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Incentive measures for the producers of electricity from renewable sources (Part II)

Incentive measures for the producers of electricity from renewable sources (Part II)

In the previous AKT blog-post on the topic of renewable energy production in Serbia (https://www.akt.rs/en/publication/incentive-measures-for-the-producers-of-electricity-from-renewable-sources--part-i-) we covered some of the key features of Regulation on incentive measures for the production of electricity from renewable sources and from high-efficiency electricity and thermal energy cogeneration (http://www.mre.gov.rs/doc/efikasnost-izvori/Uredba%20o%20podsticajnim%20merama%20ENG20092016.PDF), regarding which incentive measures for privileged producers exist, what are the required conditions for getting the incentive measures, and what is a Power Purchase Agreement. Now, what is left is to elaborate rights and obligations of privileged producers and other energy entities regarding the incentive measures, as well as the penal provisions.

 

In the previous AKT blog-post on the topic of renewable energy production in Serbia (https://www.akt.rs/en/publication/incentive-measures-for-the-producers-of-electricity-from-renewable-sources--part-i-) we covered some of the key features of Regulation on incentive measures for the production of electricity from renewable sources and from high-efficiency electricity and thermal energy cogeneration (http://www.mre.gov.rs/doc/efikasnost-izvori/Uredba%20o%20podsticajnim%20merama%20ENG20092016.PDF), regarding which incentive measures for privileged producers exist, what are the required conditions for getting the incentive measures, and what is a Power Purchase Agreement. Now, what is left is to elaborate rights and obligations of privileged producers and other energy entities regarding the incentive measures, as well as the penal provisions.

 

1 - Rights of privileged producers and other energy entities regarding incentive measures

 

On one side a privileged producer is entitled to incentive measures in accordance with the Energy Law and the Regulation, while on the other side the guaranteed supplier and the operator of the electricity transmission and distribution system have to ensure the exercise of such measures. As mentioned in the previous blog-post, this right to incentive measures is exercised through a power purchase agreement concluded with the guaranteed supplier. In case that the guaranteed supplier changes, the current guaranteed supplier has to ensure this right during the procedure of election of a new guaranteed supplier up to the date of the transfer of rights and obligations as per the power purchase agreement.

 

  1. Changes in law

 

When it comes to the rights of privileged producers, a very important question is what happens if it comes to changes in law that concern incentive measures. According to Article 19 of the Regulation, a change in law means: the coming into force of new regulations after the date of coming into force of the power purchase agreement or changes to laws valid on the date on entry into a power purchase agreement, aimed at the reduction of rights or increase of obligations of the privileged producer, resulting in increase of their costs of doing business.

 

In connection to this question comes:

 

b. Incentive modification process

 

According to Article 20 privileged producer has a right to submit a request to the Government for changes to the incentive measures due to changes in law. This proposal has to include:

  • list of regulations that have been changed;
  • analysis of the economic effects of these regulations on the costs of privileged producers;
  • certified extract from the feasibility study produced by an authorized legal entity in accordance with regulations on planning and construction and other regulations in the part that indicates the expected level of costs in the year in which the change of regulations occurred;
  • proposal of incentive measures that would bring the privileged producers to the same economic and financial position they were in before the change in regulations.

 

If the Ministry of mining and energy finds this request justified, it will within 60 days from the date of submission of the request submit to the Government, for consideration and a decision, the proposal of a regulation that would entirely or partially recuperate the loss suffered by the privileged producers.

 

The proposal of the regulation can contain new incentives that would bring the privileged producer to the same economic and financial position they were in before the changes in law.

 

In case of changes to incentive measures due to changes in law, the guaranteed supplier will, at the request of the privileged producer, amend the power purchase agreement.

2 - Obligations of the privileged producer

According to the Article 22, the privileged producer is in obligation to:

1) sell all the produced electricity exclusively to the guaranteed supplier;
2) keep records of the fuels spent;
3) submit operational plans to the guaranteed supplier if the installed power plant capacity is over 5 MW, and meet other obligations to the guarantee supplier established by the power purchase agreement;

4) notify the Ministry if the guaranteed supplier does not fulfill their obligations under the power purchase agreement;

5) notify the Ministry on actions of state bodies, holders of public authority, autonomous province bodies or local self-government bodies having effect on the performance of obligations or exercising the rights regarding incentive measures.

 

 

 

 

3 – Obligations of the guaranteed supplier

According to Article 23, guaranteed supplier is in obligation to:

1) execute a power purchase agreement within the prescribed deadline;

2) provide payment guarantees to the privileged producer of electricity in accordance with the power purchase agreement;

3) keep records of signed and expired power purchase agreements and publish such records on their website;

4) inform the Ministry in case of termination of a power purchase agreement within one month as of the date of termination of the agreement;

5) notify the Ministry if the privileged producer defaults on their obligations, within one month as of the date of default of obligations of the privileged producer of electricity;

6) amend the power purchase agreement at the request of the privileged producer pursuant to Article 21 of the Regulation and the power purchase agreement;

7) publish annual adjusted incentive purchase prices under Articles 6 and 7 of the Regulation on their website for new power purchase agreements.

4 – Penal provisions

The Regulation contains a number of penal provisions that set monetary fines for breaches of particular obligations, of both parties from the power purchase agreement.

Articles 24 and 25 contain fines for breaching the prohibition of contracting or altering the incentive measures contrary to regulations (Article 18). For the guaranteed supplier, fines are between RSD 1,500,000 to 3,000,000 (for the legal person) and between RSD 100,000 to 200,000 (for the responsible person within the guaranteed supplier). For the privileged producer, fines are between RSD 100,000 to 500,000 (for the legal person) and between RSD 50,000 to 150,000 for a natural person.

 

Additionally, Article 26 of the Regulation imposes monetary fines on the guaranteed supplier for failing to meet its obligations provided in Article 23. The fine is between RSD 500,000 to 2,000,000 (for the legal person) and between RSD 10,000 to 50,000 (for the responsible person within the guaranteed supplier).

 

Iva Zivkovic

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