to wind generating stations and simplified procedures for the construction of solar collectors and cells).
3.4.6 The new Law on Efficient Use of Energy13 (EE Law) has finally been adopted in Serbia and has become applicable as of 23 March 201314. The Law explicitly defines an ESCO company and sets the rules for ESCO projects generally in line with the EU acquis15, and aims to provide the overall legal framework for energy efficiency arrangements. The EE Law provisions relating to public financing and the energy efficiency projects incentive measures (see articles 57 to 62 of the EE Law), including the creation and operation of the Budget Fund for Energy Efficiency Improvement, were to become applicable from 1 January 2014. The EE Law stipulates that, depending on the subject-matter of the relevant by-law, all the by-laws required under it are to be adopted within eight to 18 months of the EE Law’s coming into effect (i.e. roughly by the end of 2014). At the moment, the said by-laws are in the early stages of drafting (some of them are being initially prepared by the working groups within the competent ministry) and these drafts are not currently publicly available.
3.5 Upcoming regulatory changes
3.5.1 The Government is currently working on several new policies including the Energy Development Strategy for 2025 and the National Renewables Action Plan. Subsequent to the adoption of these Acts, the overall content and extent of further reforms in the electricity sector will be better known. It is generally expected that renewables will be given higher importance in the overall Serbian electricity sector and that there will be further simplification of the processes to obtain licences.
3.5.2 Importantly, the draft new Energy Law is currently subject of public debate in Serbia involving major stakeholders in the market. The new law is expected to be adopted by the end of 2014 and generally bring the Serbian energy sector closer to the Third EU Energy Package.
3.5.3 Separately, further amendments to the by-laws supporting and/or further implementing the Energy Law (enacted in 2011) are expected, so as to bring into effect the much needed harmonisation of the Serbian secondary legislation with the current primary legislation. Also, it is expected that the new renewables regulations will introduce significant changes in the sector, including to the eligibility thresholds for feed-in tariffs for hydro generating stations and biomass generating stations (which are planned to move up from the current 10MW of installed capacity, to 30MW).
4. Country Statistics
4.1 Graphs and charts in this section show relevant statistical data relating to the Serbian electricity sector. All of the data is taken from the official AERS’ Annual Report for 2011.16
4.2 Energy market openness
4.2.1 Figure 1 shows a comparison between the openness in the electricity and natural gas markets in 2010 and 2011, and the expected openness for 2013 to 2016, as prescribed by the Energy Law.
Figure 1: Market openness (2010-2016)
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4.3 Generation, import and gross consumption of electricity in Serbia
4.3.1 Figure 2 provides data in relation to the generation, import and gross consumption of electricity in Serbia (without Kosovo) for 2005 to 2011.
Figure 2: Electricity generation, consumption and installed capacity (2006-2012)
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4.3.2 Table 1 provides details as to electricity generation and consumption of Serbia (excluding Kosovo) for 2005 to 2011:
Table 2: Electricity generation and consumption 2005-2011
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