EBRD and EU scale up investments supporting Serbia’s green transition

This article is brought to you in association with EBRD.

Reconstruction of Vlasinske system to strengthen the country’s hydropower capacity

When Marko Filipović joined Serbia’s electric power company, EPS, in 2012 as one of the country’s top 110 engineering students, the reconstruction of the Vlasinske hydropower system had already been a topic of discussion for quite some time. The system, made up of four cascade plants, had been operating for more than 70 years without any significant upgrades. One of the oldest power systems in Serbia, its technology and infrastructure were showing their age.

Today, however, the long-awaited renovation is finally on the horizon, with the support of the European Bank for Reconstruction and Development (EBRD) and the European Union (EU). The project, which is expected to begin in spring 2025, will breathe new life into a critical piece of Serbia’s energy infrastructure.

“The project has been a long time coming,” Marko explains, noting that EPS had many other priorities over the years that postponed Vlasinske’s redevelopment. “We managed to keep the plant in operation with just regular maintenance and overhauls. But this has become increasingly difficult, more costly and time-consuming. The company, therefore, realised that it would be more efficient to invest in complete reconstruction and new equipment.”

The Vlasinske hydropower system was constructed between 1946 and 1949, just after the Second World War. It is an engineering marvel, with two artificially created lakes, Vlasina and Lisina, connected by nearly 60 kilometres of canals and tunnels, which supply the plants with water. The most impressive aspect is its location: one of the plants is built inside a mountain, while the Vlasina lake sits more than 1,200 meters above sea level.

EBRD and EU backed investment to support Serbia’s transition to clean energy

When construction first began, it was nothing short of a monumental effort. Over 15,000 workers, including local youth and farmers, worked tirelessly to complete the project in just three years. The result was a system that could power around 60,000 households. However, after more than seven decades in operation, the time for modernisation has come.

The revitalisation will be financed with a €67 million EBRD loan and a €15.4 million investment grant from the EU, secured through the Western Balkans Investment Framework.

“The investment project will focus on replacing essential equipment: all turbines, generators, and primary and secondary hydromechanical equipment,” Marko says. “Once installed, this new equipment will then ensure that the four hydropower plants can operate at full capacity without the current need for frequent repairs. This will result in a much more balanced and stable electricity network and allow for a slight increase in generation capacity as well.”

These are only some of the more immediate benefits. More broadly, the project will contribute to Serbia’s efforts to strengthen its renewable energy capacity and shift its power generation network to cleaner sources. Coal still dominates Serbia’s energy landscape, accounting for around 60 per cent of electricity production. Hydropower provides nearly 30 per cent of its energy, but with all of the country’s existing plants having been built decades ago, EPS is under pressure to modernise and expand their lifespans.

“Revitalising these plants is crucial to the country’s energy future,” says Jovan Ilić, who heads the Maintenance and Subsequent Investments Unit of the Hydro and Renewables Division at EPS. “The Vlasinske system is a priority as the oldest plant of this type, but there are plans to modernise other plants as well. We have intensified work in this area and we are hopeful that, in the coming years, we will see more, similar investments. The

reconstruction of the Bistrica and Potpec hydropower plants are imminent, as well as that of Djerdap 2. Future reconstruction projects will include the remaining EPS hydropower plants: Uvac, Kokin Brod and Pirot.”

Serbia’s clean energy landscape is evolving beyond hydropower, however. While the country is making significant strides in modernising its existing hydro plants, it faces limited capacity for expanding further in this area. This is why, in recent years, the country has begun to focus on increasing its share of intermittent renewable energy sources, such as wind and solar power, which currently account for less than 3 per cent of the country’s energy mix.

To this end, Serbia has been actively working to scale up related investments, with the support of the EBRD, EU and other donors. Since 2020, the EBRD has been working with the Serbian authorities and industry stakeholders to develop renewable energy auctions through a substantial technical assistance programme funded by the Swiss State Secretariat for Economic Affairs (SECO).

Following the success of the country’s first auction in 2023, a second was announced in November 2024. The move signals the country’s commitment to expanding its renewable energy sector and attracting the necessary investment to meet its clean energy ambitions.

While the road ahead is filled with challenges, Serbia’s ambitious plan to modernise its hydro energy sector and invest further in solar and wind reflects a clear commitment to a cleaner, more sustainable energy future.

With Marko and his colleagues at EPS leading the charge, the revitalisation of the Vlasinske hydropower system is not just an upgrade of old infrastructure, but a pivotal moment in Serbia’s energy transformation.