What are the short-term and the longterm priorities of the Serbian energy sector?
The first priority of the Government and the Ministry is to provide for secure, reliable, and quality supply of energy and its products. Long-term priorities – improving energy safety, developing energy market, increasing energy efficiency, increasing the use of the RES, and the application of the environmental protection measures in the operation of the energy sector, are defined by the Energy Sector Development Strategy of the Republic of Serbia by 2025 with projections until 2030, which was adopted in the Assembly in 2015. The Ministry prepared a proposal of a regulation setting out the Programme for the implementation of the Energy Sector Development Strategy for the period 2017-2023. This regulation is quite complex, because it represents a set of measures, projects, and activities in the coming period in all energy spheres: electric power, thermal energy, coal, oil, gas, renewable energy sources, energy efficiency, including the aspects of the environmental protection.
In the process of EU association, Serbia has a lot of obligations that it has to fulfil relative to Chapter 15, which pertains to energy sector. How close are we to the EU Directives in that area and what are the major obstacles?
The Law from 2014 fully transmits the provisions of the European legislation, that is, the third parcel of regulations has been implemented pertaining to the internal energy market. This has provided a basis for the development of the market, competition on the market, linking up of the market at the regional level, as well as to the common EU electric power market.
Adopted law introduced many changes in the energy sector. Since the day the Law has gone in effect, all end buyers of the electric power have a right to choose their supplier on the electric power market freely. In addition, foreign legal entities are enabled to perform energy activities – wholesale supplying of electric power without having to be founded or registered in the RS.
Also, the Law provided a basis for the establishing of the organised electric power market in Serbia, that is, SEEPEX ad was formed. One of the objectives is the merging of the markets between Serbia and Montenegro within the WB6 initiative and the implementation of the so-called “soft measures”, as well as the accession of the Serbian day-ahead market to the closest neighbouring EU initiative for the linking up of the markets, that is, the initiative known as 4M Market Coupling (4MMC), which comprises the Hungarian, Romanian, Czech, and Slovak markets.
When it comes to oil and gas, it is necessary to implement two key activities in order to open Chapter 15 – Energy. These include establishing mandatory reserves of oil and reorganization of PE Srbijagas. In case of mandatory reserves, this practically means that, pursuant to Directive 119/2009/ EC, it is necessary to establish reserves equalling 90 days of net import, or 61 days of average daily consumption, depending on which amount is greater.
For Serbia, this obligation amounts to 460 thousand tons of oil and oil derivatives, which must be kept as reserves.
The Energy Law from 2014 provided for the establishing of the Department of Energy Products Reserves, as administration body within the Ministry competent for energy affairs, which has implemented to date a whole range of activities related to the provision, forming, and maintaining of the mandatory reserves, while at the same time, through the implementation of our plans in the coming years, we strive to fulfil the international obligations we have undertaken through the end of 2022. The development of the Action Plan to Establish the Mandatory Reserves is underway, which is one of the criteria for the opening of Chapter 15 – Energy.
I’d say that RES are among the greatest obstacles to full implementation of the Directive, due to the fact that Serbia has been quite late in promoting the use of renewable energy sources, resulting in its having to take a cautious and careful approach in adopting European regulations and standards, which are based on European experience of many years. In addition, achieving binding targets in the area of RES is mostly contingent upon the activities of the private sector. The state’s impact is reflected only in regulatory mechanisms and it may not have a direct influence on introducing investments in this area.
The Ministry of Mining and Energy prepared a proposal of the regulation setting out the Implementation Program of the Energy Sector Development Strategy for the period 2017-2023. This regulation is quite complex, because it represents a set of measures, projects, and activities in the coming period in all energy spheres
The EU insists on the protection of the indigent population from expensive energy and its products. How many indigent households in Serbia managed to achieve the benefits in paying the bills, in other words, how many of them get free power and gas? What are the effects of the social energy cards?
The total number of households who are enjoying the right to reduction of their electric power or natural gas bills, according to the latest data from June 2017, has been 70,260. For this purpose, a total of about 95 million Dinars (95,637,843.00) has been earmarked in the Budget at the monthly level.
The households may submit requests to acquire the status of indigent end buyer during the entire course of the year in the local selfgovernment units, while the status is acquired upon meeting the requirements set forth in the Regulation on Indigent Energy End Buyer. One of the requirements for complete deregulation of the electric power market in RS is the achieved level of the protection of the indigent end buyers. At the moment, that level is not high enough, as compared to the potentially energy indigent households. I would like to take this opportunity to appeal, once again, to all households to get information from their respective local self-governments about the requirements for obtaining the status of the indigent end buyer. The information is also available on the Ministry’s website.
The Government, as well as the IMF and the World Bank, request that energy companies, EPS, Srbijagas, and Resavica accelerate the reforms. What is the current status of their reorganisations?
The reforms that the Government, the IMF, and the World Bank request are being successfully implemented.
In cooperation with the World Bank, and in in accordance with the obligations to the IMF undertaken by Serbia, a Financial Consolidation Plan of the PE EPS was brought, defining the guidelines and measures for resolving problems, aimed at enhancing the profitability of the enterprises, which will be able to live up to market challenges in both quantity and price via rationalisation of their business operations, new investments, and solving their financial problems.
In 2016, the process of reorganisation of the PE EPS has continued, reflecting in two status changes: in January 2016 it was the status change of separating a part of the property and liabilities from the ODS and merging to the PE EPS, and on 1 June 2016 there was a status change of merging the subsidiary company for the electric power supply to the end buyers “EPS Snabdevanje” d.o.o. Belgrade to the Public Enterprise “Elektroprivreda Srbije”. One of the objectives set out in the Plan is the optimising of the number of employees. Beside the aforementioned, resolving the property rights pertaining to the real estate of both PE EPS and their subsidiary company ODS EPS Distribucija, which is also included in the Plan, regarding which the Government has passed several conclusions, and further activities pertaining to resolving property rights regarding real estate not comprised in passed conclusions are underway.
Also, in PE EPS the assessment of the value of the property and the capital is underway. Finally, the purpose of fulfilling all of the aforementioned is to change the legal form of the PE EPS to joint-stock company.
In the sphere of gas, a number of steps have been undertaken to reduce registering loss by the PE Srbijagas, such as passing the Financial Consolidation Plan for this public enterprise, as well as reduction of financial risks for the delivered natural gas by raising the level of securing payments from all companies, including the enterprises undergoing restructuring.
The focus of these reforms has also been on the investment program implemented by the PE Srbijagas, which is being assessed from both standpoint of financial feasibility and standpoint of total contribution of this program to life and work of the population and economy in the RS.
The Government is putting considerable efforts in creating conditions for the privatisation of the strategically important companies which are key consumers of the natural gas, in which PE Srbijagas has ownership share based on its claims.
The privatisation of these companies would help direct the focus of the operations of the PE Srbijagas exclusively toward the provision of the conditions for a secure supply of natural gas to the market of Serbia. The good direction in the implementation of the reforms has been confirmed by several revisions of the Precautionary Arrangements with the IMF, which received favourable assessments.
Renewable energy sources are among the greatest obstacles to full implementation of the EU Directive, due to the fact that Serbia has been quite late in promoting the use of renewable energy sources
Serbia plans to connect to the Turkish Stream pipeline. Also, the EU insists on constructing gas interconnection to Bulgaria, NIŠ – Sofia pipeline. Can you tell us about the current status of these projects?
One of the priority projects providing the connection of the Serbia’s pipeline system to the neighbouring countries is the construction of Niš-Dimitrovgrad pipeline. The planned capacity of the pipeline is 1.8 billion m3, which would practically satisfy the current Serbian needs for this energy product.
Memorandum of Implementation of the Priority Projects for the Region, signed by all ministries of energy of the regional countries, including the European Commission, on 10 July 2015 in Dubrovnik recognized gas interconnection Serbia – Bulgaria as one of the six priority projects for the EU and the region. This interconnection is at the second place on the list of priority projects.
There’s permanent coordination between the line ministries and the system operators JP Srbijagas and BULGARTRANSGAZ. The Government of the Republic of Bulgaria earmarked €60 million from the non-repayable European funds for the implementation of the Bulgarian section. The Memorandum of Understanding for the Construction of the Gas Interconnector Bulgaria – Serbia Project between the Government of the Republic of Serbia and the Government of the Republic of Bulgaria was signed on 19 January 2017 in Sofia.
At the end of 2016, the Spatial Plan of the Special Purpose Area of the Infrastructure Corridor of the Main Pipeline Niš-Dimitrovgrad was adopted, with elements of detailed regulation. For the purpose of the implementation of the project, as proposed by the Ministry of Mining and Energy, the Law on the Budget of the Republic of Serbia for 2017 has provided the funds for the expropriation of land.
The financing of the Serbia-Bulgaria Gas Interconnection Project from IPA 2017 has been proposed, with expected non-repayable aid amounting to €49.6 million. The total investment value of the project is circa €85.5 million. PE Srbijagas developed a Dynamic Plan for the Implementation of the Project, which is being updated and which would be applicable if the necessary financial means are provided by the EU for the implementation of the project.