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.

Climate change

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.

Storage

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.

Government policy

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.