Renewable energy producers in Croatia and Serbia have been increasingly terminating contracts for government incentives and starting to sell electricity on the market. Until just a few months ago, such a decision would be a complete surprise, but rising market prices have brought entirely new business opportunities both for producers and buyers.
In Croatia, 63 power plants with a total capacity of 341 megawatts (MW) have so far terminated their feed-in tariff contracts. The Croatian Energy Market Operator (HROTE) said 25 solar power plants and 22 biogas facilities are in the group, but that the ten wind farms and three cogeneration units have the largest total capacities: 200 MW and 103 MW, respectively.
The operators of the units estimated it is more profitable for them to sell electricity on the market, under commercial conditions, the regulatory body told Balkan Green Energy News.
According to HROTE’s data, power plants that accounted for one third of the capacity under the feed-in tariff mechanism have terminated their contracts. Currently, 1,305 power plants with an overall capacity of 698 MW receive such incentives.
A third of the installed power that was subsidized in Croatia is now on the market
In Serbia, 296 power plants with 576 MW in total were receiving feed-in tariffs at the end of last year. Since then, 17 small hydropower plants (SHPPs) have left the scheme, the Ministry of Mining and Energy told Balkan Green Energy News. In June, the owners of 11 power plants with a combined capacity of 10 MW terminated their contracts, while in August, contracts expired for another six power plants or 8 MW, it added.
There are no penalties in either of the two countries for terminating the contracts.
The Serbian Ministry of Mining and Energy said the fact that the agreements can be terminated at any point makes them unfavorable.
They should therefore not be used a lot anymore as an option for power utility Elektroprivreda Srbije (EPS) because they cannot ensure a stable supply for consumers in the country, the ministry pointed out.
Two basic options for companies that no longer want incentives
The price is, of course, the main driver for investors to give up subsidies. Depending on the technology, power plants in Croatia and Serbia that work within the mechanism receive subsidies of six to 18 euro cents per kilowatt-hour, or EUR 60 to EUR 180 per megawatt-hour (MWh).
Electricity prices on the Croatian Power Exchange – CROPEX, and Serbia’s electricity exchange SEEPEX have been ranging from EUR 300 per MWh to EUR 500 per MWh in recent months.
Dejan Stojčevski, Chief Operating Officer of the SEEPEX power exchange, told Balkan Green Energy News that power plant owners have two basic options: to enter into a power purchase agreement (PPA) with a trader or supplier or to participate directly in the market, bilateral or organized – on power exchanges.
Wind farms in Croatia conclude contracts with Danske Commodities
The first of the two versions was what happened in Croatia. Stojčevski said all details of such agreements like the price and contract duration depend on both sides.
Back in December 2021, wpd signed a PPA with Danske Commodities, which was the first commercial PPA in Croatia. Professio Energia followed, by signing contracts with Danske Commodities for its two wind farms.
SHPPs in Serbia sell electricity to be resold on the power exchange
Something similar is happening in Serbia. Small hydropower plants have signed PPAs with a company that intends to sell the energy on the power exchange.
As for the second option, Stojčevski said the producer enters the bilateral market or the power exchange on its own, which means that it also becomes the balance responsible party. It entails costs and risks, which makes it less attractive for smaller power plants. So far, no one has used the option in the region, because the market is underdeveloped.