Energy Communities on Hold: Poor Laws and HEP Stifle Development

I spoke with Goran Čačić, senior project manager and president of the Assembly of the Green Energy Cooperative (ZEZ), who told me about the practically impossible operation of energy communities due to administrative problems.

Simply put, energy communities are legal entities that enable citizens, small entrepreneurs and craftsmen, representatives of the public sector, but in some cases also larger companies that are not primarily engaged in energy, to directly participate in the production of their own renewable energy.

For example, an energy community can be formed in a neighborhood or part of a city where citizens, entrepreneurs, and craftsmen living there do not have enough roofs to produce sufficient amounts of energy from solar power plants. This may be due to small available roof areas for citizens living in high-rise buildings with many tenants or for citizens living in protected areas or historical city centers where there is a ban on placing panels on roofs.

In such cases, citizens can form an energy community and, with its help, raise funds and lease a large roof on a production hall or on a school gymnasium nearby and build their power plant on it to produce electricity for themselves.

No Adaptation

Although the establishment of energy communities has been legally enabled since 2021, only three have been registered in Croatia so far: My Energy Community (MEC) in Zagreb, the Northern Adriatic Energy Community in Rijeka, and the Špičkovina Energy Community within the local volunteer fire department. However, none of them is doing much.

Čačić told me that one of the key problems is that HEP ODS has not yet adapted its technical system to enable the sharing of that energy (electricity) despite its legal obligation to do so. However, he added that this project, according to his information, is nearing completion and should be finished in the first quarter of this year, but in ZEZ they believe it should have gone much faster.

To explain, sharing energy among members of the energy community is the basis of their business model. The production facilities that generate energy and the members who use that same energy in their homes or businesses are part of that model. Production facilities can be owned by the community itself if the members have jointly invested in them, and then the production from that system is shared according to each member’s individual investment or as the community agrees.

And the facilities can also be directly owned by individual members who have excess production and by joining the community offer their excess energy to other members. Often, facility owners can get a better price for that excess energy from other members than if they sold the excess energy to their supplier.

But as I mentioned, HEP ODS has not yet adapted the system for sharing produced electricity, so these three energy communities are stagnant, which is likely the reason why more have not been established.

Misinterpretation of EU Regulations

However, even if HEP ODS had done its job, there would still be legal obstacles to their activation. Namely, according to the Electricity Market Act, energy communities are treated as non-profit organizations, and now the question is how they will operate.

However, if all members were owners of the facilities, this could be avoided (everyone shares the produced electricity), but what about those who, as members of the community, bring in their facilities to share electricity with other members and charge for it? Thus, it is possible for the community to operate as a non-profit organization, but it is significantly complicated.

What is worse, our lawmakers misinterpreted the EU directive, which states that the primary interest of the community is not profit, but sharing cheaper electricity with its members, while those who wrote the Law interpreted that the energy community must be non-profit.

I hope that HEP ODS will do its job, but also that the authorities will recognize their mistakes.

POST SCRIPTUM

In addition to the energy community, it is possible to establish another form – a renewable energy community. Unlike energy communities, renewable energy communities have the right (in addition to producing and consuming) to sell electricity, among other things, through a renewable energy purchase agreement. However, for ‘renewables’, the registration process has not yet been defined, Čačić notes, meaning it is not known what documents are needed and how to go through that process. At this moment, there are two or three initiatives, but they are also stagnant.