In Croatia, it has been nearly impossible to build wind farms for the past seven years

Investments in new wind farms in Europe fell last year to their lowest level in over a decade, impacted by rising costs and bureaucracy that threaten to undermine the region’s energy security and climate goals.

The spent €17 billion was less than half the amount in 2021 and the lowest since 2009, according to a report by WindEurope. Investors financed only ten gigawatts of new capacity in the European Union last year, far less than the annual 31 gigawatts deemed necessary to meet the bloc’s environmental goals. Why is there so much talk about renewable energy in our country, yet so little construction? We uncover this in a conversation with Bojan Reščec, one of the pioneers of wind farm construction in Croatia.

It used to be better

– Indeed, there is a reason why Croatia was a leader in the region in installed wind capacity around 2015/2016. Based on the energy package of laws enacted in 2001, which liberalized the market and introduced the use of renewable energy sources, it was only in 2007.

The regulation on renewable energy sources completed the legal framework. In accordance with regulations in Europe and the world, Croatia introduced the so-called feed-in tariff, incentives in the form of Power Purchase Agreements for all renewable energy sources with fixed prices for 12, and later 14 years – Reščec commented for Lider.

With the status of a privileged producer, issued by the Croatian Energy Regulatory Agency (HERA), upon the construction of a wind farm, the Croatian Energy Market Operator (HROTE) would activate that contract, providing a solid basis for investors to obtain project financing. Reščec explained that the first quota of 400MW of wind farms was then increased, and a large number of wind farms of various capacities were built.

However, the last Power Purchase Agreement (PPA) was signed by HROTE in 2013, and at the end of 2015, the first Renewable Energy Sources Act was adopted, which introduced the so-called Premium model, Reščec added. The price has not been predefined since then; Power Purchase Agreements are signed only if won in auctions – tenders where prices are offered.

– The frequent model for that time in the EU is actually a contract for differences, as the price offered at auction serves as a reference; the produced electricity is sold on the market, if sold for a lower price, HROTE pays the difference, and if sold for a higher price, the surplus is returned to HROTE – he explained.

– We expected a new surge in investments; it should be noted that the same law introduces a category of land tenders, whereby investors would first compete for the location and later for the Power Purchase Agreement. However, by the end of 2021, we were waiting for additional documents to regulate the provisions of that Law.

‘It is not possible to apply, let alone develop projects’

Finally, in October 2021, the Electricity Market Act was adopted, which stipulates the issuance of an Energy Approval as a document granting the developer the right to the location and the right to obtain all other documents, as a form of tender for state and municipal/city land – commented Reščec, adding that two articles are key.

Article 17 stipulates the conditions for the tender for the award of Energy Approval and the selection criteria in the tender. In short, the developer intends to develop the project, applies for the location, and then the Ministry announces a tender for that location. Along with other criteria (local community, deadlines, efficiency), the main criterion is the payment of a fee of at least 50kn/kW.

Article 133 stipulates the direct allocation of locations to developers who have already developed the location and obtained either a location permit or a grid connection or an environmental confirmation. The deadline for applications ‘under Article 133.’ was until 19.01.2022. Although the Law clearly stipulated that a fee of 50kn/kW (as a fixed fee) should be paid upon submission of the application, it was suddenly decided that applications would not be accepted, resulting in 216 requests totaling 5,217 MW.

Interestingly, there are applications for projects that are not in the spatial plan, and there is also a lot of overlap. In the case of multiple applications for the same location, Reščec explains, it is determined who is the ‘older developer’, i.e., who obtained the documents first.

– Everything is so nicely defined, but this is just where our agony begins. The regulation under Article 17 with the definition of criteria was supposed to be adopted by 19.01.2022, and to this day it has not been, thus it is currently 433 days late. Therefore, it is not possible to apply, let alone develop projects. To avoid confusion, Energy Approval is issued even for private land; without the Regulation, I cannot build anything even on my own land!

Under Article 133, we expected the issuance of all approvals within three months (i.e., by 19.04.2022), and we are not even close to that yet. In the first 7-8 months, none were issued; at the end of the year, something started to be issued, but the issuance process from the call to the award takes 60-90 days – commented Reščec.

– This applies to all projects, not just wind farms, but if we know that it is impossible to develop a wind farm in less than five years, and we have practically been blocked for seven years, I think it is clear why there is no new surge in construction – he added.