Decentralized Solar Energy Generation
Decentralized Solar Energy Generation
Business Model Description
Set up and operate solar plants to generate revenue by selling electricity produced from solar panels. The inputs required include solar panels, inverters, mounting structures, electrical equipment, land, and sunlight. Target markets are utility companies, municipalities, and commercial businesses looking to reduce their carbon footprint and energy costs. the amount of power that a power plant can produce depends on its size, technology, and energy source, and can range from a few kW to a few dozen mW.
Expected Impact
Support energy security, reduce greenhouse gas emissions, and make energy affordable.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Serbia: Southern and Eastern Serbia
Sector Classification
Renewable Resources and Alternative Energy
Development need
In 2019, Serbia's average per capita carbon dioxide emissions was 6.6 (10), exceeding the global average of 4.78 metric tons in the same year (11). Serbia annually emits 58 to 62 million tons of carbon dioxide or its equivalent into the atmosphere. The largest emitters come from the energy sector, the electricity and thermal energy production industry (12).
Policy priority
The Republic of Serbia adopted the National Action Plan for Renewable Energy Services as a framework for promoting energy produced from renewable sources and set mandatory national goals for the share of energy from renewable sources in gross final energy consumption (27%). The achievement of that goal has been postponed to 2025 (9).
Gender inequalities and marginalization issues
In Serbia, the representation of women in sustainable energy, climate change, and environmental protection has improved. Still, their number decreases as one moves up the hierarchical ladder in public institutions and companies. However, Elektromreza Srbija (EMS) is an exception, with 56% of women at the highest management level (3).
Investment opportunities introduction
The Serbian government adopted a new regulation on market premium and feed-in tariffs for renewable energy sources in 2021 (13). The Ministry of Mining and Energy states that Investments in renewable energy services are critical to the development of energy (14).
Key bottlenecks introduction
The lack of a clear and stable regulatory framework and heavy reliance on coal are critical obstacles to renewable resources and alternative energy. However, the government has taken steps to address these challenges, such as adopting new regulations on market premiums and feed-in tariffs (7).
Alternative Energy
Development need
Serbia relies heavily on thermal power plants for electricity production, with about 70% of its electricity coming from coal-fired plants. This is due to the obsolescence of the energy system, as most of the electricity production system was built in the last century when coal and large rivers were the primary sources of energy (1).
Policy priority
Increasing renewable energy production and use is among Serbia's priorities under the EU Green Deal (2). The agreement on cooperation between the Ministry of Mining and Energy and the association "Renewable Sources of Energy" established the new goal of Serbia to have at least 40% of the produced energy from renewable sources by 2040 (5).
Gender inequalities and marginalization issues
According to the Renewable Energy Services Foundation - Partnerships for Resilience, women make up only one-third of licensed energy managers in Serbia, which is only one in a series that reflects their uneven representation in energy compared to men (4).
Investment opportunities introduction
Serbia faces a significant challenge in the coming decade as it looks to replace the production of electricity from over 4,000 MW of thermal power plants. The country must build over 10,000 MW of solar, wind, or hydropower plants. The required investment for this transition is estimated to be 10 billion USD (1).
Key bottlenecks introduction
Financial institutions still consider renewable sources risky; therefore, investors face higher financial and capital costs, reflected in higher electricity prices. In addition, higher initial capital means greater sensitivity to the country's political, regulatory, and administrative conditions (6).
Solar Technology and Project Developers
Pipeline Opportunity
Decentralized Solar Energy Generation
Set up and operate solar plants to generate revenue by selling electricity produced from solar panels. The inputs required include solar panels, inverters, mounting structures, electrical equipment, land, and sunlight. Target markets are utility companies, municipalities, and commercial businesses looking to reduce their carbon footprint and energy costs. the amount of power that a power plant can produce depends on its size, technology, and energy source, and can range from a few kW to a few dozen mW.
Business Case
Market Size and Environment
> USD 1 billion
5% - 10%
13 GWh of planned 19 GWh realised in in Serbia 2021 (35).
The global solar power plant market size was valued at USD 146.08 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 7.8% from 2022 to 2030 (34). Serbia currently has more than 370 registered producers with a total capacity 5.7 mW, and another 100 mW in the process of connecting to the grid (36).
State projects of solar power plants would be realized on state land dominated by around 8,300 ha of neglected agricultural land, on which it is possible to build around 8,300 MW of solar power plants on land structures, in a total value of USD 4.7 billion (39).
Indicative Return
15% - 20%
> 25%
Indicative return in projects of constructing solar power plants are in the range of 15-20% as an ROI. The ROI for solar power plants can vary depending on several factors, such as the location, size, and cost of the plant, as well as the prevailing energy prices and government incentives (38).
The Gross Profit Margin is higher than 25% based on stakeholder consultations (38).
Investment Timeframe
Long Term (10+ years)
The typical investment timeframe for a solar power plant depends on various factors, including the plant size, location, and financing options available. Generally, the initial investment period for solar power plants is more then 10 years (38).
Solar power plants typically have a lifespan of around 25-30 years, meaning they can continue to generate revenue beyond the initial investment period (38).
Solar power plants are located throughout Serbia, with the majority of them situated in the southern and eastern parts of the country, including Kovacica (104 mW), Borkovac (9.9 mW), Alibunar (3.1 mW), Kladovo (1.1 mW), and Vrsac (1 mW).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - Volatile
Impact Case
Sustainable Development Need
Approximately 75% of energy in the Republic of Serbia comes from fossil fuels. The combustion of fossil fuels releases carbon dioxide, the leading cause of the greenhouse effect (23).
Electricity imports in 2022 increased more than three times (231 percent) compared to 2021, when Serbia paid 503 million USD for electricity imports (24).
Gender & Marginalisation
Marginalized groups face challenges with energy security, particularly in areas with limited access to traditional electricity grids (38).
Different social position of women and men, and differences in economic position and access to different types of energy are linked with gendered energy production and consumption patterns. Energy poverty impacts more generally poorer female headed households.
Expected Development Outcome
No greenhouse gas emissions are released into the atmosphere when solar panels are used to create electricity. Installing solar power plants helps to reduce reliance on fossil fuels and promote a more sustainable energy future (38).
Solar power plants would ensure more energy independence by reducing reliance on imported fossil fuels and help improve energy security by providing a decentralized and distributed source of electricity (38).
Gender & Marginalisation
Solar installations can provide a reliable energy source, even in remote or off-grid locations (38).
Installing and maintaining solar installations can create job opportunities in the renewable energy sector, which can benefit marginalized groups that may face higher levels of unemployment or underemployment.
Decentralized solar energy generation can benefit women due to the lower economic position as it can make energy more affordable for household consumption.
Primary SDGs addressed
3.9.1 Mortality rate attributed to household and ambient air pollution
71.54 per 100,000 population in 2019 (27).
N/A
13.2.2 Total greenhouse gas emissions per year
61.86 million t in 2019 (28).
N/A
7.1.1 Proportion of population with access to electricity
99% (28).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Outcome Risks
A health risk of electromagnetic hypersensitivity is associated with living near solar farms (38).
Producing solar panels involves using toxic materials and chemicals, such as lead and cadmium. Improper disposal of these materials can lead to environmental pollution and health hazards (38).
Solar farms can disrupt the natural habitat, and the panels can kill insects and other small creatures due to the solar radiation (38).
Solar panels have a lifespan of around 25-30 years and need to be disposed of properly. Disposing of large numbers of solar panels at the end of their lifespan can create waste management issues (38).
Impact Risks
Building a solar power plant can be challenging due to the high upfront costs and the need for significant upgrades to the electrical grid infrastructure, which is costly and time-consuming (38).
Impact Classification
What
Solar energy diversifies the electricity supply, especially in a period of the energy crisis, reduces gas emissions with which Serbia has a significant issue, and provides job opportunities.
Risk
The construction of a solar power plant is challenging because of the high initial costs and the requirement for significant upgrades to the electrical grid infrastructure.
Impact Thesis
Support energy security, reduce greenhouse gas emissions, and make energy affordable.
Enabling Environment
Policy Environment
The Energy Development Strategy until 2025 with projections until 2030 (2016) defines the main priorities for the energy sector as electricity, heat, coal, oil, gas, renewable energy sources and energy efficiency (9).
The national action plan for the use of renewable energy sources of the Republic of Serbia (2013) determines the goals of use of renewable energy sources until 2020, as well as the way for reaching them. Among other things, it aims to encourage investment in areas of renewable energy sources.
Financial Environment
Financial incentives: 10 local self-governments in Serbia have announced subsidies for installing solar panels. The Ministry provided part of the money for the project at USD 888,120. Households are obliged to provide the same amount of money they receive from the ministry (21).
Fiscal incentives: The bills of buyers-producers in January 2023 show that the amendments to the Law on Value Added Tax started with a more favorable tax calculation for the production of electricity for own needs through the use of renewable energy sources (25).
Other incentives: The law on renewable energy services provides market premiums and feed-in tariffs (28), which makes the renewable energy investment more affordable and predictable.
Financial incentives: The market premium is an operational state aid representing an addition to the market price of electricity delivered to the market by users of the premium and determined in Euro cents per kWh in the auction process. The market premium is calculated and paid monthly (31).
Regulatory Environment
The Law on Energy ("Official Gazette of RS", no. 57/11 and 80/11), 2014 regulates energy policy objectives, energy supply conditions, customer protection, energy-related activities, renewable energy sources, market organization, and monitoring of implementation (30).
The Law on Energy regulates the sale of renewable energy, which can be sold through the electricity market. The state-owned company EPS buys electricity at regulated prices set by Energy Agency. Producers can also sell on the free market, but need an Energy Agency license (40, 43).
Law on the Use of Renewable Energy Sources "Official Gazette of RS", No.40 of April 22, 2021 regulates the use of renewable energy sources, sets targets for their use, determines the share of renewable energy services in Serbia's gross final energy consumption, and integrates renewable energy into the market (31).
Marketplace Participants
Private Sector
Telefon inženjering doo, SOL NAVITAS solarne elektrane d.o.o. Šabac, Amper solar group d.o.o.
Government
Ministry of Mining and Energy, Ministry of Agriculture and Environmental Protection, Agency for Regional Development and Local Self-Government.
Multilaterals
World Bank (WB), United Nations (UN), European Investment Bank (EIB), International Financial Corporation (IFC) with credit lines intended for renewable energy projects, including solar.
Public-Private Partnership
In the field of solar (and wind) energy in Serbia, PPPs are implemented through an auction system where private companies bid to provide electricity at the lowest price determined by the Energy Agency (25).
Target Locations
Serbia: Southern and Eastern Serbia
References
- (1) BBC News. Serbia, coal and the environment: Can Serbia reduce the use of coal and why it is important, 2020. https://www.bbc.com/serbian/lat/srbija-54738653.
- (2) Europe. Green agenda for Serbia, 2022. https://europa.rs/zelena-agenda-za-srbiju/
- (3) Bizlife. Women in Sustainable Energy - Leadership for Change, 2018. https://bizlife.rs/zene-u-odrzivoj-energetici-liderstvo-za-promenu/.
- (4) Klima 101. Solutions that respond to women's needs are good for society and nature as a whole, 2021. https://klima101.rs/tribina-rod-klimatske-promene/.
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