For the future financing of renewable energy projects, Power Purchase Agreements (PPAs) are key, and these could make state subsidies for investors less crucial. This was the conclusion of experts at the “Financing RES Projects” panel, which opened the final day of discussions at the Renewable Energy Days (RES Days). The event, organized by the Renewable Energy Sources of Croatia (RESC), was held from June 12 to 14 in Pula, bringing together over 400 experts in renewable energy.
Ante Salopek, Senior Manager and Head of the Energy Group for Southeastern Europe at Deloitte explained in his presentation the biggest risks of investing in renewable energy plants.
“RES project costs are more or less predictable, and the biggest investment risks are the purchase price of electricity, natural disasters, and changes in regulations during project development,” said Ante Salopek.
The panel, moderated by Lejla Barić, head of the desk at Financije.hr, discussed how willing banks are to finance renewable energy projects and what must be done before starting an investment.
“One of the main questions we get is why renewable energy projects are not financed in the early stages. Project financing is different from traditional corporate financing, which is based on balance sheets and historical indicators because project financing is based on future cash flow. Therefore, in the early stages, when the amount and quality of participation are crucial, the sponsor’s experience and knowledge are key. We are just beginning to talk about PPAs and are lagging behind the world. Additionally, banks often do not support projects in the development phase due to regulations and administrative hurdles that are not in favor of investors,” explained Ante Krečak, Head of Project Financing at ERSTE Bank.
Simone Dell’Atti, Senior Advisor for Equity Growth Capital and Project Financial Structure at the European Investment Bank, echoed Krečak’s sentiments. He said that bank support for renewable energy projects varies from country to country and that there are no universal rules. However, the situation is much better than ten years ago due to various market revolutions.
Lovre Botica, Partner in the Financial Advisory Department at Forvis Mazars, emphasized that banks typically do not consider projects until they are “ready-to-build.” “For renewable energy projects, the willingness and desire of banks to finance depend on the project’s phase. If you don’t have a previous track record, it will be difficult to get financing, so it is very important to find sponsors,” said Lovre Botica.
Jovanka Atanacković, CWP’s Manager for Serbia, spoke about the challenges of securing funding on the ground. “Recently, there has been much discussion about the risks in renewable energy projects, raising the question of why we are doing this at all. The answer is very simple: because there are no better solutions. Electricity will always be needed, and if we develop PPAs, we won’t need state aid anymore, but we all need to work on this together,” emphasized Jovanka Atanacković.
Miloš Kostić, Director of MT-KOMEX, explained what challenges his company faced when developing the first solar power plant in Serbia 11 years ago. “When we started in 2013 there were no solar plants in Serbia. Explaining to creditors what exactly we wanted to do was one of our biggest challenges. And if you are at the beginning of market development, as we were, it is difficult to develop a project without state support,” said Miloš Kostić.
Another potential challenge investors may face during project development is a change in directives during the financing or development phase, which can completely alter everything done up to that point. Yulia Novikova, Senior Financial Analyst at ALFI Renewables, spoke about this at the first panel on the final day of RES Days.
The “Biomass and Biogas in the Spotlight” panel followed, moderated by Marko List, Director of Consultare, with an introduction by Lucile Sever, Public Policy Expert from the European Biogas Association. She explained that Croatia had 42 biogas plants in 2022. Lucile Sever also discussed the benefits of digestate and noted that by 2040, biomethane production could meet 85% of Europe’s gaseous fuel demand.
Rene Buwalda, Director of Perpetual Next, shared why biogas plants are increasingly turning to organic waste and the importance of “food waste” and how bio-waste is handled in the Netherlands.
Viktor Horvatinović, Director of Pearl Holding, explained why wood biomass plants are often considered not “green.” “Cogeneration plants on wood and biomass are thought to be not green because there is a certain lack of knowledge about what our raw material is. We must return to the basics, which is the biology of wood. Forests absorb CO2 as they grow, and it is released into the atmosphere when the forest dies. This CO2 can be preserved in the wood industry, such as in furniture production where it remains ‘trapped’ or absorbed. Croatian forests prepare wood logs for the Croatian wood industry, leaving behind bark, leaves, and wood residues that cannot be used in the industry. This raw material contains large amounts of trapped CO2, which we use. Cogeneration plants invest significant money into Croatian forests; our company alone invests 10 million euros, and the entire sector around 60 million, money that Croatian forests use responsibly to manage our forests. This results in two types of energy; electricity, which is stable 24 hours a day, and thermal energy,” explained Viktor Horvatinović, who also spoke about his company’s innovative project in Babina Greda, where a circular economy is planned, including greenhouses on four hectares.
Marijan Cenger, Director of BIOEL and President of the Croatian Biogas Association, said that biogas plants are gradually returning to the support system due to a government decision made just before the elections. “The competent ministry has confirmed that biogas is needed in Croatia,” emphasized Marijan Cenger, who also highlighted the importance of digestate as an ecological fertilizer, a by-product of biogas plants that can revitalize agricultural land currently unsuitable for crops.
Josip Tešinski, Director of SLK Projekt, discussed the potential for bio-waste recovery in biogas plants. “Energy and environmental protection can be linked, and food waste is a pressing global issue. In Croatia, about 15 biogas plants currently have permits for waste management, and regulations in this segment need improvement,” said Josip Tešinski, who sees the future of biogas plants in two ways. “Either they will be hybrids; farms with 2000-3000 cows, biogas plants, solar panels, greenhouses, all self-sufficient. Or, since we are not involved in livestock farming, I hope our company will be the first to inject methane into the grid,” said Josip Tešinski.
A few years ago, the discussion was about how to stimulate renewable energy production, but today the topic is how to “store” the obtained energy for later. Pavle Milekić, Deputy Director and Senior Banker, Energy Europe at the European Bank for Reconstruction and Development, explained in his presentation which energy storage projects the EBRD finances and in which countries, and why banks are reluctant to finance energy “storage” projects.
Why storage is important and when more intensive battery development can be expected in Croatia was discussed by experts at the “Thermal and Electrical Energy Storage” panel, moderated by Marko Perožić, Deputy Editor-in-Chief of Bloomberg Adria. Karla Janeš Mesarić, Business Development Manager at Rimac Energy, explained whether energy storage started with the automotive industry.
“It started with the automotive industry, but it won’t be crucial in ‘pushing’ battery systems. We must also note that batteries no longer last ten years, but 20-25 years, and although they are good for short-term energy storage, solutions should also be sought for long-term storage,” emphasized Karla Janeš Mesarić, adding that battery prices are the same everywhere. The market needs to open, and we shouldn’t wait for battery prices to drop over time, as this is not a viable business strategy.
Doc.dr.sc. Ivan Andročec, Assistant Director of the Strategy and Development Sector at HEP, explained that HEP has already started with battery systems. “We installed the first ones next to the solar power plant Vis, we have them in the HEP building, and next to the electric charging stations in Vukova Gorica,” said Ivan Andročec, adding that they are also working on connecting the thermal and electrical systems to utilize electricity surpluses and obtain some energy for heating.
Ivan Šimić, Technical Director of EnergoVizija, concluded that Croatia is not lagging in investing in storage, as it is a question generally related to the development of renewable energy sources. “Until recently, renewable energy sources were almost undesirable, but now that Europe has realized it can no longer rely on Russia, they have received a big ‘push.’ We have 5000 megawatts of renewable sources approved that will come online in five years and require at least 2000 megawatts of storage. This will become a problem in the future, as no one will want to finance renewable projects without a storage plan. In Dalmatia, there is already an energy surplus, and some plants shut down turbines on Saturdays and Sundays because it is more profitable not to produce than to pay penalties for surplus electricity,” explained Ivan Šimić.
No one will buy a battery that costs 400-600 euros per kilowatt-hour without a circular economy, concluded Damir Žaja, Head of Design at Klimaoprema.
“The recycling process is very important, and we must consider the environmental problem of lithium,” said Damir Žaja, who also spoke about thermal energy storage and batteries that charge and discharge simultaneously.
Ece Oyan, Advisor at the Competence Centre on Climate Change Mitigation in Energy-Intensive Industries (KEI), presented the opportunities for hydrogen in Croatia. She said that hydrogen is primarily used in areas where electrification is impossible, and our country has potential, although it faces certain challenges.
The last, ninth panel of RES Days, titled “The Era of Hydrogen: Innovations, Challenges, and Opportunities,” moderated by Saša Ćeramilac, a journalist at Al Jazeera, revealed what those challenges are.
Is there infrastructure for hydrogen transport? Robert Bošnjak, Assistant to the Management Board Member of PLINACRO, answered this question. “Part of the transport is the simplest. If there is enough hydrogen, a way to transport it will be found. However, we do not have production or consumers who could receive hydrogen. The PLINACRO system is preparing for hydrogen; all new pipelines are built to transport pure hydrogen, but we do not expect to do this in the next ten years because there simply isn’t any,” said Robert Bošnjak.
Dr. Ivan Herak, Member of the Board for Finance, Corporate Law, and Human Resources at ACI CLUB, explained the practical problems his company faces as the implementer of the Northern Adriatic Hydrogen Valley project. “For project realization, there are not enough clear economic, legal, and spatial assumptions, and even in the decision-making vertical, there are different views on hydrogen implementation. We want ACI Marina Ičići to be energy self-sufficient; we plan a catamaran for passenger transport on green hydrogen, with a project value of 15-16 million euros, but we don’t know when this will be realized because we cannot get answers to any questions,” said Ivan Herak.
Vjekoslav Majetić, innovator, founder, and owner of DOK-ING, who is already working with hydrogen, explained that they made a hydrogen mining machine for Americans four or five years ago and have their hydrogen production system in Zagreb. However, they cannot transport it because they do not have permits, so they consume it immediately. “For hydrogen to be cost-effective, its price must be below two euros per kilogram. Currently, it is around 15 euros, and in terms of transport application, this is three times the cost per kilometer compared to driving on oil or gasoline,” said Vjekoslav Majetić.
Prof. emer. dr. sc. Frano Barbir, a full professor at the Faculty of Electrical Engineering, Mechanical Engineering, and Naval Architecture in Split, who has been working with hydrogen for thirty years, explained where hydrogen could be applied. “When we talk about hydrogen, we primarily need it for decarbonization because we cannot electrify everything. We cannot electrify some transport, such as heavy vehicles, and some industries. We need hydrogen as a direct replacement for fossil fuels, and it will be applied there first,” said Prof. emer. dr. sc. Frano Barbir, citing hydrogen trucks for the Croatian Post or, for example, the Zagreb-Split train as examples of the future.
Ivica Rovis, Senior Advisor to the Minister at the Ministry of the Sea, Transport, and Infrastructure, emphasized that regulations are still lacking for hydrogen in Croatia. There are no possibilities for hydrogen production or refueling, and specifically, there is no legal regulation for setting up a hydrogen refueling station. However, this will be worked on.
Dr. Vjekoslav Jukić, Head of the Energy Policy and Planning Sector at the Directorate for Energy at the Ministry of Economy, confirmed this, highlighting that Croatia’s hydrogen strategy until 2050 exists. “But the introduction of new technologies is neither simple nor smooth. However, we have sectors that can switch to hydrogen,” concluded Dr. Vjekoslav Jukić.
At the end of the three-day conference in Pula, RESC Managing Director Maja Pokrovac addressed the participants, highlighting that nine panels were organized for the first time, covering all segments of renewable energy sources: solar, wind, grid, geothermal, financing, biogas and biomass, batteries, and hydrogen.
“Experts at the conference highlighted problems, but we also heard solutions. I have noted what needs further work, but besides noting, we also remember very well. Especially the experiences of people from Europe who talked about how to accelerate the energy transition, which is crucial for Croatia and everyone who produces, works, and lives here, because energy must be accessible to everyone. Without it, we cannot ensure competitiveness or standards, and renewable sources provide just that. Over three days, we aimed to be responsible and cover all topics, and today we are already writing a letter to the Parliament because we were shocked to learn that it is the only body responsible for HERA, which has not set the grid connection fee for over two years. I thank my team, and we will see you next year at the first Croatian renewable energy fair in October at the Zagreb Arena,” said Maja Pokrovac.
