New economy: TENT burns mud and stones, so electricity has to be imported

During this winter, Electric power industry of Serbia almost every day it was forced to import electricity, after new problems faced by the Nikola Tesla thermal power plant.

Recalling the situation from four years ago, when due to a series of accidents electroenergy system was collapsing, and now trucks are arriving at TENT again, in which instead of coal, mud and stones are brought, which burden the operation of the power plant. The result is the import of electricity at high exchange prices, instead of cheap domestic production.

According to the website Energyflux.rs, through which Elektromrež Srbije publishes data on electricity trading, the price of electricity on the spot market on Wednesday morning, February 13, reached 267 euros per megawatt hour, remaining above 150 euros practically throughout the day. A similar picture is repeated throughout the winter, which was marked by high prices on the electricity markets, writes the New Economy.

A more diverse energy mix is ​​needed

At the same time, it should be borne in mind that EPS electricity, which it is forced to buy at these prices, is mostly sold by the economy for around 95 euros per megawatt hour, and cheaper than that to the population.

Experts state that in the short term it is necessary to remediate the burning problems in the thermal sector, but that a long-term solution requires a more diverse energy mix in which the share of coal in energy production will be systematically reduced, compensated by hydro potential and other renewable sources - wind, sun and biomass, especially considering the increasingly strict European requirements regarding harmful emissions, for which Serbian thermal power plants are a convincing negative record holder on the continent.

An alternative solution in the form of a nuclear power plant, which has been actualized in the last few years, is also possible, but experts warn of the high cost of such projects, the long term for their implementation, which is no less than 10 years, and often more, as well as the fact that the preferred option, a small modular reactor, has not yet been applied anywhere in the world on a commercial basis.

Small share of renewable sources

On the other hand, we have renewable sources whose current share in electricity production (with the exception of hydropower plants) is small, but which are growing rapidly. From 2023, the state replaced the previous system of feed-in tariffs with auctions for the so-called market premium, whose goal is to encourage the development of "green projects", primarily in the field of wind energy, but also in solar power plants, at the most favorable price. The result is a drastic drop in clean energy prices for new projects in Serbia, such that now the price of electricity obtained from wind farms and solar power plants is significantly lower than the prices at which EPS pays for imported electricity.

For example, in the first round of auctions held a little over a year ago, the maximum price that producers of green electricity could offer was 105 euros per megawatt hour for wind power plants and 90 euros for solar power plants. In the new round of auctions, for which producers could apply until last week, the maximum prices were only 79 euros for wind and 72 for solar. This is well below current market electricity prices.

At the same time, it should be borne in mind that even last year, the realistically realized prices at the auctions were significantly lower even than those that are now determined as maximum and went up to only 64,48 euros per megawatt hour and that EPS signed contracts with the producers of these green kilowatts at those achieved prices. This year, their additional lowering is to be expected.

Such results achieved at auctions, i.e. such a drop in the prices of clean electricity produced in Serbia compared to the average prices that EPS has to pay when importing, indicate the potential that these new technologies offer not only in terms of more environmentally friendly production, but also in terms of financial stabilization of the costs faced by the state. For example, in the previous round of wind auctions, the average price reached was 68,2 euros per megawatt hour, for a total capacity of 400 megawatts. In practice, this means that EPS received about one terawatt hour of electricity at these prices, i.e. for about 68 million euros.

Electricity at stock market prices is incomparably more expensive

For the sake of comparison, the electricity that EPS imports at exchange prices costs incomparably more. Calculating with a price of only 130 euros per megawatt hour, which is rarely a low price on the markets this winter, EPS must pay 130 million euros for the same amount of imported electricity, or even 62 million euros more. When forced to pay 200 euros per megawatt hour, which is not uncommon, the difference jumps to 132 million euros per terawatt hour. This is a direct damage to EPS, compared to the scenario in which this amount of electricity was procured from renewable energy producers in Serbia, instead of imports.

At the same time, it should be borne in mind that the energy balance of Serbia, which was recently adopted by the Government, this year is planned to import 5,6 terawatts of electricity.

According to the current three-year plan of the Government and the Ministry of Mining and Energy, which ends this year, it is planned to stimulate the construction of a total of 1.300 megawatts of clean energy in Serbia through the allocation of market premiums. Considering the problems that EPS has been facing for years in the production of electricity from thermal power plants and considering the extremely high energy prices on the markets, the question is how much these RES capacities will be sufficient.

The Ministry of Energy estimates that the system of market premiums, even with such limitations in terms of capacity, will bring three million euros per year to EPS in the future, as stated by the relevant minister Dubravka Đedović Handanović as early as 2023. Premiums are usually paid to producers only when the stock market price of electricity is lower than the price that green energy producers committed to at the auction, while otherwise producers pay the difference between their price and the market price.

The thermal sector is weakening.

Serbia receives most of its electricity from thermal power plants. The largest thermal power plant in Serbia is Nikola Tesla (TENT), which has 14 production units. On average, 70 percent of electricity is produced in thermal power plants. Production, however, varies, so for example, on the first of January at one point it dropped to less than 60 percent, so we had to import a large amount of electricity.

Such outages, which happen more and more often, especially in the winter months, call into question the usual thesis about the complete stability and predictability of thermal power plants as a source of electricity, at least in the domestic power system.
During better days, electricity obtained from thermal power plants accounts for more than 80 percent of the total energy produced, but when you look at the production from the previous two months, you can see a significant drop.

Specifically, from December 8, 2024 to February 6, thermal power plant production dropped from 80,99 to 66,45 percent of total production, which is an extremely large drop. In the same period, electricity production in hydropower plants increased from 12,77 to 29,89 percent, compensating for problems in thermal power plants.

Similarly, only on a smaller scale, during January the share of electricity obtained from wind participated with more than three percent in the total energy mix, helping to soften the price "shock" that the country then had to suffer again due to electricity imports caused by new problems in TENT.

Source: New Economy