The Association of Renewable Energy Sources of Croatia (OIEH), together with the associations SolarPower Europe and WindEurope, has sent a joint letter to the European Commission warning of the blockage of investments in renewable energy in Croatia. The Commission is urged to use all instruments to prompt the Government of the Republic of Croatia to take urgent action.
The signatories appeal to the European Commission to request from the Government of Croatia three key measures: the introduction of a connection fee of zero €/kW, the opening of the balancing market for renewable sources, and the inclusion of electrification and energy storage in national plans.
The letter highlights that 60 projects with a total capacity of 3.5 GW are blocked in Croatia, ranging from solar and wind power plants to geothermal and battery systems, worth over three billion euros. Investors have already paid 25 million euros for these projects through energy approvals, but due to regulatory delays, these approvals are set to expire at the end of the year, which would result in irreversible loss of invested funds for the projects.
As Lider previously reported, the blockage occurred due to a three-year delay by the Croatian Energy Regulatory Agency (HERA) in establishing the unit connection price, despite this being a legal obligation since 2022.
– HOPS is attempting to transfer the costs of network modernization, planned over a decade ago and unrelated to new projects, onto OIE projects. This way, projects become 30 to 40 percent more expensive, rendering them unprofitable. Such a financing model for the network is not European practice; 80 percent of EU member states rely on EU funds and the state budget, not on producers.
The Minister of Economy announced in March a fee of 0 €/kW and flexible contracts to encourage investment in battery storage, but this promise has yet to be fulfilled. If no action is taken, as much as 2.5 GW of projects will be abandoned next week when they receive HOPS’s decision, which would mean companies withdrawing from the Croatian market and losing millions in investments that would permanently reduce energy prices in the country, the OIEH statement, led by Maja Pokrovac, states.
Namely, the Energy Institute Hrvoje Požar recently conducted an analysis for HOPS, which indicates that an investment of 480 million euros is needed for the connection of the mentioned power plants, and according to this calculation, investors would need to pay 181 €/kW for the connection, making the projects unprofitable.
– The mentioned analysis is questionable for three key reasons: it includes investments in the transmission network that have been planned for over a decade, misrepresenting them as having been caused by these OIE projects. It excludes projects from 2025, including 691 MW of standalone battery storage, and predicts network overloads in an unrealistic scenario. Due to these assumptions, the costs that HOPS will transfer to energy producers will be unrealistically high, meaning that a large number of projects will be abandoned, and Croatia risks losing billions in investments, as well as long-term lower electricity prices that these projects would bring, OIEH explained.
Violation of EU Principles
The letter sent to the Commission emphasizes that the Croatian balancing market is currently dysfunctional. HEP Proizvodnja is practically the only provider of these services, while HOPS, which should ensure market procurement, is also owned by HEP, creating a conflict of interest and undermining market competition. Despite technical capability, solar and wind power plants are prevented from participating, so HOPS often activates the most expensive services, even during times of high production from renewable sources, violating EU principles that balancing services must reflect the actual costs of the network operator.
The absence of a serious electrification strategy is also criticized. In 2022, the share of renewable energy in transport was only 2.4 percent, of which only 0.2 percent was electricity from OIE, while the target for 2030 is a modest 5.8 percent, significantly lower than European ambitions. It is also reminded that Croatia is already under a procedure for violating EU law, as it is lagging in the implementation of the RED II and RED III Directives.
– Without urgent unblocking of OIE projects, Croatia will lose investments, increase fossil energy imports, which already exceed 25 percent, and miss the European and its own target that by 2030 at least 42.5 percent of energy consumption comes from renewable sources, the statement concludes.
All these, as well as other issues, such as the failure to announce tenders for energy approvals on state land, and double the fees for managing photovoltaic panels, OIEH has previously communicated with the relevant ministry and institutions involved in energy processes, but without concrete progress.
– In the past year, we have sent letters to the Ministry of Economy every month, detailing the problems and consequences and offering concrete solutions. Unfortunately, the inaction of the Ministry of Economy regarding the announcement of tenders for granting energy approvals on state land is already leading to the expiration of other permits that some projects have obtained in the meantime. We believe it is essential for the relevant ministries to agree that the validity period of permits should not run during the period from the submission of a proper expression of interest to the announcement of a public tender.
By the same logic, the Ministry of Economy must not revoke energy approvals for projects whose development has been directly halted due to the failure to establish a connection fee. Unfortunately, instead of action and agreement, we are faced with years of delays and shifting of responsibilities, which further increases uncertainty for investors and slows down the development of renewable energy sources in Croatia, OIEH concludes.
