“Energy Crisis and Climate Change – Challenges for Politics and Business in South East Europe” Evangelische Akademie Tutzing, 28 March Republic of Serbia - Ministry of Mining and Energy Dejan Stojadinovic, Assistant Minister Serbia Enhancing Energy Efficiency and use of Renewable Energy Sources

2 Legal Framework Energy Law (OJ RS 84/04) provides the overall foundation for development of renewable energy sources and energy efficiency Energy Law has established Serbian Energy Efficiency Agency, with the mission to promote and enhance rational use of energy and use of renewable energy sources - in order to ensure sustainable energy development through promotion and information dissemination, technical advices and demonstration projects Energy Sector Development Strategy of Republic of Serbia by (2005) emphasize importance of utilization of renewable energy sources for distributed heat and power generation and recognize Serbian Energy Efficiency Agency, Energy Efficiency Fund and introduction of support schemes as the main instruments for the achievement of these goals Programme for Implementation of Energy Sector Development Strategy (2007) elaborate Strategy in more details and define priorities for utilization of renewable energy sources. Programme is updated every two year, and next update will be prepared for the period Regulation on technical and other requirements of liquid biofuels (OJ S&M 23/06) defines technical requirements for biodiesel and biofuels

3 Institutional Stakeholders – EE & RES MINISTRY OF SCIENCE AND TECHNOLOGY MINISTRY OF MINING AND ENERGY MINISTRY OF ENVIRONMENT AND SPATIAL PLANNING  Renewable energy and energy efficiency policy development and implementation  National Programme for Energy Efficiency – technology dissemination and demonstration facilities  Building standards  Some energy efficiency provisions NO INSTITUTIONAL MECHANISM TO COORDINATE POLICIES WITH FOCUS ON ENERGY EFFICIENCY AND RENEWABLES  Belgrade, Novi Sad, Nis, Kragujevac, Kraljevo REGIONAL ENERGY EFFICIENCY CENTRES ENERGY EFFICIENCY AGENCY  Sectoral energy efficiency programs  Training and public awareness campaigns ENVIRONMENTAL PROTECTION FUND  Financing some energy efficiency and renewable energy programs

4 Energy production and consumption PLANNED PRIMARY ENERGY SUPPLY IN – M toe PLANNED FINAL ENERGY SUPPLY IN M toe 10% THERMAL ENERGY 13% SOLID FUELS 40% LIQUID FUELS 11% GASEOUS FUELS 26% ELECTRICITY 55% PRODUCTION 45% IMPORT Energy intensity (est.) 0.41 toe per thousand USD of GDP 2.7 times higher than average for OECD Europe Technical potential for energy efficiency – 30% Economic potential for energy efficiency – 20% Regulation under preparation Law on Rational Use of Energy Secondary legislation Introduction of Energy Management

5 Energy Balance Primary energy supply per capita (toe/capita) Electricity supply per capita (toe/capita) (kWh/capita) , , ,654 Share of RES-E in total electricity generation28%27%28% Share of RE in final energy supply13%12%11% Production (toe) Geothermal energy4,700 Large Hydro923,000 Small Hydro4,300 Biodiesel300 Fuel wood163,000 TOTAL1,095,300 Serbia 2009 Planned Production of Renewable Energy

6 Potentials (Mtoe) Biomass2.40 SHPP0.40 Solar0.64 Geothermal0.20 Wind0.19 TOTAL3.83 Serbia’s endowment of renewable energy resources is substantial - realization of these potentials require Government action RES Technical Potential Clear technical potential of renewable energy - insufficient information about the economic potential

7 Biomass Most promising utilization options for biomass: Space heating in households and buildings using biomass pellets or briquettes Co-firing or total replacement in district heating plants firing heavy oil or coal in south Serbia, where natural gas is not available yet Production of electricity utilizing agricultural and wood wastes Forest biomass Fuel Wood 7 million m³ unofficial million m³ official (55% from State forest) Wood residues 5 million m³ TOTAL12 million m³ Fruit growing residues Biomass residues (1,000 tones) Plum393.5 Apple36.2 Cherries55.0 Pear14.0 Peach35.1 Apricot15.5 Walnuts55.0 Grapes515.0 TOTAL1,119.3 Crop farming residues 1/3 available for Energy Use Total residues (1,000 tones) Residues for Energy Use (1,000 tones) Wheat2,9051,365 Barley Rye Corn5,3101,140 Sunflower Soybean Rapeseed TOTAL9,5603,060 Wood biomass 1 Mtoe Agriculture biomass 1.4 Mtoe

8 Small Hydro Power Plants >5 MW: 9 locations 2-5MW: 30 locations (average 3 MW) <1 MW :largest number of locations 1,500 GWh/year Number of SHPP in Serbia – 60 (50% out of operation) Revitalization Construction SHPP Cadastre (1987) 856 locations 500 MW

9 Small Hydro Power Plants No of SHPP locations Potential power installed (kW) Potential Annual Generation (MWh) Municipality 6434,300121,203Ivanjica 3533,284109,692Raška 4025,92594,026Pirot 4023,45878,394Kraljevo 4718,80073,971Prijepolje 917,57660,210Zaječar 2217,04572,212Crna Trava 2015,82555,100Novi Pazar 815,69058,850Bela Palanka 811,21625,850Despotovac 3010,97445,391Brus 1910,70630,180Đa 3210,18538,438Vranje 2210,14138,985Kuršumlija 169,87535,318Priboj 309,80036,099Trgovište 139,78530,937Valjevo 109,30527,419Tutin 168,94524,380Žagubica 178,67534,553Bosilegrad No of SHPP locations Potential power installed (kW) Potential Annual Generation (MWh) Municipality 198,62532,877Čajetina 178,32029,720Leskovac 218,31036,832Nova Varoš 278,17032,543Surdulica 137,99028,262Vlasotince 197,64027,395Bajina Bašta 127,07027,500Niš 86,74020,050Boljevac 125,34617,928Užice 155,32519,862Ljubovija 74,73010,230Negotin 114,69016,578Vladičin Han 64,65520,283Arilje 144,51519,459Babušnica 13,00013,700Novi Sad 18504,700Vrbas 16202,270Bečej 11,2208,190Bela Crkva

10 Solar MONTH Total Year Average Daily IIIIIIIVVVIVIIVIIIIXXXIXII Beograd , Vršac , Palić , Novi Sad , Niš , Kuršumlija , Peć , Priština , Vranje , Loznica , Kragujevac , Negotin , Zlatibor , AVERAGE DAILY SOLAR IRRADIANCE ON HORIZONTAL SURFACE IN kWh/m² Average daily value about 3.8 kWh/m² Average yearly insolation in Serbia about 1,400 kWh/m²

11 Solar Most promisin utilization options Sanitary water heating Space heating If each housing unit (2.65 million units) would install average 4 m² of collectors Equivalent to some saving potential of 7,420 GWh

12 Geothermal Use of geothermal potential is mainly for balneological purposes, sports and recreation Prospects for expanding geothermal energy for agricultural heat and water heating are reasonably good Potential for larger scale geothermal electricity is limited - requires water temperatures above 100°C. Average geothermal flow density in Serbia is higher than 60 mW/m³ There are 160 natural resources of geothermal waters (excluding Panonian basin) with temperature above 15ºC Highest temperatures recorded Vranjska spa - 96ºC Jošanička spa - 78ºC Sijarinska spa - 72ºC Total flow rate of geothermal water resources is 4000 l/sec 60 locations are in the water reservoirs up to 3000 m depth Installed thermal power (MWt) Produced heat (TJ/year) Residential and commercial areas Spas and recreation36.01,150 Gain drying0.722 Greenhouses Fishing and cattle breeding Industrial processes Heat pump heating Total86.02,415

13 Wind Wind data based on 10 metre heights extrapolated to 50 metre heights 2,300 GWh 1,300 MW of capacity at sites with minimal average wind speeds of 5 m/s Best locations in Serbia (extrapolated) Midzor7.66 m/s Suva Mt.6.46 m/s Vrsacki breg6.27 m/s Tupiznica6.25 m/s Krepoljin6.18 m/s Deli Jovan6.13 m/s

14 Wind Case Study: Popadija wind farm

15 Barriers for wider use of RES Institutional barriers Lack of experience Need for the experience of how a private sector renewable energy project can work in Serbia Absence of “first set” of projects Transition Issues Many industrial companies are in transition – both with regard to structure and ownership, and managements are not yet ready to consider measures to rationalize energy activities Financial barriers Absence of a price support mechanism Renewable energy projects are not bankable without a price support mechanism RES cannot compete with fossil electricity generation based on lignite (whose price does not reflect their environmental damage costs) Debt Financing support Difficulty to secure long term loans appropriate for small renewable energy projects Electricity tariff Low electricity tariff does not stipulate domestic, commercial and industrial consumers to use renewable energy - current average price is under 5 €cents/kWh

16 Barriers for wider use of RES Technical barriers Absence of technical standards Despite the existence of manufacturers of heating equipment and biomass fuel (briquettes and pellets), production standards are not regulated Equipment for biomass energy utilization need clear information about technical specification and performance characteristics Barriers to biomass utilization Low electricity price, which decrease motivation to install biomass firing boilers No developed market for biomass fuel and biomass utilisation facilities Absence of a renewable energy resources inventory Update and development of Small Hydro Cadastre Wind monitoring programe with wind speed measurements at 50 meters needed

17 Regulation on privileged power producers will be the definition of what types of renewable energy producers qualify for privileged status Deadline for adoption: 1 July Feed-in tariffs as the price support mechanism Deadline for adoption: 1 July Legal regulation under preparation Amendments to the Energy Law drafting Production, transporting, storaging and trading of biofules is recognized as energy activity Definition of renewable energy sources is amplified and contains biofuels, biogas, landfill gas, sewage gas Definition of biomass reffer to biodegradable material developed in agriculture, forestry and accompanying industry for energy purposes Definition of privileged power producers includes all RES producers except hydro-power plants and biomass power plants larger than 10 MW Guaranteed grid access to a privileged power producers - through obligation of local distribution company to purchase all the electricity produced from RES Purpose: to promote investments in renewable energy projects

18 Assumptions for development of Feed-in tarriffs  a purchase price, expressed in c€/kWh, is guaranteed and fixed during the 12-year period. The level of a purchase price is set to provide invested capital returned in 12 years, with covering all operating costs incurred during the same period;  in case of power plants that have been in operation before the application of feed-in tariffs – proposed feed-in tariffs are valid for the shortened period of time  feed-in tariffs for old power plants that have been out of commission for at least five years are separately defined, in order to encourage revitalisation and re-entering in operation of these plants;  additional criteria for setting the feed-in tariff is to have the internal rate of return at least 14%, i.e. not below this percentage

19 Investment incentives applicable to RES projects INVESTMENT INCENTIVES In case of investments in production facility, Government approve grant between 2000 and 5000 euros per new job creation, minimal investment value is within the range of 1 and 3 million euros, whereas the minimal number of new jobs is 50 An investor that invests in fixed assets, i.e. in whose fixed assets other entity invests over 600 million RSD (6.8 million EUR), and uses these assets for conducting business in Serba and during the investment period additionally recruit at least 100 people - shall be exempted from corporate profit tax payments for the period of 10 years proportionally with the investment made TAX CREDITS A tax payer that made profit in newly established business unit in an underdeveloped area will receive a corporate profit tax reduction in the duration of two years, proportional to the share of such made profit in total profit of the company ACCELERATED DEPRECIATION OF FIXED ASSETS This incentive is provided for fixed assets that are used for the prevention of air pollution, water and soil pollution, noise reduction, energy savings, forestation, and collection and utilization of waste for industrial raw materials and fuels FOREIGN INVESTMENTS INCENTIVES The law on foreign investments stipulates free import of goods that are the foreign investor’s nominal capital (founding capital) – providing it fulfils acts regulating environment protection. Import of equipment as the founding capital of a foreign investor, except for passenger motor vehicles and game & gambling machines, is free from customs and other duties. Besides, a foreign investor and a company with foreign founding capital are entitled to tax and customs related deductions in line with the law

20 THANK YOU FOR YOUR ATTENTION!