Things You Must Know Before Investing in RES

NATURE PROTECTION IN THE REPUBLIC OF SERBIA

Initial consideration

The nature protection system in the Republic of Serbia is regulated by the Law on Nature Protection (“Official Gazette of the RS“, No. 36/2009, 88/2010, 91/2010, 14/2016, 95/2018, and 71/2021, the “Law”), which regulates the conservation of nature, biological, geological and landscape diversity, as part of the environment.

The latest amendments to the Law from 14 July 2021 prescribe a ban on the construction of small hydropower plants in protected areas, a regime of exemption from the ban in the case of energy projects of national importance, and define the competence of the Government in a special procedure to determine overriding public interest. for projects that may have a significant impact on ecologically significant areas that form part of the ecological network.

The changes did not bring a “revolution” in the Serbian nature protection system, however, they can have a significant impact on investments and planning of renewable energy projects in the future.

Regime banning the construction of small hydropower plants in protected areas

The Law prohibits the construction of hydropower plants within all protection regimes of protected areas, regardless of their projected strength by the amendments to Article 35 (protection regime).

According to the decisions that were in force until the amendments to the Law came into force, the complete ban on the construction of hydroelectric power plants was valid only in the regime of the first degree of protection (strict protection regime).

However, investments were allowed in the construction of mini-hydropower plants with a maximum power limit of up to 5MW in protection regime II degree (active protection regime), and up to 30 MW in protection regime III degree (proactive protection regime).

The previous regime enabled the construction of mini-hydropower plants along the entire river course, which is not included in the I level of protection. Bearing in mind that in practice an extremely small percentage of the protected area is under strict protection, the construction of small hydropower plants was essentially enabled, provided that the environmental impact assessment procedure was carried out before the construction permit was issued.

From 21 July (beginning of application of amendments to the Law) the practice of construction of mini-hydropower plants, in principle, will no longer be possible with the entire watercourse within the protected area, except in the case of exemption from the ban based on a special decision of the Government of the Republic of Serbia on Renewable Energy Sources (“Official Gazette of RS“, No. 40/21).

Exemption from the regime of banning the construction of hydropower plants in protected areas

The Government may, at the proposal of the Ministry of Mining and Energy, with the previously obtained opinion of the Ministry of Environmental Protection, allow projects for the construction of hydropower plants in protected areas, “if these are projects of public and general interest, or projects of special or national importance for the Republic Serbia”.

The condition of the existence of the public Interest will exist especially if the construction of the hydropower plant:

• contributes to the security of the power system;
• provide new production capacities for the production of electricity from renewable sources that are necessary to achieve the planned growth dynamics of electricity production from renewable energy sources, to achieve national goals defined by the Integrated National Energy and Climate Plan; or
• when new generation capacities for the production of electricity from renewable energy sources are needed to achieve the goals of energy transition or fulfill international obligations.

The basis for the exemption from the ban on the construction of hydropower plants is defined very broadly without clear conditions and restrictions on the freedom of decision of the Government, which would address the issue of conditions, criteria, and methods of decision-making that may affect the preservation of natural resources.

Assessment of the acceptability of projects for the ecological network (the “Eligibility Assessment”)

Ecological network areas consist of ecologically significant areas and ecological corridors that connect ecologically important areas into a coherent habitat network suitable for maintaining the favourable status of certain protected natural plant and animal species. Namely, the ecological network consists of habitats on the territory of Serbia that meet certain scientific criteria defined by international conventions or EU directives on the protection of certain habitats of wild species and birds and which are determined and proclaimed by the Government by the Law.

Projects that, independently or in conjunction with other plans and projects, may have a significant impact on the conservation objectives and the integrity of ecologically significant areas are subject to an acceptance assessment procedure before their approval.

Therefore, an acceptability assessment is carried out for mini-hydropower plant projects of any design capacity if they can have an impact on an environmentally significant area, whether carried out inside or outside such an area.

If based on the conducted assessment of acceptability, the competent authority estimates that the project of the mini-hydropower plant has a significant negative impact on the conservation objectives and the integrity of the ecologically significant area, he is obliged to refuse consent (“negative assessment of acceptability”).

Exceptionally, a project with a negative assessment of acceptability may be approved in a special procedure for determining the existence of overriding public interest with the determination of appropriate compensatory measures in exchange for loss (natural functions) of the ecologically significant area or part thereof.

By latest amendments to the Law on the Existence of the Overriding Public Interest, the Government decides, based on a reasoned proposal of the Ministry, which must contain:

• the reasons for which it was concluded that there are no other more favourable alternatives for achieving the purpose of the project than proposed in prescribed criteria;
• the reasons for which the conclusion was made that the proposed compensatory measures are sufficient to ensure the coherence of the ecological network and that they can be implemented by the prescribed criteria;
• results of public information and participation.

After receiving the decision of the Government on determining the prevailing public interest, the Ministry issues a decision determining compensatory measures.

Can hydropower projects be exempted from the ban on construction in protected areas on the basis of public interest without prior implementation of the ecological network acceptability assessment and the procedure for determining the overriding public interest and compensatory measures?

Ecologically significant areas and ecological corridors, in terms of the Law, are not protected areas, but represent a special legal category of protected natural habitats introduced into the Serbian legal system in order to comply with Directive 92/43 / EEC on habitats and Directive 2009/147 / EC on birds.

However, an ecologically significant area may geographically overlap with a protected area.

Namely, habitats that have been declared an ecologically important area on the basis of special scientific criteria can also be part of a protected area as a whole or in its specific part.

In doing so, the criterion for activating the eligibility assessment procedure is the potential impact of the project on an ecologically significant area and not the location of the project outside or within such an area. In other words, a hydropower plant planned on a part of a river flow outside an ecologically significant area may continue to affect its conservation objectives (e.g. if it depletes water resources necessary for the survival of a protected natural species). eligibility assessments before project approval.

In this regard, the regime of exemption from the ban on the construction of a mini hydropower plant in a protected area on the basis of special public interest in accordance with Article 35 para. 15. of the Law and Article 5 para. 4. The Law on Renewable Energy Sources is potentially in conflict with the obligation to conduct an acceptability assessment procedure and a special procedure to determine the overriding public interest and compensatory measures provided for in Article 10 of the Law.

Comment

Current solutions create legal uncertainties and regulatory risk for the legal execution of a project based on the public interest.

Uncertainties regarding the scope of the provisions of different sources of equal legal force, where there is an apparent conflict, should be interpreted in a way that achieves complementarity, reciprocity and coherence in their application.

In this regard, the proper application of the Law and the Law on Renewable Energy Sources in the case of projects that may have a significant impact on ecologically significant areas would require the Government to wait for the decision on exemption from the ban on construction of hydropower plants on the project after being convinced in a specially conducted procedure that:

• the public interest in the implementation of the project defined by the Law on Renewable Energy Sources, in this particular case, prevails in relation to the public interest in the preservation of ecologically significant areas determined by the Law;
• there are no more favourable options by which the public interest could be achieved without compromising the integrity of the ecologically significant area (e.g. lack of alternative locations to implement renewable energy growth targets outside the protected area and / or more favourable energy production methods from the area considered) project implementation); and
• the compensatory measures proposed by the project holder are proportional to the loss of natural value that will inevitably occur with the implementation of the hydropower plant construction project.

In this regard, in the case of hydropower projects within a protected area that may have a significant impact on an ecologically significant area, the Government should wait for a decision from the authority responsible for implementation before making a decision on the proposal of the Ministry of Energy to exclude the project from the ban. acceptability assessments and, in the case of a negative project assessment, exempt the project from the ban, only after conducting a procedure to determine the overriding public interest and compensatory measures.

Otherwise, the Government would deviate from the provisions of the Law which transfer the requirements for harmonization with the request Directive 92/43 / EEC on habitats, according to which, before a decision is taken to exempt a project from a public interest prohibition, the following cumulative conditions must be established (1) that the public interest in construction predominates over the public conservation interest (2) that there are no more favourable alternatives for the protected good and (3) that the envisaged compensation measures are proportional to the lost good, in a procedure open to the participation of the interested public that may be affected by the decision.

What should renewable energy project promoters pay attention to?

The law, in principle, does not limit the possibility of building hydropower plants, solar power plants and wind turbines, regardless of the projected power, outside the protected area.

However, mini-hydropower plants and other renewable energy projects may still be subject to an ecological network eligibility assessment by Article 10 of the Law, if the implementation of the project may have a significant impact on the environmentally significant assessment area, even if performed outside protected areas.

The eligibility assessment is carried out “before the issuance of location conditions, location permit or other approval for the implementation or execution” (Article 10, paragraph 4 of the Law) of the project.

Transaction costs, the uncertainty of a favourable procedural outcome, additional time required to obtain a building permit, additional investment costs of protection measures and reputational risks may affect the investment decision.

In this regard, project promoters should pay special attention to the question of whether there is an area or natural corridor at the planned location or its vicinity that is under a special protection regime to exclude the regulatory risk of assessing the eligibility of the started investment.