Serbia: New Draft Energy Law – Shortcut to Investment and Innovation
January 2021 – On 20 January 2021, the Serbian Ministry of Mining and Energy published a long-awaited draft of the Law on Amendments to the Energy Law (“Draft Energy Law”), together with the call for public consultation, which runs from 21 January to 9 February 2021. According to a press statement of the Minister of Mining and Energy, this will be an important year for the energy market in Serbia due to the planned adoption of several new laws in the energy and mining sectors. In addition to the Draft Energy Law, the Ministry of Mining and Energy has also published a draft Law on Energy Efficiency and the Rational Use of Energy, a draft Law on Amendments to the Law on Mining and Geological Explorations, and a draft Law on Renewable Energy Resources. The Serbian government is also planning to reorganise certain public enterprises active in the energy sector and to launch a new energy investment plan.
According to the published explanatory notes to the Draft Energy Law, its purpose is to transpose the remaining EU acquis in the fields of electricity and natural gas, following numerous decisions and recommendations of the Energy Community in this area. It is expected that the proposed changes to Serbia’s existing legal framework will facilitate new investments, which, according to relevant public sources, include a EUR 350 million investment over the following three years in Serbia’s distribution network; work on the Niš–Dimitrovgrad gas interconnector; planned interconnections to Romania, Bosnia and Herzegovina, Croatia, and Montenegro; as well as construction of the Trans-Balkan Power Corridor, which would connect the electricity transmission systems of the entire region and put Serbia on the map as the main corridor for energy transmission.
Below is an overview of the key novelties and amendments introduced by the Draft Energy Law.
Regulation of renewables is excluded from the Draft Energy Law
For the first time, renewable energy is completely excluded from this framework law regulating energy and will be separately regulated in a new Law on Renewable Energy Resources, which is expected to be introduced as a part of the same legislative package.
Enumeration of energy activities as strategic projects
The Draft Energy Law lists energy activities in the fields of electricity, oil and natural gas that represent strategic energy projects, the development and interoperability of which will be further regulated pursuant to the bylaws to be adopted by the Serbian government. Based on previous experience on the Serbian market, it is expected that the categorisation of these activities as strategic energy projects has been introduced with the aim to enable the Serbian government to act quickly and adopt separate ad hoc rules as deemed necessary for the purpose of developing the specific strategic energy project. Pursuant to the Draft Energy Law, the following energy projects are designated as strategic:
- electricity: (i) electricity power lines with voltage of 110 kV or higher; (ii) electricity storage; (iii) equipment and installations needed for secure, reliable and efficient operation of the aforementioned systems; and (iv) equipment and installations in transmission and distribution systems that enable real-time, two-way digital communication;
- gas: (i) gas pipelines for the transport of natural gas and biogas that are part of the transmission system; (ii) underground storage of natural gas connected with the aforementioned gas pipelines; (iii) facilities for the reception, storage, re-gasification and decompression of liquefied natural gas (LNG) or compressed natural gas; (iv) equipment and installations needed for secure, reliable and efficient operation of the aforementioned systems or that enable two-way transmission of natural gas, including compressor stations;
- oil: (i) oil pipelines for the transport of crude oil; (ii) pump stations and storage needed for the operation of oil pipelines; (iii) equipment and installations needed for secure, reliable and efficient operation of the aforementioned systems, including systems for protection, supervision and management, as well as devices for two-way transport.
Public interest for expropriation
The Draft Energy Law determines public interest for the expropriation, administrative transfer and incomplete expropriation of immovable assets for the purpose of the construction of line infrastructure objects (electricity power lines, oil pipelines, gas pipelines and products pipelines), as well as objects that support the function of the aforementioned objects and connections to such objects, in accordance with the valid documents relevant for the construction of such objects. In case the construction of the relevant line infrastructure object is not envisaged by the current planning documents, an urban planning project may be prepared for the purpose of determining public interest without the need to change the existing planning documents, except for the determination of the public interest in so-called protected zones.
The public interest is determined by a decision of the Serbian government on a case-by-case basis pursuant to the proposal of the Ministry of Mining and Energy. Public interest for the expropriation, administrative transfer and incomplete expropriation of immovable assets for the purpose of the construction of line infrastructure objects is valid until the use permit for the relevant objects is obtained.
Wholesale supply in natural gas enabled for foreign entities
The Draft Energy Law defines the wholesale supply of natural gas as an energy activity that may be undertaken either by either a domestic or foreign entity that has obtained an energy license. Together with the wholesale supply of electricity, the wholesale supply of natural gas is the only energy activity available to foreign-established entities. The necessary energy license is valid for 10 years.
Regulation of “new” fuels – LNG and hydrogen
The Draft Energy Law explicitly regulates LNG and hydrogen and enables trading in such fuels, provided that they comply with the prescribed technical requirements. Although trading in LNG and hydrogen are defined as energy activities, a license is not required for such trade.
Defining smart meters
Although the basic framework for implementation of smart meters is contained in the current Energy Law, a smart metering system is now defined as an electronic system comprised of advanced measuring devices to measure the flow of energy and natural gas; as a subsystem for transmission, storage, processing and analysis; and as a central control subsystem to allow communication with advanced measuring devices using some form of electronic communication. The Serbian Energy Agency will be in charge of determining the technical conditions for the introduction of smart meters as well as the need for their implementation on the market.
Introduction of Integrated National Energy and Climate Plan
Pursuant to the Draft Energy Law, the Ministry for Mining and Energy is to prepare an Integrated National Energy and Climate Plan in coordination with other competent ministries, which will define, among others, the national goals related to decarbonisation in relation to greenhouse gas emissions and renewables, energy efficiency, energy security, research, innovations and competition. The Ministry for Mining and Energy is in charge of implementing this plan and is obliged to report on its progress to the Serbian government every two years. The Ministry is also obliged to inform the Secretariat of the Energy Community on the adoption of Serbia’s National Energy and Climate Plan and to deliver a progress report to the Secretariat. It appears that the institutionalisation of these obligations will contribute to Serbia’s more efficient implementation of the requirements imposed by the Energy Community.
Nominated operator of the electricity market (NEMO)
For the purpose of regulating the connection of the organised electricity market with neighbouring markets, a nominated operator of the electricity market is determined as a new subject in charge of the implementation of the day-ahead and intraday electricity markets with other neighbouring organised markets. The nominated operator of the electricity market is appointed on the basis of the decision of the Serbian Energy Agency. An electricity market operator with its registered seat in the European Union or European Community may be appointed as an operator of the electricity market in Serbia under the condition of reciprocity, following the expiration of four years as from the date of entry into force of the law, and/or when the Serbian Energy Agency determines that the conditions are met for having more nominated operators of the electricity market.
Additional competencies of the Energy Agency
The Draft Energy Law significantly increases the scope of work of the Serbian Energy Agency, introducing both day-to-day and additional regulatory competencies for it. For example, the Energy Agency will be additionally in charge of the transposition of EU acquis related to the adoption of the transmission and distribution grid connection rules; the adoption of the methodology and criteria for the assessment of investments in infrastructure projects in the area of electricity and natural gas; and will also have the ability to temporarily revoke the energy license of an energy subject on its own authority, if the energy subject no longer fulfils the relevant conditions on the basis of which its license was obtained or in case the energy subject does not notify the Serbian Energy Agency of any important changes relevant for its license.
For further information please contact Branislav Marić, Partner, at , and Tijana Arsenijević, Senior Associate, at .