Opportunities and Challenges in Shifting from Fossil Fuels to Renewables in Serbia

Making the transition from fossil fuels and imported gas to more renewable forms of energy is not an easy task in any country, but when your share of coal fired electricity production is in the top six, with the likes of India and South Africa, the shift required is even greater. Added to the complexity are that your gas resources are from Russia and tackling climate change targets is all the harder when firewood remains a common source of domestic heating. These are the challenge that Serbia currently faces and one which I was pleased to explore recently with a range of experts at a British Serbian Chamber of Commerce event supported by Grayling.

Serbia needs to decarbonise its energy sector if it is to meet its climate change targets and meet international obligations to reduce thermal power generation and greenhouse gas emissions. As a result, it has set a clear goal to increase the share of renewables electricity production to around 40% by 2030.

Renewables potential
Serbia’s issues highlight some of the key challenges that many countries face across the world. On the face of it, Serbia has a lot to offer in terms of energy generation from alternative sources. It has a long history of hydroelectric, which is still the country’s main source of renewable power. It is also a favourable climate for solar power and there is scope for wind power, as well as improved energy efficiency and decarbonisation measures. There may even be scope for nuclear power, though there is a current moratorium on nuclear energy in the country. And, importantly for the rest of Europe, Serbia is a vital transit country for energy from Southeast Europe.

Yet the country’s nascent renewables sector is still restricted. Hydroelectric generation is in jeopardy due to drought conditions. And as the expert panel pointed out, while there’s not a problem with interest in developing renewable projects, most have been unable to start construction or generating because there is a need for clear market mechanisms and a lack of approved connections from renewables to the grid infrastructure since 2019.

The vital role of infrastructure and regulatory upgrades
On the regulatory side, the government’s energy and climate change plan have stalled over the past couple of years. However, there is now hope that public consultation might start again, opening the doors to a debate about what forms of energy Serbia should pursue and the share of renewable generation.

Panellists highlighted that Serbia’ electricity network is already quite robust and how upgrades to the infrastructure are planned but it needs to be readied for the connection of new renewable power sources. This is part of a wider programme of infrastructure works. The EU is currently building the Trans-Balkan Electricity Corridor, which should help integrate Serbia, Bosnia and North Macedonia into the wider European market. However, according to the Serbian electricity transmission system operator, EMS, new cross-border power lines are required across nearly all the country’s borders.

Gas supply remains a major issue in Serbia. Balkan Stream, which supplies Russian gas, was only opened in 2020 and the country remains heavily dependent on Russian gas. However, a new gas interconnector with Bulgaria will open an alternative source of liquified natural gas in the meanwhile while other gas pipelines can be developed to other nations in the future.

If Serbia, and countries that are similarly dependent on coal-fired power stations and Russian gas, are to make the transition to renewables and new energy sources, they need to invest in its energy infrastructure and provide a sound regulatory and market mechanism that energy companies can have confidence in. Serbia can benefit from new technological advances, such as battery storage and hydrogen, but it needs to ensure the basics are in place first. Beyond that, we should be assured that the strong Serbian sunshine, mountain streams and winds can do much of the rest.

For further information about how we can support your organization in navigating the European energy markets please contact Ross Laird, Director, specialising in energy markets at ross.laird@grayling.com.