Serbia is advancing a €250 million district heating investment programme, including €50 million in grants, to reduce natural gas consumption and modernise municipal heating infrastructure while creating new opportunities to integrate renewable electricity into the energy system.
Supported by the European Bank for Reconstruction and Development (EBRD), the programme encompasses four major investment projects. Its largest and most technologically advanced component is planned for Novi Sad, where a hybrid heating facility will combine 80,000 MWh of seasonal thermal storage, a 60 MW electric boiler, a 17 MW heat pump and approximately 38,600 square metres of solar thermal collectors.
The programme was presented by EBRD energy efficiency specialist at an energy forum in Belgrade. The initiative addresses the Serbian district heating sector’s dependence on natural gas, with approximately 98% of district heating operators relying on the fuel, according to the Serbian district heating association. The planned infrastructure will combine renewable heat production, electricity consumption during periods of low prices, industrial waste heat recovery and seasonal storage instead of relying exclusively on conventional boilers.
Novi Sad Project Combines Seasonal Storage and Electric Heating
The Novi Sad facility is designed to capture thermal energy during warmer months and release it during the heating season, reducing the need for natural gas when heating demand and exposure to imports are highest. The system will include two seasonal storage units with a combined water volume of approximately 870,000 cubic metres, supported by solar thermal collectors, a heat pump using renewable and ambient heat, and electric boilers.
According to EBRD project documentation, the facility is expected to generate more than 118,000 MWh of renewable heat annually. Its operation is projected to reduce Novi Sad’s natural gas consumption by approximately 29%, equivalent to more than 16 million cubic metres a year. The project’s investment value was estimated at €109.6 million in a procurement notice issued in November 2025. Its financing structure comprises an €85 million EBRD loan and approximately €24.7 million in investment grants provided through the Western Balkans Investment Framework.
Thermal Storage Creates Potential Electricity Market Flexibility
Unlike battery storage systems, which retain electricity for subsequent delivery to the grid, the Novi Sad installation will store energy as heat for customers connected to the district heating network. Its electricity-market role will centre on the 60 MW power-to-heat installation, which can increase electricity consumption when wind and solar generation exceeds immediate demand. This could help Serbia accommodate renewable electricity that might otherwise be curtailed or sold at depressed wholesale prices.
Coordinated operation could create opportunities involving Elektroprivreda Srbije (EPS), electricity transmission operator EMS and Novi Sad’s municipal heating utility. The commercial value of this flexibility will depend on electricity procurement arrangements, operating schedules and mechanisms for compensating controllable electricity demand. The planned 80,000 MWh of thermal storage capacity represents stored heat rather than electrical battery capacity or electricity that can be traded directly.
Municipal Projects Expand Renewable Heat and Waste Heat Recovery
Beyond Novi Sad, the EBRD-backed programme encompasses renewable heating investments in 10 Serbian municipalities, with technologies selected according to locally available energy resources. In Kragujevac, the plans envisage recovering waste heat from the state data centre, turning heat generated by its cooling requirements into a potential source of municipal heating.
Bečej, Bogatić and Paraćin are expected to develop geothermal heating solutions, while Vršac and Kruševac will examine heat pumps linked to wastewater treatment infrastructure. Pančevo is among the municipalities targeted for solar thermal installations. A separate component will address the replacement of coal and fuel-oil boilers in six municipalities. In Smederevo, the proposed system would recover waste heat from the steelworks that is currently discharged into the Danube.
The Smederevo project would connect industrial energy efficiency with municipal heating supply. Its implementation could establish a commercial relationship between the steelworks and the district heating operator, subject to contractual arrangements covering heat availability, delivery obligations and investment costs.
Financing and Implementation Shape Investment Prospects
The proposed €250 million investment pipeline could generate contracts for European engineering companies, heat-pump manufacturers, thermal storage specialists, automation suppliers and infrastructure financiers. Some municipal tenders are expected before the end of 2026, although individual projects remain at different stages of preparation. For lenders, project viability will depend on long-term heating demand, operating efficiency, electricity and gas price assumptions, municipalities’ payment capacity and the commercial terms governing recovered industrial heat.
In Novi Sad, the financial case will also depend on whether electricity can be purchased at sufficiently low prices and frequently enough to justify power-to-heat operations and achieve the expected reductions in heating costs. Grant funding can reduce the initial capital burden but does not remove exposure to operating expenses, equipment performance or fluctuations in wholesale electricity prices.
Serbia’s expanding wind and solar generation portfolio strengthens the rationale for flexible electricity consumption, particularly during periods of high renewable output and relatively low demand. Thermal storage offers an alternative to conventional battery-based flexibility by connecting electricity-market conditions with the substantial and predictable heat demand served by municipal district heating networks.
