Serbia’s renewable energy market is in the midst of transformation, driven by domestic reforms and international partnerships – most recently, with the governments of France and the USA in the field of energy efficiency.
The government is working to diversify its energy portfolio and production away from coal and toward greener solutions. It is notable that these efforts align with EU energy standards and environmental goals which heavily influence Serbia’s national action plans. Serbia’s favorable geography offers great potential for hydropower and wind and solar energy, making these sources central to its strategy. In 2023, the government held auctions for granting contracts for difference, allocating incentives for 400 megawatts of wind and 50 megawatts of solar power projects. These incentives are part of a broader plan to increase Serbia’s renewable energy capacity in the near future. Foreign investments have been key and include a USD 2.18 billion commitment from Chinese companies for a 1.5-gigawatt wind farm and a 500-megawatt solar power plant. These projects would reduce Serbia’s dependence on lignite and imported energy. Certain challenges remain. One of them revolves around the legal and regulatory hurdles for constructing renewable energy projects, particularly the complexities involving land rights.
Legal Challenges and Land Rights
One of the least expected challenges for renewable energy projects in Serbia is acquiring appropriate land rights. The Serbian legislative body did provide an opportunity for investors to have a certain level of security in this sense. Under Article 69 of Serbia’s Law on Planning and Construction, investors are granted statutory rights to use the land for power plant projects, in relation to using the access roads for construction and using the land for laying the underground cables (i.e., installing overhead lines).
Even though there is a clear provision regulating this particular question, investors faced difficulties in the past when competent authorities required additional documentation in this regard. The request for additional documentation was linked to securing appropriate rights to use the land either via lease or easement even, regardless and despite statutory rights that were in place. Additional requests of certain authorities and inconsistent practice of the authorities occurred prior to filing the request on commencement of construction works (in the construction phase) or the investor coming to the point of obtaining the use permit.
The inconsistent practice of authorities created a situation in which the approach of investors to this topic would vary significantly even before construction began. Some investors chose to fully secure land rights through lease, easement, or purchase agreements in addition to the statutory right prior to beginning construction, while others relied solely on the statutory rights granted under Article 69. A third group of investors used a mixed approach, purchasing/leasing part of the land and relying on statutory rights for the rest – especially for land whose owners were not eager to participate.
Opportunities for Reform and Legal Clarity
To mitigate any kind of challenges in this regard, there is a need for more concrete regulatory guidance. The Ministry of Mining and Energy could play a role by issuing binding guidelines to standardize the approach to land rights for renewable energy projects, which would serve to establish clearer guidelines for state authorities and secretariats on land usage. This could foster a more stable investment environment. Generally speaking and regardless of a particular issue, such reforms would reduce legal uncertainties and streamline the development process, encouraging more consistent investment. More concretely, a formal opinion from the competent ministry could help resolve the question that investors often have prior to entering or acquiring a project in Serbia. Also, having in place an official interpretation by state authorities would ensure that all investors operate under the same guidelines and expectations when securing land for projects, thus removing barriers to renewable energy development.
Conclusion
In conclusion, Serbia’s renewable energy market offers significant opportunities, especially in wind and solar energy. There are still certain other open items and issues that may come up in the process of developing and constructing a wind or solar power plant in Serbia, however, due to the rise and need for these types of investments, state authorities and investors find a way to overcome the obstacles in order to fulfill the common goal – developing renewable projects as greener and cleaner solutions for electricity production. Regardless of the circumstances surrounding concrete issues that investors face in the renewables sector, addressing any type of legal uncertainties is crucial for Serbia to attract investment and develop renewable energy projects, contributing to a more sustainable energy future.
By Radovan Grbovic, Partner, and Sara Ostojic, Senior Associate, SOG in cooperation with Kinstellar
This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
