ARTICLE Legal framework for investments in energy facilities in Serbia

ARTICLE Legal framework for investments in energy facilities in Serbia

     The whole world is facing major climate changes and environmental disasters caused by the use of coal as energy source. In order to overcome this looming problem, global community is trying different ways to use sustainable and renewable energy sources, such as wind, water or sun. 

Keeping pace with global trends, the Republic of Serbia has set the increase in the RES share in electricity production as one of the strategic priorities. To this end, the Law on Use of Renewable Energy Sources was adopted, as well as the Law on Amendments to the Law on Energy, which will be accompanied by a set of corresponding by-laws. This has led to a great foreign investors interest reflected in an investment boom in the area of RES in the Republic of Serbia.

BUILDING ENERGY FACILITIES

In order to be able to build an energy facility, the first step is to obtain necessary permits:

- Location Conditions, based on the architectural plan;

- Building Permit, based on the building project.

A Site Assessment is a document that contains all the necessary information about the plot of land where the construction of the building is to take place. Obtaining this document is not a mandatory step towards the construction of the building, but it is certainly useful to have information of this type.

A Location Conditions permit contains all urban, technical and other conditions and specifications required for the development of the project. This is why obtaining it might be the first potential obstacle. 

 

 

BUILDING ON AGRICULTURAL LAND 

Law on Agricultural Land  VS  Law on Planning and Construction

The Law on Agricultural Land stipulates that agricultural land cannot be used for non-agricultural purposes, unless conversion of land has been carried out, or there is a public interest, which is defined by another law.

Bearing in mind that most of the land attractive for the construction of renewable energy facilities is in fact agricultural land, the very first step a potential investor should take is to start complicated conversion procedures prescribed by the Law on Planning and Construction. The procedure of conversion of agricultural land is costly and time consuming, which could discourage potential investors.

Law on Use of Renewable Energy Sources

As a type of incentive for investing in energy production using renewable sources, the Republic of Serbia has made room for a relative easing of this rule. The Law on Use of Renewable Energy Sources stipulates that the use of energy from renewable sources represents the public interest of the Republic of Serbia, while the Law on Planning and Construction stipulates that facilities for energy production can be built on agricultural land, regardless of the cadastral class of that land, as well as on forest land, without the need to obtain permission of the Ministry of Agriculture.

Law on Energy

In accordance with the Law on Energy, when constructing energy facilities, the investor is to obtain the Energy Permit first, and then the Building Permit. Acquiring the Energy Permit is not necessary for the construction of energy facilities that are built in accordance with the law governing public-private partnerships and concessions.

The next step is acquiring a Building Permit. This document determines whether the building project is made in accordance with all regulations and conditions that must be met by any building in certain location. In order to obtain it, it is necessary to 
-   submit the Project Plan, 
-   submit a proof of corresponding right on the land (property right or lease), 
-   pay corresponding fees, 
-  submit the Project Excerpt for the issuance of the Building Permit. 

Decree on Leasing of State-owned Agricultural Land for Non-agricultural Purposes

The Government of the Republic of Serbia has adopted an interesting by-law related to this topic - the Decree on Leasing of State-owned Agricultural Land for Non-agricultural Purposes. In order for the land to fall under the application of this Regulation, it has to be registered as agricultural land in the Real Estate Cadaster and it needs to be owned by the Republic of Serbia. It can be both arable and non-arable land of the sixth, seventh and eighth cadastral class.

Both legal and natural persons have the right to lease this land, and the maximum period of the lease is set up to 30 years. This right is acquired in a public bidding process, which begins with the Decision on Publication of Public Announcement for Provision of State Agricultural Land for Use by the competent body of а local government, with the consent of the Ministry of Agriculture, Forestry and Water Management.

In order for an interested party to exercise the right to use the land, they must submit a letter of intent to use the land and a corresponding project to the competent body of the local self-government. With the consent of the named Ministry, the competent body makes a Decision of approval to the most favorable bidder. After making this Decision, the lessee and the Ministry conclude the Agreement. 

This by-law also regulates the compensation for the use of this land. The amount has to be five times the average rental price per hectare of state agricultural land, when it comes to leasing land for the purpose of building solar power plants and wind farms. This amount of compensation can be adjusted every third year. Payment of this fee is made in advance, annually.    

Legal framework aimed at increasing capacity of RES sector in Serbia

By predicting such conditions for the construction of energy facilities, as well as the lease of state agricultural land for these purposes, an incentive is provided for projects aimed at increasing energy efficiency using renewable energy sources.

According to the strategic documents the Government has adopted so far, such as the National Renewable Energy Action Plan, the Draft Energy Development Strategy of the Republic of Serbia until 2025 with indications until 2030 or the Energy Sector Development Strategy of the Republic of Serbia until 2015, Serbia is willing to follow the path of green energy and sustainable environment. Such path would lead Serbia to a healthier and therefore happier environment.

Authors

Miloš Vučković, Senior & Managing Partner

Milena Šejnjanović, Associate

 

*The information in this document does not represent legal advice and is provided for general informational purposes only.

**Partner, Senior Associate, Associate and/or Junior Associate refers to Independent Attorney at Law in cooperation with IVVK Lawyers.

13/07/2022

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