In the course of 2020, Croatia has taken a crucial step forward in the energy transition – adopted the Strategy for Energy Development in the Republic of Croatia to 2030, looking ahead to 2050. The Government brought the final decision on initiating the implementation of the premium model and legal and regulatory propositions established for the beginning of its application. “These are all important steps for the preparation of RES projects,” Maja Pokrovac, director of the Renewable Energy Sources of Croatia (OIEH) said for the journal Poslovni Dnevnik and pointed out that in spite of the general trend of growth of renewable energy sources in Croatia, the EU and beyond, the Covid-19 pandemic period was detrimental and numerous projects have come to a standstill.
Due to limited mobility during the lockdown, they could not be implemented according to plan. However, even in these extraordinary circumstances, she points out, owing to exceptional knowledge and adaptation to newly created conditions, more than 400MW of wind energy projects were completed that are ready for the next premium model competition and nearly 300MW of solar projects are also almost completed. “What is important for countries which have RES capacities, and those are to the main part countries from the Mediterranean region with good solar irradiation and wind is that during the lockdown the political authorities have come to understand that the country can and should rely on its own forces – the production of energy from domestic RES”, Pokrovac pointed out.
A new decade and a new challenge
The Government has set the share of 36.4 percent of RES as the goal for the year 2030. “A large number of RES projects, which are in the phase of development, show us that we have enough potential for fulfilling the set goal. However, this should not be taken for granted but must be worked on. Now we are at 28.5 percent and the goal of 36.4 RES in the gross direct consumption of energy, in line with the integrated national energy and climate plan,. should be achieved through new investments in RES, above all through a new wind farm and solar plant projects but also very likely through new geothermal plants since last year research rights were awarded for four research areas. Naturally, we expect the participation of other RES technologies. A greater share of RES is also expected in transportation as well as heating and cooling”, Pokrovac pointed out and added that the last century was marked by the lack of ambition which could be depicted in the inconsistent related to the development of the RES sector, absence in the adoption of required by-laws, including frequent changes in the legal provisions. All this created insecurity for investment in RES.
A new decade is in front of us, she continued. in which much more demanding tasks are before us, as well as the transformation of conventional business models so we can no longer allow for irresponsibility and inconsistency. “In order to transform the economy and provide for new innovative models, we have to be fast, effective, and consistent in pursuing and implementing RES policies. It goes without saying that all these changes also require abundant financial means, having at the same time numerous possibilities open for acquiring those means through EU funds and the Recovery and Resilience Mechanism which offers assistance in overcoming the consequences of the COVID-19 pandemic whereby emphasizing the necessity of implementing a green transition. From all the chances missed in the past we should draw lessons and now be wise and use appropriately the funds at our disposal”, Pokrovac pointed out.
That is why, she emphasized, we have to have high-quality projects ready, and in order to have them a well-ordered legislative basis is needed. “Therefore, we are turning back once again to the foundations necessary for the development and fulfillment of goals – a clear, transparent, and consistent regulatory framework for RES projects. Only in this way can Croatia reach the goal of 36.4 percent. On the other hand, through smart development, Croatia can become self-sufficient in energy and even become an exporter of renewable energy. With the aid of the RES sector, the re-industrialization of the economy can also be achieved. The potentials are unquestionable but the change of paradigm is necessary. The time is ripe for sustainable investments”, the director of OIEH is convinced.
Investments in the electric energy grid
One of the questions that arise up due to the fact that every day increasing amounts of electricity come from renewable sources is one pertaining to the capacities of the electric power distribution system in Croatia. Pokrovac points out that the electric power grid is an important infrastructural component of every country and therefore constantly requiring investments in order to secure sufficient quantities of electricity. She holds that if new RES capacities that will be connected to the grid are taken into consideration additional investment will be necessary both at the transmission as well as distribution levels. Although integrated solar plants at sites of consumption will facilitate the RES impact on the grid, she points out that overall RES projects will require additional investments in the grid in order for all the produced energy to be delivered to the place of consumption, and before all, to urban centers where the consumption is highest.
At the initiative of OIEH and with the financing of the European Bank for Reconstruction and Development (EBRD) the elaboration of the study “Analysis of the key obstacles and proposal for the improvement of the integration of variable renewable energy sources in Croatia” was initiated which is to result in an overview of the current state of the electricity transmission and distribution system in the Republic of Croatia and propose measures that could alleviate the integration of variable renewable energy sources into the system. The measures will be based on the analysis of the existing connecting processes implemented by the Croatian operator of the transmission system (HOPS) and HEP-Operator of the distribution system (HEP ODS) and will be in line with contemporary practices of other EU countries, with adjustments to the state in Croatia. FER and EIHP, two leading institutions in the field of electrical engineering in the broader region, known for numerous international and domestic scientific projects will jointly work on the elaboration of the study. “This is the first study of its kind in Croatia and is of great importance so I wish to thank EBRD for having recognized the significance of its financing and the top-notch experts who responded to OIEH’s initiative, the director of OIEH told Poslovni Dnevnik,
Main administrative obstacles and unused potentials
In regard to the main obstacles in RES development in the country and area of the greatest number of unused opportunities, she pointed out that the development of RES projects requires a broad spectrum of knowledge from various field and a truly considerable volume of information making it rather difficult to grapple the complex administrative procedures. “Knowledge of all the necessary steps, which investors had to thread for years developing their projects is the basis of another study initiated by OIEH and financed by EBRD. It will be “a Guidebook for the development and implementation of RES projects in the Republic of Croatia” which will attempt to answer all the questions posed by those who wish to invest in renewable energy sources”, Pokrovac added.
The Guidebook will expound on all the steps necessary to take in the fields of the legislature, environmental protection, issuing of permits, financing, the premium incentive system, manner of electricity market functioning. In addition, measures will be proposed that would accelerate and facilitate the development of RES projects in Croatia. The study was prepared by EnergoVizika which engaged for this project additional RES experts from the private sector. “Regardless of the will and knowledge we have, this nevertheless solves only one obstacle – the lack of all required information in one place. We draw attention to all the others. And above all others is the slowness in implementing regulations due to which the administrative development of the project is very complicated and long-lasting. It is not rare to spend seven or more years, with enormous financial costs only in collecting documentation required for the project to reach the construction phase. It is not rare that investors attain all the building permits and then cannot solve property-legal relations linked to the project in spite of the fact that RES projects have been proclaimed projects of interest to the Republic of Croatia. An appeal and administrative proceedings system are required as a corrective remedy for the administrative decisions brought but due to the inefficiency of the judiciary system, the resolution of an appeal lodged by someone will last from three to five years. In the development of a project that is an eternity, and the prolongation makes it uncompetitive in relation to projects that develop much more quickly in other countries, prolonging in this way the need to promote such project with state incentives, while the goals should be for the projects to move towards market mechanisms. Let’s be clear: the efficient implementation of regulations is a precondition for the efficient realization of projects and that is also the way to lower the price of electricity from RES”, Pokrovac emphasized.
Of equal importance is the cost of connecting RES plants to the electric power system. It implies investments in the replacement and supplementation of the existing distribution and transmission electrical grid and is fully covered by the investor, which ultimately raises the investment costs and increases the production costs of electricity from RES. Maja Pokrovac considers that if this was financed from EU funds so as not to burden either the investor or the consumer of electricity from RES, the projects would be much more competitive than they are present. “ Accordingly a more constructive approach to the investors, a simpler administrative procedure, and a more efficient and faster judicial system would undoubtedly be a better framework for the further development of RES projects. No lesser role is played by the local communities which, according to our experience, want RES projects in their midst, but are not the decision-makers in regard to such projects because they do not dispose of the land which is on the basis of physical plans intended for the development of RES – the land is in the ownership of the state. If the government would support the local communities by allocating the land to the local authorities, projects would be implemented much faster as well as property legal relations and thereby fulfill the interest of the communities for sustainable projects. In addition, it is necessary to use the potential of the land lost for other purposes, such as, for example, the remediation of landfills, abandoned quarries, and plan the installation of solar plants at these locations. The implementation of geothermal energy projects would be considerably accelerated if the use of old drill wells was made possible, namely those once used for the extraction of gas and oil, considerably lowering thereby the costs of geothermal potential research. That would very quickly result in the increase of the number of investments in geothermal energy. Its potential is important not only for the production of electricity but should be used in the future for heating and cooling through central heating systems which would result in the required increase in the use of RES in the heating and cooling systems”, Pokrovac explained and added that Croatia should actually map the publicly accessible locations in order to clearly see the RES potentials. She pointed out there is room for progress in using RES in the sector of building construction, transportation, agriculture. “The agricultural and food processing sector has a much greater potential in the production of biogas than currently used. Great possibilities exist in connecting RES and the agricultural industry, primarily through the use of waste, because it is possible to use manure, waste from the food processing industry and biodegradable waste as raw materials in the production of energy. In this way, Croatia can considerably increase the installed capacities in the processing of bio-waste into useful biogas,” she pointed out and added that a similar situation exists in the development of plants on wood bio-mass where much greater attention should be devoted to the highly efficient use of energy from wood biomass and position production capacities at those locations where there is a need for heating energy, such as schools, hospitals, etc. She also emphasized how important it was not to devastate forests, but rather grow short rotation cultures for energy needs on appropriate surfaces. “Synergy and innovation can results in many good things and we already have the required knowledge and experience”, the director of OIEH underscored.
Opportunities for Croatia through EU funds
Regarding the withdrawal of EU funds for the development of RES in Croatia through the Operational Programme Competitiveness and Cohesion, 100 million EUR has been earmarked for projects of energy efficiency and renewable sources in companies. “On the basis of the first two announced opened calls, 89 projects of the production industries have been contracted and 77 projects from the sectors of tourism and trade and in respect to the third call which was open until early February of this year the selection of projects is underway. Part of the projects included the measures of installing photo-voltage modules owing to which 6.7GWh of energy from the sun will be produced in the industrial sector and 0.5 GWh in the service sector. I believe that it is only the beginning in the use of EU funds since Europe has secured through the Recovery and Resilience Mechanism 6.31 billion EUR in grants and 3.6 billion EUR in loans. In the approval process, great importance is laid on the green component and the request is that at least 37 percent of all expenses of the state’s plans be directed at climate change. The Just Transition Fund for environmental measures is also available. Here I see a great opportunity for Croatia, including the possibility of financing changes and supplementations of the existing distribution and transmission electric power grid which is the foundation for the further development of RES projects and thereby safe energy transition without increasing the price of electricity for the end users”, Pokrovac concluded for Poslovni Dnevnik.
Prices of RES energy are falling but will remain the same for consumers
Lower energy prices from RES is a trend enabled by lower investment costs in RES projects, before all in wind farms and solar plants. ”Lower investment costs are the result of the continual development of technology as well as the economy of scale which enabled a significant price decrease. New RES projects are increasingly cheaper throughout the world and in Croatia as well. This is best illustrated in guaranteed price competitions and the premium model. The amounts in the guaranteed price competitions are significantly lower than were the feed-in tariffs a few years ago. This year’s premium competition will also show how much RES has become cheaper. However, the overall price of electricity, as you will see on your bills, is composed of a number of elements among which, along with the price of energy, include a fee for using the transmission and distribution grid, accounting and supply location, tax. In some countries, for example, Denmark, Portugal, Germany, taxes, and fees for RES production are significantly higher than the market price of electricity. In our country, with the increasing number of RES plants, the energy component amount on bills will be ever lower and the price of producing electricity from RES could decrease even more if the price of capital falls, which is currently in Croatia much higher than in more developed EU economies. Although, considering the transmission to a ‘zero emission’ economy it is not to be expected that the price of electricity for end-users will go down. In Croatia, consumers can actively participate in the co-creation of an electric power market through the system of ‘production at the place of consumption which enables our households and the economy to control the costs of procuring electricity. Anyone who produces electricity for his own needs does not play fees for the grid, taxes and RES charges for such energy and thereby has a direct impact on the overall costs of procuring electricity”, the director of OIEH pointed out.
