HUP: Urgently unblock investments in energy projects

Croatian companies are encouraged by the drop in electricity prices in the second half of 2023, considering that in the first half of the year they exceeded the European Union average for the first time, writes the chief economist of the Croatian Employers’ Association Hrvoje Stojić in the Weekly Focus. Moreover, the price of electricity at around 70 euros per megawatt hour on the regional exchange (HUDEX) is significantly lower than its average level in the first half of last year (around 120 euros per megawatt hour), which will certainly have a stabilizing effect on the average inflation rate and the expected reduction in the gap compared to the inflation rate in the European Union.

By creating conditions for a competitive electricity price along with the relaxation of the non-competitive tax treatment of wages (which has worsened in the last two years), Croatia needs to focus on increasing competitiveness.

HUP therefore sees as a priority the urgent decision on the connection fee to the electricity grid in order to ‘unblock’ investments in renewable energy sources whose total capacity is even 1,500 MWh of energy, and whose value exceeds two billion euros, Stojić states, adding that the Croatian Energy Regulatory Agency (HERA) should act quickly and efficiently in the interest of the market, consumers, and the economy. Numerous projects are on hold, which negatively impacts the entire economy.

HERA canceled the tender for the selection of a gas supplier for the period from 2024 to 2027 in April 2024 due to the risk of excessive market concentration; however, after the tender was repeated, the situation did not change significantly. The cancellation of the tender and insufficient consultation with key energy entities creates uncertainty in market competition, which can only negatively affect the stimulation of concreteness in the gas market.

In addition to the connection fee, the investment standstill is also caused by the lack of a public tender for the allocation of a market premium to encourage renewable energy sources by HROTE. The tender was finally published in April 2023, which is why we missed the opportunity for growth in renewable energy production in 2023.

HERA, along with the decision on the connection fee to the electricity grid, needs to relax the deadlines of HOPS. We also propose that part of the administrative procedures that are significantly delayed be handed over to energy institutes and that we use funds from the National Recovery and Resilience Plan (NPOO) for network development. It is particularly important to further open the electricity market to competition in order to increase investments in innovations and RES projects and reduce electricity prices for companies below the EU average and ensure more reliable electricity supply.