February 2015 - On 30 December 2014, Serbia’s new Energy Law came into force with the main objectives of encouraging investments in the renewable energy sector and generally improving the Serbian energy sector’s regulatory framework by removing a number of obstacles contained in the previous energy law.
The new Energy Law further implements the EU’s Third Energy Package, thus making a step forward in harmonising Serbian law with the relevant EU framework in the energy sector. Certain provisions of the new Energy Law also aim at ensuring a better functioning of the process for issuing construction permits for energy assets, with a view to bring the Serbian energy law framework in line with important novelties introduced by the recent amendments to the Serbian Law on Planning and Construction.
Although the new Energy Law already formally started to apply, it will only gain full force and effect once the competent ministry has adopted a number of necessary additional bylaws and further regulations. The new Energy Law prescribes a period of one year from the day of its entry into force for the adoption of the necessary secondary legislation. In the meantime, the existing bylaws and regulations will continue to apply.
Below is a high-level overview of some of the main novelties introduced by the new legislation:
Substantially improved regulatory framework for renewable energy investments
- Improved bankability of power purchase agreements (PPA). The previous energy law provided that a so-called preliminary privileged power producer (a RES producer) may conclude a temporary power purchase agreement with an off-taker and only has the right to sign the final power purchase agreement upon having obtained the status of a so-called privileged power producer, which has represented a major obstacle in Serbia to securing financing for renewable energy projects. The new Energy Law addresses this concern by enabling the preliminary privileged power producer to conclude a power purchase agreement with the off-taker designated by law with the condition that such preliminary privileged power producer subsequently obtains, within a prescribed deadline, the final status of a privileged power producer. This new arrangement has already resulted in positive feedback by major investors and financiers and now the expectation is that the necessary detailed rules will be introduced shortly through the adoption of a bankable model PPA by the regulator.
- Improved rules regarding the status of a preliminary privileged power producer of electricity. According to the new Energy Law, the duration of the status of a preliminary privileged power producer of electricity in case of wind power projects is now three (3) years (in comparison with the previously applicable period of two (2) years), and it may be extended for an additional year. The same rule has now been introduced for hydroelectric power plants with the installed capacity of up to 30 MW, as well as biomass, biogas, waste, and geothermal power plants, for which such status has not existed pursuant to the previous energy law. At the same time, photovoltaic projects continue to be subject to the period of one year (potentially extendable for an additional year) in terms of the preliminary privileged power producer status.
- Possibility to finance and construct the grid connection infrastructure by the power plant or its electricity off-taker. Addressing another issue which has been critical in recent years in power plant development projects in Serbia, the new Energy Law now explicitly provides for an obligation of the electricity transmission system operator (TSO) to authorize the power plant owner or its contracted electricity off-taker (if they so request) to obtain the necessary permits and construct the power plant’s grid connection infrastructure at its own expense, on behalf and in the name of the TSO.
Introduction of the licence for wholesale supply of electricity
The new Serbian Energy Law introduces a new licence for the wholesale electricity supply, i.e. covering trading with electricity on the wholesale electricity market, except of course for the sale of electricity to end-consumers. The new electricity wholesale licence may be obtained by both domestic and foreign legal entities and it is valid for ten years.
Introduction of the trader change rules in the market for natural gas
Pursuant to the new Serbian Energy Law, all end-consumers of gas, also including households, now have the right to buy natural gas on the open market. However, households and smaller gas consumers (meaning gas consumers with annual consumption of up to 100,000 m3, whose gas usage facilities are connected to the distribution system of natural gas)continue to be entitled to public supply of natural gas at regulated prices, unless they opt for changing supplier.
For further information, please contact Kristóf Ferenczi, partner and head of Kinstellar's Energy practice, at +36 1 428 4471 or or Branislav Marić, partner, at +381 11 3210 201, , Zajednička advokatska kancelarija Marić & Mujezinović in cooperation with Kinstellar.
On 30 December 2014, Serbia’s new Energy Law came into force with the main objectives of encouraging
investments in the renewable energy sector and generally improving the Serbian energy sector’s
regulatory framework by removing a number of obstacles contained in the previous energy law.
The new Energy Law further implements the EU’s Third Energy Package, thus making a step forward in
harmonising Serbian law with the relevant EU framework in the energy sector. Certain provisions of the new
Energy Law also aim at ensuring a better functioning of the process for issuing construction permits for
energy assets, with a view to bring the Serbian energy law framework in line with important novelties introduced
by the recent amendments to the Serbian Law on Planning and Construction.
Although the new Energy Law already formally started to apply, it will only gain full force and effect once the
competent ministry has adopted a number of necessary additional bylaws and further regulations. The new
Energy Law prescribes a period of one year from the day of its entry into force for the adoption of the necessary
secondary legislation. In the meantime, the existing bylaws and regulations will continue to apply.
Below is a high-level overview of some of the main novelties introduced by the new legislation:
Substantially improved regulatory framework for renewable energy investments
Improved bankability of power purchase agreements (PPA). The previous energy law provided
that a so-called preliminary privileged power producer (a RES producer) may conclude a temporary
power purchase agreement with an off-taker and only has the right to sign the final power purchase
agreement upon having obtained the status of a so-called privileged power producer, which has
represented a major obstacle in Serbia to securing financing for renewable energy projects. The new
Energy Law addresses this concern by enabling the preliminary privileged power producer to
conclude a power purchase agreement with the off-taker designated by law with the condition that
such preliminary privileged power producer subsequently obtains, within a prescribed deadline, the
final status of a privileged power producer. This new arrangement has already resulted in positive
feedback by major investors and financiers and now the expectation is that the necessary detailed
rules will be introduced shortly through the adoption of a bankable model PPA by the regulator.
Improved rules regarding the status of a preliminary privileged power producer of electricity.
According to the new Energy Law, the duration of the status of a preliminary privileged power producer
of electricity in case of wind power projects is now three (3) years (in comparison with the previously
applicable period of two (2) years), and it may be extended for an additional year. The same rule has
now been introduced for hydroelectric power plants with the installed capacity of up to 30 MW, as well
as biomass, biogas, waste, and geothermal power plants, for which such status has not existed
pursuant to the previous energy law. At the same time, photovoltaic projects continue to be subject to
the period of one year (potentially extendable for an additional year) in terms of the preliminary
privileged power producer status.
Possibility to finance and construct the grid connection infrastructure by the power plant or
its electricity off-taker. Addressing another issue which has been critical in recent years in power
plant development projects in Serbia, the new Energy Law now explicitly provides for an obligation of
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the electricity transmission system operator (TSO) to authorize the power plant owner or its
contracted electricity off-taker (if they so request) to obtain the necessary permits and construct the
power plant’s grid connection infrastructure at its own expense, on behalf and in the name of the TSO.
Introduction of the licence for wholesale supply of electricity. The new Serbian Energy Law introduces
a new licence for the wholesale electricity supply, i.e. covering trading with electricity on the wholesale
electricity market, except of course for the sale of electricity to end-consumers. The new electricity wholesale
licence may be obtained by both domestic and foreign legal entities and it is valid for ten years.
Introduction of the trader change rules in the market for natural gas. Pursuant to the new Serbian Energy
Law, all end-consumers of gas, also including households, now have the right to buy natural gas on the open
market. However, households and smaller gas consumers (meaning gas consumers with annual consumption
of up to 100,000 m3, whose gas usage facilities are connected to the distribution system of natural gas)
continue to be entitled to public supply of natural gas at regulated prices, unless they opt for changing supplierOn 30 December 2014, Serbia’s new Energy Law came into force with the main objectives of encouraginginvestments in the renewable energy sector and generally improving the Serbian energy sector’sregulatory framework by removing a number of obstacles contained in the previous energy law.The new Energy Law further implements the EU’s Third Energy Package, thus making a step forward inharmonising Serbian law with the relevant EU framework in the energy sector. Certain provisions of the newEnergy Law also aim at ensuring a better functioning of the process for issuing construction permits forenergy assets, with a view to bring the Serbian energy law framework in line with important novelties introducedby the recent amendments to the Serbian Law on Planning and Construction.Although the new Energy Law already formally started to apply, it will only gain full force and effect once thecompetent ministry has adopted a number of necessary additional bylaws and further regulations. The newEnergy Law prescribes a period of one year from the day of its entry into force for the adoption of the necessarysecondary legislation. In the meantime, the existing bylaws and regulations will continue to apply.Below is a high-level overview of some of the main novelties introduced by the new legislation: Substantially improved regulatory framework for renewable energy investments Improved bankability of power purchase agreements (PPA). The previous energy law providedthat a so-called preliminary privileged power producer (a RES producer) may conclude a temporarypower purchase agreement with an off-taker and only has the right to sign the final power purchaseagreement upon having obtained the status of a so-called privileged power producer, which hasrepresented a major obstacle in Serbia to securing financing for renewable energy projects. The newEnergy Law addresses this concern by enabling the preliminary privileged power producer toconclude a power purchase agreement with the off-taker designated by law with the condition thatsuch preliminary privileged power producer subsequently obtains, within a prescribed deadline, thefinal status of a privileged power producer. This new arrangement has already resulted in positivefeedback by major investors and financiers and now the expectation is that the necessary detailedrules will be introduced shortly through the adoption of a bankable model PPA by the regulator. Improved rules regarding the status of a preliminary privileged power producer of electricity.According to the new Energy Law, the duration of the status of a preliminary privileged power producerof electricity in case of wind power projects is now three (3) years (in comparison with the previouslyapplicable period of two (2) years), and it may be extended for an additional year. The same rule hasnow been introduced for hydroelectric power plants with the installed capacity of up to 30 MW, as wellas biomass, biogas, waste, and geothermal power plants, for which such status has not existedpursuant to the previous energy law. At the same time, photovoltaic projects continue to be subject tothe period of one year (potentially extendable for an additional year) in terms of the preliminaryprivileged power producer status. Possibility to finance and construct the grid connection infrastructure by the power plant orits electricity off-taker. Addressing another issue which has been critical in recent years in powerplant development projects in Serbia, the new Energy Law now explicitly provides for an obligation of2the electricity transmission system operator (TSO) to authorize the power plant owner or itscontracted electricity off-taker (if they so request) to obtain the necessary permits and construct thepower plant’s grid connection infrastructure at its own expense, on behalf and in the name of the TSO. Introduction of the licence for wholesale supply of electricity. The new Serbian Energy Law introducesa new licence for the wholesale electricity supply, i.e. covering trading with electricity on the wholesaleelectricity market, except of course for the sale of electricity to end-consumers. The new electricity wholesalelicence may be obtained by both domestic and foreign legal entities and it is valid for ten years. Introduction of the trader change rules in the market for natural gas. Pursuant to the new Serbian EnergyLaw, all end-consumers of gas, also including households, now have the right to buy natural gas on the openmarket. However, households and smaller gas consumers (meaning gas consumers with annual consumptionof up to 100,000 m3, whose gas usage facilities are connected to the distribution system of natural gas)continue to be entitled to public supply of natural gas at regulated prices, unless they opt for changing supplier.