In the context of its preparation to become an EU member state, Serbia is taking on a number of energy sector reforms to address long-standing sector challenges. Electric Power Industry of Serbia (EPS) is being modernized to ensure long term profitability and competitiveness in the European market. The government has also committed to a renewable energy target of 27% in final energy consumption by 2020, with a particularly ambitious target for wind (500 MW by 2020). The Government introduced feed-in-tariffs (FiTs) for RE in 2009, provides capital subsidies for investment in RE, and has subscribed to the Clean Development Mechanism. A clear sector strategy is needed to unite the twin policy goals in the sector: fiscally responsible sector management and progress toward a clean energy future. The World Bank wanted to help the Government identify economic options for generation investment and network development over a 20-year time horizon, and assess the implications of RE integration on electricity end-user tariffs. The World Bank also wanted to analyze EPS' current financial condition, progress toward targets outlined in its Development Policy Loan, and tariff increases to achieve financial sustainability through 2025.
DHInfrastructure updated an existing model, which forecasts EPS' financial statements, to reflect the current situation of the sector, then used this model to determine the necessary yearly tariff increase to remain cash-neutral or cash-positive in each year through 2025. DHInfrastructure also prepared a memo on EPS' current financial situation, progress toward Development Policy Loan targets, and necessary tariff increases; and a PowerPoint presentation on the state of RE uptake and RE policy in the country and the surrounding region, the cost impact of Serbia's FIT (utilizing a cost analysis of generation investment and network development needed to fulfill RE goals for Wind prepared by another firm) and policy alternatives to the FiT.