Month: September 2023

While in some Member States citizens, businesses, institutions and local self-government units share gigawatts, in Croatia they have not yet divided or loved each other. There are energy communities in the Member States that have tens of thousands of members, invest in renewable energy sources, disperse the risks associated with the availability and affordability of energy needed for life through different energy generation and sharing technologies. In one word, citizens in developed Member States are taking investment and management actions responsibly and wisely to improve their lives. Their countries create a framework for them to do so. In our country, the state, by "taking care" of its "precious" citizens, has not yet managed to create such a framework, which, somewhat, puts Croatian citizens in a subordinate position, moreover, by public policies contributes to the erosion of energy substance, contributes to the unavailability of civic energy and contributes to the increase of the risk of energy poverty. Massively subsidised energy prices for citizens are certainly not an effective instrument.

Introduction

Directive (EU) 2019/944 of the European Parliament and of the Council dates from 5 June 2019 and was transposed into the Croatian legislative system with the entry into force of the Electricity Market Act (ZTEE) on 22 October 2021, i.e. 29 months (2 years and 5 months) after the entry into force of the Directive. Since the entry into force of the ZTEE, an additional 21 months have passed (1 year and 9 months), i.e. a total of 4 years and 2 months since the entry into force of the directive, without any energy community having been established in the Republic of Croatia, without distributing even a milliwatt of civic energy and without integrating any more complex system of civic production.[1] and sharing renewable energy. The reason, at least visible to the public, is traditional: poor regulations that do not enable and facilitate the establishment and operation of citizen energy communities, but for incomprehensible reasons restrains them, hinders them, prevents them from establishing and operating. If the citizens of most Member States are allowed to come together and do business within energy communities, and Croatian citizens are not, then it can be argued that Croatian citizens are in a subordinate position. What are the motives for this should not be entered because they are always uncommunicated in public, so a person who is not involved in insider information is exposed to the risk of speculation. Therefore, the authors believe that the reasons of a technical nature such as the impossibility of connecting the energy community to the Croatian energy system or the impossibility of recording shared energy by the institution responsible for such activities, and hope that the Ministry of Economy and Sustainable Development (MINGOR) could invite various experts in this field so that all together, taking into account the possibilities and technical-administrative limitations, new and meaningful regulations contribute to the establishment and development of the civic energy market in the Republic of Croatia.

Barriers and challenges

Regardless of the justified or unjustified reason that there is not yet a functioning energy community in Croatia, it is also a fact that citizens bear the costs due to missed opportunities. This, of course, will not be a surprise in a country of enormous potential and opportunities, but it is necessary, in the interest of the whole community, once again to draw attention only to some, authors of significant obstacles whose overcoming could significantly accelerate the emergence, development and growth of the market of energy communities in Croatia.

Low, politically determined, electricity price

A commentator of the low price of electricity from the grid for citizens is always at risk that his comment, and the consideration that it is so low and unsustainable, will be almost harassed by the majority of citizens who profit because of its value in relation to their purchasing power. This does not include citizens for whom even such a low price of energy is not affordable. However, the sale of electricity at a politically determined price below its minimum sustainable value has at least two negative characteristics. The first negative characteristic relates to the inability to meet the total cost of living for an electricity supplier[2]. This deficit in the supplier's business, which arises due to the disproportion of the structure of assets and sources of financing, will most likely be met by recapitalization, borrowing or direct transfers from the budget, therefore, all citizens will be a source for the settlement of the deficit, these same citizens who consume electricity at an unsustainable price. The second characteristic is related to the potential of investments in renewable energy production systems. Investment of citizens in the production and sharing of civic energy. The low (unsustainable and politically determined) price of electricity from the grid does not stimulate[3] citizens to find their own solution to the availability and affordability of electricity. Rational behaviour will be one that prefers to “do nothing” and benefit from the low-cost benefits of the network. Therefore, preferring "the state to care for the citizens" and serving, in the long run, most likely unsustainable solutions. Unfortunately, the consequences of this "state concern for citizens" will be paid for by these citizens themselves, as they have allowed the "state to take care of them" and failed to do what is really best for them – invest in long-term sustainable solutions, and self-generated energy is certainly part of the set of these opportunities.

Obligation to establish a legal entity for citizens connected to the same transformer station

During the summer, the Government of the Republic of Croatia adopted amendments to the ZTEE, among other things, in the part relating to the location of its member. Until those amendments, only local entities connected to the same substation could be members of the energy community. Thus, our Ministry of Economy and Sustainable Development (MINGOR) has understood the aforementioned directive. Such a provision was at odds with the logic and purpose of establishing energy communities. However, this provision has changed (after almost 2 years from the entry into force of the ZTEE) and now members of the energy community can be located anywhere in the territory of the Republic of Croatia. That makes sense now. However, the question remains of that dimension of state stimulation and facilitation of business activities of energy communities. Indeed, it is not clear for what technical or administrative reasons MINGOR would not allow citizens connected to the same substation to form an energy community without having to form a legal entity. Such cases exist in Europe.[4], Why don't you come with us? Such as a way of associating citizens in the same multi-dwelling building. This proposal is rejected by MINGOR in the e-Consultations procedure. The law of the economy of scale directs energy communities to be as large as possible so that the unit cost of community management is as small as possible. But in practice, there will be numerous cases in which it will be logical to connect entities connected to the same substation. Why are entities not exempted from the obligation to establish a legal person in such cases?

The issue of compensation for the use of the distribution and transmission network

While energy sharing between members of an energy community is virtual, i.e. billing, and there is no actual electron movement between members of the community that can cause the existing network to be consumed, it is reasonable to accept that the price of shared energy is charged with a reasonable share of the costs of investment and maintenance of the distribution and transmission network. Allegedly, the competent institutions have yet to calculate and determine the fair value of these network usage prices. It would indeed be incentivising if the charges for the use of the transmission and distribution network for energy sharing within an energy community were generally lower than the normal charges and the charges for the use of the network between members of a community connected to the same transformer station than the charges for the sharing of energy within a community between members connected to remote transformer stations. The author is of the opinion that the possibility of establishing energy communities should not be understood as an opportunity for new revenues for the company operating the distribution and transmission network by burdening energy sharing processes on the same basis as burdening transmission and distribution services of users who do not have any of their own renewable energy sources and/or renewable energy storage systems and who are not members of energy communities. Tariffs for the use of the transmission and distribution network should be incentivising, at least slightly lower than existing network charges. For example, minimum tariffs could be for network use among members of an energy community connected to the same substation. Compared to these tariffs, there could be something more for members who share energy in the administrative area of a city or county, and a third level of tariffs for members who share energy in the territory of the Republic of Croatia. As regards sharing costs, the provision of Article 26.16 of the ZTEE, which provides that the distribution system operator is to provide energy sharing settlement services, is of particular importance. Indeed, the distribution system operator should not charge for sharing settlement services because these accounts are provided to the operator by the energy community on a member-by-member basis.

The key to sharing energy among members

The provision of Article 26.19 states that the energy community should provide the distribution system operator with the energy sharing key between the members of the community. In practice, this will mean that the energy community will agree on a sharing key between its members, prescribe this key somewhere, and according to this, predetermined key, the distribution system operator will include it in the monthly bill. Thus, the regulation implies a fixed relationship (key) of energy sharing. It implies that community members, e.g. hundreds of them, will share energy in the same way every day, every week, every month. That at any moment the member with the excess energy that he shares with the always same members with a lack of energy will be known. But in nature, different processes happen. Community members, a fact, have a similar dynamics of energy production (members with the same production facilities), but they can have very different dynamics of energy consumption. The flows of those members who give up their surpluses and those who demand energy above their current consumption change from second to second. Today, there are various software solutions that enable the management and reporting of these real dynamics of energy sharing.

Legal form of the Energy Community

In the Report on the Consultation with the Interested Public on the Proposal of the Law on Amendments to the Law on the Electricity Market with the Final Proposal of the Law (PZ 516), one of the proposals focused on the legal personality of the energy community. It is proposed that, in addition to the text relating to action on the basis of the regulation governing the financial operations and accounting of non-profit organisations,[5] adds the possibility of legal supervision of cooperatives that are established and operate on the basis of the Cooperatives Act[6]. The proponent of the amendments to the law rejects the comment with the proposal on the grounds that:

The energy community on the principle of cooperative does not meet the conditions required, primarily because the cooperative as a way of organizing represents cooperatives or physical members, it is not possible to involve local communities and others that should be enabled. How should the concept of energy community be organized in a way that contributes to the wider well-being of the community and not be focused exclusively on profit or profit . Therefore, we believe that it is not possible to use the concept of a cooperative in the energy community, which can be organized on the principle of the company, and as far as we know the company works exclusively on the principle of profit, and here this benefit would of course be directed only to the members of the cooperative. The goal of the energy community is designed to achieve wider social benefits and it is important that in addition to citizens, some other organizational forms or a local community or even a regional community participate in it. This securely achieves and ensures that social, environmental and sociological benefits will be above those of the cooperatives themselves. Again, the aim of the cooperative is to benefit the cooperatives, i.e. their profits. Considering the fact that the goal of the energy community is not only the well-being of cooperatives, but also the improvement of life and better conditions for all citizens and not only cooperatives. Promoting in a way that does not only encourage renewable sources, which is sometimes the main goal of the renewable energy community here in the energy community is a very important emphasis on the social component and encouraging the association of vulnerable and vulnerable groups of people with poorer social or health status, which would be prevented by the cooperative because only the economic benefit for cooperatives should be in focus there.”

MINGOR

This justification for rejecting the proposal except that not compliant Directive (EU) 2019/944, in force since 5 June 2019, which, on point 44 of the preamble,

‘Member States should be able to ensure that citizen energy communities are an entity of any form, such as an association, a cooperative, a partnership, a non-profit organisation or a small or medium-sized enterprise, as long as such an entity can, acting in its own name, exercise rights and be subject to obligations.’,

MINGOR

In some parts, it is also incorrect.. Without going into a broader elaboration, several important determinants will be highlighted:

(i) The legal form should be irrelevant. The Energy Community operates in accordance with the regulations, but in its business it also bears certain costs (e.g. transmission and distribution network fees, business records, procurement and maintenance of sharing calculation programs, community legal entity management services, perhaps salaries of employees if it is a community with a larger number of members, costs of purchasing energy devices, costs of preventive and reactive maintenance of the plant, insurance premiums, etc.). These costs need to be met from certain sources.

(ii) The Directive draws attention that national regulations should not restrict the legal form of the community ("Member States should be able to ensure that citizen energy communities are subject to any form of entity, such as an association, a cooperative, a partnership, a non-profit organisation or a small or medium-sized enterprise.), and our competent public management explicitly denies the Commission’s framework. Why this is so, one can only guess, but it is certainly a pity that Croatian citizens are shrinking the space of business activity in relation to remaining EU citizens.

(iii) The public authority responsible for the JTEC justifies its rejection of the proposal that a cooperative may also be the legal form of an energy community on the grounds that:

“... because the cooperative as a way of organizing represents cooperatives or physical members, it is not possible to involve local communities and others that should be enabled …”

MINGOR

. Indeed, this does not correspond to the practice of cooperatives in the Republic of Croatia because there are cooperatives whose members are public bodies. The payment of surplus revenues over expenditures to its members is not mandatory in any regulation. A cooperative does not have to pay out excess income over expenditure to its members if the rules of the cooperative so define.

(iv) A cooperative (and also a company) as a legal form of an energy community is also rejected on the grounds that

”... here in the energy community, the emphasis is also very important on the social component and encouraging the association of vulnerable and vulnerable groups of people with poorer social or health conditions, which would be prevented by cooperatives because only the economic benefit for cooperatives should be in focus there.”

MINGOR

This statement is neither accurate nor life-giving, but least sustainable. Social activities have a price tag. It can be covered by donations, subsidies from public bodies, increased membership fees of community members, but also by surplus revenues from the sale of some legally permitted activities over expenditures.

Opportunities arising from the democratisation of the energy sector, which we are missing

The past twenty years have been marked by rapid technological changes – from the rapid development of the internet, the emergence and explosion of social networks and serious social, social and political distortions, globalisation with all the positive and negative effects, the emergence and development of artificial intelligence, to the process of energy transition to sustainable energy sources. Although underrepresented in the public space, it is the democratization of the process of energy production and consumption that represents, probably, the biggest technological revolution in the past decades. In general, there are two key drivers of human development – food and energy. In this context, the processes of improving their production mark milestones and significant civilizational breakthroughs. The green revolution and long-term solution to the problem of food production was enabled by a change in the concept of production, i.e. the industrialization of the food complex (from the introduction of artificial fertilizers, tillage machines, and today automation of the production chain from farm to fork).  Equivalent processes have taken place in the energy sector, since the discovery of the steam engine, generators, transmission systems and ultimately a multitude of devices for end users have ensured the level of standards that we have today.

But in both cases, resilience is important. resilience) ), i.e. the question of the extent to which we are self-sufficient and how we function in the context of major distortions and potential shortages. While this is relatively simple in the context of food – anyone can have a garden at home and grow some food there, in the context of energy this has not been possible until recently. The development of power systems has been extremely centralized for a century, precisely because of the need for industrialization and large energy consumption in large technological plants such as steel plants or production plants, large power facilities with power of hundreds or even thousands of megawatts (MW) were built. Thus, the power of rivers with hydroelectric power plants is limited, large thermal power plants have been built on coal mines, nuclear energy has been introduced, and transmission is ensured by complex systems based on transmission lines and transformer station networks. Such a system has provided reliable energy sources for a long time, but climate change and the associated environmental price are directing today's attention to the necessary significant changes.  

As the problem also creates a search for a solution in the 1960s and 1970s, following the global oil crisis, research has been launched into the potential of so-called ‘alternative energy sources’. The development of technologies that are widely used today has been marked. Solar panels, batteries, energy storage in general, monitoring and control systems, and even energy sharing is not an invention of the 21st century, but is part of a stable process of technological innovation that is faster or slower depending on the size of the energy crisis. Ultimately, this has had an impact on the democratisation of the electricity production process, which for the first time allows citizens to secure electricity from their own production systems for their own needs and those of their neighbours, thus providing additional benefits in terms of income or savings. Such opportunities certainly contribute to bringing the idea of resilience, affordability and sustainability to life.

Production from sustainable energy sources

In the observed context of democratization of energy flows is probably the most significant individual contribution made through the development of solar power plants for individual use. Sustainable energy sources are characterized by the process of converting energy sources such as the sun, wind, geothermal sources, into electricity without additional environmental pollution. The term simple conversion means the simplicity of the structure of a system in its location at the point of consumption. The production of energy from fossil fuels is significantly more complex, and the value chains are drastically longer (oil fields, extraction, crude oil transport, refinery processing, transport to end users, conversion via ICE[7] generators/engines and the like). This length of chains reduces the reliability of energy supply, because possible distortions are numerous (economic, political, technological, environmental), as indicated by a series of energy crises from the 1970s to the present day. The ecological dimension was an additional incentive to accelerate the development of alternative energy sources with the aim of reducing the negative consequences of complex energy chains. However, it should be noted that of these renewable sources only solar energy has the potential to democratise because geothermal and wind energy are more profitable on a larger investment volume.

Figure 1 Electricity supply chain components (Source: Authors)

The development of solar panels has been really explosive in the past twenty years, and in essence, in addition to the process of raising the efficiency of the solar cells themselves (which has its physical limits) it is crucial to reduce purchase value panels and equipment (inverters, smart meters) to the level of accessibility and affordability to citizens. Today, the purchase price of a standard solar power plant for home use is approximately 1200 €/kW. Setting up power plant is essentially a relatively simple installation work and can be completed in a few days. However, questions often arise about the future availability of rare raw materials for their production.  Minerals and Rare Materials in the production of panels are used in a relatively small percentage. Also, despite its name, these materials are actually not so rare. Their availability is less of an economic-technical nature, and more of a geo-political nature. Another issue that is often raised is the issue of recycling solar panels and the danger that in about twenty years we will find ourselves in a world covered in worn-out solar panels. However, significant progress has been made in this area as well, with the fact that the lifespan of the panels is long (20-30 years) with a gradual decrease in productivity.

Supervision and management

The next segment of the development of this market refers to converters (inverters) or devices that convert direct energy produced by solar panels into alternating energy as we usually use in everyday life. Modern inverters are very effective (between 95% and 98%) therefore, the conversion losses are practically negligible. But another important feature of today's converters is the ability to operate autonomously and remotely monitor the plant (all modern converters can be monitored via mobile devices and ensure the availability of travel standardized interfaces such as modbusa) which gives the possibility of their full connection to the electricity network. Thus connected solar power plants (often combined with batteries) enable virtualization processes and connect a large number of small power plants through aggregation platforms to organizations (sustainable energy communities) that can seriously participate both in the electricity markets and in the context of stabilizing the energy system. In other words, modern converters are a key component of the democratization of energy flows because, in addition to the mentioned virtualization, they also enable real-time information of power plant owners on energy production and consumption, and thus ensure gradual changes of the usual paradigms in the energy sector. Namely, the previous paradigm was based on the principle that production always followed consumption (in order to include some consumption, the energy operator always had to ensure the supply of energy, some generator had to produce more energy). However, switching to sustainable energy sources, which are for the most part variable in nature, creates a need for behavioural change (energy is consumed when it is available, i.e. consumption follows production). At first glance, it seems complicated, but in nature it comes down to charging an electric vehicle, heating water, laundry and dishes when the solar power plant produces energy and the like. Of course, in this context, it is shown that a solar power plant should always be combined on the implementation of smart home/building solutions that provide monitoring, metrics and management with loads in energy-consuming buildings. And, of course, AI-assisted automation that optimizes energy flows in a facility according to available sources and prices.

Energy storage

The variability of sustainable energy sources can be largely offset by energy storage platforms. Although most batteries are the first to come to mind, in fact most of the current energy reserves are in some form of gravitational energy – water reserves in a lake at the top of a mountain, which can be converted into kinetic energy if necessary to run turbines and generators that will produce electricity. There is also a common belief that all potential sites for such plants have already been exhausted, but this is not entirely true, as an analysis by the Australian National University of Canberra shows.[8]. The analysis identified a global 616.818 potential, economically acceptable locations for the realization of gravitational energy reservoirs with combined storage potential of 23.1 million GWh. Interestingly, in the territory of Europe, the most potential locations are located in the area of Alps and neighboring Bosnia and Herzegovina (Figure 2). Of course, not all locations are acceptable for ecological, planning or strategic reasons, but this research calls for a rethinking of what potentials we actually have.

Figure 2 Potential locations for new gravitational energy reservoirs in the environment of the Republic of Croatia. (Source: https://re100.eng.anu.edu.au/global/)

In recent years, it has attracted a lot of attention. Gravitational energy storage systems in the form of concrete blocks that are stacked in the form of towers when energy surpluses are available, and when there is a shortage, the blocks are lowered while generating electricity (Figure 3). These are very old ideas that get new original interpretations in times of crisis, which is the essence of any innovation process.

Figure 3: Gravitational energy storage (Source: https://www.energyvault.com/)

Electric vehicles (EV) and their high capacity batteries can be used to store electricity and deliver it back to the grid at peak times via V2G[9] interfaces (Figure 4). These possibilities[10] rely on standards and market arrangements that enable dynamic energy pricing and the ability of owners to benefit from such arrangements, also given that this type of battery use increases the number of charging and discharging cycles, thereby objectively reducing the lifetime of the battery on the vehicle.

Figure 4: EV in support of grid stabilisation (Source: Utilization of Electric Vehicles for Vehicle-to-Grid Services: Progress and Perspectives)

EV batteries can also be used after the end of the life of the vehicle (EoL[11]). When the remaining battery capacity drops to between 70-80% Of original capacity, batteries generally become unsuitable for use in electric vehicles. However, these batteries can still have years of useful life in less demanding stationary energy storage applications and represent significant value to the network, but also to the owner through additional revenues[12].

It should be emphasized here that the development of batteries and the number of teams investigating alternative chemical processes that would allow the elimination of harmful or rare metals from batteries is growing almost exponentially. The main problem is not research (currently working on more than 30 different chemical variants), but the question of the production of laboratory solutions and in particular scaling of battery production on a global level. In this context, breakthroughs follow already in the last quarter of this year when commercially available batteries of twice the energy density of today will have far-reaching consequences on mobility (EV vehicles with a range of over 1000 km will become available).

Concluding observations

Missing opportunities for citizens arising from the process of democratization of the energy sector in the Republic of Croatia will soon enter its fifth year. That failure has its price. These are savings that citizens could not have achieved if the regulations had allowed them to do so. It is particularly important that there are no technological barriers for years, on the contrary, most of the equipment for the production of energy from sustainable sources has become available to the average household, and advanced systems for the virtualization of such production capacities and their joint appearance on the market have been fully developed.  Proposed amendments to the CCA They did not solve this obstacle. Therefore, there will be further public discussion on establishing the best framework for the establishment and operation of energy communities in the Republic of Croatia.

The authors hope that the authority responsible for JTEA will bring together experts in this field and in several workshops constructively discuss and, ultimately, bring the best solutions. 

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[1] For example, a combination of rooftop photovoltaic plants, batteries, electric vehicle charging stations, heat pumps and, possibly, mini-vertical wind farms.

[2] The official financial statements of HEP for the business year 2022 are the best argument for this claim.

[3] The justifiability of investing in own renewable energy sources (rooftop photovoltaic power plants, batteries, etc.) is measured by comparing the value of the investment plus operating costs and the difference between the price of energy from the grid and that produced by the own power plant.

[4] https://www.nature.com/articles/s41597-022-01902-5 A Europe-wide inventory of citizen-led energy action with data from 29 countries and over 10000 initiatives

[5] The Act on Financial Operations and Accounting of Non-Profit Organizations (OG 121/14, 114/22,

effective as of 01/01/2023).

[6] Cooperatives Act (OG 34/11, 125/13, 76/14, 114/18, 98/19 in force since 01/01/2020).

[7] ICE – Internal Combustion Engine

[8] https://doi.org/10.1016/j.joule.2020.11.015 Global Atlas of Closed-Loop Pumped Hydro Energy Storage

[9] V2G – Vehicle to Grid.

[10] https://www.mdpi.com/1996-1073/15/2/589#B7-energies-15-00589 Utilization of Electric Vehicles for Vehicle-to-Grid Services: Progress and Perspectives

[11] EoL – End of Life.

[12] https://www.nature.com/articles/s41467-022-35393-0 Electric vehicle batteries alone could satisfy short-term grid storage demand by as early as 2030

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