(1 December 2000)

The energy sector in Serbia consists of three large systems. These are:

These systems are country-wide, republic or municipal monopolies and are vertically integrated. In one way or another, most of the population relies on this system for the provision of domestic heating, water and electricity.

Reliance on electricity in Serbia is very high. 57% of the total households use electricity as their main source of heating, thus consuming almost 70% of the total amount of available electricity. Half of that number of households are not technically equipped to be able to use alternative sources of energy for heating. Yet, reliance on electricity for heating and non-payment of electricity bills is also a key coping strategy for most poverty stricken households, regardless of their ability to switch to alternative sources of energy.

8% of the households are luxury homes, which also use electricity to operate their central heating systems; but they could switch to alternative sources of energy for heating or even reduce the heated area. However, even those households (27%) that are connected to the district heating system, which relies on gas, require electricity to operate the pumps in the system.

Moreover, about 85% of the households are connected to central water supply systems, which also use electricity to operate the water pumps. There are about 100 water supply systems all over the country; only the one in downtown Belgrade can be prioritised in the supply of electricity. There are no back-up generators. Hence, for most households, lack of electricity also means lack of drinking water.

About 70% of the households are equipped with hot water boilers and deep freezers. Hot water boilers are the primary source of sanitary hot water. Since electricity is relatively cheap, home deep freezers are used to store food in order to cope with growing food prices during the winter.

The remaining 30% of available electricity is used by administrative buildings and priority institutions (10%), public street lighting (2%), transport – the railway system and public transport in Belgrade (15%), and in the food processing and pharmaceutical industries (3%).

Current electricity production in Serbia amounts to approximately 90M KWh per day. About 27.6M KWh (30%) are generated at the hydropower plants, while the rest come from thermal power plants. In effect, a more favourable inflow of the Danube, has made it possible for the Djerdap thermo-electric power plant on the Yugoslav-Romanian border to increase daily electricity production by two and-a-half times compared to previous weeks. Moreover, the hydro-power plant Piva, that is located in Montenegro, is connected to the Serbian electricity grid and supplies electricity only to Serbia. The long-term agreement between Serbia and Montenegro is that Piva is leased to Serbia in exchange for regular supplies of electricity from Serbia. At present, though, all electricity supplies from Serbia to Montenegro have been suspended. Instead, Montenegro is currently supplying 1.2M KWh per day to Serbia.

However, most electricity is generated at the thermo-electric power plants at Obrenovac and Kostolac. The power plant ‘Kostolac B’ produces 14M KWh of electricity per day. The power plant Kostolac A, which consists of two blocks, with a capacity of, respectively, 100,000 and 200,000 KW, is, at present, not functioning, due to an explosion in the boiler at A1 and repairs that are currently under way at A2. On 16 November, the power plants at Obrenovac produced 43.6M KWh of electricity per day, by working at 80% of normal capacity, since one of the seven generators is undergoing maintenance work and is therefore out of service.

Both power plants rely heavily on coal for the production of electricity. The power plants at Obrenovac receive their supply of coal from the coal mines at Kolubara, whereas the power plants at Kostolac are connected to two nearby open pit coal mines. One of the major problems affecting mining activities is the removal of overburden, which has been especially neglected in the past six months. This has led to poor reserves of coal and to a poorer quality of available coal, as coal is increasingly extracted closer to the edge of the pit. A change in the quality of coal, as coal of the highest quality is gradually replaced by lower quality coal, is likely to cause damage in the boilers, that are already in fragile condition. Any damage in the boilers will, in turn, bring about leakages of circulating water and outages. In order to repair the damage, production will have to be temporarily interrupted and then restarted again. To restart the system, significant quantities of mazut are needed, which are, at present, not available.

Delays in coal extraction are further exacerbated by the lack of equipment, i.e. bulldozers to flatten the ground, while poor auxiliary machinery and the extremely bad condition of rubber belts are making transport of coal to the nearby power plants especially slow. As a result, a decrease in electricity production at the power plants is likely to follow.

Another problem affecting the domestic production of electricity is the likelihood of technical failure. Poor maintenance and overuse in the previous winter, in particular, has left equipment at power plants in poor condition. Yet, inadequate records on recent improvisations and reconnections, to allow for continued functioning of the machinery, and the fact that most machinery are operating beyond their design lives, makes it difficult to estimate the actual probability of technical failure. The electricity network in Belgrade, however, is in relatively good condition compared to that in the rest of the country. Moreover, Belgrade’s supply comes from several sources, which means that technical failure at one source would not result in a cut of electricity for the whole city. Consequently, electricity outages outside Belgrade are likely to be much worse than in the capital.

27% of the total number of households are connected to the district heating system. Almost the entire district heating system relies on gas. Some stations operate on mazut, of which there is little available at present. However, as already noted, the district heating system, requires electricity to operate the pumps in the network.

There is still a significant shortage of natural gas in Serbia. Russia is delivering to Serbia about 3M m3 of gas per day. Under the current agreement, which ends on 31 December, about 115M m3 of natural gas are being provided. As domestic production of natural gas amounts to 235.5M m3, while total natural gas requirements for the whole winter amount to 1472.9M m3, an additional 1122.6M m3 of gas are required to meet the total winter demand for gas through March 31. Most of the quantities required could be provided from Russia. (FRY currently owes Russia US$ 380 million for natural gas previously provided).

If the shortage of natural gas persists throughout the winter, many consumers will likely switch to electricity as an alternative source of heating and cooking, thus causing a serious overload in the electricity network. Such overloads are of particular concern since the network operates without reserve capacity and lacks proper protection in case of such overloads.

Assistance for natural gas import therefore represents a high priority for the government. Moreover, just as the electricity transmission network stands in need for substantial maintenance work, so the gas network is in fragile conditions and spare parts are required to ensure its continuous operation during the period from December to March 2001.

Following a two-year suspension, crude oil has again begun to flow through the Adriatic Pipeline to oil refineries in Novi Sad and Pancevo. On 13 November, the first 10,000 of a total of 70,000 tons of oil that the NIS and Beopetrol companies imported from the Swiss Glencore company through assistance from the FRY government, Serbian government, and the National Bank of Yugoslavia, left the Croatian island of Krk. Although no refining plan is yet available, it is expected that the crude oil may allow for the production of about 3,000 tons of mazut (heavy oil) per day for two weeks.

The Adriatic Pipeline will also transport 200,000 tons of crude oil purchased from the Zagreb-based INA oil distributor by NIS and Beopetrol. In addition to this, NIS Jugopetrol company and Croatian INA oil company have signed a long-term contract on the delivery of 200,000 tons of oil via the Adriatic Pipeline to Serbia by the end of the year.

At present, domestic production of diesel and mazut, which are obtained from refining available crude oil, amounts to, respectively, 24,000 and 28,000 tons. Yet, Serbia needs about 195,000 tons of diesel and 220,000 tons of mazut to cover the requirements of priority institutions, district heating system and also the food processing industry and agricultural sector for the remaining of the winter.

Assistance from the European Union is expected to cover the fuel requirements of all priority institutions across Serbia for most of the winter. In addition, the EU will deliver 3,400 tons of diesel and 17, 200 tons of mazut to power plants and mines to help keep them functioning through the winter. In all, some 120,000 tons of diesel and mazut will be delivered during the winter.

It is estimated that current electricity production in Montenegro amounts to 8M KWh per day. Electricity demand for household consumption amounts to approximately 3 to 3.4M KWh per day. About 2M KWh per day are required by priority institutions and small industry. The rest is used by the aluminium plant in Podgorica, which consumes over 2M KWh when operating at full capacity.

The relevant Montenegrin authorities set aluminium production levels according to levels of electricity generation at the two main power plants, that is, the thermal power plant Pljevlja and the hydro-power plant Perucica. In effect, the thermal power plant Pljevlja has sufficient capacity to satisfy the maximum requirements of the aluminium plant. Yet, it is currently operating below full capacity and with frequent interruptions, due to poor quality coal supplies.

In effect, Montenegro could experience a shortage of electricity this winter, as unfavourable weather conditions may lead to lower coal output at Pljevlja and negatively affect the inflow of water at Perucica.

The shortage of electricity in Montenegro is usually covered through imports of electricity from Serbia. This remedial strategy will not be available this winter. At present, Montenegro is importing certain amounts of electricity for industrial purposes from Bosnia. Yet, existing imports will not be sufficient in the event of significant technical failures and especially adverse weather conditions.

There is no district heating system in Montenegro. Electricity is sometimes relied on as a source of heating. Most heating, however, is generated by burning coal or wood, which are present in considerable amounts in the country.

Although the electricity situation in Serbia has substantially improved in the past few weeks, mainly as a result of approved international assistance and lasting good weather conditions, the need for technical assistance in the form of spare parts and new equipment is still greatly felt. The electricity transmission grid is in extremely fragile condition as a result of damage from bombing, overload in past years, and neglected maintenance. Further damage to the electricity transmission grid will almost certainly cause worse electricity outages for large sectors of the population, since it takes time to deliver and install spare parts and new equipment.

Moreover, priority institutions throughout the country lack adequate backup generators. Where backup generators are present, they are merely designed to cope with short-term interruptions in the supply of electricity and are of limited capacity. The generators’ capacity normally covers only immediate needs, e.g., arising from surgery blocks, but cannot guarantee adequate heating in a particular institution. Hence, in the event of technical failure, vulnerable groups who live or spend the night in priority institutions, such as collective centres, will likely experience a total lack of heating

In this respect, it is important to note that saving electricity through simple reductions of electricity at specific times during the day is likely to give rise to significant technology-related problems. For if electricity is only available at certain times during the day, district heating, which requires electricity to operate the pumps in the network, will not be available during switch-off hours, while the overload during switch-on hours will be likely to cause substantial damage to the transmission grid. Instead, new tariffs on electricity and heating will have to be imposed as a way to encourage greater energy savings.

Serbia also suffers from a shortage of natural gas, since current gas supplies from Russia are not enough to meet gas requirements, as temperatures fall to levels slightly above 0°C. Finally, although large amounts of diesel and mazut are reaching Serbia through EU assistance, more is required if all humanitarian requirements for diesel and mazut are to be met.