How to participate in auction for renewable energy incentives in Croatia
Authors: Marija Mušec, Partner, and Šime Dujmović-Maruna, Associate at law firm Bardek, Lisac, Mušec, Skoko doo, in cooperation with CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH
The Government of Croatia enacted new renewable energy incentives quotas on May 14, 2020. New quotas represent a substantial amount of the new renewable energy connecting power that will be incentivised, especially in the wind and photovoltaic farms sector.
Developers now have practical questions in relation to the application and bidding process. These questions range from the eligibility criteria (such as financial and technical capacities) to the selection and award criteria.
Only Project Carriers can apply to an EoI public call and a public tender for auction-based incentives. Project Carriers are developers that hold an Energy Approval for their renewable energy projects. Renewable energy projects that have Energy Approval are registered with the national registry of renewable projects (OIEKKP Registry).
Project Carriers can be either domestic or foreign companies. This in turn means that foreign companies can participate in the auction process in the same manner as domestic companies.
Expression of Interest Public Call
The Croatian Energy Market Operator (HROTE) intends to hold auctions for renewables at least once each year. An auction consists of two steps: an Expression of Interest (EoI) Public Call and a Public Tender for auction-based incentives.
The EoI Public Call is announced two to four months prior to the Public Tender.
Participation in the EoI Public Call is not obligatory and any developer who has not participated in the EoI Public call can freely apply to the coming Public Tender
The EoI Public Call specifies the components of the coming Public Tender. It will determine the groups of renewables to be incentivised (i.e. photovoltaic, wind energy, geothermal etc.), the maximum connecting power for each renewable group, the Maximum Referential Values or Maximum Purchase Price that can be offered by tender participants, the method of choosing winning bids (determined by the Renewables Act and bylaws), the form of a bid guarantee and other conditions for tender participation and conditions for the conclusion of contracts on incentives.
Participation in the EoI Public Call is not obligatory and any developer who has not participated in the EoI Public call can freely apply to the coming Public Tender. The purpose of the EoI Public Call is purely informative – the Government wants to share with Project Carriers the requirements and conditions of the upcoming Public Tender.
Public tenders for incentives
A Public Tender is expected to be announced by HROTE two to four months after the announcement of an EoI public call.
In the Public Tender developers will be required to submit a set of documents, including an Electro-energy Approval (EES), the registration number of a project in the OIEKPP Registry, a building or other permit for the construction of a power plant (these in turn, require title to the land on which the project will be built).
The bid guarantee will take one of two forms:
- A bank guarantee with the total sum of HRK 50.00 per kW of connecting power; or
- A cash payment to HROTE with the total sum of HRK 50.00 per kW of connecting power (i.e. if a power plant has connecting power of 20 MW = 20000 kW then the total sum is 20000 x 50 = HRK 1,000,000.00 or approx. EUR 133,000.00).
In the Public Tender for Market Premium the developer submits an offer by offering a Referential Value (expressed in HRK/MWh). This value is the basis for calculating Market Premium and serves as the main decision factor in the Public Tender.
An auction consists of two steps: an Expression of Interest (EoI) Public Call and a Public Tender for auction-based incentives
Simply put, the bidder who offers the lowest Referential Value, receives the incentive.
Similarly, the Public Tender for Guaranteed Purchase Price is decided upon according to the offers for Purchase Price. Again, the bidder who offers the lowest Purchase Price, receives the incentive.
In both cases, Maximum Referential Value and Maximum Purchase Price are determined by HROTE. Project Carriers cannot offer higher Referential Values or Purchase Price than the maximum price determined by HROTE.
Winning bids obtain the right to conclude a Contract on Market Premium or a Contract on Guaranteed Purchase Price. HROTE has 15 days after receiving a guarantee for the construction of renewable energy facility to offer these contracts to the winning bidders.
The guarantee for the construction of a renewable energy facility has the same form as the bid guarantee, but higher price – HRK 300.00 per kW of connecting power.
The payment of Market Premium and Guaranteed Purchase Price starts when the winning bidders attain the status of an Entitled Producer.
Project Carrier gets the status of the Entitled Producer upon a request to the Croatian Energy Regulatory Agency (HERA), after attaining a usage permit for the renewable energy facility and a production permit. The permit for production of electric energy is granted by HERA. HERA’s financial requirement for a permit for producing electrical energy is reasonably low (HRK 50,000.00 or approx. EUR 6,650.00).
The government officials expect the first auctions to be held by the end of the year.
Project Carriers and investors just a step away from getting the status of Project Carriers should begin their preparations as soon as possible.