Serbia to House World's Largest Solar Farm, But Investment Climate Flounders

While Serbia prepares to build the largest solar park in the world, tax revenue incentives and European Union policy initiatives rather than a public desire to go green help to drive Southeastern Europe’s alternative energy future, which will not see much progress in the absence of serious subsidy support.

Earlier this month, the Serbian government signed a memorandum of understanding (MOU) with Luxembourg-based Securum Equity Partners Europe to build the world’s largest solar farm on 3,000 hectares of Serbian territory.

Securum will invest $2.5 billion in the farm, which will have an estimated capacity of 1,000 MWp. Construction of the farm is slated to begin early next year and will take up to five years to complete.

The deal is a very significant one both for the future of renewable energy in Southeastern Europe and for the Serbian government. Around 3,000 jobs will be created just in the building of the farm, and another 600 jobs will be created to permanently manage the farm. While the Serbian government will lease the land for free, it will generate some 750 million euros in taxation from the park.

The two sides have not yet agreed on a final location for the park, but the choice of Serbia was based on the fact that the country receives around 40 percent more solar radiation than other countries in Southeastern and Central Europe. 

Renewable energy  development is not a high priority in Serbia. Serbia’s conventional energy infrastructure was significantly damaged during the conflict over Kosovo in 1999, and remains in some disrepair.

Some experts estimate that Serbia will need annual investment of between 100 million and 200 million euros for modernization to European standards. At the same time, energy prices in Serbia remain artificially low because anything else would be politically unfavorable.

This brings us to our next point: Serbia (along with other countries in the region) cannot focus on renewable energy in tandem with the European Union amid political, economic and social instability. Long-term thinking along the lines of renewable energy is a Western luxury. 

Indeed, Serbia has vast renewable energy potential, particularly in terms of agricultural and forestry biomass capacity, but also in hydroelectric, wind and photovoltaic (PV), or solar power. However, the massive solar farm aside, this will remain untapped for the foreseeable future.  While projects funded by the European Union’s Instrument for Pre-Accession Assistance (IPA) are incrementally working towards laying the foundation for the tapping of Serbia’s renewable energy potential, the current investment climate is not promising.

While Western Europe, particularly Italy and Germany, have seen massive growth in the PV industry, this has been thanks to very generous subsidies supporting those endeavors. Serbia cannot afford such subsidies, the cost of which are passed on to the consumer. Without the support mechanisms in place, renewable energy investors will not be flocking to Serbia.

And the investment climate could further deteriorate. Russia largely dictates Serbian energy policy, and Moscow’s hold over Serbia is likely to be boosted by the results of 20 May elections in Serbia, which saw the defeat of pro-European incumbent President Boris Tadic and the victory of pro-Russian conservative Tomislav Nikolic.

By. Charles Kennedy for Oilprice.com