Even before the outbreak of the conflict in the Middle East, the situation in Serbia's energy sector had already been intense and challenging. While the process of resolving ownership issues surrounding Petroleum Industry of Serbia (NIS) is still ongoing, along with all the challenges this entails, Serbia - like the rest of the world - is feeling the spillover effects of the global crisis in the Persian Gulf.
Geopolitical tensions, supply disruptions, and rising energy prices are raising questions about the security and sustainability of energy systems worldwide. In order to ensure stable short-term supply while simultaneously accelerating the energy transition towards more sustainable sources, the country faces a great deal of work, difficult decisions, and strategic planning.
We discussed how resilient Serbia's domestic energy system is in the face of new crises, where Serbia stands in relation to European policies, and what plans are envisaged for the coming period with Dubravka Đedović Handanović, Minister of Mining and Energy.
How would you assess the current global energy situation, and to what extent are its effects already spilling over into Serbia?
"The conflict in the Middle East has produced, in the opinion of the International Energy Agency (IEA), the greatest threat to global energy security in history, with 13 million barrels of oil per day effectively lost from the market.
The price of oil rose from around 70 dollars per barrel before the conflict involving Israel, the United States, and Iran began, to as much as 141 dollars at the beginning of April. The increase in oil prices, as well as its limited availability due to supply disruptions through the Strait of Hormuz, directly contributes to rising inflation in importing countries, which is reflected in higher fuel prices and increased prices for other goods.
Serbia cannot remain insulated from these events, but we prepared in good time by procuring additional quantities of crude oil and gas while fully replenishing all petroleum product storage facilities. We did not allow extreme increases in fuel prices at petrol stations, nor did we introduce measures such as fuel purchase restrictions, as was the case in Slovenia, Slovakia, and Croatia.
Our most important objectives are to continue ensuring full fuel availability at petrol stations and to keep fuel prices under control. The state has relinquished a significant portion of excise revenue. These funds are important because they are used to finance public projects and infrastructure development across the country. Together with colleagues from the Ministry of Finance, we will undertake measures to maintain economic stability, preserve investment levels, and safeguard the country’s credit rating."
What are currently the greatest risks to Serbia’s energy security?
"For Serbia, the most important issue at present is the successful conclusion of negotiations between MOL Group and Gazprom Neft, with the aim of permanently removing NIS from the American sanctions list. This would ensure uninterrupted operations and long-term planning, more secure crude oil procurement, and consequently the stable operation of the refinery in Pančevo.
Another risk beyond our control is the rise in global oil prices, which affects not only energy security but also the stability of the economy.”
To what extent does the current energy situation burden the Serbian economy, and which sectors are most exposed to changes in energy markets?
"Rising energy prices in all countries first affect the transport and logistics sector, which directly depends on fuel prices, followed by agriculture, manufacturing, construction, and so forth. The International Monetary Fund forecasts a slowdown in global economic growth alongside rising inflation.
Serbia has managed to preserve macroeconomic stability and a relatively low inflation rate of 2.8 per cent. During discussions with the IMF delegation that recently visited Belgrade, we spoke, among other things, about the measures we have already undertaken, as well as potential new measures aimed at mitigating the negative effects of rising energy prices on the domestic business environment."
Serbia is caught between the need for system stability and the obligation of accelerated decarbonisation. How do you balance these two goals?
"For Serbia, the most important priority is to continue ensuring secure energy supply while developing projects that will gradually reduce the use of fossil fuels in the energy sector. Decarbonisation and the phase-out of coal are by no means simple or inexpensive tasks. The process must be managed rationally, which means we cannot decide overnight to shut down thermal power plants that currently provide around two-thirds of our electricity.
We are pursuing this process sustainably and over the long term, while taking the country’s energy security into account.
Germany, for example, made ambitious decisions to phase out nuclear power and gradually abandon coal, while strongly developing renewable energy sources. However, the energy crisis following the outbreak of the war in Ukraine demonstrated that the transition must be managed carefully, bearing in mind supply security and the need for flexible energy sources. During certain periods, Germany became more dependent on electricity imports and temporarily resumed greater use of coal-fired power plants, confirming that the energy transition cannot be implemented abruptly.
We have recognised nuclear energy as a future source of baseload power that will eventually replace coal-fired thermal power plants.
European Union countries such as Poland and the Czech Republic, which still rely heavily on coal, have used dedicated funds to support the transition to renewable energy and the retraining of workers affected by the energy transition. For Serbia, securing greater financial support from the EU will be extremely important in accelerating the energy transition, with the aim of decarbonising the energy sector as much as possible by 2050, in line with the European Green Deal."
What are the biggest challenges to faster renewable energy development in Serbia?
"The greatest challenge for the development of renewable energy sources in Serbia is, above all, the uncontrolled number of projects currently seeking grid connection, which significantly exceeds national targets and places excessive strain on the system.
It is therefore necessary to align renewable energy development more closely with the realistic capabilities of the system, as well as with the parallel development of new baseload capacities, which are technically and financially extremely demanding - especially in the case of projects such as nuclear energy.
Renewable energy sources cannot be developed faster than the system’s ability to integrate them, which is why the transition must be gradual and balanced. Its pace also directly depends on the availability of financing, making European Union support crucial for a fair and sustainable transition in Serbia."
What are the ministry's key investment priorities in the coming period? Are there plans for more substantial investments in energy storage and new technologies such as hydrogen?
"The state has launched an ambitious investment cycle within the Serbia 2030–2035 plan, under which 30 per cent of all investments are allocated to the energy sector. Our principal objective is for Serbia, by 2035, to become more energy secure, better connected with European and regional markets, and positioned as a stable energy hub of South-Eastern Europe. We plan to implement projects worth approximately €14.4 billion.
The largest investments relate to new generation capacities, amounting to around €6.5 billion. We will build the Bistrica and Đerdap 3 reversible hydropower plants, which will play a key role in secure supply, balancing production from wind farms and solar power plants, and energy storage, alongside around 1,000 MW of gas-fired power plants that will provide the stable and flexible generation necessary for secure system operation.
At the same time, we must strengthen our transmission network in order to ensure supply security while integrating new renewable energy capacities. We plan to construct 1,000 kilometres of new transmission lines and increase cross-border capacities from 4,000 to 6,000 MW.
Diversifying natural gas and oil supply sources and routes is essential in order to ensure security of supply amid increasingly frequent geopolitical disruptions. Over the next two years, we will build new gas interconnections with Romania and North Macedonia, as well as an oil pipeline with Hungary. The expansion of the underground gas storage facility in Banatski Dvor is currently underway, increasing gas storage capacity from 450 million to 750 million cubic metres.
In the Energy Development Strategy to 2040, we recognised hydrogen as an energy source that will play an important role in the country’s long-term energy future. In the coming period, we will work on developing a regulatory framework that will enable the development of a hydrogen market. By 2030, the construction of a demonstration facility for the production, storage, and use of hydrogen can be expected."
What is your view of the role of the thermal power sector over the next decade?
"Serbia is undergoing an energy transition in which we are planning major changes in electricity generation, with a clear commitment to significantly increasing renewable energy capacities through the construction of reversible hydropower plants, solar plants, and wind farms.
By 2030, the total installed capacity of wind and solar power plants should reach 3.5 GW, meaning that nearly every second megawatt-hour will come from green energy. According to the Integrated National Energy and Climate Plan, after 2030 a further increase in wind and solar capacities is expected, reaching a total of 10.5 GW. As a result, the share of renewables in electricity generation should reach 70.3 per cent by 2040.
This means that coal, as a domestic resource, will gradually be replaced by renewable energy capacities, additional hydropower capacities such as the Bistrica and Đerdap 3 reversible hydropower plants with a combined capacity of 2,460 MW, as well as new gas-fired generation capacities.
However, in order to completely phase out fossil fuels - which is the vision for Serbia’s energy sector by 2050 - it will also be necessary to secure sufficient baseload energy capacity, for which we plan to introduce nuclear energy.
At the same time, as a country where coal still dominates electricity generation, we must plan the energy transition sustainably, without negative social or economic consequences for those parts of Serbia that traditionally rely on coal mining and the mining industry."
(EUpravo zato)