Wind Farms
Wind Farms
Business Model Description
Construct and operate wind farms to generate revenue by selling electricity through long-term Purchase Power Agreements, covering the expenses and potentially selling renewable energy credits. Distributors are obliged to purchase all the energy produced from renewable sources. Wind power plants require supplying equipment, transportation, risk mitigation and planning know-how, location with frequent and robust wind, energy license, use, and construction permit.
Expected Impact
Reduce harmful energy production emissions, increase energy security, and replaces fossil fuels.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
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Country & Regions
- Serbia: Vojvodina Autonomous Province
- Serbia: Southern and Eastern Serbia
- Serbia: Šumadija and Western 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 (8).
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).
Wind Technology and Project Developers
Pipeline Opportunity
Wind Farms
Construct and operate wind farms to generate revenue by selling electricity through long-term Purchase Power Agreements, covering the expenses and potentially selling renewable energy credits. Distributors are obliged to purchase all the energy produced from renewable sources. Wind power plants require supplying equipment, transportation, risk mitigation and planning know-how, location with frequent and robust wind, energy license, use, and construction permit.
Business Case
Market Size and Environment
> USD 1 billion
Serbia's total wind energy potential is 1,300 MW.
From just one wind farm with a capacity of 150 MW, Serbia would have a profit of 250 million Euros (app. USD 280m) (21). If Serbia uses its full potential of 1,300 MW, the profit will amount to 2.2 billion euros or USD 2.6 billion (21).
In the period from 2016 to 2020, approximately 5 wind farms with a total capacity of 381.5 MW were built on the territory of the Republic of Serbia. That makes total energy potential of more than 900 MW, and potential market of more than USD 1 billion (18).
According to the report of the Energy Agency from May 2022, the production of wind power plants amounted to a record 1,004 GW in 2021. It accounted for 2.8% of the total electricity production in Serbia, but on the other hand, this data indicates that the potential of wind energy is still underutilized (19).
Indicative Return
< 5%
5% - 10%
Indicative return in projects of constructing wind power plants is less than 5% as an IRR. Following the payback period, the ROI of wind power investments is 5-10% based on stakeholder consultations (13).
Investment Timeframe
Long Term (10+ years)
The payback period of investment in wind farms is 9-12 years based on stakeholder consultations (13).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
75% of Serbia's electricity comes from fossil fuels, constituting a significant challenge to tackle in the face of climate change. Renewable energy sources still include a small share of installed energy capacity in the country (14).
Serbia depends on imports for three quarters of its crude oil, with most coming from Iraq, Russia, and Kazakhstan. Despite increasing renewables, reducing fossil fuel dependence is crucial for a country with growing energy needs (33).
Gender & Marginalisation
Roma men and women often face discrimination in the area of electricity supply (17).
A study of 1,000 Serbian women working in sustainable energy, climate change, and environmental protection found gender inequality in decision making (38).
Expected Development Outcome
Investment in wind power plants enables reaching the climate goal of reducing the increase in the average global temperature by 1.5 °C by 2050 and reducing the use of fossil fuels by 75% (34). Serbia targets to have 40% of its energy mix generated by renewables by 2040 (30).
Investing in wind farms may help Serbia to diversify its energy sources and reduce its dependence on imported energy. Wind energy can significantly contribute to Serbia's energy mix (36).
Gender & Marginalisation
Incorporating domestic renewable energy, like wind power, can lead to cost savings and greater affordability for low-income families (13).
The green energy transition is an opportunity to affirm women as active participants in this process and to open this sector for female entrepreneurs, managers, and engineers (37).
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
32.88% (2021) (32).
N/A
N/A
N/A
13.2.2 Total greenhouse gas emissions per year
30.87 million t (2021) (32).
N/A
12.a.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Outcome Risks
Wind farms in areas with high bird concentrations (enormous birds and raptors with no natural predators) can lead to habitat fragmentation, noise, and visual pollution (29).
Wind farms can harm habitats if nature protection guidelines are not followed during construction (20).
Wind farms can harm habitats by disrupting hydrological regimes, changing groundwater levels, and causing habitat degradation through disturbances (20).
Impact Risks
Wind farms may have unexpected costs due to environmental impact and community conflict, so such expenses should be considered in the project planning phase (20).
Impact Classification
What
Wind power plants increase the share of renewable energy in the energy mix, reduce CO2 emissions, and reduce energy dependency on imported energy.
Who
Energy providers and energy consumers, manufacturers and energy services companies, the general public, and the planet benefit from clean energy from wind farms.
Risk
Energy production from wind power plants may result in unexpected risk due to environmental impact and community conflict.
Impact Thesis
Reduce harmful energy production emissions, increase energy security, and replaces fossil fuels.
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: Serbia incentivizes wind power investment through feed-in tariffs (FITs), set by the Energy Agency, which offer fixed payments for renewable energy fed into the grid (15).
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 (41).
Fiscal incentives: Tax benefits are granted to investors who make special importance investments: improve competitiveness / regional development, invest USD 5.2 million / 500+ jobs (developed areas) or USD 2.1 million / 100+ jobs (less developed areas), support common priorities, or have bilateral agreements (16).
Other incentives: Serbia does not offer any significant incentives other than tax exemptions for wind power investments, but investors may benefit from general investment incentives like free trade agreements, foreign investment protection, and access to credit lines and guarantees.
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 (43).
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 (43, 44).
The Law on the Use of Renewable Energy Sources "Official Gazette of RS", No.40 of April 22, 2021 regulates the use of RES, 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 (41).
Marketplace Participants
Private Sector
Electrawinds K-Wind d.o.o, New Energy Solutions, Elicio Serbia, MK Fintel Wind, NIS.
Government
Ministry of Mining and Energy, Ministry of Agriculture and Environmental Protection, Agency for Regional Development and Local Self-Government, Energy Agency of the Republic of Serbia.
Multilaterals
European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), European Investment Bank (EIB), World Wind Energy Association (WWEA), European Wind Energy Association (EWEA), International Renewable Energy Agency (IRENA).
Non-Profit
Center for Ecology and Sustainable Development (CEKOR).
Public-Private Partnership
In the field of wind (and solar) 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 (42).
Target Locations
Serbia: Vojvodina Autonomous Province
Serbia: Southern and Eastern Serbia
Serbia: Šumadija and Western Serbia
References
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