Serbia’s Growing Distributed Generation Raises Need for Local Grid Flexibility

Serbia’s expansion of distributed power generation is creating reverse-flow constraints in parts of the electricity distribution network, increasing the need for mechanisms that can manage local electricity surpluses. Elektrodistribucija Srbije (EDS) technical system director said limits at parts of the distribution-to-transmission interface currently restrict reverse electricity flows to around 16 MW, while expected flows in areas including Banat and southern Serbia could exceed 30 MW. EDS has around 498 power plants with combined capacity of about 540 MW connected to its network, alongside approximately 8,500 prosumers representing about 160 MW.

Distributed generation changes electricity flows

Distribution networks were traditionally designed mainly to transport electricity from the transmission system to consumers. Growing distributed generation is changing those flow patterns. When local generation exceeds local consumption, surplus electricity moves through distribution infrastructure toward the transmission system, creating constraints in locations that were not originally designed for significant reverse flows. The issue is therefore increasingly linked to where electricity is produced and consumed rather than only to Serbia’s overall generation balance.

Industrial demand can absorb local surpluses

Local electricity consumption can provide flexibility when production exceeds demand in a particular distribution area. Industrial facilities could shift production toward periods of high local generation, while EV charging, water pumping, electric boilers, refrigeration and thermal storage could also adjust consumption.

The economic value of that flexibility is location-dependent. A 5 MW increase in demand in Banat could help alleviate a local export constraint, while the same increase elsewhere might have little impact on the affected network. This creates the basis for local flexibility markets in which the location of changes in electricity consumption or generation becomes part of their value.

Flexibility could complement network investment

Traditional responses to rising reverse flows include replacing transformers, reinforcing substations and upgrading transmission and distribution lines. Such investments will remain necessary as distributed generation expands, but flexibility could provide an alternative where network constraints occur only during limited periods.

For example, if a transformer experiences excessive loading during 100 hours per year because of high solar generation, EDS could potentially procure additional local consumption or temporary reductions in generation during those periods. The cost of such flexibility could then be assessed against the cost of permanent network reinforcement, creating a potential non-wire alternative.

Flexible connection rights could manage exports

Another possible mechanism is the use of flexible or non-firm connection rights for distributed generators. Under such an arrangement, a generator could receive a larger connection capacity while accepting temporary export restrictions when the local network becomes congested. A solar project could consequently begin operating without waiting for complete grid reinforcement, provided it accepts occasional limitations on electricity exports.

This would turn available network capacity into a contractual product, allowing developers to choose between firm and flexible access depending on their project economics. Projects expecting limited curtailment could accept flexible access, while projects requiring guaranteed exports, including those subject to lender requirements, could require firm capacity. Serbia does not yet have a mature market for these products.

Flexible demand can reduce curtailment

Industrial electrification could also become part of distribution-grid planning by creating additional consumption in areas with high distributed generation. Electric boilers and thermal-storage systems can use electricity during periods of high renewable output and deliver heat later. Cold-storage facilities can shift refrigeration demand, while water utilities can move pumping operations toward periods of surplus generation. EV fleets can likewise adjust charging schedules to periods when local electricity production is abundant.

These assets do not necessarily need to be installed specifically for grid services. Their flexibility can come from changing the timing of electricity consumption.

Aggregators could combine smaller resources

Individual commercial and industrial consumers may be too small to contract directly with EDS, creating a potential role for aggregators. An aggregator could combine multiple facilities within the same constrained distribution area, including refrigeration systems, HVAC equipment, pumps, batteries and EV chargers. EDS could procure a specified response from the aggregated portfolio, while the aggregator determines which individual assets should respond.

Such a structure could lower transaction costs and allow smaller customers to participate in flexibility markets. The model would require smart metering and detailed network visibility, since EDS would need to verify not only the amount of demand that changed but also its location.

Banat could provide a flexibility-market test

The current situation combines growing distributed generation with reverse-flow constraints before Serbia has an established commercial mechanism for procuring local flexibility. EDS has identified operating pressure in areas where expected flows could exceed current limits, while local flexibility remains primarily a regulatory and market-design issue. Future arrangements would need to address issues including contract timing, availability and activation payments, baseline calculations and the interaction between local distribution services and national balancing markets.

Areas such as Banat, where distributed generation and reverse-flow pressure are increasing, could provide a testing ground for local procurement. A potential tender could specify a defined distribution area and require 10 MW of additional consumption or reduced exports between 1100 and 1500 during selected high-generation periods, allowing industrial users and aggregators to bid for the service. The resulting flexibility price could then be compared with the cost of conventional network reinforcement, providing operating data for any broader Serbian market design.