Serbia’s energy system is built on a paradox. The country urgently needs new electricity-generation facilities to secure supply, support industry, and accelerate the shift toward cleaner energy. Yet its dominant state-owned utility, Elektroprivreda Srbije (EPS), is delivering new projects slower than expected—or in some cases, not delivering them at all. While demand climbs and Serbia positions itself as a regional energy hub, EPS finds itself entangled in delays that undermine both national ambitions and public confidence.
The challenges facing EPS are not simply technical. They are structural, regulatory, financial, contractual, and organizational. The story behind the delays reveals a deeper truth about the Serbian energy sector: that the transition from an aging lignite-based system to a modern, diversified energy mix is far more complicated than official statements or political announcements suggest.
The scale of the backlog
Delays in EPS’s project portfolio are widespread:
- The major pumped-storage hydropower project Bistrica remains in preparatory stages, its environmental studies repeatedly postponed due to changes in environmental legislation.
- The company’s wind-power ambitions—such as the Kostolac wind farm—have suffered from slow design cycles, postponed technical milestones, late equipment deliveries, and inconsistent coordination among stakeholders.
- The flagship thermal-power expansion at Kostolac B3, meant to be Serbia’s last major lignite-fired unit, missed deadline after deadline, drifting into multi-year delay and eventually becoming a subject of contractual disputes and claims.
These are not isolated anomalies; they are symptoms of systemic constraints. Serbia’s political leadership frequently announces new power plants, but the institutional machinery behind EPS often proves unready to execute them.
Five core reasons for EPS’s delays
1. Regulatory and permitting bottlenecks
Serbia’s regulatory environment—especially for energy and environmental protection—is constantly evolving. In recent years, environmental legislation has changed its structure, expanded documentation requirements, and introduced stricter compliance standards. This created cascading effects on projects whose permitting processes were already underway.
When EPS must revise environmental studies mid-process, update project designs to include newly mandated chapters, or submit documentation based on fresh interpretations of ecological risk, months—sometimes years—are lost. Regulatory uncertainty becomes a built-in delay mechanism.
This dynamic is especially acute in renewable-energy projects. Serbia is under pressure to harmonize its laws with European Union directives, yet implementation on the ground lags behind. This creates a gap between policy ambition and administrative reality, and EPS often finds itself caught in the middle.
2. Legacy infrastructure and operational burdens
EPS still controls a generation fleet dominated by mid-20th-century lignite plants and hydropower stations. Many facilities are older than the company’s average retiree. Efficiency has declined, environmental compliance is slipping, and maintenance costs are rising. Production disruptions in older units—especially coal plants—are common and costly.
Instead of focusing fully on new projects, EPS is forced to allocate resources toward stabilizing aging infrastructure. This diverts both funding and managerial attention. When an old unit fails or when a coal mine feeding a power plant drops in quality or output, EPS must react immediately, pulling engineering teams, budgets, and planning staff away from future projects.
The net effect is predictable: new-generation projects are repeatedly delayed because the company is stuck firefighting problems from the past.
3. Financial pressures and cost escalation
EPS has faced a turbulent financial trajectory. Sharp declines in output, increased coal import needs, emergency electricity purchases, and fluctuating market prices have stressed the company’s balance sheet. When profits fall, liquidity tightens—reducing the company’s ability to initiate or accelerate capital-intensive investments.
Large power-generation projects require substantial upfront financing, and delays inflate their costs. Global disruptions—from pandemic-era supply chain issues to the effects of inflation—have driven up prices of turbines, transformers, steel, and electromechanical components. Export-credit-financed projects linked to foreign contractors have become more expensive due to shifts in interest rates and contractual claims.
For EPS, the calculation becomes complex: the more the delay, the higher the cost; the higher the cost, the harder it is to justify or finance the project; the harder it is to finance, the more likely further delays become. It is a self-reinforcing loop.
4. Contractual disputes, scope drift and procurement failures
Large power projects require integrated design, procurement, engineering, construction, commissioning, and grid integration. Each interface—between EPS, contractors, subcontractors, design institutes, suppliers, regulators, and financiers—carries risk. When coordination fails, schedules slip.
The Kostolac B3 project offers a textbook example of scope drift: shifting technical requirements, delayed site handover, changes in plant specifications, inflation claims, and disagreements over whether cost increases were justified. Internally, EPS struggles with procurement agility, partly due to the rigidities inherent in state-owned enterprises, and partly due to limited in-house project-management capacity for mega-projects.
This creates an environment where projects often begin before designs are fully matured, where contract governance is reactive rather than proactive, and where contractors escalate claims because the client is slow or inconsistent in decision-making.
5. Strategic transition and system integration challenges
EPS is navigating one of the most complex energy transitions in Europe. Serbia is attempting to shift from coal to a diversified mix of renewables, hydropower upgrades, pumped-storage capabilities, and potentially gas-based flexibility.
But every part of this transition is delayed:
- The renewable build-out cannot progress without stronger transmission infrastructure.
- Pumped-storage requires coordination with water-management planning and ecological compliance.
- Solar and wind require balancing reserves and modern trading and dispatch systems.
- Thermal-plant modernisation must align with EU emissions expectations.
EPS is simultaneously expected to maintain system stability, decarbonize its mix, integrate intermittent renewables, and launch new projects—all while its organizational structure evolves and political oversight remains heavy.
This creates strategic uncertainty. Plans shift frequently. Projects are redesigned mid-stream. Investment priorities are sometimes influenced by political announcements rather than feasibility studies. Execution suffers.
Case study: Kostolac B3 – A delayed project that defines a decade
Kostolac B3, the 350-MW lignite-fired unit constructed with a foreign EPC contractor, illustrates many of the systemic issues EPS faces.
Originally, the project was scheduled to be delivered by 2019. In the following years, deadlines shifted repeatedly as delays accumulated:
- The plant’s design was altered mid-project.
- Equipment delivery schedules slipped due to global supply-chain shocks.
- Inflation drove materials and labour costs significantly upward.
- Disputes arose between EPS and the contractor over responsibility for delays.
- Serbia was forced to import large volumes of electricity during winter seasons because the unit was not online.
The backlog of claims and counterclaims reached hundreds of millions of euros. While Kostolac B3 is now reportedly operational, the project’s turbulent journey underscores the deeper structural constraints within EPS’s project governance. It also highlights the growing risk exposure for Serbia: large energy facilities delivered late and over budget compromise the stability of the entire system.
Structural and institutional limitations
Beyond the technical and financial factors, EPS is hampered by long-standing institutional constraints.
Organizational inertia
As a large, state-owned monopoly, EPS operates with layers of managerial bureaucracy and slow approval chains. Innovation is difficult, accountability diffuse, and incentives for performance improvement are limited.
Human-capital bottlenecks
EPS struggles with the dual challenge of an aging workforce and a shortage of modern engineering skills in digital planning, renewables integration, HSE, power electronics, and large-project management.
Grid and upstream dependencies
New plants depend on:
- grid upgrades and flexibility services,
- balancing and reserve capacities,
- coal mines or water management systems.
If even one of these dependencies is delayed, the generation facility is delayed.
Political interference
Project priorities in Serbia can shift quickly, particularly around election cycles. EPS is often asked to align with political narratives that may not match technical or financial realities.
Energy security risks
Delays at EPS are not just administrative nuisances—they pose systemic risks.
High-cost electricity imports
When new capacity is delayed and old assets fail, Serbia must purchase power on the open market, often at peak prices. These costs drain EPS’s finances and increase exposure to currency volatility.
Stagnation in decarbonisation
Without new renewable capacity and storage, Serbia cannot meet transition targets or modernize its energy system. This may result in penalties or constraints from international frameworks.
Loss of investor confidence
Private developers, EPC contractors, and international lenders watch EPS’s execution record closely. Chronic delays raise the risk premium for investing in Serbia’s energy sector, making future projects more expensive.
What Serbia and EPS must do
1. Stabilize the regulatory environment
Clear, consistent rules for environmental assessments, permitting, and project governance are essential. Legal changes must be predictable and synchronized with project timelines.
2. Professionalize EPS’s project-management capacity
EPS must embrace:
- front-end engineering design (FEED),
- strict scope discipline,
- standardised contract templates,
- independent project oversight.
Without strengthening execution capacity, delays will persist.
3. Expand financing models
EPS should combine:
- development-bank financing,
- public-private partnerships,
- export-credit facilities,
- and private co-investment.
This disperses risk and enables more rapid project initiation.
4. Modernize legacy assets and fuel supply
EPS must reduce emergency interventions by accelerating planned overhauls, improving coal-mine logistics, and upgrading hydro assets. This creates the operational breathing room necessary to focus on new plants.
5. Integrate renewables and storage strategically
Projects must be planned in tandem with grid investments, balancing markets, and system-operator readiness. Pumped storage and flexible capacity should be treated as central pillars, not optional add-ons.
6. Increase transparency
EPS should publish public progress dashboards with timelines, milestones, risks, and budgets. Transparency builds trust, improves accountability, and reassures investors.
Looking ahead: Slow progress, but a chance to reset
Despite the delays, EPS has an opportunity to reposition itself. Serbia’s energy demand will rise, electrification will accelerate, and regional electricity markets will expand. A modern, agile EPS could thrive in this environment. Its hydropower dominance is a strategic advantage, its renewable potential is considerable, and its infrastructure—while aging—is extensive enough to support modernization.
But unless the structural causes of delay are addressed, Serbia risks a lost decade in energy development. Each postponed project increases system vulnerability, weakens investor trust, and delays the country’s transition to a cleaner, more efficient generation mix.
EPS’s future will be shaped not by the ambition of its project lists but by the discipline, competence, and transparency with which it executes them.
