Amendments to the Law on the Use of Renewable Energy Sources

The Law on Amendments to the Law on the Use of Renewable Energy Sources entered into force on 7 May 2023 (“Amendments to the Law”). The purpose of these amendments is to resolve the identified obstacles in the implementation of the originally adopted law from 2021, with the aim of having a positive impact on the security of the distribution of electricity from renewable sources and the electric power system, as well as protecting end customers and operators from the high costs of integrating renewable sources into the system.

The main amendments relate to the regulation of the construction of wind power plants and solar power plants, the conditions for priority access to the network, the procedure for awarding incentives and connecting power plants from renewable sources to the network.

Limitation of balance liability of the guaranteed supplier

One of the main amendments refers to limiting the assumption of balancing responsibility by the guaranteed supplier. Balance responsibility represents the obligation to balance production, consumption and take financial responsibility towards the transmission system operator for all deviations from planned and contracted obligations.

Namely, the initial legal solution from 2021 provided for the right of all producers from renewable energy sources to transfer the balance responsibility to the guaranteed supplier, regardless of whether they are in the incentive system. However, such a solution represented a significant risk both for the stability of the network and for the business of the guaranteed supplier, since the obligation to assume balancing responsibility was imposed for commercially developed ones as well (without incentives).

In addition, the previous legal solution led to a reduction of business risk for producers from renewable sources, which resulted in the arrival of a large number of requests from interested investors for connection to the transmission system. This situation resulted in the suspension of the processing of requests for connection to the transmission system by the transmission system operator. According to the data of the operator, applications were submitted for the connection of solar parks and wind farms with a total capacity of 20,000 MWh, which is more than twice the capacity of the currently installed capacities in Serbia.

The Amendments to the Law aim to solve the mentioned obstacle by enabling the assumption of balance responsibility by the guaranteed supplier only for privileged producers, who are in the incentive system, while other projects that are developed on a commercial basis will have the obligation to solve the issue of balance responsibility independently.

According to the new legal solution, the guaranteed supplier assumes balancing responsibility and bears the balancing costs for privileged producers who are in the feed-in tariff system until the end of the incentive period, and for power plants whose approved power is less than 400 kW, i.e., from 1 January 2026, for power plants whose approved power is less than 200 kW.

Existence of adequate reserves for system balancing and connection delay measures

As one of the restrictions for the connection of a power plant that uses renewable energy sources, the Amendments to the Law envisage the postponement of the connection to the power system until the moment when reserves for balancing the system are provided, i.e., until the moment when the adequacy analysis shows that there is a reserve for balancing the system in the power system that allows all power plants that are subject to disposal can be connected to the power system without jeopardizing its safe operation. The mentioned steps are carried out in order to protect against the potential complete consumption of the available balancing reserves, which would negatively affect the stability of the system.

On the other hand, the Amendments to the Law also introduce the duty of the operator to analyse the adequacy of production, and if the reserves can be provided by the market participants themselves or their subcontractors (providing batteries, gas power plants or other manageable sources), delay in connection can be avoided. It should be borne in mind that reserves in the context of renewable energy sources are particularly significant, due to the unpredictability that can affect energy balancing, and this indicates the importance of building batteries, other storages, or manageable sources of reserves as part of projects.

Restriction of priority access

Also, the limitation of the obligation of priority access to electricity produced from renewable sources in demonstration projects is introduced. The operator is now obliged to preferentially take over electricity produced from renewable sources in power plants with an approved power of less than 400 kW (i.e., for power plants connected to the network after 1 January 2026 with an approved power of less than 200 kW), regardless of whether they are in the incentive system, except in the case when the security of the system’s operation is threatened. The earlier decision provided that the operator is obliged to take over electricity from renewable sources as a priority without the specified criteria in terms of the approved power of the power plants.

A new financial compensation mechanism

On the financial side, the Amendments to the Law introduce a new mechanism of mutual financial compensation that is more in line with real production, and which is based on the principle that if privileged producers produce less than planned, they pay the guaranteed supplier, and if they produce more, the guaranteed supplier pays the privileged producer at the prices of the day - ahead of the market. On the other hand, the new mechanism introduces additional responsibility to producers in terms of good forecasting of electricity production, bearing in mind that in the case of an inadequate forecast, they would have the obligation to pay the negative difference. According to the operator’s conclusion, the previously existing mechanism of permitted deviation percentages and fixed fees did not prove to be effective in practice.

Limitation of buyer-producer power

By introducing a limit on the installed power of consumer-producers to 10.8 kW for households and 150 kW for non-household consumer-producers, the Amendments to the Law create the basis for establishing the conditions for installing a solar power plant for own needs, as well as for placing excess electricity produced in the power network. In addition, these amendments require increased responsibility towards system operators (balance responsibility, provision of auxiliary services, etc.). The provisions governing the installed capacity of household customer-producers will be effective from 1 January 2024.

The previous solution provided that customers-producers could connect to the power system without restrictions, while their responsibility towards the power system was completely excluded, which could potentially threaten the stability of the system.

It can be concluded that the main goal of the Amendments to the Law is to ensure the safe connection of new renewable energy sources to the electricity distribution network, which is useful for operators, end customers and investors. In addition to the above, the Amendments to the Law also aim to solve the unsustainable situation in which the transmission network operator suspended the resolution of requests for the issuance of conditions for connecting new power plants to the transmission system due to an overly broad legal basis. This situation effectively stopped the progress of projects that are essential for development of renewable energy sources in the system.

In the following period, it is expected to adopt bylaws (Regulations on the conditions of delivery and supply of electricity, Rules for connecting facilities to the transmission system, Rules on the operation of the transmission system and Procedures for connecting facilities to the transmission system) which would enable the implementation of new legal solutions.

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