EU approves Croatia’s renewable energy auction support mechanism

The European Commission has approved, under state aid rules, Croatia’s EUR 783 million scheme to support electricity production from renewable sources through 2023.

Croatia is ready to establish an aid mechanism for projects for power plants that will use renewable sources, in the form of a premium on top of the electricity market price. The European Commission said the EUR 783 million scheme is acceptable under the European Union’s state aid rules.

CfD contracts to be valid for 12 years

The premium will be set through a competitive bidding process and will not be higher than the difference between the average production cost for each renewable technology and the electricity market price. The beneficiaries will be selected in tenders that will take place in the period 2021-2023.

The contracts for difference or CfDs will be issued with a duration of 12 years for electricity produced from wind, solar, hydro, biomass, biogas and geothermal energy.

The scheme will help Croatia reach its renewable energy goals, including those from the Integrated National Energy and Climate Plan (NECP), and contribute to the European objective of achieving climate neutrality by 2050, the European Commission said.

Vestager: Support mechanism contributing to climate goals

“The measure will contribute to the reduction of CO2 and other greenhouse gas emissions, in line with the EU Green Deal objectives and the environmental targets set in Croatia’s recovery and resilience plan, without unduly distorting competition in the single market,” said Executive Vice-President Margrethe Vestager, in charge of competition policy.

Such aid has an incentive effect, as electricity prices do not fully cover the costs of generating electricity from renewable energy sources, the statement adds.

The Croatian Parliament or Sabor, has just passed the amendments to the Act on Renewable Energy Sources and High-efficiency Cogeneration.

Of note, neighboring Serbia is preparing for its first wind power auction, planned for early next year.

Last month the European Commission accepted Greece’s renewable energy support plan.