OIEH Association: New HOPS Rules Prevent Projects Worth 1.5 Billion Euros

The Croatian Renewable Energy Sources Association (OIEH) has reacted to the new Connection Rules for the transmission network published by the Croatian Transmission System Operator (HOPS) a few days ago, specifically on July 14. The reaction states that the new Rules were awaited in the OIE for two years, and when they were finally adopted, there was great disappointment. They emphasize that instead of encouraging the development of renewable energy projects, the adopted rules prevent them, which is unacceptable and harmful to Croatia, and they point out that such burdensome and discriminatory rules have not been seen in Croatia since the beginning of the development of renewable energy projects.

We requested a comment from HOPS regarding the statement from the OIEH Association, but we did not receive a response from that operator. Below, we fully transmit the statement from the OIEH association:

“HOPS, with the new Rules, extends the process of issuing necessary permits for renewable energy projects by almost two years. Thus, for obtaining the electricity consent (EES), which is a condition for obtaining the location permit, investors will wait between 9 and 12 months. For the connection feasibility study (EMP), they will wait 90 days, and for the optimal technical solution for connection study (EOTRP), an additional 5 to 8 months. By comparison, the EU mandates that all construction permits must be issued within two years, while now it takes a year and a half just to resolve the connection.

According to the new Rules, it is uncertain when or how much electricity HOPS will take from renewable energy producers into the grid. On the other hand, HOPS has the right to disconnect any renewable energy facility from the grid at any time, even when every megawatt of produced domestic green energy is needed.

In the initial phase of developing a renewable energy project, the investor fulfills all their financial obligations, while HOPS postpones its obligations until the construction of a new grid, which will happen in about 20 years, even though it is already taking money for connection and construction.

HOPS, with its comfort and extremely conservative stance, has delayed the development of the grid, and now it further shirks its responsibility with extremely discriminatory and arbitrary mechanisms of throttling or even complete disconnection of producers from the grid, without having to financially compensate them for the incurred damage.

Under such Rules, no financial institution will approve a loan for a renewable energy facility for which it does not know how much electricity it will be able to deliver and receive a return on investment. Investors are thus sent the message that they are unwelcome, and the achievement of energy independence and autonomy is indefinitely prolonged.

In developed EU countries, the situation is clearly different. The goal of grid development is optimization that leads to the greatest increase in social welfare. This is achieved by having the system operator bear the financial burden of throttling/disconnection, through these costs the system operator then has a strong incentive to optimize its operations and has clear indicators of when it is better to build new elements of the grid and when to throttle/disconnect production, which ultimately results in the lowest costs within the regulated activity.

It is important to clarify that electricity transmission is a regulated activity (monopoly) that is not subject to competition, while on the other hand, electricity production is subject to an extremely competitive EU single market. With these rules, HOPS reduces its obligations and risks and places domestic investors in an extremely unfavorable position where they cannot compete in the EU market. Unfortunately, such Rules will only encourage the import of electricity.

HOPS also introduces a discriminatory rule that data on the state of the transmission network for connection to the grid can only be requested once a year. If an investor, for any objective reason, fails to do so within the period from May 1 to May 15, they lose the entire year, even if they are just one day late.

The Rules state that all HOPS lines are registered in the national infrastructure cadastre, but this does not correspond to the actual state, and the cadastre needs to be urgently updated. An accurate state is an important prerequisite for quality planning and construction of future renewable energy production facilities.

Additionally, the Rules impose a fee for connection to the grid on investors already upon signing the connection contract, even though until the construction permit for the connection is obtained, HOPS has an extremely low risk, so it would be logical and reasonable for the connection fee to be paid only after obtaining the construction permit.

HOPS states that it will provide data on the state of the grid within 30 days upon request. OIEH believes that in today’s age of informatization, this deadline is too long and that HOPS has information about the state of the grid it maintains available at all times, as it is also its owner.

The Electricity Market Act (ZOTEE) from 2021 stipulates that only projects with obtained energy approval (EO), which is prescribed as the first step in project development, can request connection to the grid. This was a good step that soon halved the backlog of as much as 12,000 MW of submitted requests.

Unfortunately, after HOPS published the Connection Rules, we are returning to a chaotic state. At this moment, it is unclear how many requests for project development remain under the transitional provisions of ZOTEE, and how many are under the recently adopted Regulation on the criteria for conducting public tenders for issuing energy approvals and conditions for issuing energy approvals, according to Article 17 of ZOTEE.

The European Union in the Renewable Energy Directive, as well as the Law on Renewable Energy Sources and High-Efficiency Cogeneration, mandates that all permits must be issued within two years, and in special zones suitable for accelerated development of renewable energy projects, all permits must be issued within one year. This will be impossible in the Republic of Croatia, thanks to the new Rules!

All of this, we emphasize, is happening in the same month when the Ministry of Physical Planning, Construction and State Property adopts a legislative framework that accelerates and simplifies the development of solar energy. The same legislative framework gives strategic importance to the development of agrivoltaic power plants, which are desperately needed by our agriculture in the fight against climate change. And then, in the same month, we received new Connection Rules from HOPS that almost negate all progress.

Electricity transmission is a regulated activity (monopoly) that is not subject to competition, while on the other hand, electricity production is subject to an extremely competitive EU single market.

With these rules, HOPS reduces its obligations and risks and places investors in an extremely unfavorable position where they cannot compete in the EU market.

We note that the development of renewable energy has been assigned the status of a prevailing public interest in all documents of the European Union so that ultimately its citizens have access to available, domestic clean energy. Unfortunately, the Republic of Croatia, thanks to these Rules, is becoming one of the countries that hinder the development of renewable energy.

Renewable energy projects that are currently waiting for development are worth as much as 1.5 billion euros, and due to the new HOPS Rules, it is uncertain when and whether they will be able to develop at all. OIEH believes that urgent interdepartmental action and coordination of relevant ministries are necessary for the Republic of Croatia to stop with such restrictive rules that block the development of renewable energy projects.