Drilling can reveal that there is not enough potential for exploitation at the location, so millions of euros can be wasted. A potential investor must invest in at least one to three exploratory wells, often as deep as 4,500 meters. One such well costs around 10 million euros, which means that the investor would need to invest at least 30 million euros in exploration before even starting to seek the remaining permits for building the power plant.
In Veliko Korenovo, a village near Bjelovar with about five hundred residents, next month the installation of a drilling tower will begin for the exploration of a geothermal source that will heat the local industrial zone and greenhouses. Then drilling will commence at a depth of 1,500 meters, where there should be water with a temperature of around eighty degrees Celsius. The completion and testing of the well is scheduled for late March, and the entire process is planned to be completed by the end of 2024, according to the Bjelovar city administration. Bjelovar will thus become the first city to use geothermal energy, says Mayor Dario Hrebak. – It has been widely reported that Osijek and Velika Gorica will be the first to use geothermal energy, but according to our information, they are currently in the process of collecting documentation. Work is already underway in Bjelovar, and other cities are expected to reach this stage in a few years – Hrebak says. Incidentally, this is the second geothermal well in Bjelovar in a few years. In the first one, water at a temperature of around thirty degrees was found at a depth of five hundred meters, which the city plans to use for future spa facilities.
Emerging from the shadows
In addition to Karlovac, Križevci, Kutina, Lipik, Sisak, Topusko, Virovitica, and Vukovar, the latest city in that list exploring the geothermal potential in its area is Sveta Nedelja. Some of the investigative work has already been carried out, says Deputy Mayor Gabrijel Deak. – An analysis of available geological, geochemical, geophysical, and drilling data in the research area has been prepared. Magnetotelluric measurements and mapping of our city have been conducted, as well as the identification of the most potent points. The complete documentation required for an exploitation well should be completed by the end of April 2024 – Deak says. Preliminary estimates suggest that Sveta Nedelja has the greatest geothermal potential for district heating, given the existing well that is currently used for agriculture. – The temperature is 68 degrees Celsius, with a flow rate of 25 liters per second, which is equivalent to about 5.5 MW of thermal energy. If we find higher temperatures and potential through future exploitation or research well, we do not exclude electricity production. However, it is necessary to meet all parameters – Deak adds. Geothermal energy is slowly emerging from the shadow of much-hyped solar and wind energy and is attracting increasing attention from both local governments and private investors. According to the Hydrocarbon Agency (AZU), there are currently seven exploitation fields and 28 exploration areas for geothermal water scattered across the Međimurje, Podravina, Pokuplje, and Slavonia regions of Croatia. Out of these, 12 exploration areas belong to local government units that have recognized the potential of utilizing geothermal energy for district heating, 11 belong to private investors planning electricity production, and five private investors plan to use geothermal energy for district heating or agriculture, according to AZU. According to estimates, all these exploration areas could attract around 400 million euros in investment. The Croatian part of the Pannonian Basin is an exceptionally favorable area for the exploration and exploitation of geothermal water because the average geothermal gradient is as much as 60 percent higher than the European average, as emphasized by AZU. Over the past few years, based on preliminary assessments, AZU has initially identified 75 geothermal areas suitable for use in energy production. Out of these, 43 areas are suitable for obtaining thermal energy, and 32 for electricity production. – All geological, geophysical, and drilling data necessary for the assessment of the geothermal potential of each area are publicly available in the data room. It can be accessed physically or virtually, which has significantly influenced the number of interested visitors, which is constantly growing – they emphasize at AZU. – We are entering the era of geothermal energy because previous preliminary estimates indicate a potential greater than one gigawatt – they are optimistic at the agency.
1 GW represents Croatia’s geothermal potential
75 geothermal areas suitable for energy exploitation have been identified bz the Hydrocarbon Agency
400mil € in investments are estimated to be attracted by geothermal energy
600.000 MWh of electricity per year from geothermal sources could be produced in Croatia
What is behind this?
However, when asked if experienced investors in this type of energy and energy experts can tap into this potential, they respond very cautiously, to say the least. Dragan Jurilj is the only private investor who has completed a geothermal project for electricity production so far. After 13 years of development, the Geothermal Power Plant Velika 1, with a capacity of 16.5 MW, started operating in Ciglena near Bjelovar at the end of 2019. Jurilj’s partner in that project was the Turkish company MB Holding, but a dispute arose between them that has not yet been resolved. Jurilj believes that the biggest problem facing investors in the geothermal sector and geothermal power plants is access to state support, specifically from the relevant Ministry of Economy. – On one hand, AZU grants concessions for exploration and obliges investors to make large and risky investments in exploration, which is great, but on the other hand, the Ministry does not provide an adequate quota and contracts for the purchase of electricity, or premium contracts. Without these, investors will not invest in exploration, and no bank in Croatia will finance the construction of a geothermal power plant after the exploration is completed – Jurilj claims. Even the exploration of a geothermal power plant location is very capital-intensive, and money must be provided solely by the investor because no bank wants to provide a loan due to the risk of exploration. Namely, drilling can reveal that there is not enough potential for exploitation at the location, which means that millions of euros are wasted. A potential investor must invest in at least one to three exploratory wells, which are often as deep as 4,500 meters. One such well costs around 10 million euros, which means that the investor would need to invest at least 30 million euros in exploration before even starting to seek the remaining permits for building the power plant. – Geothermal energy is not like solar power plants, which do not require risky exploration and can be commercially viable by selling electricity on the market. Unfortunately, investments in geothermal power plants cannot be realized without the support of securing a premium contract that guarantees a 12-year incentive to the investor – Jurilj emphasizes. As for purchase prices, in the latest public tender for the allocation of market premiums from 2022, the maximum reference value for geothermal power plants with an installed capacity of over 500 kW was 167 euros per megawatt-hour. Independent energy expert Zdeslav Matić also says that there is undoubtedly interest in investing in geothermal sources, but what is behind it is not entirely clear.
BUREAUCRATIC MAZE FOR OBTAINING A PERMIT FOR A GEOTHERMAL POWER PLANT
Geothermal projects start by initiating a public tender for the issuance of a permit to explore geothermal resources. Only after obtaining this permit do companies gain the right to conduct exploratory work for a specific research area. For each of these areas, the Ministry of the Environment and Energy (MINGOR) makes a decision regarding the issuance of an exploration permit. During the lengthy exploration period, investors are required to determine the capacities of the underground reservoir through various measurements, drilling new wells, and conducting testing. This process can take months, and only after completing the exploration work are reports and an economic assessment of geothermal reserves prepared, which also need to be approved by the commission appointed by MINGOR. In this exploration phase, investors are obliged to request a decision on the establishment of an exploitation field with the delineation of confirmed reserves. Furthermore, according to regulations in the field of environmental and nature protection, procedures for assessing the need for an environmental impact assessment (EIA) are mandatory before obtaining approval for exploration and exploitation, and these procedures can each take from eight to twelve months. It is also possible that each of the EIA procedures may result in the requirement for an environmental impact assessment (EIA) and/or a main assessment (MA), which can take up to two years. Investors can only obtain an exploitation permit after the approval of the geothermal water development and exploitation project, which is an integral part of the reserves report. Only after signing an exploitation contract can investors obtain an energy permit and then request the preparation of a report on the optimal technical connection solution to the grid (EOTRP).
Solar has become cheaper, while geothermal has become more expensive
“At the current electricity prices, investments do not make any sense. Geothermal energy is a very specific category of renewable sources. It is extremely capital-intensive and, with high operating costs, produces basic energy. While for dominant new energy sources like solar or wind energy, equipment prices, and then production costs of electricity have fallen by 50 to 70 percent in the last decade, for geothermal power plants, they have increased by five to 10 percent. Therefore, significant societal incentives are needed for minimal profitability of geothermal power plants, and these incentives need to be provided in a very generous amount,” says Matić. In addition, investors must be aware that they are facing a regulatory framework that is in chaos in Croatia, he adds. “Today, investing millions in the underground geological part of the project and hoping that in 2028 and 2029 there will be a favorable political and regulatory system in place for the construction of the above-ground, energy part of the project requires exceptional financial courage,” Matić adds. When asked if mainly foreign investors with fewer domestic, financially powerful players will engage in such projects, Matić says that if we consider Ina as a domestic company, he is not sure if they still have the financial power, ambition, or knowledge for such investments. “I expect mainly naive or uninformed foreign investors who do not know what awaits them here,” emphasizes the expert. In addition to significant funding for the realization of a geothermal project, equal patience is required to navigate through extensive paperwork. As explained by the Association of Renewable Energy Sources of Croatia (RESC), geothermal power plants are subject to the Electricity Market Act (ZoTEE) and, additionally, the Hydrocarbon Exploration and Exploitation Act. “Thus, two parallel administrative procedures are carried out for geothermal projects, which means that various bodies at the local, regional, and national levels are involved in the issuance of permits. Often, different permits depend on each other, resulting in project implementation delays,” RESC points out. Legal expert Tea Dabić of RESC emphasizes that the organization has already sent a letter to MINGOR with a proposal to simplify the procedure.
Tea Dabić, RESC Legal expert
Bureaucratic Quirks
“In it, we propose that when the exploration phase is completed and MINGOR approves the reserves report, the report on the optimal technical connection solution (EOTRP) should be prepared immediately, without waiting for the energy permit (EO). Unfortunately, this is not possible at the moment because it would require a change in the Electricity Market Act,” says Dabić. Another proposal from RESC concerns the pressing issue that, according to current rules, data on EOTRP is only issued once a year, from May 1 to May 15. This is extremely unfavorable for investors because if they miss this two-week deadline, they have to wait until the next May. Dabić agrees that this is a bureaucratic quirk because the Croatian Transmission System Operator (HOPS) knows the state of the grid at any given time, so issuing data for EOTRP only once a year is unacceptable. “Operational restrictions can also be as high as 90 percent. As a result, HOPS can disconnect the RES plant from the grid at any time, and no financial institution will agree to finance such projects in which there is no mechanism to guarantee the safety of loan repayment,” emphasizes Dabić. Although we have a simpler procedure than, for example, Hungary, which regulates the procedure for geothermal projects with three laws, Europe expects us to expedite and shorten the issuance of all permits to two years. With the current barriers, achieving the promised 600,000 MWh of electricity production annually from geothermal power plants is undoubtedly too challenging.
WHO ARE THE PRIVATE INVESTORS INVESTING IN GEOTHERMAL SOURCES
As for the involvement of private investors, data provided by the Hydrocarbon Agency show that Ina intends to produce electricity from geothermal sources at the locations Međimurje 5 and Leščan. According to previous media reports, the Leščan exploration area attracted the most interest from investors in the concession allocation tender, but in the end, the largest oil company in the country won it, offering €91 million for installing eight wells in the next five years. IGeoPen, owned by the British company A14 Energy, will explore the Pčelić and Sječe locations. The British plan to invest €27 million by installing three wells in Pčelić. IGeoPen is also the concessionaire for the Ernestinovo location. Viola Energy Generation, owned by the Turkish corporation Soyak, will attempt to generate electricity at the Kotoriba location. This Turkish investor is the owner of Terra Energy Generation, which plans to explore the Legrad 1 location. Companies Geo Power Babina Greda and Geo Power Zagocha, backed by Enna, have obtained the Babina Greda 1 and Slatina 2 locations. Recall that Enna acquired Zagoch from Dragan Jurilj. The concession for the Slatina 3 location was obtained by EES Dravacel Energetika, a company founded by Marijan Mikulić and Cindrigo Geothermal based in London. The last company planning to produce electricity from geothermal sources at the Merhatovec location is Ensolx in Zagreb, owned by Robert Stepanić. Genera is interested in producing thermal energy at the Sveta Nedelja location – Genera, and at the Sveta Nedelja 1 location, Eko Plodovi, owned by Zvonimir Belić, is active. Geotermal Water from Dugo Selo, owned by Vilko and Josip Ivaniš, obtained the Novigrad Podravski location, and Dalis, founded by Stipo Filakov,
SOURCE: Lider
