Croatian Renewable Energy Sector Faces Crisis as Key Projects Remain Blocked

In a troubling development for Croatia's renewable energy ambitions, RES Croatia, alongside SolarPower Europe and WindEurope, has formally alerted the European Commission to the critical impasse facing the nation's green energy projects. For several years, a staggering 60 initiatives, spanning solar, wind, geothermal, and battery technologies, have been effectively stalled, and if swift action is not taken, many of these projects could soon be abandoned.

The associations conveyed that the current regulatory environment is not only hindering investment but also exacerbating Croatia's reliance on fossil fuel imports, which have already surpassed 25%. They emphasized that without the urgent unblocking of renewable energy initiatives, Croatia risks failing to meet both its national and European Union targets, which mandate that at least 42.5% of energy consumption derive from renewable sources by 2030.

Compounding this issue is the gradual withdrawal of government subsidies for electricity prices, which threatens to leave citizens and businesses exposed to rising costs. The stagnation of renewable energy development is a critical concern, as it represents the only sustainable path to lower energy bills and reduced import dependence. Currently, projects with a combined capacity of 3.5 GW and total investments of €3 billion are caught in bureaucratic limbo.

The situation is further complicated by ongoing infringement proceedings against Croatia for delays in implementing EU directives aimed at enhancing energy security and independence. The letter sent to the Commission calls for decisive intervention, urging the government to establish a grid connection fee of €0 per kWh, open a balancing market for renewable energy producers, and integrate battery energy storage systems into national planning.

As these projects languish, the domestic industry remains unable to secure long-term power purchase agreements, essential for fostering a competitive market. The state has already collected €25 million in fees for energy approvals, but these investments are now at risk of expiring due to the ongoing stagnation. Local communities, too, stand to lose significant revenues that would have been generated from these renewable initiatives.

The associations highlighted that the development of new renewable projects larger than 10 MW has been stalled since 2022, primarily due to the Croatian Energy Regulatory Agency's failure to set a reasonable transmission network connection fee. Instead, the transmission system operator is attempting to impose costs associated with outdated network modernization projects onto new renewable developments, inflating project costs by 30% to 40% and rendering them unviable.

Despite previous assurances from the Minister of Economy that the connection fee would be set at €0 per kW, developers are still waiting for concrete action. If the status quo continues, projects totaling up to 2.5 GW could be abandoned imminently, prompting companies to withdraw from the Croatian market and resulting in substantial financial losses.

The letter also points to a dysfunctional balancing market, where the state-owned utility Hrvatska Elektroprivreda dominates the provision of balancing services, creating a conflict of interest that stifles competition. This situation has led to excessively high balancing costs, particularly during periods of high renewable generation, directly contradicting EU principles that dictate these services should reflect actual costs incurred by the transmission system operator.

Additionally, the lack of a robust electrification plan hampers progress. In 2022, renewable energy accounted for a mere 2.4% of final energy consumption in transportation, with electricity from renewables contributing only 0.2%. The target of 5.8% for renewable electricity in transport by 2030 reflects a concerningly low ambition compared to EU standards.

The potential for electrifying railways to significantly lower emissions remains largely untapped, underscoring the need for a comprehensive and actionable plan to accelerate Croatia's transition to a sustainable energy future.