According to the recently published ‘Energy Union Status Report for 2024‘, in the first six months of this year, half of the electricity in the European Union was produced from renewable sources. Wind energy has surpassed gas and become the second largest source of electricity in the European Union, behind nuclear, and it is worth noting that the share of Russian gas in EU imports has decreased from 45 percent in 2021 to 18 percent by June 2024, while imports from reliable partners such as Norway and the US have increased. Additionally, from August 2022 to May 2024, gas demand has decreased by 138 billion cubic meters, and information about gas storage is now being closely monitored. The report states that the EU achieved its winter gas storage target of 90 percent as early as August 19, 2024, significantly ahead of the November 1 deadline. All of this is good news for EU citizens, but it is little consolation for Croatian consumers as energy prices for industry are expected to rise due to the government abolishing subsidies, and we know that this will lead to further price increases.
The good and the bad side
In the context of the European energy union, Croatia can only lament that it does not have more energy from renewable sources, while on the other hand, we can be happy that we bet on LNG before the war in Ukraine, so today we have our terminal receiving liquefied gas from countries that are neither our nor Ukraine’s enemies, and we also transport some further, giving our economy some crumbs. In the context of gas, it helps that we do not have large industrial facilities, which keeps consumption within tolerable limits. An interesting fact is that we also have an increasing number of concessions for geothermal projects, and some concessionaires have already found good sources in the depths they are drilling. However, we should certainly be more successful in renewable energy, and here, let’s be honest, we do not have data to boast about. The rating is only passing, and that is due to, as even the sparrows on the branches know, hydroelectric plants that are 50 years old or more. Hydroelectric energy is ‘green’! When it comes to new projects, we are literally standing still, as although there are investors, projects are not getting the green light, and Croatian consumers are bearing the brunt of this story.
Half-empty or half-full
And this ‘end’ is interpreted in different ways. One interpretation comes from the Ministry of Economy and Sustainable Development, a department that is now in the hands of the coalition partner of Prime Minister Andrej Plenković‘s government, the Homeland Movement, led by Ante Šušnjar, a lawyer. For the Ministry, the situation in the Croatian market is, poetically speaking, more like a glass that is half full than half empty; there are plenty of plans, one of which is the adoption of a new version of the National Energy and Climate Plan (NECP), which they say is in the final stages of adoption and that a public discussion on this document is expected to begin very soon.
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The price of electricity for industry in Croatia is among the highest in the European Union, just as the fee for renewable sources is among the highest in the European Union. All of this negatively affects the competitiveness of Croatian industry – they stated from the Ministry, adding that after the adoption of the second NECP, the Distribution System Operator (HEP ODS) will proceed to develop a ten-year development plan that will be submitted to HERA for approval and adoption. Only then will the dynamics of necessary investments in the distribution network be more accurately known, in accordance with the set goals. In other words, investments are starting, but what kind remains to be crystallized.
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The ratio of supply and demand
When asked what specific measures Croatia is taking to reduce dependence on fossil fuels, especially since certain projects in the renewable energy sector are blocked because the connection price cannot be determined for a long time, the Ministry responds that they are implementing numerous support projects that encourage the energy transition.
– We note that the energy transition must be viewed from both the supply side and the demand side for electricity. On the supply side, the necessary conditions for investment in renewable energy sources are being ensured, as well as targeted encouragement of certain forms. This year, there has been significant growth in capacity for electricity production from solar energy, either thanks to various programs and tenders from HROTE or the construction of self-supply capacities in households co-financed by the Environmental Protection and Energy Efficiency Fund – they said from the Ministry, which sees many opportunities in the reformed model of the electricity market in the EU, as they believe that such a model encourages market development and especially more active participation in the market by consumers themselves, but also producers, which needs to be transferred to our legislation as soon as possible.
Flexible contracts are coming
In this sense, there will also be news, particularly regarding flexible contracts.
– The regulator or other competent body is developing a framework for transmission system operators and distribution system operators to offer the possibility of establishing flexible connection contracts in areas where network capacity for new connections is limited or non-existent – they stated in Šušnjar’s department, adding that under these contracts, suppliers will be able to offer electricity supply contracts with mandatory duration and fixed prices, as well as contracts with dynamically determined electricity prices. In this case, end customers with smart meters can request the conclusion of contracts with dynamically determined electricity prices, and all end customers can request the conclusion of electricity supply contracts with mandatory duration and fixed prices for at least one year with at least one supplier and with any supplier that has more than two hundred thousand end customers.
Just about to happen
The Croatian Energy Regulatory Agency (HERA) is one of the most responsible institutions for the stagnation of projects, as it approves permits; reportedly, there was a delay until management was appointed, but this is little consolation for those waiting for approvals. In response to Lider’s specific question about why investors are blocked, HERA responds by ignoring the real question. They state that according to data from the Croatian Transmission System Operator (HOPS), in July 2024, 824.85 MW of connection capacity from all wind farms that are in regular operation was connected to the transmission network, plus 332 MW of new wind farms in trial operation. Thus, the total connection capacity of all wind farm projects in July 2024 amounted to 1156.85 MW.
– Based on the data received from HOPS, currently more than 1000 MW of projects (mostly solar and wind farms) have a connection agreement with the transmission network. Therefore, it can be expected that in a very short period, more than 2156 MW of connection capacity from renewable energy sources will be connected to the transmission network, which does not include existing hydroelectric plants. Additionally, according to the ‘HERA Annual Report for 2023’, the number of production facilities connected to the distribution network (distributed sources) more than doubled in 2023 compared to 2022, almost exclusively due to the connection of solar power plants. Likewise, the total connection capacity of distributed sources increased, which at the end of 2023 amounted to 842 MW, or 244 MW more compared to 2022, representing a 41 percent increase – they emphasized at HERA.
Success numbers
Furthermore, this institution in its response states that from August 2022 to August 2024, the connection capacity of distributed sources increased 2.4 times, and the connection capacity in August 2024 amounted to almost 1.1 GW, with an average monthly increase in installed capacity of production facilities on the distribution network of 31 MW in the first seven months of 2024.
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Investors lack the key data needed for financial planning of their projects – the connection price for new renewable energy production facilities to the grid has not yet been defined.
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– Additionally, according to data available to HERA, in the process of connecting new production units, developers of optimal technical connection solutions (EOTRP) have requested data for about 2200 MW of new solar power plants and 349 MW of new wind farms. If we add 1600 MW of new solar power plants on the distribution network, about 3800 MW of new solar power plants are in the connection process on transmission and distribution. Based on all the aforementioned, it can still be observed that the Republic of Croatia is successfully achieving its goals in the development of renewable energy projects, all in accordance with the goals set in the NECP – they stated from HERA.
Regarding the connection price for new renewable energy production facilities to the grid, they respond that HERA is only now establishing a framework for calculating the connection fee, which is defined through the connection methodology and unit prices for connection, and the connection price for each individual project is different.
Undefined connection price
On the other hand, the Croatian economy continues to show interest, even a need, said Marija Šćulac, director of the HGK Sector for Industry and Sustainable Development, for further increasing the share of renewable energy sources, but she also points out the key issue: that the main challenges lie in the legislative framework.
– Although modest progress in regulation has been made, it is still not enough for the economy to fully exploit its potential in this sector. A positive example is, for instance, the recently published public consultation by the Ministry of Environment and Green Transition on the ‘Action Plan for Strengthening Efficiency in Environmental Impact Assessment Procedures’. The Ministry of Economy has also recently published a public consultation, and legislative changes for 2025 have been announced, where amendments to the Renewable Energy Act have been announced. These changes include the transposition of Directive (EU) 2023/2413 on promoting energy from renewable sources and Regulation (EU) 2019/942 aimed at improving the design of the electricity market in the EU. While the announced legislative changes represent a positive step, the success of these changes will depend on the rapid and effective simplification of administrative procedures – said Šćulac, emphasizing that investors, who are key to the growth of renewable energy sources, face many obstacles.
The lack of a defined connection price represents a significant barrier for investors, who are thus left without the key data needed for financial planning of their projects.
– This uncertainty complicates investment decision-making, slows down the development of new capacities, and increases the risk for all market participants, and recent warnings from the European Commission clearly indicate the urgent need to improve the project approval system – concluded Šćulac.
