HOPS plans to invest 2.7 billion euros in the network by 2034

In the next 10 years, by the end of 2034, HOPS plans to invest a total of 2.7 billion euros in the maintenance and development of the electricity grid. This is evident from the proposal of HOPS’s ten-year plan, which HERA has put out for public consultation until mid-September. This plan is revised and amended annually, but it is expected to create a clear picture of the necessary investments in the electricity grid, so that HERA can more accurately determine who will bear the costs and to what extent through the unit connection fee, the adoption of which this agency has been postponing since 2022. The task will not be easy as opinions remain unchanged.

‘Renewables’ insist that the development of the grid should be financed by its operator, while HOPS maintains its earlier proposal to finance it through the unit connection price.

– The ten-year plan for the development of the transmission network, which is approved by HERA and to which the Ministry gives consent, becomes a huge risk for HOPS in terms of the actual realization of the plan over the years without securing the necessary financial resources. The integration of renewable energy sources will represent a significant challenge for HOPS in the upcoming period, and significant financial resources are needed for the preparation and construction of facilities primarily at the 400 kV voltage level (new 400 kV power lines and new 400/x kV substations). In the event of non-acceptance of the unit prices for connecting new users to the grid and increasing the connection capacity of existing users at least in accordance with HOPS’s proposal submitted to HERA during 2023, HOPS will not have the necessary financial resources to build a transmission network that can effectively accommodate production from renewable energy sources. Currently, significant financial resources for the reinforcement and expansion of the transmission network are being invested from EU funds, but for investments around 2030, such a source of financing has not been secured – HOPS explicitly stated in the draft of its Ten-Year Development Plan.

This was also emphasized by the director of the Industry and Sustainable Development Sector of the Croatian Chamber of Economy Marija Šćulac, who warned that the level of investment required for the development of the transmission network does not mean that it is not and cannot be justified. Namely, the development of the grid enables the construction of larger capacities, which fundamentally creates conditions for economic growth that can be easily measured by the increase in energy demand. Ultimately, it also reduces dependence on imports, which is no less important. According to data available to the Renewable Energy Sources Association of Croatia (OIEH), in June of this year, as much as 32 percent of total consumption was imported, and in July, 26.3 percent, while in the first seven months of this year, a total of 1531 GWh of electricity was imported, which is the equivalent of energy that could have been produced if an additional 1845 MW of solar power plants had been built. There are projects that could meet and exceed this energy demand, but their construction requires a more developed electricity grid, and previously a certain unit connection price.

– Ten-year plans rely on a mix of network fees, unit connection fees, and EU co-financing, which we welcome, but at this moment it is impossible to assess what the effects of such a mixed model will be, said Marija Šćulac.

Missed opportunity for the construction of a key power line with NPOO funds

Therefore, regardless of all the good intentions stated in the ten-year plans, the question is how realistic it is that funds will be found for their realization. From OIEH for Lider, they highlighted the example of the Konjsko-Melina power line, which has been mentioned in HOPS’s plans since 2016. However, to date, the route of the power line has not yet entered the spatial plans of all counties through which it will pass. Because of this and the fact that they did not have the necessary project documentation, OIEH states that HOPS could not take advantage of the opportunity to finance its construction that opened up in the NPOO in 2022. In addition to the cost that the unit connection price proposed by HOPS would bring to investors, such examples of administrative sluggishness of state companies and competent authorities are the reason why ‘renewables’ insist that they should not bear the cost of network development.

– Due to delays in modernizing the grid and building new capacities, we have come to a situation where investments will have to be made precisely at a time when all of Europe is heavily investing in grid infrastructure, which will inevitably lead to a significant increase in costs. Shifting the cost of investment in the grid to producers of electricity from renewable sources through the connection fee is not a sustainable solution. It is a one-time amount that cannot finance future maintenance and modernization of the grid. Moreover, the increase in the costs of building power plants necessarily raises the final price of electricity, which negatively affects not only end users but also the competitiveness of the economy. If we know that neighboring countries, such as Bosnia and Herzegovina, Montenegro, and Serbia, do not impose such costs on their electricity producers, Croatia would, in that case, remain dependent on electricity imports as domestic projects would become unprofitable, OIEH stated.

According to OIEH, the development of electricity infrastructure, including the mentioned power line, should be financed from the accumulated financial resources of the operators, following the example of the Dutch solution that allows favorable financing for operators based on their stable revenues.

This power line is, by the way, one of the key projects in HOPS’s Ten-Year Plan, and it is also crucial for the further uninterrupted development of renewable energy projects. Overall, the renewal of the 400kV infrastructure (power lines Konjsko-Lika-Melina, Lika Tumbrsi, new Lika substation, and the expansion of the Konjsko, Melina, and Tumbri substations) is urgently needed, and according to HOPS’s assessment, it is essential for the continued integration of renewable energy sources. According to HOPS’s plan, the preparation for the construction of these investments should be completed by 2029, and the actual construction by 2035. In this context, HOPS expects that new users will also bear part of the cost, as the need to renew this infrastructure arose primarily due to the strengthening demand for connecting renewable energy facilities.

And that demand is continuously growing. Currently, there are 55 projects in the pipeline with a total expected connection capacity of 3900 MW, of which 45 with 2600 MW capacity from 2024, and another 10 with about 1300 MW capacity from this year. Approximately one-third of these projects could be connected upon the completion of the Konjsko – Melina power line.

In the end, our interlocutors, as well as HOPS’s plan itself, highlight the longevity of this type of investment as a particular challenge. According to HOPS’s estimates, the preparation for the construction and the actual construction of facilities on the 400 kV transmission network takes a minimum of 10 years. This is a result achieved through a complicated administrative procedure that Croatian citizens, unfortunately, have had to get used to. It does not help that Croatia has not yet, OIEH warned, implemented Directive (EU) 2023/2413 on promoting energy from renewable sources (the so-called RED III Directive), which would ensure that renewable energy projects and the development of the grid itself are considered of predominant public interest, until achieving climate neutrality.