13 May Interview with Hon. Dubravka Đedović Handanović, Minister of Energy and Mining, Serbia
What are your main priorities as minister for the medium and long term of Serbia’s energy sector?
Serbia’s energy sector traditionally relies on fossil fuels, with coal as our natural resource, similar to some extent to Poland. Our energy transition will take time and financial resources and it will need to be planned carefully; however Serbia is committed to meeting the decarbonization targets of the European Union by 2050. We have set clear goals and priorities for 2030, 2040 and 2050. One of the key targets is to have almost half of our electricity produced by renewable sources by 2030. Serbia has a rich hydro potential, with up to 35% of our production generated by hydro production. We would like to expand our hydro capacities and introduce more renewable sources, such as wind and solar. Our target is 3.5 megawatts of new capacities from wind and solar by 2030. From 2040 and 2050, these plans will be more developed and extrapolated.
For our transition we also will rely on gas as fuel. Gas still pollutes much less than other fossil fuels and the EU recognizes it even though it is more difficult to secure financing for gas infrastructure. We hope that there will be actors on the market in order to ensure this transition. Last but not least, we are looking into the introduction of nuclear energy in order to eliminate coal as a baseload, because we know that gas is only for the transition and there needs to be a more sustainable baseload capacity that is considered clean or green. Nuclear is one viable option. We removed the moratorium last year on construction of nuclear power plants and we are now undergoing the first analysis to see which technology would be most suitable considering our grid structure and our energy system. Based on that, future decisions will be made. This is going to be a long-term process.
Decarbonization will also need to come from the electricity and the transportation sectors. Greater use of electric vehicles will reduce the adverse impacts on the environment. We plan to look into heating as well and we are planning to introduce more reliance on heat pumps. In municipalities across the country, we want to switch from fossil fuels to renewable energy sources. It can be a combination of heat pumps, solar energy and geothermal energy. The intention is to accelerate decarbonization through all sectors that are part of the energy system, or have CO2 emissions.
The energy community of the European Union, which overviews this part of Southeast Europe and non-EU member states, sees how we align with EU objectives for energy targets. Serbia was first ranked when it came to reforms in the energy sector for 2023 and 2024. We are second best ranked and first for decarbonization efforts. I am also confident that we will be one of the first in the region to achieve the coupling of the energy market with the European Union energy market. This would provide even greater security for investors and I do believe that we will also be the champions in that regard.
Overall, in the last 18 months, the share of renewables has increased by 83% in terms of capacity. We have increased the number of independent producers 10 times. We are really accelerating the energy transition and introduction of renewable energy to ensure that the targets that we have set for 2030 will be reached. We organized in 2023 the largest auctions for renewable energy implemented by European standards. We had quite a good turnout with good prices and good competition. In 2024, we completed the second round of auctions for solar and wind. We expect that just from those two, we will reach the three-year objective we have set, i.e. 1,300 megawatts of new energy capacities from the auctions.
Overall, we are paving the way for big changes in our energy sector. There are many opportunities for investors. One of the largest solar power plants will be implemented in the next two and a half years. It is one gigawatt of solar, together with 200 megawatts of battery storage. We are implementing that project with partners from South Korea and the US. We are confident that this project will be implemented successfully with their experience and knowledge. This will significantly boost the energy transition and the targets to decarbonization from public resources.
What key policies or incentives have been implemented to attract foreign direct investments in the sector?
Serbia attracts a lot of foreign direct investment. Around 60% of all investment in the Western Balkan countries comes to Serbia. Last year, it was above €5 billion in FDI. I expect the energy sector to play a key role in the coming years in terms of FDI. We already have some projects and potentially new investments from private and public sources so that private investors are not dominating energy. We need a healthy combination, as we want to preserve our state-owned energy production company. The transmission and distribution sectors are by definition controlled by state companies. This is also the European standard. In that context, we want to have a good combination. I expect that a majority of the investments will come from the public sector, however, we can work with different partners from different parts of the world. I expect that partners from Western Europe, USA and Asia will be increasingly present. We already have some investments from China, they are primarily present in the mining sector.
We estimate that we will need €15 billion of investments in the energy sector over the next 10 years. Most will be for renewable energy, diversification of the gas and oil sectors, transmission and distribution of electricity. To facilitate, we need to have a good regulatory framework that provides security and predictability for investors. It should incentivize them to come and be active in Serbia. One of the largest solar projects in Southeast Europe will be implemented here. Partners from Asia and the US will develop a public sector investment. We have two important projects in the hydro sector. The pumped hydro power plants are good natural storages for energy balancing. You need to have the possibility to store energy in order to integrate many renewable sources into the grid. With those two large projects, in Western Serbia and in Eastern Serbia, we hope to increase our potential for energy storage.
We hope to develop one project with partners from Japan and the other with the USA. One is more prepared and closer to implementation. In Western Serbia, we have pumped storage hydropower plant Bistrica. In the East of Serbia, we already have two existing power plants near the border with Romania. It is in the preparation phase and needs more time. Bechtel is involved in the pre-feasibility study and subsequent phases of project development need to continue. However, with these two projects, the landscape will change through energy security and introduction to renewable energy. If we implement the pumped storage hydropower plant Đerdap 3 on the border with Romania, we will become a regional leader in the energy sector.
Can you summarize the potential, the opportunities that exist in the mining sector?
Serbia has a long tradition in the mining sector that spans several centuries. One of the first mining laws in Europe was actually introduced in Serbia in the 15th century. We even cooperated in the past with some of the regions in Europe, such as Saxony, Germany, which was very mining intensively in the middle ages.
Today we are the second largest copper producer in Europe, with ambition to become a first ranked copper producer. We have one of the largest lithium potentials in Europe. This can satisfy about 17% of the demand for electric vehicles in Europe. Annually, it could produce one million electric vehicles. The 58,000 lithium carbonate can be produced out of the Jadarite mineral deposits that are verified reserves.
To strengthen our mining sector, we will be working on the regulatory framework. We will be adopting a new strategy for the mining sector and amending the laws on mining and geology. The aim is to incentivize investments and protect our natural resources. Furthermore, we can enforce and streamline some procedures to protect the environment. With this in place, I believe that we will be ready to explore our natural resources.
We have quite a large list of critical raw materials present in Serbia, in terms of either verified reserves or potential reserves. Attracting investors in that sector will be the priority for us. We will also be looking at increasing overall standards and imposing international standards on investors. The targets for energy transition cannot be reached without more mining and access to raw materials, so that critical minerals will be for the 21st and the 22nd century what fossil fuels were for the 20th century. If we want technology to progress, to move on from fossil fuels and to reduce the carbon footprint, we need more mineral resources. We intend to cooperate with the European Union in the context of proximity. We want to shorten the distances between the resource-rich countries and industries that use those resources, especially the automotive industry. We signed a strategic cooperation agreement with the EU for critical raw materials. Its implementation will lead to more responsible mining in Serbia.
Our other priority will be to create the full value chain and not just export the raw material. For electric vehicles for example, we can produce an entire vertically integrated production: from batteries, cathodes to the final electric vehicle. That is our strategy to work in that direction to develop the mining sector and to boost the GDP growth.
What is your final message to the readers of USA TODAY?
Serbia and USA recently signed the first strategic cooperation agreement in the energy field in September 2024. I am sure it will open more cooperation in the energy sector, be it in renewable energy, nuclear energy, other forms of transitional energy sources and mining. Our collaboration brings mutual benefits to all parties. Our aim is to decarbonize our energy sector and to develop our mining industry. Furthermore, we want to find new areas of economic growth.
We will continue diversifying our gas routes. We would like to open new routes and build more interconnectors. Last year, we completed the interconnector between Serbia and Bulgaria. It opens access to Serbia to get gas from TAP and TANAP gas pipelines and to get gas from the Caspian Sea. By completing the interconnector between Serbia and North Macedonia, we will have access to more capacities from the LNG terminal in Alexandropoulos. We are already able to access this Bulgarian interconnector, but the capacities will certainly increase by the completion of this project. The interconnection with Romania will give us access to more gas sources from Romania.
Our other plan this year is to diversify oil routes. We rely on one oil pipeline through Croatia, but we are working with the Hungarian government on building additional oil pipelines that will connect us with the Druzhba oil pipeline. In case of any disturbances in the market such, we have a diversified energy sector and supply routes. This is our plan in addition to strengthening our interconnectivity capacities when it comes to our neighbors and electricity sector. We will be working in the future to strengthen the capacities with Hungary, Romania, Bulgaria, Bosnia-Herzegovina and Montenegro. There is definitely room for investment from international partners on our public investment side and foreign direct investors that wish to invest their capital. I see many opportunities in renewables for joint ventures or other sorts of private-public partnerships.
The investment climate is favorable. We will continue to improve it by aligning our legislative framework with the standards of the European Union. There is a place for financial institutions in this context. I believe that investors from financial institutions such as international financial institutions or commercial banks and other financial organizations will have the possibility to invest in projects in Serbia. The demand for energy will continue to increase in Serbia as our economy expands and as technology improves. I only see opportunities for those who are considering investment in Serbia.