Policy and law
What is the government policy and legislative framework for the electricity sector?
The power industry is of special (national) importance in Croatia. The general guidelines of Croatia’s government policy regarding the electricity sector are set out in the Strategy of Energy Development (Official Gazette No. 130/09) (the Strategy). At the time the Strategy was adopted, Croatia’s main aim was to adjust and prepare the energy sector in general, which includes the electricity sector, for accession into the EU and participation in the single EU market, but at the same time to preserve Croatia’s national interest. The strategy is to achieve a balance between the liberalisation of the electricity market and necessary government intervention, to enhance energy efficiency and to use more alternative energy sources and technologies that protect the environment. Croatia’s further aim is to achieve security of supply (especially in import of electricity), competitiveness in the international market and sustainable energy development.
In the meantime, the global crisis affected the energy sector, which resulted in a volatile market and prices and lack of planned investments. Consequently, although the main principles remain, the Strategy is not entirely in line with the current market and some of its goals will be hard to attain. As a result, the government has adopted several national action plans modifying aims set by the Strategy, implementing specific measures for the realisation of EU and national energy targets.
Furthermore, on 1 July 2013 Croatia became a member of the European Union and joined the EU energy market. One of Croatia’s obligations as part of its accession process was the incorporation of the EU Third Energy Package. Thus, in 2012 and 2013, new legislation was adopted governing the electricity sector, later amended in line with EU legislation: the Energy Act (Official Gazette Nos. 120/12, 14/14, 95/15, 102/15 and 68/2018), the Energy Activities Regulations Act (Official Gazette Nos. 120/12 and 68/2018) and the Electricity Market Act (Official Gazette Nos. 22/13, 102/15 and 68/2018). These acts incorporate respective EU directives, in particular Directive 2009/72/EC, 2009/28/EC and 2005/89/EC and a number of EU regulations. Since 2006, Croatia has been a party to the Energy Community Treaty (Official Gazette International Treaty No. 6/06). According to the Croatian Constitution, international agreements take priority over domestic laws and form an integral part of Croatian legislation.
2Organisation of the market
What is the organisational structure for the generation, transmission, distribution and sale of power?
Croatian law regulates six electricity activities: generation, transmission, distribution, supply, retail and electricity market organisation. Traditionally, all activities were performed exclusively by the Croatian national electricity utility, HEP Grupa (HEP Group). However, through the process of liberalisation and opening of the electricity sector to market competition, certain electricity activities became market activities, while others remained as HEP’s exclusive activity. Thus, generation, retail and supply of electricity (except when performed as a public service) are performed as market activities (the price and quantity of delivered power is freely negotiated). On the other hand, the transmission and distribution of electricity, electricity market organisation and supply (when performed as a public service) are regulated activities and are performed as public service obligations.
HEP Group consists of Hrvatska elektroprivreda dd (HEP dd) as parent company and several subsidiaries, each of which performs regulated and market activities.
HEP dd has undergone an unbundling process to meet the requirements of the Electricity Market Act. It opted for the independent transmission operator model, meaning that the transmission system operator (renamed HOPS d.o.o.) remained part of the vertically integrated undertaking HEP Group; however, it had to secure physical, technical and financial independence from HEP dd.
HEP-Operator distribucijskog sustava d.o.o. (HEP-DSO) is the Croatian distribution system operator. It is also part of the HEP Group but independent from other HEP Group undertakings and activities.
In August 2018, there were 52 registered electricity generation undertakings, 17 suppliers and 33 retail undertakings. Although the number of registered electricity undertakings has been growing continuously since Croatia joined EU, HEP Group still holds dominant position on the Croatian electricity market. HEP’s position on the market has changed rapidly in the past couple of years because new competitors have been entering the market, especially the supply market, where these new competitors, such as German RWE and Slovenian GEN-I, offer lower prices. Since HEP started losing its customers, it has been forced to lower its prices.
Regulation of electricity utilities – power generation
Authorisation to construct and operate generation facilities
What authorisations are required to construct and operate generation facilities?
There are two types of authorisations necessary to construct and operate generation facilities: licences for the performance of electricity generation activities and energy authorisation for construction of new generation capacities.
The licence for electricity generation is issued by the Croatian Energy Regulatory Agency (HERA) in accordance with the Rules on Energy Licences and Maintenance of Registry of Issued and Revoked Energy Licences (Official Gazette Nos. 88/15, 114/15 and 66/2018).
The energy authorisation for the construction of generation capacity is granted by the Ministry of Energy (the Ministry) pursuant to the Electricity Market Act. Other construction, location and environmental licences are issued by authorised administrations or ministries in accordance with the respective legislation.
If and when it finds it is necessary, the government may decide on the construction of additional electricity generation facilities through a public tender procurement process in the interest of safety of supply.
Grid connection policies
What are the policies with respect to connection of generation to the transmission grid?
Under the Electricity Market Act, HOPS must provide non-discriminatory access to the transmission grid according to the regulated third-party access regime. Any new generator should file a request for connection to the transmission grid, which HOPS must accept if all the prerequisites set out in the General Conditions for Grid Usage and Electricity Supply (Official Gazette No. 85/15) and the Grid Code are met. HOPS may not deny access to the new generator based on possible future network limitations or additional costs related to an increase in network capacity.
Upon issuing consent for connection to the grid, an agreement is concluded between HOPS and the new grid user. A new generator whose access to the grid was denied may appeal against HOPS’ decision to HERA. HERA’s decision is final, but the unsatisfied party may file a claim with the Croatian Administrative Court.
Alternative energy sources
Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?
The use of alternative energy sources (water, wind, sun, geothermal sources, combined heat and power (CHP), etc) is one of Croatia’s strategic plans as outlined in the Strategy. According to the Strategy, Croatia has great natural and technical potential. Following EU requirements, in late 2013, Croatia adopted a National Action Plan for Renewable Energy Sources until 2020 (Action Plan), as the implementing instrument for the realisation of EU targets (20-20-20) and national energy strategy. In order to meet the targets, the government has shifted its focus from encouraging wind farm construction (the incentives have been quite high in recent years) to energy production from biomass, biogas, cogeneration plants and small hydropower plants. Croatia has already reached its 20 per cent target.
The Energy Act also expressly states that use of alternative energy sources and CHP is in Croatia’s interest (article 13). According to the Electricity Market Act, any generator that uses renewable energy sources may be awarded ‘eligible producer status’, under conditions set by the law.
Effective from 1 January 2016, the new Act on Renewable Energy Sources and High Efficient Cogeneration (Official Gazette No. 100/15, 123/16, 131/17) (RES Act) harmonises for the first time national and EU legislation (in particular Directives 2009/28/EC and 2012/27/EU) in the field of renewable energy and aims to stimulate and enhance production of ‘green’ energy. RES Act introduces market premium as the new incentive model, which replaces the present feed-in tariff model. Feed-in tariffs have been kept as incentive model for smaller plants only, up to 30kW.
What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?
Environmental protection has a great impact on Croatia’s policy in the electricity sector, as outlined in the Strategy. In this regard, Croatia encourages the use of natural gas and renewable energy sources, while in the future it plans to accept nuclear and hydrogen technology only if the aforementioned technologies prove to be safe and acceptable to the environment. Renewables are not only encouraged because they are less harmful energy sources and better for the environment, but also because national fossil energy sources are insufficient for the steady increase in electricity demand. Furthermore, Croatia has natural potential for the production of ‘green energy’.
Generally speaking, because Croatia is an importer of energy, the use of renewable energy sources causes an increase in generation costs and, consequently, electricity prices.
Does the regulatory framework support electricity storage including research and development of storage solutions?
Electricity storage is not specifically regulated or supported by Croatian law. RES Act prescribes that renewable energy demonstration projects shall not be supported through market premium or feed-in tariff incentive models but through general research and development and innovation support programmes.
Does government policy encourage or discourage development of new nuclear power plants? How?
Croatia does not have nuclear power plants on its territory; however, HEP dd is a co-owner of Krsko nuclear plant in Slovenia. Although Croatia recognises the need for nuclear energy and has adopted a nuclear energy programme outlined in the Strategy, no plants have been built.
The greatest concern in construction of a new nuclear plant is its influence on the environment. To date, the government has not approved any nuclear energy construction projects and is not expected to do so in the near future.
Regulation of electricity utilities – transmission
Authorisations to construct and operate transmission networks
What authorisations are required to construct and operate transmission networks?
The national transmission networks are owned and operated by the national transmission system operator, HOPS (see question 2). Since electricity transmission is a regulated, non-market activity, HOPS, has the sole power to construct and operate transmission networks.
In accordance with the Electricity Market Act, and with prior approval from HERA, HOPS has to pass an annual 10-year transmission system development plan. The current plan is prepared from 2018 until 2027. The plan implements measures to guarantee enough capacity and security of supply.
HOPS was granted a licence for electricity transmission activities, issued by HERA.
Eligibility to obtain transmission services
Who is eligible to obtain transmission services and what requirements must be met to obtain access?
Pursuant to the Electricity Market Act, HOPS must provide non-discriminatory access to the transmission grid to all grid users, based on the regulated third-party access regime, in accordance with the General Conditions for Grid Usage and Electricity Supply and the Grid Code. To obtain access to the transmission grid, new generators and customers are obliged to obtain consent from HOPS to connect to the grid. HOPS may deny access only in the case of limited technical or operating capabilities of the grid, undergoing maintenance works or in case of danger to the human lives or assets. Any new generator or customer whose access to the grid is denied may appeal against the HOPS decision to HERA. HERA’s decision is final, but the unsatisfied party may file a claim with the competent administrative court. The administrative court proceedings should be conducted as expedited proceedings.
Government transmission policy
Are there any government measures to encourage or otherwise require the expansion of the transmission grid?
According to the HOPS 10-year transmission system development plan (2018-2027), Croatia has a transmission grid that is 7,487.50km long. There are no government incentives to encourage expansion of the transmission grid. However, HERA as a regulatory body must review, approve and monitor the application of the 10-year transmission system development plan including any investment projects regarding expansion of the transmission grid.
Rates and terms for transmission services
Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?
In accordance with the 2015 amendments to the Energy Act, transmission services rates are set by HERA, instead of the Croatian government (which was previously the case). HERA rendered the Methodology for Calculation of Tariffs for Electricity Transmission (Official Gazette Nos. 104/15 and 84/16) and on the ground of the Methodology HERA renders tariff rates until 15 December of each year for the following regulatory year. The rates for 2016 were set by the Decision on Tariff Rates for Electricity Transmission (Official Gazette No. 134/15). No rates have yet been set up for 2017. The new Methodology adopts a recognised costs method meaning that tariffs are calculated based on total recognised costs for the previous year, estimated costs for the current year and planned costs for the following regulatory year. The main legal standards HERA applies are justified, transparent and objective costs.
Entities responsible for grid reliability
Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?
HOPS is responsible for the reliability of the transmission grid, as the sole TSO in Croatia with the licence to carry out electricity transmission as a public service (see question 2). HOPS’s main responsibility is to transmit electricity and to maintain and develop the transmission network for the purpose of the reliable supply of electricity for customers at the lowest cost and the protection of the environment. An extensive list of HOPS powers and responsibilities is outlined in articles 29 and 30 of the Electricity Market Act.
The maintenance of the transmission network includes maintenance of overhead lines and underground cables, primary and secondary equipment, auxiliary plants, telecommunications equipment and building structures in substations and switchyards.
Regulation of electricity utilities – distribution
Authorisation to construct and operate distribution networks
What authorisations are required to construct and operate distribution networks?
Croatian distribution networks are owned, constructed and operated by HEP-DSO. Since distribution is also a regulated energy activity, all principles that apply to the transmission network also apply to the distribution network (see question 9). The current 10-year distribution development plan was prepared by HEP-DSO for the period 2018-2027.
Access to the distribution grid
Who is eligible to obtain access to the distribution network and what requirements must be met to obtain access?
The regulated third-party access regime that applies to the transmission grid also applies to access to the distribution grid. Therefore, the same rules applicable to access to the transmission grid also apply to the access to distribution grid (see question 10).
Government distribution network policy
Are there any governmental measures to encourage or otherwise require the expansion of the distribution network?
According to the HEP-DSO 10-year distribution development plan (2018-2027), Croatia has a 138,327km-long distribution grid. Although there are no government incentives to expand the distribution network, HERA as a regulatory body must review, approve and monitor the application of the 10-year distribution system development plan including any investment projects regarding expansion of the distribution grid. The government’s intention is primarily to modernise the existing network and to enhance its efficiency.
Rates and terms for distribution services
Who determines the rates or terms for the provision of distribution services and what legal standard does that entity apply?
In accordance with the 2015 amendments to the Energy Act, distribution services rates are set by HERA, instead of the Croatian government (which was previously the case). HERA rendered the Methodology for Calculation of Tariffs for Electricity Distribution (Official Gazette No. 104/15) and on the ground of the Methodology HERA renders tariff rates until 15 December of each year for the following regulatory year. The rates for 2016 are set by the Decision on Tariff Rates for Electricity Distribution (Official Gazette No. 134/15). The new Methodology adopts a recognised costs method, meaning that tariffs are calculated based on total recognised costs for the previous year, estimated costs for the current year and planned costs for the following regulatory year. The main legal standards HERA applies are justified, transparent and objective costs.
Regulation of electricity utilities – sales of power
Approval to sell power
What authorisations are required for the sale of power to customers and which authorities grant such approvals?
Sale of power to final customers (supply) may be regulated (public service) or market activity. Supply of power under regulated terms is performed as universal service (to households) or as a last-resort service (to entrepreneurs).
Both types of suppliers (regulated and market) have to obtain their energy licences for supply of power to customers from HERA. In addition, a supplier under regulated terms is awarded a public service obligation by decision of the government.
Power sales tariffs
Is there any tariff or other regulation regarding power sales?
Croatia’s power sales market has been fully open since 1 July 2008, meaning that all customers have acquired ‘eligible customer status’. This means that all customers have the legal right to choose their electricity supplier and freely contract the quantity and price of the supplied electricity.
Tariffs are regulated only with respect to supply of electricity as a last-resort service (see question 18). Power sales tariffs are set by the following regulations rendered by HERA: Methodology for Calculation of Tariffs for Electricity Supply as Last-Resort Service (Official Gazette No. 158/13) and Decision on Tariffs for Last-Resort Electricity Supply (Official Gazette No. 50/18).
Even though the market is opened and competitors offer lower prices, a large number of customers have still not chosen their supplier and are still supplied by HEP-ODS (last-resort supplier). In order to encourage customers to choose their market supplier, based on the aforementioned methodologies and tariffs, entrepreneurs supplied by HEP-ODS have been paying 20 to 50 per cent higher prices since 1 July 2014.
Rates for wholesale of power
Who determines the rates for sales of wholesale power and what standard does that entity apply?
Croatia does not regulate rates for sales of wholesale power; it is a market activity and all prices are freely negotiated. HEP dd is negotiating power wholesale rates with other electricity companies in the region through tenders.
Public service obligations
To what extent are electricity utilities that sell power subject to public service obligations?
Public service obligations exist with regard to household customers who opted for or automatically use the universal service and in relation to the last-resort supply to entrepreneurs (ie, in the event of failure of the electricity supplier).
HEP-ODS d.o.o is nominated as the universal service and last-resort supplier.
Which authorities determine regulatory policy with respect to the electricity sector?
The regulatory policy with respect to the electricity sector is determined by the Ministry and to a certain extent by HERA. HERA is both a regulatory and supervisory body.
Scope of authority
What is the scope of each regulator’s authority?
The Ministry prepares strategy and legislation with respect to the electricity sector and implements electricity laws enacted by the Croatian parliament. The Ministry also enacts different electricity by-laws and regulations. Furthermore, it supervises and reviews economic measures affecting the status of electricity undertakings, carries out activities relating to the construction of electricity facilities, proposes measures for the efficient organisation of electricity activities, etc.
HERA is a partially regulatory and partially supervisory body (see question 22). As a regulatory body, HERA grants different licences for the performance of energy activities, participates in electricity policy design, approves investment plans and various general acts rendered by electricity undertakings, renders methodologies, tariff rates, etc. As supervisory body, it supervises the performance of different energy activities (generation, transmission, distribution, supply of electricity and the organisation of the electricity market), the quality of services provided by energy undertakings, unbundling process, the application of all tariff systems, the degree of transparency of market competition, etc.
Establishment of regulators
How is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?
The Ministry, as a government body, is independent of the electricity business and industry. However, in the process of preparation of electricity legislation, the Ministry follows and accepts proposals from electricity specialists.
HERA is an independent, non-profit institution established to regulate energy activities, and was founded in accordance with the Energy Activities Regulations Act. HERA is also independent from the electricity industry since members of the HERA management board (and members of their family) cannot be owners of any company in the energy business or perform any other activity in that sector that may lead to a conflict of interest. They are also independent of government officials since they cannot be members of parliament, members of local representative bodies or of the political parties’ main bodies.
Challenge and appeal of decisions
To what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds and procedures for appeal?
HERA’s decisions are either final or appealable to the Ministry, depending on the matter in question. If HERA’s decision is final, it can be challenged only before a competent administrative court. The Ministry’s Appellate Decision can also be challenged before competent administrative court.
The Ministry’s decisions are usually final. If the decision is final, it can be challenged only before a competent administrative court. Exceptionally, if it is provided by the law, the Ministry’s decisions may be appealed back to the same Ministry, but also to the Appeal Senate as the second instance authority.
Acquisition and merger control – competition
Which bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?
The European Commission, Croatian Competition Agency (CCA) and the Croatian Financial Services Supervisory Agency (HANFA) are responsible for acquisition and merger control in general, including the electricity sector (see question 27). HERA controls the eligibility of parties participating in acquisitions and applies a system of measures for protection of market competition (see question 28).
Review of transfers of control
What criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of control? How long does it typically take to obtain a decision approving or blocking the transaction?
Procedures, criteria and time limits for review of transfers of control are set out in the Competition Act (Official Gazette Nos. 79/2009 and 80/13) and the Act on the Takeover of Joint-stock Companies (Official Gazette Nos. 109/07, 36/2009, 108/12, 90/13, 99/13 and 148/13).
Pursuant to the Competition Act, the review procedure is performed by the CCA and European Commission. The procedure is initiated ex officio or upon the initiative of any natural or legal person, association the government or governmental and administrative bodies. Upon carrying out the procedure provided for by the Competition Act, the CCA issues a decision by which it either approves or refuses a transaction.
The CCA will block a transaction in the case of a prohibited concentration, referring to those undertakings that can significantly influence the prevention, restriction or distortion of competition. The CCA should issue a decree within three to eight months of the day the proceeding was initiated, depending on the type and complexity of the case in hand.
HANFA supervises the takeover of joint-stock companies and the application of the Act on the Takeover of Joint-stock Companies. If takeover irregularities are identified, HANFA may impose measures provided for by law such as declaring the takeover bid invalid or to instructing revision, supplementation or withdrawal of the takeover bid.
Prevention and prosecution of anti-competitive practices
Which authorities have the power to prevent or prosecute anti-competitive or manipulative practices in the electricity sector?
HERA supervises, inter alia, the degree of transparency and market competition between electricity undertakings. In case of possible anticompetitive or manipulative practices, HERA has the obligation to notify, cooperate with and assist the CCA. The CCA is authorised to impose measures prescribed by the Competition Act for removal of the adverse effects of such practices. For severe infringement of the provisions of the Competition Act, the CCA may fine the undertaking up to 10 per cent of the past year’s total income.
Determination of anti-competitive conduct
What substantive standards are applied to determine whether conduct is anti-competitive or manipulative?
There are no specific criteria that apply to the energy sector that define ‘anticompetitive’ or ‘manipulative’ conduct. Regulated energy activities are regulated on the principles of transparency, objectivity and non-discrimination, while market energy activities are regulated according to the principles of market competition. Therefore, the Competition Act applies to market energy activities. The Competition Act prohibits entering into agreements that directly or indirectly fix purchase or selling prices or any other trading conditions, limit or control the market, share markets or sources of supply, etc. Furthermore, abuse of a dominant market position is also prohibited, as well as concentration of undertakings.
Preclusion and remedy of anti-competitive practices
What authority does the regulator (or regulators) have to preclude or remedy anti-competitive or manipulative practices?
HERA has the power to withdraw licences for the performance of energy activities, for instance, if the supplier under public obligation does not apply the prices set by the tariff system. Furthermore, HERA has the power to request the HOPS or HEP-DSO to change its conditions and rules if it is necessary to ensure their non-discriminatory application. HERA also issues other legally binding decisions in accordance with the law.
The Electricity Market Act prescribes fines for any misconduct, including anticompetitive or manipulative practices (for instance, if the HOPS or HEP-DSO unlawfully denies access to the transmission grid). The fines are imposed by the Ministry. In the case of recidivism, energy undertakings may be suspended from carrying out licensed activities for up to a year. The Electricity Market Act prescribes that a TSO or DSO may be fined up to 10 per cent of its total past year’s income in the case of international discrimination of grid users.
According to competition law, the CCA issues legally binding decisions by which it prohibits anticompetitive conduct. Finally, the CCA is authorised to instigate misdemeanour court proceedings in the case of violation of the Competition Act.
HANFA is also authorised to instigate misdemeanour court proceedings in case of takeover irregularities.
Acquisitions by foreign companies
Are there any special requirements or limitations on acquisitions of interests in the electricity sector by foreign companies?
There are no special requirements or limitations in the electricity sector regarding acquisitions by foreign companies.
The only limitation concerns the privatisation of HEP: the government may sell HEP’s shares only in accordance with Croatian privatisation acts that regulate the privatisation procedure, control mechanisms, the proportion of shares that may be sold on the capital market, etc.
Authorisation to construct and operate interconnectors
What authorisations are required to construct and operate interconnectors?
There is no specific energy licence prescribed for operating of interconnectors. HOPS, as TSO and owner of the transmission network, has the right and obligation to maintain and develop transmission network, including constructing and operating interconnectors. Construction of possible interconnectors should be envisaged in the 10-year transmission development plan, approved by HERA (see question 9). Interconnectors should be developed and operated in line with international agreements and respective EU frameworks, including the European Network of Transmission System Operators for Electricity plans and codes.
Interconnector access and cross-border electricity supply
What rules apply to access to interconnectors and to cross-border electricity supply, especially interconnection issues?
Pursuant to the Electricity Market Act, interconnector access and cross-border electricity supply is governed by international agreements binding upon the Republic of Croatia. The HOPS must carry out the transit of electricity through the transmission network according to the terms and conditions stipulated in those agreements, and the technical capacity of interconnections.
Croatia has been a party to the treaty establishing the Energy Community since 1 July 2006. The treaty abolishes customs duties and quantity restrictions and creates a legal and institutional framework for a free transport and trade in electricity and gas. It also allows a single mechanism to be created for cross-border transmission or transport of interconnected energy for the whole of Europe. This treaty enabled Croatia to become part of the European energy market.
Based on the Energy Community treaty, the HOPS has adopted the Rules on Allocation and Use of Cross-border Transfer Capacities.
Transactions between affiliates
What restrictions exist on transactions between electricity utilities and their affiliates?
Under the Electricity Market Act, all commercial and financial transactions between the parent company (HEP dd) and HOPS (including loans), have to be made in accordance with market conditions. HERA is authorised to approve or deny each transaction.
With respect to HEP-DSO, HEP dd as the parent company approves annual financial plans and sets the limits of their possible debt, but cannot give instructions relating to their everyday operation. Cross-subsidisation of companies engaged in regulated activities and those engaged in market activities, and cross-subsidisation of activities within the same company are prohibited by the Electricity Market Act.
Enforcement and sanctions
Who enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-compliance?
For serious breaches of unbundling rules, misdemeanour proceedings may be initiated and a fine imposed. HERA supervises all activities mentioned in question 34 and may demand their implementation.
Update and trends
Update and trends
Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?
The renewable energy market has been stagnating for the past few years, mainly owing to the lack of incentives for renewable energy production. As of 2016, when the new Act on Renewable Energy Sources and High Efficiency Cogeneration (Official Gazette No. 100/15) (RES Act) entered in to force, feed-in tariffs where replaced by the premium model. The government was obliged to render respective by-laws for implementation of the premium model and new incentive scheme within six months; however, they are still pending as draft by-laws did not pass public consultations.
One reason that the government and the public are more sensitive to implementing new incentive models is lessons learned from the renewable support scheme 2007-2015. During the period 2007 to 2015, the government concluded agreements with eligible producers guaranteeing high incentives (feed-in tariffs) to eligible producers for a 14-year period, especially for wind and solar energy, which resulted in high financial obligations to the state budget. Consequently, in 2017, incentive fees for renewable energy production paid by end-consumers was significantly raised resulting in higher electricity bills.
Furthermore, electricity suppliers’ obligation to take over the total net delivered electricity of eligible producers, on regulated purchase price, was (once again) postponed until 2019. Under the RES Act, electricity suppliers’ obligation to purchase renewables under regulated prices should have been terminated by 2017. However, owing to the same reasons, lack of funds to fulfil contractual obligations towards eligible producers, free trade of electricity produced from renewable energy was once again postponed.
Amendments to the RES Act are currently under review and whether there will be significant changes and complete renewable market liberalisation is yet to be seen.