Croatia builds largest solar-powered irrigation system in Europe

The solar pump station, consisting of total 363 photovoltaic modules that power six water pumps, irrigates an orchard in Knezevi Vinogradi, a small village and municipality in the north-east of Croatia. A local investor, Rabo doo, a fruit manufacturing company, replaced the existing diesel generators with a more efficient and environmentally friendly solar pump system. The largest solar-powered irrigation system in Europe was constructed by the Croatian renewable energy expert Solarni projekti doo Osijek.

Before the project, the orchard was irrigated by six water pumps in three locations (Rabo I, II and III) and was powered by diesel generators which used approximately 33,500 litres of fuel per year. This corresponds to 3,320.2 megawatt hours (MWh) of electricity.

The new solar-power system, also built in three locations (Rabo I, II and III), consists of six new, more efficient water pumps and a photovoltaic system that is expected to produce approximately 123 MWh of electricity annually. It is estimated that the system should cover approximately 62.7% of the orchard's electricity needs and the remaining electricity should be produced by diesel generators, as a back-up system.

The total estimated carbon dioxide savings with the new solar system is 48.44 tonnes annually. It is expected that the new system will produce only 15.74 tonnes of carbon dioxide annually.

The system has been in operation for six months and it is already proving to be an ideal solution for water management in agriculture. Although the investment itself is relatively expensive, operating costs are minimal which makes the solar-power system a viable long-term investment.

Possible increase of renewable energy sources incentive fee

Croatia, as EU member state, introduced a number of measures to incentivise the production of electricity from renewable energy sources. Thus, since 2007, the fee for incentivising electricity production from renewable energy sources and cogeneration has been collected from all electricity customers. The existing fee is set out in the Ordinance on Fees for Incentivising Electricity Production from Renewable Energy Sources and Cogeneration (Official Gazette 128/2013) and amounts to 0.035 kuna per kilowatt hour (without value added tax (VAT)).

In addition, the Renewable Energy and High Efficient Cogeneration Act (Official Gazette 100/15) imposes an obligation on electricity suppliers to buy electricity produced from renewable energy sources and cogeneration under regulated purchase price and conditions (for further details please see "Renewable energy and electricity update"). This obligation has been imposed until December 31 2016, and as of January 1 2017, the electricity produced from renewable sources should be sold under market terms and prices.

Until 2015, Croatia offered large incentives for renewable energy production and, as a result, in 2017 approximately €300 million will be due for payment to incentivised eligible producers and by 2020, approximately €390 million will be due. Due to the significant financial obligations towards eligible producers and a lack of budget funds, the government announced an increase of the incentive fee up to 3.5 times the existing price and opened up the possibility of extending the supplier's obligation to buy electricity produced from renewable energy sources under regulated terms. As a countermeasure, the government lowered the VAT for electricity supply from 25% to 13%.

The government's announcement led to public discussions and oppositions from consumers, suppliers and renewable energy producers. In particular, the increase in the incentive fees will inevitably result in an increase in electricity prices, regardless of the countermeasure.

The government is in the process of finding the optimal solution. However, whatever the final solution is, the government's measures have re-opened public debates regarding incentivising renewable energy production and arguments in favour and against existing models. Regardless of the arguments, it is safe to conclude that without quality long-term financial and economy plans and surveys, any incentive measure may turn out to be detrimental for the consumers and economy and beneficial for private investors only.

For further information on this topic please contact Miran Macešic or Ivana Manovelo at Macešic & Partners by telephone (+385 51 215 010) or email (mmacesic@macesic.hr or manovelo@macesic.hr). The Macešic & Partners website can be accessed at www.macesic.hr.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.