Croatia Decisively Indecisive at the Crossroads of Energy Transition

In the energy sector, the discussion revolves around renewable energy sources (RES). Money flows more freely there, betting on a future conditioned by decarbonization goals and green transition. But how quickly is the shift to cleaner energy taking place? In the first half of 2025, RES surpassed coal for the first time in the global energy mix, and in June, solar energy became the largest source of electricity in the European Union for the first time. The goals are ambitious, and we see that they have started to be achieved, but record growth is accompanied by a slowdown in investments due to political changes in America and the war conflict in Ukraine. A country the size of Croatia largely depends on the conditions imposed by its environment, which is why it will almost certainly realize its enormous potential in solar, water, wind, and geothermal energy more slowly than others in the future. Partly due to internal political conditions.

– Social policies have been intertwined with energy for years, and they certainly no longer belong in this sector in the 21st century. It is known, or should be known, which department should implement this type of policy. Citizens are actually discouraged from investing in RES and from being among the drivers of the energy transition. Social peace is literally bought with cheap energy and fuels, which is not good for the future of the energy sector, nor for the citizens themselves; industry and entrepreneurship, on the other hand, pay quite a high price for energy. Evidence of this is the Eurostat report for the last six months of 2024, which clearly shows that our entrepreneurship pays for electricity at prices just behind Germany – explained energy consultant Igor Grozdanić.

Numbers Speak

According to relevant data aggregated with the help of international energy organizations, Croatia has satisfied about 68 percent of its electricity needs from low-carbon sources in the past year, with about 38 percent from hydropower plants, about 20 percent from wind farms, and about seven percent from solar power plants and biofuels. On the other hand, fossil sources in electricity production remain important. Gas contributes 16 percent to electricity production, coal 4.5 percent, and the remainder is attributed to the share of the Krško nuclear power plant. It should also be noted that other energy needs are not to be forgotten. Oil is not used in electricity production, but we know how dependent we are on it daily. It is mostly imported as Croatia produces barely about 10 percent of its needs, gas production is somewhat higher, at about 25 to 30 percent, so the rest is imported, and for electricity production from coal, all necessary raw materials must be imported.

In contrast to these fossil fuels, which need to be imported and for which it is heavily dependent on external supply chains and margin volatility influenced by global trends, Croatia is abundant in sunny days, windy areas, and water resources, and a 60 percent higher geothermal gradient than in other countries promises that it is equally promising in terms of energy from geothermal sources. So how to utilize this potential?

Drill, baby, drill!

How to specifically unlock solar opportunities, whose technology prices have fallen so much that they are exponentially multiplying across Asia? Perhaps through incentive feed-in contracts that prevailed during the initial steps towards decarbonization?

– If we look only at photovoltaics as a technology, the first generation of photovoltaic cells has almost reached its maximum. Further improvements are possible with tandem layers, but no significant technological advancement can be expected. However, there is a whole third generation from which further price reductions and simpler installations are expected. The main technological trick is not how to produce electricity from photovoltaic plants, but how to match the consumption profile, and for that, storage systems are needed, as well as a better transmission system – said Andro Bačan, a consultant from the RES and Environmental Protection Department of the Energy Institute Hrvoje Požar.

Global investments in new RES projects reached $386 billion in the first half of 2025, according to BloombergNEF, but at the same time, financing for the development of large solar power plants that supply energy directly to the grid and sell it under wholesale contracts has decreased by 13 percent. The arrival of U.S. President Donald Trump marked the beginning of the drill, baby, drill policy, accompanied by the cessation of subsidies for RES projects, which caused many to shut down on their own, and some due to government decisions. It is clear then why investments in these sources in the U.S. fell by 36 percent.

A Connection Like Godot

Europe, on the other hand, has problems with RES projects that are on hold due to a lack of grid capacity. According to some estimates, projects totaling approximately 1500 GW of capacity are waiting for grid development across Europe; a similar situation exists in America, where the average waiting time for RES connection to the grid is counted in years.

– One of the main problems, if not the biggest, is that Croatia has not invested in the electricity grid. We are not alone. Everyone in the region has been cutting back on investments, and now the situation is such that we have an outdated grid. We are not ready for new power plants, for a new era and time of decentralized energy, where we have small decentralized systems. On the other hand, we have not built a single large thermal power facility for years; we are only patching existing ones and trying to invest as little as possible in energy and new thermal power plants – emphasized Grozdanić, who expects a lot from so-called renewable gases. What is that now?

Next-Generation Fuels on Hold

These are gases that do not arise from the combustion of fossil fuels but from renewable energy sources. For example, biogas is produced from the decomposition of organic waste, hydrogen from water electrolysis, synthetic methane from hydrogen and CO₂ methanation, biopropane and bioLNG from biomass or biogas. Such fuels could contribute to decarbonization using known and proven technologies in the construction of new facilities or the repurposing of existing ones. It is certainly easier to replace gas with gas than with electricity. Bačan emphasizes batteries as a logical technological solution that could temporarily help reduce problems due to the outdated grid, and once the grids are renewed, in the long term, they would fulfill their true purpose: dedicated use for flexibility.

– The need for flexibility is crucial, which is why such systems are expected to be necessary in the future, along with demand management. We will have to accelerate the introduction of these technologies. Croatia can apply proven technologies and best practices from more developed countries. The main obstacle is not technological but regulatory and political – a clear regulatory framework for connection, tariffs, and market participation of storage and hydrogen technologies needs to be quickly established. For optimal planning, consensus among all stakeholders is required: ministries of economy, environment, spatial planning, construction, HERA, HOPS, investors, and the expert public, as well as alignment of plans and strategies. Although there is a willingness for consensus and dialogue, they somehow fall short or are not fully implemented – noted Bačan.

Fruitless Discussions

Similar to achieving consensus, administrative constraints, Bačan warned, unjustifiably hinder projects and encourage fruitless discussions and procedures in the system. Grozdanić noted that investors have been threatening through various channels for some time, and Bačan explained how long procedures for obtaining permits, misalignment of spatial planning levels, excessive bureaucratization, and lack of transparency significantly affect investors.

– It seems to me that the danger of investors fleeing to other markets or sectors has become a reality, as we have witnessed the departure of at least two major global players from Croatia in the past year. They did not leave because Croatia lacks potential or because it was too expensive to realize the project, but due to delays and lack of transparency with permits – assessed Bačan.

The best example of this is the years-long delay in establishing the unit price for connecting to the grid for RES. HERA has persistently failed to establish this price, but it seems that this story is coming to an end with the announcement that a methodology for calculating this price will soon go to public consultation.

Atomic Fashion

The latest trend in energy is small nuclear reactors. Although this is a promising technology, it is not yet commercially applied, but due to its scalability, it is quite possible that it will soon find a place in the market. The initiative of the Ministry of Economy to connect to this wave is therefore useful, as well as for a better position in possible discussions with Slovenia about the construction of the Krško 2 nuclear power plant. However, our interlocutors believe that caution is necessary.

– Nuclear energy is one way of decarbonization, but it also carries some risks and drawbacks, such as the time required for planning and construction and high and uncertain initial investments. If we look at existing energy strategies and plans, Croatia has not planned to build a nuclear power plant, and that endeavor is not exactly simple – said Bačan.

Grozdanić, on the other hand, noted that any nuclear power plant does not guarantee independence because we still have to import nuclear fuel, but he accepted its value as a reliable source of baseload energy without CO₂ emissions because it allows renewable energy sources to function without the risk of interruptions and network instability.

RES or fossil sources – is a false dilemma. The real question is what their relationship should be in the energy transition process, and what beneficial interrelationship with nuclear energy should be achieved. It is clear that Croatia will continue to use natural gas, oil, and coal in the foreseeable future. A terminal for LNG has been built and expanded, and the Hydrocarbon Agency hopes to establish a company for oil and gas exploration in Kazakhstan. Only coal is on its final exit – when the Plomin thermal power plant finally shuts down in 2033. Until then, the grid will need to be renewed and large battery systems installed alongside it to allow RES to connect and draw energy from it. Of course, as with everything else in our country, this will proceed more slowly than in the world or Europe, but it would be a shame to be too late because the resources for producing electricity from the sun, wind, water, and geothermal energy are free.