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Serbian GO exports pick up but EU agreement still pending

The article is being subject to updates following clarifications from EMS.

Serbia investigated possibilities to start exporting guarantees of origins (GOs) to some EU markets amid its AIB membership, but provisions of the Renewable Energy Directive (RED II) prevented such realisation.

Serbian GOs recognition

Serbia became a member of the Association of Issuing Bodies (AIB) in 2019, amidst the negotiation of the RED II in the EU. With a desire to be able to export Serbian GOs, EMS asked each AIB member to declare their stance on the acceptance of Serbian GOs.

Some countries indicated that they might accept guarantees of origin issued and exported from Serbia, according to an EMS representative. However, with the start of the application of the RED II, this never became a reality.

Art.19.11 of the RED II restricts the export of Serbian GOs to EU member states, with the wording: “Member States shall not recognize guarantees of origins issued by a third country (such as Serbia, Switzerland, post-Brexit UK etc.) except where the Union has concluded an agreement with that third country on mutual recognition of guarantees of origin issued in the Union and compatible guarantees of origin systems established in that third country, and only where there is direct import or export of energy”.

EMS had discussed the RED II Article’s provisions with the AIB and ENTSO-e, an EMS representative said. The parties were pushing for a comment to be added to RED II stating that “Art 19.11 needs to foster the participation and recognition of third countries in the European GO market and rather than a political agreement, exchange of GOs with non-EU/non-EEA countries, could be based on the fulfillment of technical and legal criteria to be installed in the country of concern, which guarantee avoidance of double counting of the same amount of energy with specific attributes“.

However, such comments were left out of the pre-final version of RED II. This put Serbia in the same situation as Switzerland whereby local GOs cannot be recognised in the EU markets despite fulfilling all requirements on a technical level due to a missing bilateral agreement with the bloc.

GOs issued in Switzerland stopped being accepted in the EU when the provisions of RED II came into force in July 2021.

Serbian GO exports & disclosure

"From the beginning of [2023 market participants from the Serbian registry] has started exporting GOs to several countries such as Switzerland, Italy etc.,” according to the official statistics from the Serbian registry. For clarification, Serbian GOs can be transferred to several countries but only be used for disclosure in Switzerland among the mentioned countries.

Serbia exported 2.7 TWh hydro GOs between 1 February - 30 April 2023, according to Grexel data. This is almost double the total amount of issued Serbian hydro GOs in 2022 alone, suggesting that interest in the market is growing in non-EU countries such as Switzerland to which Serbia can export GOs.

Some 5.9 GWh solar GOs were also exported in the same period, Grexel data shows. However, the majority of them were not issued in the country due to the very small amount of subsidy-free solar capacity. Instead, they were imported from another country and then re-exported, while others were issued in a previous period, EMS confirmed.

The Serbian GO market is dominated by state-owned utility EPS which owns 3 GW of hydro capacity which generates around 10.5 TWh per year. Most wind and solar producers are part of a support system and are not able to offer GOs.

EPS organises ad-hoc GO selling auctions but volumes and prices are kept confidential. Two market sources confirmed that the prices from those auctions tend to be at a discount to the EU.

Serbian – EU electricity market integration

Serbia is by far the most advanced of all Contracting Parties of the Energy Community in regards to the transposition of the 2021 Clean Energy Package with many elements of the Governance Regulation, Renewables Directive and Energy Efficiency already transposed.

However, the Energy Community recommended in its 2022 implementation report that Serbia should focus, among others, on intraday market opening, full unbundling of the transmission system operator and allocation of interconnection capacities with the transmission system operator of Kosovo (KOSTT).

The latter has been a contention issue for years which led to the Energy Community Secretariat opening a dispute settlement case against Serbia last year. The case was prompted by EMS not cooperating with KOSTT on coordinated cross-border capacity allocation and not making available the maximum capacity to market participants.

If this issue remains unresolved Serbia may have a hard time securing an agreement with the EU on mutual GO recognition.

Market impact

The impact of the Serbian GOs on EU supply would remain neutral unless a bilateral agreement with the bloc is reached.

Other western Balkan countries have taken steps to establish GO registries, although they are a long way from becoming full AIB members. Nevertheless, a regional market could be established among those countries, including Serbia as a Contracting Party of the Energy Community.

(2023-08-10 17:00 CET - Update following clarifications from EMS that no Serbian GOs are being exported to EU Member States)