Quota for Incentives for Wind Power Plants

In April 2021, the Law on the Use of Renewable Energy Sources (“Official Gazette of RS, No. 40/2021”), which is in line with the latest EU directives in this field, entered into force. On November 10, 2021, on the basis of this Law, the Government passed the Regulation on the quota in the market premium system for wind power plants (“Official Gazette No. 107/2021“).

The main goal of the new Law is to increase the share of renewable energy sources in the total energy production, and also the environment protection, involvement of citizens in the energy transition and more efficient procedures for investments.

The new Law, amongst other things, introduces market premiums instead of the current feed-in tariffs, which are retained only for small plants (power plants with an approved power of less than 500kW or wind power plants with an approved power of less than 3MW) and demonstration projects, in accordance with EU state aid rules.

In accordance with Article 5, the Law enumerates power plants which are using renewable energy sources: hydropower plants, biomass power plants, biogas power plants, wind power plants, solar power plants, geothermal power plants, biodegradable waste power plants, landfill gas power plants, gas power plant from facilities for the treatment of municipal wastewater and power plants that use other renewable energy sources.

What are the market premiums?

A market premium is a type of operational state aid that represents an addition to the market price of electricity delivered to the market by the premium beneficiaries, determined in euro cent per kWh in the auction process.

The Law prescribes methodology for determining the maximum market premium or the amount of the maximum purchase price, that shall be prescribed by the Energy Agency of the Republic of Serbia (“Agency”). Based on the methodology, the Agency shall, at the latest by the end of December of the current year for the next year when auctions are planned, publish on its website the maximum feed-in tariffs and/or maximum purchase prices for each type and subtype of power plant for which quotas are prescribed.

How to acquire the right to a market premium?

The procedure for acquiring the right to a market premium is carried out through auctions. The Ministry conducts auctions on the basis of available quotas prescribed by the Government in accordance with the law, valid planning documents in the field of energy, international obligations, i.e. available data on existing capacities, planned needs and other data important for determining quotas.

The auction procedure is initiated by a public invitation of the Ministry which defines who is eligible for submitting an application to participate in the auction, available quotas per type and installed power of the power plant, maximum purchase price, method and form for applying for auction, list of documents to be submitted, conditions for qualification and bidding at auction, etc.

The procedure consists of three phases: qualification, competition and selection of the best bids.

Participants in the auction procedure whose bids at the auctions are covered by the decision of the Ministry of Mining and Energy of the Republic of Serbia acquire the status of a temporary privileged producer of electricity on the day of the finality of that decision.

After a successful auction and the acquisition of the status of a temporary privileged producer of electricity, a contract on market premium is concluded with an authorized contracting party – a guaranteed supplier.

What is the quota in the market premium system for wind power plants?

The Regulation on the Quota in the Market Premium System for Wind Power Plants was passed in order to increase the use of energy from renewable sources and create a competitive market for electricity production from such sources.

The Regulation stipulates that “non-small” power plants (approved power plants over 500kW and wind power plants with an approved power over 3 MW) and power plants that are not demonstration projects have the right to participate in the auction.

Considering that, by determining the quota, the conditions for announcing the auction for acquiring the right to a market premium have been fulfilled, the first auction will be conducted by the end of 2021.