Guides for investors to encourage investments in Renewable Energy

A conference held on November 15, 2010, to launch four guides to renewable energy investment was a highly successful event that drew renewable energy experts, investors and law makers to a presentation of the first official documents that explain the permitting and licensing process for renewable energy investment in Serbia.

Since adoption of a Feed-in Tariff decree in Serbia in November 2009, the USAID Serbia Competitiveness Project has been assisting renewable energy project developers to rationalize their projects and to access local and international sources of finance to encourage investment in the sector. Key questions from foreign investors most often relate to understanding and navigating the licensing process. For this reason, the USAID Serbia Competitiveness Project worked closely with GTZ Project for Strengthening Local Self Government (SLS), the Ministry of Mining and Energy, and the Ministry of the Environment and Spatial Planning to create and market investment guides that would map the licensing process for investment in biomass, geothermal, mini hydro and wind power sub-sectors.

The launch of these renewable energy guides was held at the Palace of Serbia and the key note speakers included State Secretary in the Ministry of Mining and Energy, Nikola Rajaković, State Secretary in the Ministry of Environment and Spatial Planning, Bojan Đurić, US Ambassador to Serbia, Mary Warlick, and German Ambassador to Serbia, Wolfram Maas.

US Ambassador in Belgrade Mary Warlick explained at the conference that the USAID Serbia Competitiveness Project has been working with several foreign investors that could inject over EUR 1.5 billion into Serbia’s wind energy sector, as well as into other renewable energy sub-sectors, notably hydro-power. The investments in wind, however, hinge on legislative reforms that Serbia should implement. State Secretary at the Mining and Energy Ministry Nikola Rajaković recalled that Serbia hopes to attract EUR 2 billion in investments in the renewable energy sector over the next five to seven years, up to EUR 500 million of which in the next two years. State Secretary Rajaković expects that investment in renewable energy will reach €4-5 billion within 10 years. Currently, excluding legacy large hydro-power plants (>10MW), Serbia produces less than 1% of its energy from Renewable energy sources.

(Ambassador Mary Warlick)

In an open discussion between panelists and the audience, conference participants actively contributed by sharing their experiences in development of renewable energy sources projects and posting numerous questions, which included:

• Sequencing of the Power Purchase Agreement (PPA) within the licensing process, which currently prevents or restricts the financing of Renewable projects. The current Ministry of Energy decree requires that renewable projects are constructed prior to issuing a Purchasing Power Agreement (PPA). This situation prevents the project from being financed because financiers would consider the Project to be ‘non-bankable’ unless the developer could obtain a conditional PPA prior to the construction phase (which is currently not possible).

• Lack of Municipal Plans. Many municipalities in Serbia have not yet created Municipal Plans, which define critical stages of renewable energy project development, such as land use and types of investments permitted in various locations within a municipality. Since site identification is the starting point, many renewable energy projects are stalled as draft Municipal Plans are being created. In Vojvodina, for example, of 45 municipalities, 15 do not have Municipal Plans, according to Dušanka Sremački of the Provincial Secretariat for Architecture, City Planning and City Engineering in Vojvodina.
• The stage during the licensing process at which an 'Opinion' is required from the Ministry of Environment and Spatial Planning on a project's environmental impact. Since the application for an 'Opinion' requires the project developer to present a preliminary design, which is a significant expense, a project developer proposed that the 'Opinion' should be sought later in the project development process so the investor has greater certainty of the potential investment prior to investment in a preliminary design.
• The Belgrade district heating directorate asked the Ministry how to get status of privileged heat producer. According to the Energy Law, local governments have responsibility and are the catalyst for this process, though they lack capacity or willingness to prepare necessary municipal and city regulations.

Note: Complete text is taken from the USAID Serbia Competitiveness Project and dates back to 15 October 2010.