An incomplete legal framework for awarding premiums at auctions and high market prices of electricity are the main reasons why the first auctions for utility-scale renewable power plants were undersubscribed, according to the Renewable Energy Sources of Croatia (RES Croatia) association.
Croatia offered premiums for 638 megawatts (MW) at the first auction for renewable energy projects with large installed capacity, but it received bids for only 150 MW in total.
Maja Pokrovac, Managing Director of RES Croatia, told Balkan Green Energy News the renewable energy scene in Croatia is undergoing a transformation and that auctions for the allocation of market premiums are an important part of it.
The grid connection fee for the new power plants is currently unknown
The key to the transformation is the adoption of the new legal framework that started at the end of last year. However, not all the by-laws are in place, which hinders the realization of the projects.
The development of 1,500 MW is underway, but at the fee for grid connection is still being determined, Pokrovac said.
This segment is very important, and project implementation will not continue as long as the issue is not solved. Therefore, in her words, a transparent, clear and high-quality methodology for calculating the price of grid connection is necessary.
Market prices are five times higher than the offered premiums
In addition, due to the energy crisis, electricity prices are five times higher than premiums that are offered at auctions.
It is up to the investors to decide whether they will sign a 12-year power purchase contract at the auctions with prices five times lower than in the market, or a contract based on market prices, but with a significantly shorter duration, Pokrovac said.
She believes the premium model is a good guarantee mechanism for investors and financial institutions. If any disruptions occur in the market, such as during the pandemic, when the price of electricity collapsed by 50%, and no project was feasible, premium contracts provide security, she added.
RES Croatia expects 5,000 MW of capacity from renewable sources by 2030
According to Pokrovac, in a situation when the market prices are five times higher than before the pandemic, renewables don’t need incentives but security.
In uncertain circumstances, it is wise to apply the premium model to all renewables projects to ensure the long-term sustainability of the investment, stressed Pokrovac.
RES Croatia noted that another round of auctions would be held in the autumn.
With 1,500 MW now in the pipeline, Maja Pokrovac expects Croatia would have 5,000 MW of renewable energy projects by 2030.