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  • 1. Beuth University of Applied Sciences MBA Renewables Written Assignment Module 2: Energy Policy and Economic Framework Renewable Energy as a part of Strategy of Energetic Development in Republic of Croatia By Mario Maras 20th January 2013
  • 2. Table of contents 1. Introduction……………………………………………………………………….3 2. Main Part………………………………………………………………………….3 2.1. General Guidelines of Strategy…………………………………………...3 2.2. Short Comparisons of Total Energy Consumption, Production, Import and Export 2009 vs 2011……………………………………………………...4 2.3. Feed in Tariff System……………………………………………………..5 2.4. Renewable Energies………………………………………………………8 2.4.1. Biomass, Biofuels, Geothermal Energy……………………….8 2.4.2. Sun Energy…………………………………………………….9 2.4.3. Wind Energy…………………………………………………10 2.4.4. Small Hydro Power Plants………………………………...…11 3. Resume…………………………………………………………………………..12 4. Bibliography……………………………………………………………………..13   2  
  • 3. 1. Introduction Republic of Croatia is becoming 28th European Union member as of 1st July 2013 after almost 8 years and opening negotiations for membership in October 2005. Legislation and strategies are becoming aligned with legislation and strategies of European Union. For this reason in 2009 the Parliament brought new Strategy of Energetic Development of Republic of Croatia at 16th October 2009. Current challenges of generation, distribution and more efficient usage of electrical energy, goals and vision of energy system in 2020 are explained in the document. Goal of this assignment is to check if Republic of Croatia is on the right path to achieve its goals. Official legislation is examined, official results from 2009 when Strategy was brought are compared with official results from 2011 when last official data were released in public. Feed in tariffs as very important part in investing in renewable energy sector are also examined and review of all renewable energies are showed. A lot of unofficial information gathered were also used as official reports lack complete and coherent information. Main actor in this process is Government of Republic of Croatia and secondary actors are private companies investing in renewable energy field. 2. Main Part 2.1 General Guidelines of Strategy Energy Law and its legislations (2001, 2004, 2007, 2008) define Strategy as basic legislation for establishing energy policy and energy development till 2020. First Strategy from 2002 had to be changed as Republic of Croatia has become EU member candidate, joined Energy Community, ratified Kyoto protocol and has faced great instabilities in global energy market. New Strategy has defined three main energy goals: Security of provision of electrical energy because Croatia is dependent of oil as more than 50% of yearly energy consumption is imported, Competitiveness of Croatian product and Sustainability of energy development. Strategy also defines its main principles:   3  
  • 4. Strategy of energetic development focuses on country’s part in energetics – country is responsible in securing and using energy sources, securing competitiveness and environment protection. Legislation, energy efficiency, consumer protection and other important aspects like planning future investments are to be secured. Energy system is opened and is included in energy system of EU and south-eastern Europe. Energy sector is based on market principles, it is entrepreneur and export oriented. 2.2. Short Comparisons of Total Energy Consumption, Production, Import and Export 2009 vs 2011 Liquid Fuels (%) Natural Gas (%) Hydo Power (%) Coal and Coke (%) Fuel Wood (%) Renewables (%) Heat (%) Electricity (%) Total (PJ) 2009 43,8 25,1 16,2 6,1 3,5 0,35 N/A 5,0 406,92 2011 38,9 28,3 11,1 8,3 5,8 0,7 0,5 7,2 383,65 Table 1. Total Primary Energy Supply 2009 vs 2011 Source: Ministry of Economy. 2011. Energy in Croatia 2011. Ministry of Economy. 2009. Energy in Croatia 2009. Natural Gas (%) Hydro Power (%) Crue Oil (%) Fuel Wood and Biomass (%) Renewables (%) Heat (%) Total (PJ) 2009 44,2 31,1 15,6 2011 45,4 22,7 15,1 8,5 0,63 N/A 211,64 14,3 1,6 0,9 187,42 Table 2. Primary Energy Production 2009 vs 2011 Source: Ministry of Economy. 2011. Energy in Croatia 2011. Ministry of Economy. 2009. Energy in Croatia 2009.   4  
  • 5. Crue Oil (%) Petroleum Products (%) Coal and Coke (%) Electricity (%) Natural Gas (%) Biomass (%) Total (PJ) 2009 56,5 15,2 7,6 8,9 11,6 0,12 305,37 2011 42,9 24,1 11,3 11,1 10,5 0,08 282,61 Table 3. Energy Import in Croatia 2009 vs 2011 Source: Ministry of Economy. 2011. Energy in Croatia 2011. Ministry of Economy. 2009. Energy in Croatia 2009. Petroleum Products (%) Natural Gas (%) Biomass (%) Electricity (%) Coal and Coke (%) Total (PJ) 2009 67,3 23,2 3,2 5,8 0,6 118,43 2011 76,0 10,0 9,0 4,2 4,2 87,83 Table 4. Energy Exports from Croatia 2009 vs 2011 Source: Ministry of Economy. 2011. Energy in Croatia 2011. Ministry of Economy. 2009. Energy in Croatia 2009. When looking data above it is obvious that energy sector in the country is dependent on import as more than 50% of energy is imported thus concluding that energy production is not well developed. It is also obvious that renewable energies are not used very much. Most hydropower plants are large hydropower plants which are not defined as renewable energy source. Country has to increase its share in renewable energy due to EU legislation and thus provide simple approach to investments in the field. There were increases of renewables in energy production and energy supply in two years period but it is still insignificant. 2.3. Feed in Tariff System At 6th June 2012 new Feed in Tariff System for renewables was introduced. Major changes were introduced especially concerning solar power plants which became very   5  
  • 6. popular during last few years. For example, incentive tariff for on-grid pv plants was decreased as follows: • Solar power plants with installed power up to and including 10kW was decreased from 3,40 HRK/kWh to 1,10 HRK/kWh • Solar power plants with installed power exceeding 10kW and up to 30kW was decreased from 3,00 HRK/kWh to 1,10 HRK/kWh • Solar power plants with installed power exceeding 10kW was decreased from 2,10 HRK/kWh to 1,10 HRK/kWh 1 In the old FiT system electricity producers who didn’t use equipment produced by Croatian manufacturer could get reduced FiT. Now this is changed and those who use Croatian products will get additional incentive price. This is good for promoting local production and usage of Croatian products than importing foreign ones which creates additional work places and additional taxes which can be used for further investments. New prices introduced were explained as new and more efficient technologies are available on the market. This is true but it creates additional problems. Investments in science and technology development are less than countries in Western Europe. This could make domestic manufacturers undesirable if this price deficit is to be substituted with new technology because new technologies will be imported. If this situation occurs then it would be opposite to second main goal of Strategy – Competitiveness of Croatian product. Statement of foreign Vice President of Government and Minister of Economy Radimir Čačić who introduced new FiT system was that solar power in expensive and unnecessary. Solar power plants became very popular during last few years due to old incentive prices but as they were decreased there is a serious threat that investments in this field could drop significantly. 2 New system goes in favor for small hydropower plants which are included in renewable energy list. Price from 0,69 HRK/kWh was changed to:                                                                                                                 1  See: The Government of the Republic of Croatia. 2012. Tariff System for the production of electricity from renewable energy sources and cogeneration OG 63-12 ENG See also: Vlada Republike Hrvatske. 2007. Tarifni sustav za proizvodnju električne energije iz obnovljivih izvora energije i kogeneracije. 2 See: http://www.vecernji.hr/vijesti/cacic-dosta-je-solara-skupi-su-holy-solari-nam-trebaju-clanak401854   6  
  • 7. • hydro power plants up to and including 500 MWh generated in a calendar year – 1,20 HRK/kWh • hydro power plants exceeding 500 MWh up to and including 1000 MWh generated in a calendar year – 0,80 HRK/kWh • hydro power plants exceeding 1000 MWh generated in a calendar year – 0,60 HRK/kWh3 Hydro power plants share in energy production in 2011 was 22,7 % and most of it are large hydro power plants which makes excellent basis for further investments in small plants on the rivers. New system also goes into favor for wind power plants as prices was increased from 0,64 HRK/kWh to 0,72 HRK/kWh4. This was a very good decision as there are a lot of winds on mountains and islands on Adriatic sea and as there are only nine wind power plants existing now in the country. Biomass and biogas power plants faced small price increase. • biomass power plants with installed power up to and including 300 kW – increase from 1,20 HRK/kWh to 1,30 HRK/kWh for solid biomass and increase from 1,20 HRK/kWh to 1,42 HRK/kWh for biogas power plants • biomass power plants with installed power exceeding 300 kW – increased from 0,95 HRK/kWh to 1,20 HRK/kWh for solid biomass and the same price of 1,20 HRK/kWh for biogas5 This was a very good decision as region Slavonija situated on the east which covers almost one fifth of total country area is full with woods and is advanced in agricultural development comparing to other parts of the country.                                                                                                                 2,3,4   See: The Government of the Republic of Croatia. 2012. Tariff System for the production of electricity from renewable energy sources and cogeneration OG 63-12 ENG See also: Vlada Republike Hrvatske. 2007. Tarifni sustav za proizvodnju električne energije iz obnovljivih izvora energije i kogeneracije.         7  
  • 8. Geothermal power plants have faced decrease of price from 1,26 HRK/kWh to 1,20 HRK/kWh.6 2.4. Renewable Energies Greater consumption of renewable energies are to be incited with funds of electrical energy consumers. Therefore, Government has obliged to invest money in research, development and application of new technologies. It has been also stated that there are very good conditions for development of technologies for biomass, energy wind in wind turbines, small hydro power plants and new electricity grids. Country has obliged itself to use 20% of renewable energy in electricity consumption till 2020 and the goal will be achieved if: 35% electricity share comes from renewables including big hydro power plants, 10% of gross share in transport and 20% of gross share used for heating. Another goal that has been set is that, 42 PJ should be produced from renewables in 2010 and 84 PJ should be produced from renewables in 2020.7 2.4.1. Biomass, Biofuels, Geothermal Energy Republic of Croatia has great potential for usage of biomass derived from wood and agriculture as there are 2.69 million ha of forests and 3.15 million ha of agricultural fields in country and only 63% of the fields are used. The goal has been set to use 15 PJ from biomass in 2010 and 26 PJ in 2020.8 To achieve this further investments in forest growing, electricity and heat plants on biomass are to be incited. Concerning biofuels, production of 9 PJ is set for 2020 and concerning biogas, production of 2.6                                                                                                                 6  See: The Government of the Republic of Croatia. 2012. Tariff System for the production of electricity from renewable energy sources and cogeneration OG 63-12 ENG See also: Vlada Republike Hrvatske. 2007. Tarifni sustav za proizvodnju električne energije iz obnovljivih izvora energije i kogeneracije.   7  See: Hrvatski Sabor. 2009. Strategija_energetskog_razvoja_RH_NN 130_2009. See chapter 9.1. Razvojne smjernice i nacionalni ciljevi 8  See: http://www.hr/hrvatska/gospodarstvo/poljoprivreda See also: http://portal.hrsume.hr/index.php/en/forests/general/forests-in-croatia     8  
  • 9. PJ is set for 2020. For geothermal energy no tangible goals have been set, only that the country will incite electrical energy production from geothermal energy.9 When looking in 2009 when Strategy was brought, electricity generation form biomass was at 24,9 GWh and in 2009 was at 54,0 GWh in 2011. Heat generation was increased from 14,171 PJ in 2009 to 19,046 PJ. Information coming from NGOs showed that in country region Slavonija, there is a lot of unused energy in agriculture. In County of Osječko-baranjska 350.000 tons of cow manure is not used which has energetic potential of 189 GWh per year, pig manure of 150.000 tons per year is not used and 16.000 tons of chicken manure is not used. 10 Despite all the natural possibilities, not enough money, energy, time nor attention is put into this area as there were no new facilities built. Nice example has emerged in 2012 when Croatian major private owned company Agrokor has introduced new investment of 1 milliard HRK in next five years in biogas plant as Agrokor owns few major production facilities in meat industry in Republic of Croatia. 11 Official information from Government state that Geothermal energy was used in heat production in total amount of 902,03 TJ in 2011. Still there are great possibilities in unused wells which were found in several places in counties in western part of the country used mainly as spas and several spaces in counties in eastern part of the country. As an obligation to build geothermal power plants, private company GEOen started developing first geothermal power plant with capacity of 4,71 MW in Velika Ciglena near Bjelovar as a part of national strategy GEOEN to produce electrical energy and heat using geothermal energy. 12 2.4.2. Sun Energy Strategy has defined goal to have 0,225 !! of sun collectors13 per citizen in 2020 which would make 960.750 !! in total. In 2009 when Strategy was brought,                                                                                                                 9  Hrvatski Sabor. 2009. Strategija_energetskog_razvoja_RH_NN 130_2009. See chapter 9.2. Ciljevi i aktivnosti u razdoblju do 2020. godine. 10  See: http://www.tportal.hr/vijesti/hrvatska/219961/Otkriveni-neiskoristeni-energetski-potencijaliSlavonije.html#.UPsWsKHjn4R 11 See: http://www.business.hr/kompanije/agrokor-ulaze-milijardu-kuna-u-proizvodnju-el-energije-izbiomase 12 http://geoen.hr/demo/?page_id=2   13  See: Hrvatski Sabor. 2009. Strategija_energetskog_razvoja_RH_NN 130_2009. See subchapter 9.2.7. Sunčeva energija     9  
  • 10. electricity generation was 91,36 MWh and in 2011 was 136,7 MWh14 which shows big growth in using sun energy. Unfortunately official documents don’t show how many !! of sun collectors are used. Good thing is that usage of sun energy has become very popular among private companies and domestic environments due to incentive prices introduced by the government. A lot of small new companies emerged in the last few years across all parts of country as more and more people became very interested in investing their money in solar collectors for electricity and heat generation. Investments in solar power plants highly depend on FITs which were changed in May 2012. Investments in solar energy were significantly dropped comparing to first FiTs and this new system was met by private companies with disagreement. 15 2.4.3. Wind Energy Republic of Croatia has obliged to incent building of wind power plants. The goal for energy consumption in Croatia in 2020 is 9 to 10 %. It is expected that total amount of installed wind power in 2020 will be 1200 MW.16 Official data showing installed capacity in MW are from 2005 and they are irrelevant as they are outdated but official data showing electricity generation in MWh show significant growth from 54,2 GWh to 201,0 GWh in just two years period. 17 Unofficial data from September 2012 show that there are 129,75 MW of installed capacity in 8 wind power plants (officially 9, but ZD2 and ZD3 are considered as one). There are new wind power plants announced to be built - Danilo, Glunča, Voštane and Kamensko with capacity of 40 MW, Zelengrad with capacity of 42 MW, Ogorje with capacity of 44 MW, ZD4 with capacity of 9,2 MW. These new projects announced combined with old plants already in use have total power of 400 MW which is still far away from 1200 MW announced to be installed by 2020. 18                                                                                                                 12,13,14  See:  Ministry of Economy. 2011. Energy in Croatia 2011. See also: Ministry of Economy. 2009. Energy in Croatia 2009. See: http://www.tportal.hr/biznis/gospodarstvo/220862/Zasto-strani-investitori-izbjegavajuHrvatsku.html#.UPvXf6Hjn4Q   15   18   See: http://www.vjetroelektrane.com/aktualno/1047-vjetroelektrane-u-hrvatskoj-u-2013   10  
  • 11. 2.4.4. Small Hydro Plants Total energy potential from waters in Croatia is 12,45 TWh/year and only 6,12 TWh/year were used (data from 2009) which is 49,2%. There is a lot of potential in small rivers across the country and a goal of 100 MW in 2020 is set. Problem in environmental protection is presented which is said to be the biggest problem in achieving this goal.19 Official data say that there were 31,05 MW of installed capacity both in 2009 and 2011 but as stated in chapter above, the data is outdated. Official data also say that electricity generation has dropped from 99,5 GWh in 2009 to 67,1 GWh which is inconsistent with the goal set for 2020 as it requires yearly increase.20 In election year 2011, Socijaldemokratska partija with future Prime Minister Zoran Milanović had promised building ten new hydropower plants – four plants on river Sava, two on river Drava, Senj, Kosinj, Ombla and Trebišnjica.21 Till now there is no public data of starting of any construction, just some statements by former Minister of Entrepreneurship Radimir Čačić of future constructions. All existing hydro power plants were built before time of this Strategy.22 It is obvious that there is growth in energy production and new companies investing in the field but these efforts are still very low. At the same time when focus should be in renewable energy field, former Minister of Economy pushed construction of new Thermal power plants TE Plomin C powered by coal despite public opposing this decision. Mr Čačić eventually stepped down from his function and this projects is delayed.23 There are great possibilities for using solar and wind power in the Adriatic sea. EIHP – Energetski institut Hrvoje Požar made a research and came back with outstanding result. Wind and solar potential in Counties are: Šibensko-kninska – 250 MW for wind and 1,54 MWh/m2 for solar insolation, Splitsko-dalmatinska – 450 MW for                                                                                                                 19  See: Hrvatski Sabor. 2009. Strategija_energetskog_razvoja_RH_NN 130_2009. See subchapter 9.2.5. Male hidroelektrane   20  See:  Ministry of Economy. 2011. Energy in Croatia 2011. See also: Ministry of Economy. 2009. Energy in Croatia 2009.   21  See: http://www.croenergo.eu/ovo-su-energetska-obecanja-kukuriku-koalicije-3741.aspx   22 23 http://www.hep.hr/proizvodnja/osnovni/hidroelektrane/default.aspx See: http://www.tportal.hr/biznis/gospodarstvo/206050/Svatko-kome-je-ekologija-na-srcu-bit-ce-za- Plomin-C.html#.UPrWAaHjn4R     11  
  • 12. wind and 1,35 – 1,60 MWh/m2 for solar insolation and in Dubrovačko-neretvanska – 150 MW for wind and 1,50 – 1,60 MWh/m2 for solar insolation.24 3. Resume Republic of Croatia has faced transition from socialism to democracy more than 20 years ago and is now becoming 28th European Member in July, 1st 2013. As a future EU member Croatia had to accept EU guidelines concerning politics, laws, energy, etc. In 2002 first Strategy of Energetic Development was brought and in 2009 new one was brought in time when Croatia was in a process of becoming member of EU. Therefore new Strategy had to define goals provided by EU and laws had to provide legal background for growing business in energy production. Now, there are many laws concerning area – Energy law, Electrical energy market law, Natural gas market law, Heat energy law and many regulations concerning these laws which makes bureaucracy very complex. The result of this complex bureaucracy is getting status of privileged producer to be eligible for using FITs which makes energy production from renewable energies very difficult and it takes a lot of time. There is no Renewable Energy law despite announcement that it will be brought by the end of 2012 but it was postponed to the end of 2013. It would be recommended that all important aspects of legal background in investing in renewable energy field are covered with this one law to reduce bureaucracy and attract future investors.25 Legislations and official results are inaccurate and not tangible enough which leads to self interpretations. Government investments were reduced which might make less production comparing to previous period. Country follows its goals but very slow and it is a big question if it will achieve its goals by 2020 despite all natural potentials for growth. There is a lot of work to be done if EU guidelines are to be met and constant EU monitoring would be very recommendable.                                                                                                                 24 See: http://www.tportal.hr/vijesti/hrvatska/196021/zupanije-s-najvise-potencijala-za-obnovljiveizvore-energije.html#.UPvVyaHjn4Q 25 See: http://www.tportal.hr/biznis/gospodarstvo/220862/Zasto-strani-investitori-izbjegavajuHrvatsku.html#.UPvXf6Hjn4Q     12  
  • 13. 4. Bibliography Hrvatski Sabor. 2009. Strategija_energetskog_razvoja_RH_NN 130_2009. Hrvatski Sabor. 2008. Zakon_o_energiji_4_NN 152_2008 Boromisa, Ana-Maria. 2011. Strateške odluke za energetsku budućnost Hrvatske. Ministarstvo Gospodarstva. 2012. Pravilnik o korištenju obnovljivih izvora energije i kogeneracije Ministry of Economy. 2011. Energy in Croatia 2011 Ministry of Economy. 2009. Energy in Croatia 2009 The Government of the Republic of Croatia. 2012. Tariff System for the production of electricity from renewable energy sources and cogeneration OG 63-12 ENG Vlada Republike Hrvatske. 2007. Tarifni sustav za proizvodnju električne energije iz obnovljivih izvora energije i kogeneracije. Hrvatski Sabor. 2011. Uredba o minimalnom udjelu električne energije proizvedene iz obnovljivih izvora energije i kogeneracije čija se proizvodnja potiče http://www.croenergo.eu/ovo-su-energetska-obecanja-kukuriku-koalicije-3741.aspx. Retrieved on 17th January 2013 http://www.tportal.hr/biznis/gospodarstvo/193645/Velik-potencijal-biomase-uHrvatskoj.html#.UOS8aonjlfQ. Retrieved on 09th January 2013. http://www.tportal.hr/vijesti/hrvatska/219961/Otkriveni-neiskoristeni-energetskipotencijali-Slavonije.html#.UOS_n4njlfQ. Retrieved on 09th January 2013. http://www.vjetroelektrane.com/aktualno/1047-vjetroelektrane-u-hrvatskoj-u-2013. Retrieved on 15th January 2013. http://www.tportal.hr/biznis/gospodarstvo/206050/Svatko-kome-je-ekologija-na-srcubit-ce-za-Plomin-C.html#.UPrWAaHjn4R. Retrieved on 17th January 2013. http://www.zelenaenergija.org/hrvatska/clanak/kakav-je-energetski-diskurs-novehrvatske-vlade/3206 Retrieved on 17th January 2013. http://portal.hrsume.hr/index.php/en/forests/general/forests-in-croatia Retrieved on 09th January 2013. http://www.hr/hrvatska/gospodarstvo/poljoprivreda. Retrieved on 18th December 2012. http://www.business.hr/kompanije/agrokor-ulaze-milijardu-kuna-u-proizvodnju-elenergije-iz-biomase. Retrieved on 20th December 2012.   13  
  • 14. http://www.vjetroelektrane.com/vjetroelektrane-u-regiji Retrieved on 15th January 2013. http://www.croenergo.eu/uskoro-krece-gradnja-prve-geotermalne-elektrane-uhrvatskoj-2897.aspx. Retrieved on 20h January 2013. http://www.mingo.hr/default.aspx?id=3250. Retrieved on 10th January 2013. http://www.hep.hr/proizvodnja/osnovni/hidroelektrane/default.aspx. Retrieved on 19th January 2013. http://www.tportal.hr/vijesti/hrvatska/196021/zupanije-s-najvise-potencijala-zaobnovljive-izvore-energije.html#.UPvVyaHjn4Q. Retrieved on 16th January 2013. http://www.tportal.hr/biznis/gospodarstvo/220862/Zasto-strani-investitoriizbjegavaju-Hrvatsku.html#.UPvXf6Hjn4Q. Retrieved on 20th January 2013. http://www.vecernji.hr/vijesti/cacic-dosta-je-solara-skupi-su-holy-solari-nam-trebajuclanak-401854. Retrieved on 20th January 2013.   14