Renewable energy sources (RES) have long been a prerequisite for energy, economic, and thus national stability, while the ongoing energy crisis has further highlighted the need for green investments. However, as the transformation of the energy sector is much more than just switching from fossil fuels to renewable energy sources, it is necessary to adjust the regulatory framework so that complicated procedures are avoided and potential investors can easily decide to build RES power plants in the future.
We talked with Peter Mitrović, a lawyer who heads the regional industrial group Energy and Natural Resources at the Karanović & Partners Law Firm, about how the legal framework regulating renewable energy sources can be improved in order to expedite and promote Serbia’s energy transition.
EP: You have been helping your clients to develop, implement and finance new energy projects with an emphasis on renewable energy sources. Since the green sector is still developing, what challenges do you face?
Petar Mitrović: At the moment, the key challenge is the unfinished regulatory framework for developing projects that use renewable energy sources. Experience from the previous period tells us that one of the critical factors for the implementation of such projects is adequate regulation, which is the result of a compromise of all key factors – those who make strategic directions and political decisions, system operators (first and foremost, transmission system operators), then investors and financiers. As of recent, this kind of compromise has been lacking. The conceptual divergence of the Ministry of Mining and Energy, as the creator of the Renewable Energy Sources Law, and the EMS resulted in the fact that, from April 2021 to date, we do not have a rounded regulatory framework for the development of renewable energy projects. And so, from a solid law, that everybody expected a lot from, we fell into a period of stagnation, and every stagnation is actually a regression. We still don’t know what the balancing system will look like.
The law provided some frameworks, but the by-laws that were supposed to be elaborated on were not adopted. Now, admittedly, we are increasingly hearing announcements that the law will be changed to prescribe that, even before the establishment of a liquid intraday market, producers of electricity from renewable sources will be fully responsible for the balance. Another unknown is how and under what circumstances new projects will be connected to the transmission system. The basic prerequisites for announcing an auction for awarding premiums to solar and other power plants, except for wind firms, have not been created. As for wind farms, the maximum “incentive” price is set but this is an incentive only for EPS, which certainly could not be the basic idea. The state has no influence over many circumstances, such as the war in Ukraine, overall inflation, rising financing costs and disruptions in the supply chain. However, if the key stakeholders agree on the strategic directions for the development of our power sector, and I think they are obliged to do so, then this challenge, arising from an incomplete regulatory framework, can be overcome.
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EP: If the unfinished regulatory framework is the main challenge or the main obstacle, how can you and your clients overcome it?
Petar Mitrović: The circle of opportunities has been narrowed down to constant appeals for the activities on this topic to finally start. Along with that, or perhaps better said within that, we have been making constructive suggestions through various professional associations regarding the direction that these activities should take. As far as other challenges go, by default, they differ from project to project. These include a lack of planning documentation, issues of environmental impact assessment, complicated and unresolved legal issues regarding ownership, delay in issuing various permits, unfounded requests and inconsistent practice of authorities. Yet, while the challenges are different, the answer is often the same – let’s find a compromise solution. Experience from previous projects, as well as experience from the region and Europe, helps a lot in this. But the key prerequisite is to listen to each other.
EP: Are you optimistic about the further development of RES projects in Serbia and the region, or do you think that because of the energy crisis we are slowly reverting to fossil fuels?
Petar Mitrović: I would say that the crisis did something completely opposite – that in the long term, it gave additional wind to the sails of the green transition. As never before, energy security has become an unquestionable prerequisite for national security. As a limited and short-term response to the crisis, decisions are occasionally made that could be interpreted as Europe reverting to fossil fuels, but I think that such an interpretation is deeply flawed and often extremely malicious. Relevant sources say that energy security in Europe can be ensured in the long run only through greater integration of renewable energy sources. And Europe will certainly not give up on that. We can see that the pace of activities in this segment is picking up. I would say that the same relates to Serbia. This does not mean that coal-fired power plants should be shut down tomorrow. But in the long run, there is no doubt that abandoning the green transition would cost us dearly, in terms of security, health and economics. Because of this, I am confident that a framework will be created in this country to foster the development of renewable energy projects on a larger scale than ever before.
Interviewed by: Milena Maglovski
Read the story in the new issue of the Energy portal Magazine RESPONSIBLE BUSINESS.
