EBRD lends up to €105 million to Serbia to decarbonise district heating

This article is brought to you in association with EBRD.

• EBRD providing up to €105 million loan to Serbia to decarbonise district heating
• Investment to finance the construction of a large-scale solar-thermal plant in Novi Sad
• Project qualifies for an investment grant from the European Union

The European Bank for Reconstruction and Development (EBRD) is providing a sovereign loan of up to €105 million to Serbia, through the Ministry of Finance, to benefit Novosadska Toplana Novi Sad, the district heating company of Novi Sad. The project is expected to be co-financed by an investment grant of up to €21 million, plus €3 million of project implementation assistance, from the European Union (EU) and other donors through the Western Balkans Investment Framework (WBIF).

The loan will finance the construction of a large-scale solar-thermal power plant in Novi Sad, featuring 38,600 m² of solar collector fields, an 850,000 m³ seasonal heat storage system, a 17 megawatt (MW) heat pump and a 60 MW electric boiler, incorporating advanced power-to-heat technology.

The project is part of the Green Cities Window 3 Framework (GrCF3 W2 Framework) and is included in the Green City Action Plan (GCAP) being developed by the City of Novi Sad. Through the GCAP, the city has identified and prioritised its most pressing environmental challenges and set out targeted investments and policy actions to address them. The project will be implemented by Novosadska Toplana Novi Sad in conjunction with the Ministry of Mining and Energy, the city of Novi Sad, and state power company Elektroprivreda Srbije (EPS).

Producing more than 118,000 MWh of clean renewable heat energy annually, the project will reduce the district heating agency’s natural gas consumption by around 29 per cent. It will thus provide an efficient, reliable and environmentally friendly heat supply for households, public institutions and businesses in Novi Sad by delivering base heat energy capacity to the city’s district heating network using innovative technologies, while supporting Serbia’s efforts to decarbonise the sector.

In addition, seasonal thermal energy storage, combined with power-to-heat solutions, will enable the storage of surplus electricity from renewables, enhancing grid balancing capacity, supporting electricity market operations and reducing investment risks for new wind and solar photovoltaic (PV) renewable energy projects.

The loan agreement was signed by Siniša Mali, First Deputy Prime Minister and Minister of Finance of Serbia, while the project agreement was signed by Dubravka Đedović Handanović, Minister of Mining and Energy, and Nenad Barac, Director of Novosadska Toplana. Both agreements were signed by Matteo Colangeli, EBRD Regional Head of the Western Balkans, on behalf of the Bank.

EBRD Director Matteo Colangeli said: “This project is innovative beyond Serbia and the region. The renewable energy solutions it will deliver to provide heat to Novi Sad and to balance the country’s electricity system, as well as the scale of the project, are groundbreaking on an international level. We are proud to support Novi Sad in this transformative investment, which will contribute to better air quality and cleaner, more affordable energy. With this loan, the EBRD closes 2024 with over €800 million of new investments in Serbia, underscoring our strong commitment to the country’s sustainable economic development.”

First Deputy Prime Minister and Finance Minister Siniša Mali said: “Serbia has bravely tackled the reform of its energy system, and the main goals in that process are the decarbonisation of the sector, increasing energy efficiency, the share of renewable energy sources, and better air quality. Projects like Green Cities help us a lot in that, because the solar thermal power plant in Novi Sad will reduce CO₂ emissions by 17,350 tonnes per year and will enable the direct connection of the EPS electricity system and the Novi Sad district heating system. Responsible investment in clean energy is the future for the whole world. Serbia’s investments in comprehensive reforms that have lasted for more than a decade are great, and the results are great, but we still have a lot of work to do. I am confident that with such reliable partners, we will finish everything well.”

Mining and Energy Minister Dubravka Đedović Handanović said: “Efforts to decarbonise our energy sector cannot be complete if we do not include the production of thermal energy, which accounts for a significant share of the energy balance. We took the first steps by building four biomass heating plants, and I believe that the integration of a solar collector and a heat pump that uses the heat of the river Danube into the district heating system of Novi Sad will be a turning point that will show the way that other cities and municipalities in Serbia will follow. Thermal energy produced in a sustainable manner will cover more than 20 percent of Novi Sad’s heating needs, which will replace the consumption of more than 16 million cubic meters of natural gas. The project is unique in Serbia, in that it also includes an electric boiler for balancing excess electricity, which will provide additional capacity for balancing energy produced in solar and wind power plants.”

Director of Novosadska Toplana Nenad Barac said: “I am delighted that the Novi Sad heating plant, with the support of the Ministry of Mining and Energy and the EBRD, will aim to secure up to a €24 million grant to implement the solar-thermal Novi Sad project. This investment includes the design and construction of a hybrid facility integrating a solar field, electric boilers, a heat pump and seasonal heat storage, enhancing Novi Sad’s district heating system. The project positions Novi Sad as a Green City, utilising cutting-edge technologies for sustainable and efficient heat energy supply.”

The EBRD is a leading institutional investor in Serbia and has invested more than €9 billion through 367 projects to date, the majority of which have supported the private sector. The Bank’s focus in Serbia is on supporting private-sector competitiveness, the green energy transition and sustainable infrastructure.