Energy Transition Council of the President of the Republic of Croatia Presents Guidelines for Encouraging Citizens and Entrepreneurs to Construct Integrated Solar Power Plants
The President of the Republic Zoran Milanović participated in the 4th session of the Energy Transition Council of the President of the Republic of Croatia, which presented Guidelines for Encouraging Citizens and Entrepreneurs to Construct Integrated Solar Power Plants. The Guidelines were drafted by the Council chaired by Julije Domac, PhD, Special Adviser to the President of the Republic of Croatia for Energy and Climate.
As noted at the session, the Guidelines attempt to significantly encourage the so-called civic energy, i.e. remove obstacles so as to increase the construction of solar power stations by citizens and entrepreneurs according to principles of righteousness and transparency. The Energy Transition Council of the President of the Republic of Croatia proposed the incorporation of these Guidelines into the Act on Renewable Energy Sources and Highly Efficient Cogeneration and the Electricity Market Act in order to ensure preconditions for connecting new solar power plants for citizens and entrepreneurs. The Guidelines were presented to the Minister of Economy and Sustainable Development Tomislav Ćorić, also in attendance, at a time when amendments and additions to the legislation are under way in the area of renewable energy sources.
“This topic is important to me. It deals with something that I recognized as an important topic for Croatia, i.e. renewable energy, Croatia’s independence, in this case with a focus on solar energy. The Government is drafting a law, that’s why we are presenting these recommendations and ideas to see how they can be incorporated into the law. Therefore, they are timely synchronized in order to, if possible, through joint efforts get closer to Croatia’s goal of being energy independent, more productive, tougher and more productive in the use of solar energy. We haven’t made as much progress in this area as we could, there is a lot of room for improvement, it’s a life issue. These are topics to ponder and act upon, and action is under way. I would like to thank the minister once again for having participated with his team of associates and in this way, symbolically and actually, made it clear that this is an important topic which should interest Croatia. My motive for dealing with this issue is precisely because I feel that it can be resolved”, President Milanović said after the Council session.
Minister Ćorić said that the discussion at the 4th Session of the Energy Transition Council of the President of the Republic of Croatia showed above all a high degree of the same line of thinking, both of the members of the Council on the one hand, and of the Ministry, i.e. the Government of the Republic of Croatia on the other hand, on the need for our country to undergo energy transition. “The focus was on electricity generation, on the development of solar energy applications and so-called civic energy, because Croatia has a lot of space to make headway in the period ahead. Our strategic documents are opening up room for us to go in that direction. The concept is quite clear – production on household roofs, on thousands of houses in Croatia, as well as industrial plants. That is what we should strive for. Through the Act on Renewable Energy Sources and the Electricity Market Act, which will be sent to the Croatian Parliament in the coming months, we will open the way in that direction”.
The minister explained that, in comparison to some other countries, the Croatia’s level of economic development is to some extent an obstacle on that path. However, he noted that the models that are appearing on the Croatian market in the last few years will successfully tackle this problem. “A number of suppliers are offering co-financing and this is actually a trend that will be increasingly significant. Such a model opens the prospect for increasing the share of solar panels in production from renewable energy sources, which will clearly be achieved in the coming years. Finally, we jointly concluded that Croatia is moving in the direction of renewability and that is a positive thing, that direction is irrevocable. We must proceed as quickly as possible and that is why I thank the President and the Energy Transition Council for the guidelines shared today in the context of drafting laws and the public debates that now follow. I am sure that they will point us in the right direction and serve as the foundation for our further communication with the Office of the President”, Minister Ćorić concluded.
The President’s Special Adviser for Energy and Climate and Energy Transition Council Chair Dr. Julije Domac said the following: “Never in the history of the Republic of Croatia has the topic of civic energy, the topic of renewable energy sources for citizens of Croatia and its entrepreneurs been the subject of discussion between the President of the Republic and the minister responsible for the economy and sustainable development. Unfortunately, Croatia lags behind similar countries in the use of renewable energy sources, especially in the use of solar energy for its citizens. I am glad we have concluded today that it is worth working on this, that we will work together and that the Ministry and the President’s Council have similar views on how to improve things. According to European regulations and plans, by the end of 2050 one out of two EU citizens will produce energy on their own. I think that we, as a state, as a society, owe our citizens the opportunity to be equal and free and on par with all EU citizens. These guidelines provide very concrete solutions and proposals. The Ministry is in the process of amending the laws regulating this and I believe that this is the start and a positive contribution to a constructive debate and dialogue that we have been engaged in since day one”.
Guidelines for Encouraging Citizens and Entrepreneurs to Construct Integrated Solar Power Plants
These guidelines were developed by the Energy Transition Council of the President of the Republic of Croatia and outside experts, with the intention of more strongly encouraging the use of integrated solar power plants on the part of citizens and entrepreneurs in the key producer and consumer categories. The principles that guided the Council in drafting these guidelines were fairness and transparency in the distribution of costs and benefits of using solar energy as a domestic renewable energy source and a national resource, for the benefit of all citizens of the Republic of Croatia.
The objective of this document is to provide guidance in the following ways:
– Identify the main obstacles in the implementation of projects for the installation of integrated solar power plants regardless of the type of building;
– Propose legislative amendments in order to remove technical and financial obstacles that were identified.
The Energy Transition Council of the President of the Republic of Croatia proposes to incorporate these guidelines into the relevant legal framework governing this area in the Republic of Croatia – the Act on Renewable Energy Sources and Highly Efficient Cogeneration and the Electricity Market Act, with a view to fulfilling the preconditions for connecting the new solar power plants in the electricity transmission and distribution network. The implementation of the proposed recommendations will enable unambiguous and clear preparation and implementation of the project for the preparation of the construction of solar power plants for citizens and entrepreneurs.
1. Principles for encouraging greater use of integrated solar power plants in the Republic of Croatia
Electricity from solar power plants in the European Union accounts on average for 5% of the total electricity produced, while in the Republic of Croatia this share is only 0.4%. In order to reach the European Union average at the very least, it would be necessary to have at least 800 MW of solar power plants installed, which is significantly more than the current 100 MW. NECP and the Energy Strategy of the Republic of Croatia have already set this target and the regulation on quotas has increased it to more than 1000 MW. The advantage of the Republic of Croatia in relation to other members of the European Union is the potentially high number of annual hours of sunshine and total radiated solar energy. Taking into account this potential and in view of the limitations in terms of roof surface area and structure, the leased connection power of facilities and the profile of electricity consumption, we can assume that it is possible to have at least about 1500 MW of installed solar power plants with an acceptable impact on the electricity network, assuming that prior research and investments in the adaptation of the network are done, since the produced electricity would for the most part be consumed on location. It is also important to note that the potential stated in the strategy background is estimated at around 5300 MW for ground systems and around 1500 MW for roof systems (with an increase to 2700 MW).
It is necessary to emphasize the importance of using renewable energy sources for energy independence and self-sufficiency of the Republic of Croatia, which currently imports over 40% of electricity.
Electricity generation and consumption – regardless of whether it concerns external investors using local renewable sources for their own business interests or the domestic population for generation at the point of consumption – creates new regional value, new opportunities for the nation’s industry and new jobs. Initiatives for civic energy from renewable sources foster cooperation between different actors at the local level, which is visible throughout the European Union through the marked growth of the number of energy cooperatives, and through alternative means of financing, such as group financing. Throughout Europe, the number of local communities embarking on municipal projects (including the construction of municipal solar power plants) by involving citizens and using co-financing models is constantly on the rise.
Solar energy used in solar power plants on the roofs of family homes, apartment buildings and public and private buildings should become a much more prevalent renewable energy source in the Republic of Croatia. In addition to solar power plants, there is increasing success in the market of electricity storage technologies, mostly electrochemical storage systems such as lithium-ion batteries. Battery systems for storing electricity can also use a variable energy source such as the Sun, but also help relieve the power system from sudden and unpredictable frequency changes. In addition to electrochemical storage systems, a significant contribution is expected from the use of hydrogen technology as a chemical mechanism for long-term energy storage. To enable all this, the Energy Transition Council warns of obstacles and points to possible changes to the legislative framework, as described below.
2. Obstacles and recommendations for increasing the share of integrated solar power plants
2.1. Obstacles in the implementation of projects for the construction of integrated solar power plants on single-family homes (users of self-generation plants)
• The maximum allowed power of integrated solar power plants is not the same due to the type of connection to the electricity network (single-phase / three-phase),
• Although the expense of installing a bidirectional meter (and related work) is paid by the property owner, the new smart bidirectional meter provides the owner with no data on the daily energy balance (consumption and production) or other indicators that would be useful to optimize the consumer’s operation of a solar power plant, in order to avoid the risk of losing the self-generation status, i.e. the purchase price incentive of surplus electricity produced from a solar power plant,
• Very low (discouraging) purchase price of surplus electricity, in the event of a transition from the status of self-generation power plant user to the status of customer with their own generation, i.e. risk of losing the status of self-generation power plant user in the case when more electricity is delivered annually to the electricity network, compared to the electricity taken from the network, as measured at the same meter.
Proposal for legislative amendments
• Amendments to the Power Distribution System Network Regulations (Official Gazette 74/2018), which would enable the connection of solar power plants to the electricity network up to the limit of the leased connection power of single-family homes, regardless of the type of connection (single-phase / three-phase),
• Amendments to the Power Distribution System Network Regulations (Official Gazette 74/2018), Connection Regulations (HEP-ODS d.o.o., 2018) and Household Connection Operational Instructions (HEP-ODS d.o.o., 2019), which would transparently define the technical specifications of bidirectional meters and related work at the meter, with the obligation of giving the property owner the possibility to access data from the meter,
• Amendments to the Act on Renewable Energy Sources and Highly Efficient Cogeneration (Official Gazette 100/15, 123/16, 131/17, 111/18) with the aim of further encouraging self-generation among users within the category by removing the restriction that makes the supplied electricity and acquired electricity from the network interdependent (as there is already a limit in terms of the maximum allowable power, which must be less than the leased power of the property connection), paragraph 14, Article 44 and amendments to the Electricity Market Act (Official Gazette 22/13, 95/15, 102/15, 68/18), which would liberalize and democratize the trade of surplus energy from a self-generation plant without the risk of losing that status.
2.2. Obstacles in the implementation of projects for the construction of integrated solar power plants on apartment buildings
• Lack of a legal framework that enables the implementation of projects for the construction of integrated solar power plants on apartment buildings. Citizens who own apartments are thereby discriminated against because they do not have the possibility to build solar power plants on the roof of their building, as do owners of single-family homes.
Proposal for legislative amendments
• Amendments to the Power Distribution System Network Regulations (Official Gazette 74/2018), which would enable the connection of solar power plants to the electricity network up to the limit of the total leased connection power of the apartment building,
• Amendments to the Act on Renewable Energy Sources and Highly Efficient Cogeneration (Official Gazette 100/15, 123/16, 131/17, 111/18), which would make it possible for integrated solar power plants to be installed on apartment buildings under the same conditions as for single-family homes. The maximum allowable power of the solar power plant should depend on the sum of the leased connection power of all apartments. The construction of the solar power plant would be realized through a joint meter of the apartment building and the difference, i.e. the trade of the electricity surplus would be recorded as increased revenue of the apartment building’s joint account (mandatory maintenance fee),
• Amendments to the Act on Renewable Energy Sources and Highly Efficient Cogeneration (Official Gazette 100/15, 123/16, 131/17, 111/18) with the aim of further encouraging self-generation among users within the category by removing the restriction that makes the supplied electricity and the electricity taken from the network interdependent, paragraph 14, Article 44 and amendments to the Electricity Market Act (Official Gazette 22/13, 95/15, 102/15, 68/18), which would liberalize the trade of electricity and surplus electricity from self-generation power plants. It is necessary to define a fair price for the purchase of surplus electricity from solar power plants on apartment buildings,
• Amendments to the Electricity Market Act (Official Gazette 22/13, 95/15, 102/15, 68/18), which would introduce and develop the concept of long-term contracts for the purchase of electricity and regulate the legal rights and obligations of participants.
2.3 Obstacles in implementing construction projects of integrated solar power plants regardless of type of building (public, apartment building, single-family home, office)
- Electricity bills issued by the supplier are calculated exclusively on a monthly basis and do not take into account the season in terms of electricity consumption and needs, which leads to potential unprofitable investing in solar power plants. For example, public school buildings that are closed in the summer, yet their installations generate electricity, marinas, hotel and general tourist complexes that are closed in the winter months, residents who temporarily leave their homes in the summer, etc.
Proposed legislative amendments
- Introduce balancing of consumed/supplied electricity on an annual (or at least semi-annual) basis and establish the final calculation of the excess or shortage of delivered/supplied electricity and final payment/payment according to billing (implement through amendments to the Act on Renewable Energy Sources and Highly Efficient Cogeneration).
2.4 Obstacles in implementing construction projects of integrated solar power plants for the major customer (end customer with own generation)
- The purchase price of excess electricity for all systems without incentives is calculated on the basis of the average unit cost of electricity, which the customer pays the supplier without fee for use of the network, and other fees and taxes.
- For the construction of solar power plants larger than 500kW, it is necessary to obtain the study of an optimal technical solution from HEP ODS. This step delays the entire investment, and the study itself can significantly increase the cost of the investment (eventual construction of a substation and connecting lines) so that the investor cannot plan the timeline or financial aspect of the planned project.
Proposed legislative amendments
With an amendment to the Act on Renewable Energy Sources and Highly Efficient Cogeneration (Official Gazette 100/15, 123/16, 131/17, 111/18) it is necessary to define the just conditions and formulas for calculating the purchase price of excess electricity,
- It is necessary to consider the option of simplifying and expediting the process as well as to define in the most transparent way the deadlines for obtaining and the methodology for drafting and issuing the study of an optimum technical solution.
2.5 Obstacles in implementing construction projects of integrated solar power plants for electricity producers
- The absence of a legislative framework that would enable the implementation of long-term contracts for the purchase of electricity outside of the system of national incentives, i.e. obligation to obtain the status of energy supplier, which impacts the intensity of individual investments in the renewable energy sources sector.
Proposed legislative amendments
- With amendments to the Electricity Market Act (Official Gazette 22/13, 95/15, 102/15, 68/18) it is necessary to introduce and elaborate the concept of long-term contracts for the purchase of electricity as well as define legal obligations and rights of contracting parties.
2.6 Obstacles in funding construction projects of integrated solar power plants through crowdfunding
- Crowdfunding platforms, like the model itself, are currently not specifically addressed by the actual legislation, which creates ambiguity in the business practice of the platform operators themselves, and insecurity for potential investors in sustainable energy projects. Due to fragmented and contradictory regulatory systems, crowdfunding platforms cannot be expanded in order to freely provide their services on a Pan-European level, therefore domestic platforms and project promoters register their initiatives in EU countries or the USA where crowdfunding is clearly defined (e.g. Estonia), and the founding of the companies is possible online. Project promoters face numerous administrative obstacles such as expensive or unfeasible changes in ownership structure that are carried out for the requirements of new projects, and the impossibility of borrowing from physical persons in the case of public sector stakeholders.
Proposed legislative amendments
- It is necessary to completely adjust the domestic legislation to the EU Parliament and Council regulation on European crowdfunding service suppliers. The objective of this regulation is to ensure a coordinated regulation on the unique EU market in issues of free cross-border business crowdfunding platforms, enforce a clearer identification and regulation of business platforms in terms of an increased protection of investors by directing to a reliable risk management (especially on business behaviour, capability and adequacy, risk management, deep analysis) and adequate published information about the business.
- Regardless of European initiatives, it is necessary to amend the domestic legislation in the area of entrepreneurship so as to reduce the costs of founding and amend the directive of the Corporations Act (Official Gazette 40/19) whereby all founders or their attorneys must be physically present at the notary public’s office during the founding of a company and at the time of any changes to the social contract. It is necessary to enable the entire procedure to be carried out by one member of the company (CEO).
- It is desirable to consider that by means of the Budget Act (Official Gazette 15/15) an exception be made to borrowing rules for local and regional self-government units whereby all these subjects may borrow from the citizens in case of local small investments (e.g. up to 1 million HRK) that have a significant climate-energy effect on the local community.
2.7 Obstacles in implementation of projects on the part of citizens and local and regional self-government units
- Shortage of human and technical capacities in municipalities, cities and counties
Limitation of public budgets of municipalities, cities and counties and ineffectiveness of mechanism of absorption of funds for encouraging construction of solar power plants. Funds placed through Environmental Protection and Energy Efficiency Fund tenders are usually allocated for 40-80% of justified investment costs. Such sizable subsidies lead to a distortion of the market because many subjects wait for tenders and, due to the limited amount of funds, some projects that even without incentives would be feasible are not implemented while, on the other hand, some subjects receive unnecessarily large subsidies. At the same time, there is an increase of costs in the market during that period.
- Impossibility of funding project documentation and execution of investments for a large number of citizens.
Proposed legislative amendments
- Introduce multi-annual programmes and systematic funding of technical assistance aimed at informing, public relation campaigns and education of local communities, citizens and local and regional self-government units in conjunction with civil society organizations, regional and energy agencies, associations, cooperatives, education institutions aimed at strengthening local capacities for the implementation of the Green Plan in cities.
- Introduce progressive models of placing public funds such as guaranteed or revolving funds, Mezzanine Financing, etc. (through the Environmental Protection and Energy Efficiency Fund or similar institutions).
- Encourage the construction of domestic equipment and the utilization of Croatian know-how in the entire chain of solar power plants, and where these capacities are insufficient, develop, stimulate and educate them in a systematic and targeted manner.
3. Conclusion and Final Recommendations
The Republic of Croatia has all the natural conditions to be one of the most significant European generators of solar energy, however, this chance has been missed until now because of an uninspiring legislative framework even though a long tradition and technical know-how of experts in this field exist.
These Guidelines present a number of recommendations that the Council proposes to be incorporated into the legislation of the Republic of Croatia, whose final draft is currently being prepared under European directives – i.e. the Act on Renewable Energy Sources and Highly Efficient Cogeneration and the Electricity Market Act – in order to encourage greater use of solar power plants by the citizens and entrepreneurs.
The Guidelines were adopted at the 4th session of the Energy Transition Council of the President of the Republic of Croatia in Zagreb on 1 March 2021.
DOC. CLASS.: 300-01/20-01/18
REF. NO.: 71-06/3-21-7
Energy Transition Council of the President of the Republic of Croatia
Council Chair: Julije Domac, PhD, Special Adviser to the President of the Republic of Croatia for Energy and Climate
Reporter: Darko Jardas, Council member
Outside experts who contributed to the drafting of the Guidelines for Encouraging Citizens and Entrepreneurs to Construct Integrated Solar Power Plants:
– Marko Vlainić, North-West Croatia Regional Energy Agency;
– Ljubomir Majdandžić, PhD, Croatian Solar Energy Professional Association;
– Ivan Pržulj, North-West Croatia Regional Energy Agency;
– Velimir Šegon, MSc, North-West Croatia Regional Energy Agency.
PHOTO: Office of the President of the Republic of Croatia / Tomislav Bušljeta