EU ACCESSION PROCESS Republic of Serbia MINISTRY OF ENERGY,DEVELOPMENT AND ENVIRONMENTAL PROTECTION ENERGY SECTOR IN SERBIA AND EU ACCESSION PROCESS Belgrade, 15 April 2013.

UPDATE ON SERBIA’S ENERGY FIGURES National Energy Balance Energy system of the Republic of Serbia consists of the following sectors: Oil sector Natural gas sector Coal sector Power sector Direct heating systems Industrial energy system Ministry of Energy, Development and Environmental protection 2

UPDATE ON SERBIA’S ENERGY STRATEGY The energy balance of the Republic of Serbia for 2011 contains data about the annual production, stocks, imports, exports, transformation and consumption of electricity, heat power, coal, oil and oil derivatives, natural gas, geothermal energy and firewood. The balance does not entirely present the use of renewable energy sources. Within the activities of the Energy Community in the area of renewable energy sources and due to the lack of reliable information, research on biomass consumption was conducted for all Contracting Parties to the Treaty Establishing Energy Community, for periods 2009 and 2010, based on which results the targets in the area of renewable energy sources were defined for each Contracting Party to the Treaty. Based on this research, projections for biomass consumption are made for the needs of the new Energy Sector Development Strategy of the Republic of Serbia, but also for the needs of the preparation of the new energy balance. Ministry of Energy, Development and Environmental protection

UPDATE ON SERBIA’S ENERGY FIGURES Production of primary energy includes exploitation and/or use of domestic resources of coal, crude oil, natural gas and renewable energy sources (hydro-potential, geothermal energy and biomass). In Serbia in 2011, 11.163 Mtoe of primary energy was produced (70% of the total primary energy needs). Structure of the domestic primary energy : - production of coal makes 7.823 Mtoe - remaining portion : production of crude oil, hydro-potential, firewood and natural gas. The total consumption of primary energy in 2011 was 16.192 Mtoe. Serbia’s import dependence in 2011 - 30.28%. 2011 import: - crude oil and oil derivatives - 52%, - natural gas - 24% - coal - 14%. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Figure 1. Structure of primary energy production by energy-generating products in Serbia in 2011 Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Figure 2. Share of energy products in the total consumption of primary energy Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Figure 3. Breakdown of final energy consumption for energy purposes by energy consumption sectors Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Figure 4. Share of energy-generating products in total final energy consumption for energy needs in 2011 Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection STRATEGIC FRAMEWORK Energy policy of the Republic of Serbia is defined, according to the Energy Law, through three main documents: Energy Sector Development Strategy; Strategy Implementation Programme; Energy Balance. The Energy Sector Development Strategy was adopted at the National Parliament in 2005 and it defines long-term objectives of the development and its priorities. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection STRATEGIC FRAMEWORK The Strategy Implementation Programme Prepared for the period from 2007 to 2012; Adopted in January 2007; amendments adopted in 2009 and 2010. The Strategy Implementation Programme defines all measures, activities and projects which need to be implemented in all segments of the energy sector, including environmental protection, with a view to achieving the objectives defined in the Strategy. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection STRATEGIC FRAMEWORK The energy balance of the Republic of Serbia: Prepared every year. Covers energy flows in the period of three years: realization of the previous year’s balance, estimation of the situation in the current year and plan for the following year. Adopted by the Government of the Republic of Serbia at the proposal of the Ministry of Energy, Development and Environmental Protection. Preparation of the new Energy Sector Development Strategy of the Republic of Serbia by 2025, with projections by 2030 is under way. This Strategy will define new directions of development in line with the activities and obligations arising from the Treaty Establishing the Energy Community and EU accession process. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Alignment to and implementation of the Energy Community Treaty obligations 10th Ministerial Council of the Energy Community (October 2012) adopted: Decision on implementation of Directive 2009/28/EC (mandatory target has been set for the Republic of Serbia of RES 27 % in its gross final energy consumption by 2020); Decision on implementation of Directive 119/2009/EC (imposing an obligation on Contracting parties to maintain minimum stocks of crude oil and/or petroleum products by January 1, 2023 at the latest); Decision on implementation of Regulation (EC) No. 1099/2008 of October 22, 2008 on energy statistics and Directive 2008/92/EC of October 22, 2008 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users, (deadline for implementation December 31, 2013; Energy Strategy of the Energy Community. Ministry of Energy, Development and Environmental protection

Internal gas and electricity market Energy Law adopted in August 2011, is fully harmonised with the: provisions of the Directive 2003/55/EC of the European Parliament and of the Council concerning the common rules for the internal market in natural gas, Regulation (EC) No. 1775/2005 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks and the Council Directive 2004/67/EC concerning measures to safeguard security of natural gas supply.. provisions of the Directive No. 2003/54/EC concerning rules for internal market in electricity, Directive No. 2005/89/EC concerning measures to safeguard security of electricity supply and infrastructure investment and Regulation (EC) No. 1228/2003 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity. New Energy Law prescribed deadlines for market opening in Serbia. Ministry of Energy, Development and Environmental protection

Internal gas and electricity market Gradual opening starts on January 1, 2013 and finishes on January 1, 2015 with full market opening. Market code has been issued by Serbian Transmission System Operator and approved by Energy Agency and came into force on January 1, 2013. Grid Code on natural gas is under preparation This Law creates the conditions for safe, quality and reliable electricity supply, balanced development of electricity sector with a view to providing the required quantities of electricity for meeting customers' needs, improving market competitiveness on the principles of non-discrimination, developing electricity infrastructure and introducing modern technologies and establishing transparent, attractive and stable conditions for investment in construction, reconstruction and modernisation of energy facilities, protection of buyers and use of renewable energy sources. Preparation of related by-laws is under way. Ministry of Energy, Development and Environmental protection

Internal gas and electricity market Public Enterprise “Electric Power Industry of Serbia” (PE EPS) - In compliance with the Energy Law. PE EPS will supply electricity buyers whose properties are connected to the transmission system and who have lost electricity supply at the regulated prices, but have not yet chosen the supplier in the period from January 1 to January 31, 2013. This Decision is adopted as one of the measures towards opening of the electricity market in the Republic of Serbia. Ministry of Energy, Development and Environmental protection

Internal gas and electricity market Functions of Integrated IT System for market functions of Serbian Transmission System Operator : Scheduling (bilateral market) Balance responsible party / Customers management Settlement Balancing Tracking (balancing mechanism) Full balance management Capacity allocation Ministry of Energy, Development and Environmental protection

Update on the restructuring of the energy companies Restructuring of the energy companies - According to the provisions of the Energy Law; Public Enterprise “Srbijagas” - under IPA 2010, which is presently implemented, will result in the proposal for restructuring PE “Srbijagas; “Yugorosgaz” a.d. (joint stock company), - in the process of separating the activity of natural gas transport from other energy activities. Ministry of Energy, Development and Environmental protection 17

Ministry of Energy, Development and Environmental protection Energy interconnections and infrastructure projects Gas interconnections Interconnection with the Republic of Bulgaria - The Memorandum for the Implementation of the Gas Interconnection Bulgaria – Serbia was signed in Brussels14 December 2012; Upgrading of the existing gas pipeline Batajnica – Zvornik; Interconnection with the Republic of Croatia; Interconnection with the Republic of Macedonia; Iterconnection with the Republic of Montenegro. Ministry of Energy, Development and Environmental protection

Energy interconnections and infrastructure projects Electricity Interconnections Between Former Yugoslav Republic of Macedonia and Serbia Between Montenegro, Bosnia and Herzegovina and Serbia Between Romania and Serbia (Resita – Pancevo) In February 2013 JP EMS applied for technical assisastance, through WBIF, for project which is in direct connection to strengthening of the regional East-West corridor and further potential strengthening of the interconnection between Serbia and Bulgaria. Ministry of Energy, Development and Environmental protection

Energy interconnections and infrastructure projects Planned projects for construction of new capacities: Construction of thermal power plant Kolubara B 2x350MW. Partner was selected in the tender procedure (EDISON Italy). In thermal power plant Nikola Tesla – new unit B3 700MW. Partner/alternative method of financing Reconstruction and/or construction of new gas power plant – combined electricity and heat generation in the combined gas-steam facility on the existing location TPP-HP Novi Sad (up to 450MWe+300 MWt) with partner selected in the tender procedure. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy interconnections and infrastructure projects In the hydro-power sector, the following projects are being developed: Projects for ten hydro-power plants on the Ibar River, capacity 103 MW (420 GWh), based on the international agreement with the Company "SECI ENERGIA", Italy Projects for hydro-power plants in accordance with Memorandum on Cooperation with Company RWE on the Velika Morava River and for PSHPP Djerdap 3 on the Danube Projects on the Drina River with the Republic of Srpska and international partners: Hydro-power plants on the middle Drina River, capacity 321 MW (1.197 GWh per year) – (PE EPS and SECI ENERGIA) Lower course of the Drina River, capacity 372 MW (1.600 GWh per year) Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Gas storage facilities Company Underground Gas Storage “Banatski Dvor” limited liability company Novi Sad performs energy activity of natural gas storage and management. Underground Gas Storage “Banatski Dvor” capacity 450 million m3; Maximum daily gas injection capacity is up to 3.5 million m3; Maximum daily production capacity is up to 5 million m3. Ministry of Energy, Development and Environmental protection 22

Ministry of Energy, Development and Environmental protection Security of supply Legislation Energy Law (“Official Gazette of the Republic of Serbia”, No. 57/11, 80/11, 93/12 and 124/12); Decree on the Conditions of Natural Gas Delivery (“Official Gazette of the Republic of Serbia”, No. 47/06, 3/10 and 48/10); Decree on the Conditions for Delivery of Electricity (“Official Gazette of the Republic of Serbia”, No. 107/05). Working group for analysing and monitoring the situation regarding security of energy and fuel supply. Mandatory oil stocks: new Law on Commodity Reserves with separate chapter on mandatory stocks of oil and oil derivatives is under the preparation; necessary financial funds - EUR 130 million for storage capacities; EUR 600 million for oil and oil derivatives; Ministry of Energy, Development and Environmental protection 23

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures) Energy law Amended: Area of energy permits and approvals for construction of energy facilities up to 1 MW has been further regulated; Permits validity period for both categories (energy permits and approvals for construction) has been defined; Rules and obligations of investors towards the Ministry which is issuer of permits and approvals have been introduced ; Reasons for not extending the energy permit end approval have been defined; Reasons for revocation of energy permit and approval have been defined; Duration of temporary privileged producer status has been reduced - for wind energy 2+1 years (instead of previous 3+1 years) - for solar energy 1+1 years (instead of previous 3+1 years) Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures) New regulations in the RES area adopted Regulation on incentive measures for privileged power producers ; Regulation on conditions and procedure for acquiring the status of privileged power producer; Regulation on the method of calculation and allocation of funds collected for purpose of incentive remunerations for privileged power producers; Regulation on Special Fee for Incentive Measures in 2013. Ministry of Energy, Development and Environmental protection 25

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures) Activities of Ministry towards higher use of RES Simplified version of NREAP has delivered to the EnC Secretariat; NREAP has been finished and in procedure for adoption by Government; Ministry published the list of priority projects in RES area; Public announcement - NOTICE to investors (domestic and foreign) who have a serious intention to invest in Serbian water resources up to 10 MW (SHPPs); Guidelines for investors who want to build in RES area has been finished and published; Power Purchase Agreement (PPA) is preparing – model of contract for the purchase of electricity from producers who have acquired the status of privileged producer; One stop shop within Ministry for investors in RES area is planned. Ministry of Energy, Development and Environmental protection 26

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures) Law on efficient use of energy – current status: Revised draft law from 2011; New draft law harmonized with Energy Community (EC); Passed by Government decision on February 4 th, 2013; It is expected to be adopted by Parliament in March 2013; Purpose of the Law: Secure responsible, rational and sustanable use of energy; Securing supply of energy, reducing negative impacts on the environment, increasing competitiveness and standard of living; Ensure fulfillment of the obligations to the EC in field of energy efficiency. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures Mechanisms introduced by the Law National energy efficiency action plan (NEEAP); Energy management system (EMS); Energy audit; Minimum energy efficiency requirements; Energy labelling of energy-related products; Energy efficiency in public procurement; Energy services; Budget Fund for energy efficiency improvement etc. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures Budget Fund – financing/co-financing Technical measures Encouraging implementation of EMS for non-designated parties of EMS Promotion and implementation of energy audit Promotion and encouraging of energy services Encouraging use of RES and CHP for own purposes Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures Establishment: January, 2014 Allocation of assets: In compliance with annual Programm adopted by the Government; Public tender; Performing energy audit before and after implemenatation of the project. Ministry of Energy, Development and Environmental protection

Ministry of Energy, Development and Environmental protection Energy efficiency and renewable energy sources (legislative developments, administrative capacity and concrete measures Other important activities: preparation of the secondary legislation (about 30 bylaws); preparation of the second NEEAP (2013-2016) – IPA Fund 2012; Establishment of a system for monitoring, verification and evaluation of NEEAP; Implementation of the projects related to energy consumption reduction (WB, EBRD, KfW) Ministry of Energy, Development and Environmental protection

Update on IPA programming Programming process for 2013 IPA Sector Fiche for Energy was prepared where the value of the EU funding was estimated to EUR 22,700,000. Improvement of strategic planning in energy sector and creating conditions for increased use of renewable energy sources; Improvement of security and efficiency of supply and use of energy through further development of energy equipment; Improvement of security and diversification of gas supply through construction of new energy facilities; Development of waste water treatment plants. Ministry of Energy, Development and Environmental protection

MINISTRY OF ENERGY, DEVELOPMENT AND ENVIRONMENTAL PROTECTION Republic of Serbia MINISTRY OF ENERGY, DEVELOPMENT AND ENVIRONMENTAL PROTECTION THANK YOU FOR YOUR ATTENTION! Ministry of Energy, Development and Environmental protection 33