Danijela Isailovic, the Manager of Renewable Energy Sources of Serbia Association – Red Alarm for Green Energy

Danijela Isailovic, the manager of the Renewable Energy Sources of Serbia Association (RES Serbia), which, as per her words, links the private sector, international financial institutions and the Serbian government, discussed the following topics with eKapija – what the biggest obstacles are to producing more energy from the renewable energy sources in Serbia and why this is a paradox, what the priorities are in the development of the national energy system, what is in store for prosumers – both businesses and households – and how lawmakers can help them.

eKapija: Who are the associates of Renewable Energy Sources of Serbia Association? What is the relationship between domestic and foreign capital among Association`s members?

– In little over two years, Association RES Serbia has become a respectable player among organizations and a distinct industry voice that gathers the largest and most important green energy producers. From an organization that began with three founding members (the largest operational wind farms in Serbia – Cibuk 1, Kovacica and Alibunar), we became an association that brings together 20 regular and 12 associate members. Apart from the biggest wind farms with the total capacity of 312 MW, the largest solar energy producers, biogas power plants and electric companies, one of our members is the PU Elektroprivreda Srbije, meaning that our members produce more than 3GW of green energy, or over 95% of electricity from renewable energy sources in Serbia. European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) have also joined us, which proves we are creating not only the synergy of green energies, but a set of all positive factors from private and public sectors as well as the international financial institutions. Regarding the relationship between the foreign and domestic capital, if we exclude the undeniable value of EPS then we can say that foreign companies have invested considerable more in Serbia but also have that much more responsibility. However, the number of domestic companies in the RES sector is rising, and some of the members are companies that own solar power plants, wood pellets producers which are also the biggest prosumers and of course, electric companies. There is a good balance of domestic member-companies and companies registered in Serbia with foreign ownership.

eKapija: What are the main goals of the Association?

– Association`s goals are defined by our founding policies and they haven`t changed, but we refine them regularly, thus setting greater objectives for ourselves conforming to the needs of the society and energy transition. Our primal goal is to improve the public-private dialogue, normative framework and the investment environment in order to get more green energy and to make green transition a moderate, lasting and an equitable process. Being connected to all the major players from the private sector through our member network and other contacts and,at the same time, having excellent relationship with the government institutions that we often support and provide with information and understanding, makes us the link between the private sector, international financial institutions and the government. Only the synergy of all those factors and the wider public support can help us make meaningful steps in the energy transition and contribute more green megawatts to the network. We get the public support by organizing educational workshops for all ages and population groups, panel discussions and conferences and we are specially proud of our inclusive activities largely aimed at women and the young population. We try to convey to them the possibilities of the renewable energies sector as well as the ecological, energy and economic potential of the renewable energy sources.

Kovacica wind farm opened in 2019

eKapija: When it comes to the general interest, what is the Association`s stance on the necessary steps in the development of the electric power system? What are the priorities? Does the Association think that investing in other energy sources, such as nuclear power, on the national level undermines the realization of its goals?

– Investing in and developing the energy power infrastructure is one of the priorities for Serbia. In that sense, it is crucial to invest in building and maintaining the transmission and energy supply systems so the network could accept more solar power plants and wind farms. The Trans-Balkan Electricity Corridor is an excellent example of a project whose realization will enable the connection to the transmission system of the surrounding countries and the bigger integration of the renewable-energy power systems. The project is financially endorsed by the EU, whose representatives announced at our events how pleased they were with how EMS was managing this project which the Energy Community and the EU recognized as the project of interest within the “Clean Energy” investment window. Of course, the construction of pumped-storage hydropower plants such as Bistrica and Djerdap 3,which are extremely important to the integration of new renewable energy sources capacities and balancing, should be the priority. The good news is that PU EPS is building the Kostolac wind farm and is planning the construction of Petka solar power plant.

Regarding your nuclear energy question, we don`t see it as a threat to the renewable energy sector, because diversification means considering all options for the electric energy supply. In times of energy challenges we have to have several options and plans, especially considering that the development and construction of large power plants often lasts over a decade.

It will sound like a paradox, but currently, we think that the renewable energy sector poses the biggest risk for achieving goals and increasing the production of power from renewable energy sources. Namely, in the last two years Serbia has witnessed the hyperproduction of projects and the massive number of requests for connecting to the network, which has overloaded the transmission network operator, hindered the completion of the RES legislation and postponed the auctions. EMS received a large number of request for network connection from potential solar power systems and wind farms with the total power of around 19 GW. That`s two and a half times more capacity that the Serbian electric energy system manages, and which includes thermal power plants, large hydropower plants and wind farms. It is perfectly clear that we don`t need that many new power plants, nor can we manage it.

eKapija: Why did this happen and what are the possible solutions?

– The Law on the Use of Renewable Energy Sources was a good bait for numerous foreign and domestic investors, both genuine and those who were looking to secure a space or a position on the network and then sell it to a domestic or a foreign investors who really has the funds to invest in it. None of this is illegal, it happened in other countries in the region. But it`s also not good for the safe development of the renewable energy sources or the entire system. The problem lies in the fact that everyone can send a request for a network connection and the EMS has to treat all requests equally even though they are aware that applicants which lack built facilities, employees and offices or aren`t part of a foreign group definitely won`t develop and build projects worth 300 million euros. Still, to EMS, every applicant has the same status and is viewed as project in the pipeline.

I believe that the amendments to the Law on the Use of Renewable Energy Sources, which the Parliament is discussing right as you are interviewing me, will help cull the herd, whereas the market will stabilize the moment stricter rules are introduced and investors have to provide bank guarantees or other financial instruments to secure their place on the network. Thus, the investors will ensure their power plants, and the government will know when and how many MW it can expect. Stricter rules would help crystallize serious investors ready to invest in Serbia and build power plants that they would manage for decades to come, and eliminate those that view Serbia as a transit station and an opportunity for quick and easy profit.

eKapija: The changes to the Law on RES are currently underway. Are the proposed amendments fundamental or superficial? What does the process seem like to you?

– The new changes will surely bring fundamental changes to the renewable energy sector, since they are expected to bring new projects after the first auctions this year and probably the new auction cycle in the following year as well.

Having in mind that the renewable energy power plants project realization lasted for a long time and thus slowed down the whole process, the said amendments are expected to pave the way for the realization of new projects in a manner that will gratify the most important actors in this process, namely the transmission system operator, Elektroprivreda Srbije, the Ministry of Mining and Energy, investors, and above all, the citizens of the Republic of Serbia.

We have to point out that the changes to the Law are carried out in a transparent and steadfast process where absolutely all organizations, companies, legal and natural persons were, in a statement published on the Ministry`s website, called to submit their comments for the public hearing within a reasonable time. It is commendable that all comments have been published in the public hearing report on the website of the Ministry of Mining and Energy. The report showed which organizations and institutions are interested and ready to provide comments and contribute to improving the legislative framework and which comments the Ministry found acceptable. I hope the transparency in operations will be carried over to the process of adopting subordinate legislation crucial for the implementation of the law.

eKapija: RES Serbia was active during the public hearing and provided comments on the proposed changes to the Law on the Use of RES. Which important propositions that your association submitted were accepted and which weren`t?

– The Association RES Serbia has provided a number of comments in the public hearing on the draft Law according to instructions and comments from our members that were interested in submitting their proposals. By accepting certain comments, the Ministry of Mining and Energy sent the message that it clearly supports the continued development of power plants that are fueled by renewable energy sources. The most significant comment adopted states that if the Study of connection to the transmission grid ( prepared and adopted by the transmission system operator, in accordance with the Energy Law ) shows that there is a need to design additional energy storage facilities, those projects will be prioritized when it comes to network connections over other projects. This means that projects that provide additional storage will not have to wait to be connected to the grid.

To clarify, the transmission operator has received requests to connect renewable energy power systems with around 19 GW to the grid, which is absolutely unacceptable and superfluous. Nevertheless, not all will be eliminated. Instead, investors with adequate knowledge and expertise will be able to realize their projects provided they also have storage facilities. The obligatory electricity storage will, naturally, increase the price of project realization per a MW installed. As far as rejected comments go, we believe that the proposer has their reasons for refusal, so we don`t want to publicly comment on it because we like to look forward. We all have an interest to unblock the investment process as soon as possible and to subsequently organize new auctions with sufficiently attractive and competitive maximum prices.

I have to mention that the costs of raw materials, equipment, logistics, transport for wind farms and solar power plants as well as the costs of construction works, financing and projects insurance costs have drastically increased. There are still big problems in the supply chain. All of this indicates that investors will find it worthwhile to participate in auctions if the Serbian government offers a sufficiently attractive and competitive price. Unfortunately, we missed out on the period of low RES investment prices, there was no construction during that period and now we are facing hardships and financial challenges like the investors in most European countries. This is corroborated by the latest WindEurope report that states that in 2022 only EUR 17 billion was invested for 16 GW of new wind, the lowest amount invested since 2008. In order to reach energy and climate targets, it is necessary that Europe builds 30 GW a year of new wind, which, in current conditions, is almost impossible.

eKapija: The draft Act on amendments to the Law on the Use of RES stipulates that only producers in the incentives programme will be able to take over the balance responsibility. The right to priority access is limited to facilities up to 400 kW and starting from January 1, 2026 to facilities up to 200 kW, in line with the EU practices and legislation. Are you happy with those changes? What will that actually look like in practice?

– We are all aware that assuming balance responsibility is inevitable and our members have been preparing for years for that obligation. This sort of this isn`t anything new to the participants in this field, rather it`s a logical sequence of events in adjusting our laws to the EU practices and regulations. We consider keeping the priority access for small power plants an optimistic outcome that will encourage investors to develop “smaller” projects as well. Setting up solar power system on rooftops of buildings, houses and in less accessible locations increases energy efficiency that we all strive for. The contribution of each and every renewable energy power plant is obvious because every installed megawatt will successfully replace and reduce the electricity production in thermal power plants, which is precisely our end-goal – using energy from renewable energy source for the healthier life of all of us.

eKapija: What are the new regulations regarding prosumers and does the Law create favorable conditions for boosting their numbers?

– The first draft of the amendments to the Law limits the installed power for buyers-producers to 5 MW for legal entities and 10.8 kW for households and this was proposed by the transmission system operator. This limit was caused by a high number of potential prosumers (as much as 2 GW) requesting connections to the grid. Unfortunately, as well as in the case of large power plants with over 10 GW in capacity, there were also unfounded prosumer requests that overloaded Elektrodistribucija which asked for the limit to be imposed. Many organizations and companies rallied against this saying that the prosumer concept is being devalued, especially concerning a part of the industry, having in mind factories and industrial facilities that want to produce electric power on their own rooftops for their own needs. We got the exclusive information that counters this during the energy panel that I moderated in the Western Balkans-Spain Multilateral Opportunities Days conference that said the Ministry will accept many appeals, so I think there is a reason for prosumers to be satisifed that the limit will be changed to 10.8 kW for households and 5MW for legal entities. Of course, not until the changes to the Law are published in Sluzbeni Glasnik RS can we talk about the merit of this interim solution.

We certainly have to find a permanent solution. We have discussed this issue with NALED representatives that wanted to hear our member`s opinions and potential solutions. It seems that the proposition that Milos Kostic, the General Manager of MT Komex, a member of RES Serbia and leader in the solar power sector, put forward to introduce high-value bank guarantees for prosumers who request the transmission system operator to connect them to the grid, is the most rational one. That would, of course, only be applied to legal entities, not households.

eKapija: Aside from the amendments to the Law, what activities will the Association participate in until the end of the year?

– As we`ve already mentioned, we have secondary legislation coming up followed by the auctions. We are also expecting the adoption of the three-year auction plan which will define how much electric power from the renewable energy sources by 2030 Serbia wants and plans for. As an association, we will actively participate in those processes. This will be routinely discussed in our OIE SERBIA 2023 conference that will take place on September 14, and in any case, we are preparing a series of other events that will include all relevant parties from the public sphere. We remain a synergy of good, renewable energy.

M. Radonjic – eKapija