Building Solar Plants in Serbia: Costs, Duration, and Legal Insights
At a time of growing global awareness of clean energy, Serbia is on the threshold of energy transformation. In 2023, the development of several solar power plants has been initiated, and the first factory for the production of photovoltaic panels was established. Also, the construction of solar power plants is supported by a state subsidy, and the international organization The Nature Conservancy (TNC) published a map of the 100 best locations for solar power plants in Serbia.
According to experts, the trend of growing interest in investments in solar power plants in the Republic of Serbia will continue in 2024. In this text, we investigate costs, duration, and legal insights for building solar plants in Serbia.
In the middle of 2023, the construction of the solar power plant “Saoaroci” in Smederevo was initiated. This solar power plant will have a power capacity of 9.95 megawatts, and the electricity is intended for the domestic market and will supply about 2,500 households. It is an investment by the German company AVR Solar Park, and it is realized by the Chinese company PowerChina.
Also, in mid-December, the company Domi Eko Solar started production of solar panels in its plant in central Serbia. It is the first factory for the production of photovoltaic panels in the country. However, although a total of 157 solar power plants with a capacity of 23.3 megawatts have been built by the middle of 2023, the current capacities are far below the potential. How much does it cost and what are the key steps in choosing a location and obtaining permits for building solar plants in Serbia?
The first important decision when building solar plants in Serbia is the choice of location, where we distinguish between two cases. The first, when the investor already has a plot on which he wants to set up a power plant, but he is not sure if it is possible. In that case and assuming that the power plant is connected to the distribution system, the investor should contact the local branch of "Elektrodistribucija" (Distribution System Operator).
The competent authority will provide an expert opinion on the connection requirements.
If the investor has several potential locations, consulting firms can conduct an analysis of the current state of the network at each individual location. Then, the consulting firm gives a recommendation which location shall prove as the most efficient for building a power plant. It can also be in the form of a study with a detailed network connection plan.
Depending on the capacity of the power plant, an expert is hired to a justification study with the appropriate design and conceptual design. It is important, first of all, to check whether an energy permit is required for the construction of the power plant at the selected location.
In accordance with energy regulations, an energy permit is required for a solar power plant of one megawatt (MW) or greater capacity. The request is submitted to the Ministry of Energy and is valid for up to three years. During that period, the investor is obliged to complete the construction and commissioning of the power plant.
The next step is to assess the impact of the power plant on the environment. After the competent authority approves the request for checking the need to conduct the study, the investor submits EIA Envirnonmental Impact Assessment study. It is stipulated that the assessment must be carried out for solar power plants with a capacity of 50 MW or above. An assessment is not mandatory for a solar power plant with a capacity of less than one MW, except in the case when it is located in a protected area or in an area that represents a cultural asset.
The investor can hire an expert for the preparation of the conceptual design, as well as for all technical documentation. After obtaining a legally binding construction permit, the investor applies for works and commences construction. The investor has a period of three years from the moment the building permit becomes legally valid to apply for commencement of works.
It is possible to hire a certified contractor from Serbia for the construction of a solar power plant. In addition to costs of materials, the cost of building solar panels largely depends on labour costs. Compared to other countries in the region, the costs of hiring qualified experts and manual workers in Serbia are far more favourable.
The deadline for obtaining a use permit is five years from the issuance of a valid construction permit. Instead of a use permit, a certificate from the technical inspection commission can be submitted, approving the commissioning of the power plant for trial operation.
In the case of approval for the connection of the power plant to the power grid, it is necessary to prepare a connection study. After obtaining a use permit, i.e. fulfillment of legal regulations and conditions for approval, the Agreement on exploitation of the power plant is concluded. The applicant (investor) concludes a Connection Agreement with the competent authority and submits a bank guarantee in the amount determined proportionally to the power plant’s power. The price amounts to 25,000 euros per MW of power.
Amendments to the Law on the Use of Renewable Energy Sources and the adoption of a three-year auction plan for market premiums created a predictable framework for investors in renewable energy sources. The goal is to double the solar power generation capacity to 50 megawatts of solar power plants through ongoing auctions. Also, the goal is to build about 300 megawatts of solar power plants in a few years.
In order to receive state aid, the investor can apply to public invitation by the Ministry of Energy for state incentives. Depending on the capacity of the solar power plant, two types of incentives are available: market premium and feed-in tariff.
The government incentive in the form of a market premium or feed-in tariff is awarded on the basis of an auction. The auction is carried out so that producers of electricity from renewable sources define their prices, and the government incentive is given to whoever offers the lowest price. This means that the government will compensate the privileged producer of electricity for the difference in price between the market price and the price it offered in the auction procedure. The reverse is also true, so if the privileged producer sells electricity at a market price higher than the one offered, he pays the difference to the government.
If incentives are granted to the investor, he becomes a temporary privileged electricity producer. The investor then concludes a contract with the competent state authority, delivers a bank guarantee or secures a cash deposit, which is defined in the public invitation, and depends on the capacity of the power plant.
Thanks to the constant growth of electricity prices, as well as the new Law and by-laws, more efficient and effective investment in solar power plants in Serbia has been made possible. Due to the growing interest in building solar plants in Serbia, the share of solar power plants in the total production of electricity is expected to increase.
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Serbia''s upcoming second renewables auction, scheduled for later this month, aims to procure 124.8 MW of solar power with a ceiling price of €72 ($75.30)/MWh. This price is lower than the €90/MWh ceiling offered in the country''s first renewables auction last year.
Image: Stefan Kostić, Unsplash
The Serbian government has set the regulatory framework for the country''s second renewables auction.
These figures are down from the ceiling prices of €90/MWh for solar and €105/MWh for wind available in the country''s first renewables auction.
According to details available on the the Association of Renewable Energy Sources of Serbia''s (OIE Srbija) website, the second auction will launch officially later this month,
Serbia''s first auction ran in 2023, procuring 50 MW of solar and 400 MW of wind power. The lowest solar bid, announced in August 2023, was €0.08865/kWh.
Serbia has announced development of several large-scale solar projects this year, including a deal for 1 GW of solar across six sites and a 1 GW solar panel factory. Work is also underway on state utility Elektroprivreda Srbije''s first solar project.
Figures from the International Renewable Energy Agency (IRENA) show that Serbia had cumulatively deployed 137 MW of solar by the end of 2023.
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