Last week two key regulatory changes took place that will have important implications for future development of the Croatian renewable energy market.
What will change?
Firstly, on 9 December 2021 the European Commission approved the EUR 783m Croatian state aid scheme to support production of electricity from renewable energy sources ("RES"). The new scheme will enable Croatia to support renewable electricity production from various technologies (wind, solar, hydro, biomass, biogas and geothermal power plants).
Secondly, on 8 December 2021 the Croatian parliament adopted the new Act on Renewable Energy Sources and High-Efficiency Cogeneration ("RES Act"). The key amendments are centred around the introduction of a renewable energy auction support mechanism.
The RES support mechanism will be introduced by way of market premiums which are going to be paid to RES producers on top of the (reference) electricity market price. The premium will be set through a competitive bidding process (auction). The new support scheme provides for a total budget of EUR 783m (HRK 6bln) for support payments for the upcoming two years (until 2023).
Double-sided sliding feed-in premium
Notably, Croatia will have a double-sided sliding feed-in premium in place, going along with components of a contract for difference (CfD) mechanism: If the (reference) market price is below the CfD value (i.e. strike price under the contract), the plant operator will receive this difference as a premium. If the (reference) market price is above the CfD strike price, the plant operator will be required to pay-back the difference to the Croatian energy market operator (HROTE). The premium will be paid out for a period of 12 years.
What happens next?
The Croatian energy market operator (HROTE) will finally start preparing the long-awaited first auction for large-scale wind and solar power plants, which is expected to start in the second quarter of 2022.
By Bernd Rajal, Partner, and Petra Santic, Attorney at Law in Cooperation with Schoenherr