Establishment of energy communities in the Republic of Croatia

Entry into force Renewable Energy Sources and High-Efficiency Cogeneration Act (OG 138/21), Electricity Market Act (OG 111/2021) i Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities (Official Gazette 44/2022) preconditions for the establishment of energy communities in the Republic of Croatia have been met, for the purpose of association of citizens, entrepreneurship and public law bodies due to joint production, consumption at the place of production and sharing of produced energy among community members. The goal of establishing such formations is to achieve energy independence, reduction and stability of energy prices, greater efficiency in the use of energy produced due to sharing, etc.

However, it is socially justified and economically rational to ask questions about whether these regulations provide an enabling legislative and institutional framework for launching intensive investment activities in civic renewable energy and whether the above objectives will be achieved in a socially and economically acceptable period? The general impression is that the Ordinance represents another instrument for competent public bodies and public companies in preventing activities related to the establishment and operation of energy communities.

Introduction

The Electricity Market Act provides for the possibility of association of citizens, entrepreneurship and the flow of public authorities in the so-called Energy communities, and the Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities determines the procedure and rules for establishing energy communities;. Article 26. The Electricity Market Act stipulates that citizens can come together to jointly produce and share the generated energy for their own consumption. This will be done through so-called energy communities. Citizen energy community is a legal entity established in the territory of the Republic of Croatia, whose shareholders or members voluntarily come together to benefit from the exchange of energy produced and consumed in a certain spatial area of the local community.

The legislation allows citizens to team up with public law entities such as cities, municipalities, institutions or utility companies in order to better exploit the potential of producing and (in-house) consuming (in-kind, sharing) the electricity produced. The envisaged activities of the energy community are, inter alia, the generation of electricity from renewable sources, the supply of electricity to the community; power management; aggregation of community members energy storage, energy efficient, charging of electric vehicles with energy produced, etc.

It is also important to draw attention to the fact that energy communities are based on voluntary and open participation whose primary purpose is to provide environmental, economic or social benefits to their members rather than generate financial returns. The legislator seeks to achieve this purpose of establishing energy communities by coercion by obliging members of the community to conduct business and business books in accordance with the laws governing the financial operations and accounting of non-profit organizations. These regulations in the Republic of Croatia deviate from the idea of Directive (EU) 2019/944, which explicitly allows a company as a legal form of an energy community.

Point 8. Annex I of the Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities defines the documentation and necessary evidence for an energy community to perform the activities for which it is established - energy production and sharing. The energy community of citizens, entrepreneurs and public authorities must first and foremost assume its legal personality, usually in the form of a cooperative, association or foundation. Subsequently, that legal person must apply for a licence to carry out energy activities and eventually start the work and activities for which it was established. It is a complex procedure both in the phase of establishment and preparation, and later in the phase of conducting business activities.

Activities during the establishment and operation of the energy community

Energy communities will most often be established as associations or cooperatives. The procedures for the establishment of such legal formations are determined by the Law on Associations (NN Nos 74/14, 70/17, 98/19) and the Cooperatives Act (OG 34/11, 125/13, 76/14, 114/18, 98/19).

Association

Association is any form of free and voluntary association of several natural or legal persons who, for the purpose of protecting their interests or advocating for the protection of human rights and freedoms, the protection of the environment and nature and sustainable development, and for humanitarian, social, cultural, educational, scientific, sports, health, technical, information, vocational or other beliefs and goals that are not contrary to the Constitution and the law, and with no intention of gaining profit or other economically estimable benefits, subject to the rules governing the organisation and operation of this form of association. The activity of the association is based on the principle of non-profit, which means that the association is not established for the purpose of making a profit, but may carry out an economic activity, in accordance with the law and the statutes. The Association acquires legal personality on the date of its entry in the Register of Associations of the Republic of Croatia.

The Association may establish at least the Three Founding Fathers. The founder of an association may be any natural person with legal capacity if his legal capacity has not been withdrawn in the part of concluding legal transactions and a legal person. The association is obliged to lead List of its members which is kept electronically or in another appropriate manner and must contain information on the personal name (name), personal identification number (PIN), date of birth, date of accession to the association, category of membership, if they are determined by the statutes of the association and the date of termination of membership in the association, and may contain other information. The list of members shall always be made available to all members and competent authorities, upon their request.

Statut is the basic general act of the association adopted by the assembly of the association. The Statute of the Association contains provisions on the name and seat, representation, areas of activity in accordance with the goals, goals, activities that achieve the goals, economic activities in accordance with the law, if performed, the manner of ensuring the public activity of the association, the conditions and manner of membership and termination of membership, rights, obligations and responsibilities and disciplinary responsibility of members and the manner of keeping a list of members, the bodies of the association, their composition and the manner of convening sessions, election, revocation, powers, decision-making and term of office and the manner of convening the assembly in case of expiry of the mandate, election and revocation of the liquidator of the association, termination of the association, property, the manner of acquiring and disposing of property, the procedure with property in case of termination of the association and the manner of resolving disputes and conflicts of interest within the association. The statutes of the association may contain provisions on the territorial functioning of the association, the sign of the association and its appearance and other issues of importance to the association. Once established, the association must be entered in the register of associations.

Application for registration the Association shall be enclosed with the minutes of the work and decisions of the founding assembly, the decision of the assembly to initiate the procedure for entry in the Register of Associations, if such a decision is not adopted at the founding assembly, the statutes, the list of founders, the personal names of the persons authorised to represent and the personal name or name of the liquidator, an extract from the court or other register for a foreign legal person of the founder of the Association, a copy of the identity card or passport for founders, liquidators and persons authorised to represent, the approval or approval of the competent body to perform a certain activity, when this is prescribed by a special law as a condition for registration of the Association. The competent administrative authority shall adopt solution on the application for registration within 30 days from the date of submission of a valid application for registration.

Assets of the Association make funds that the association acquired by paying membership fees, voluntary contributions and gifts, funds that the association acquires by performing activities that achieve goals, financing programs and projects of the association from the state budget and the budget of local and regional self-government units and funds and/or foreign sources, etc. Economic activities the association may carry out activities in addition to those pursuing its objectives as laid down in the statutes, but may not carry them out for profit for its members or third parties. If an association achieves a surplus of income over expenditures in the performance of its economic activity, it must, in accordance with the statutes of the association, be used exclusively for the achievement of the objectives laid down in the statutes. Associations are obliged to keep business books and prepare financial reports in accordance with the regulations governing the manner of financial operations and accounting of non-profit organizations.

Cooperative

Cooperative is a voluntary, open, autonomous and independent society governed by its members, and through its work and other activities or the use of its services, pursues, advances and protects, on the basis of unity and mutual assistance, its individual and common economic, economic, social, educational, cultural and other needs and interests and achieves the objectives for which the cooperative was founded. The cooperative is based on cooperative values: self-help, responsibility, democracy, equality, equity and solidarity, and the moral values of honesty, openness, social responsibility and care for others. Relationships between its members are regulated by the cooperative at the Cooperative Principles: voluntary and open membership; supervision of the business by the members; economic participation of cooperative members and distribution; autonomy and independence; education, training and information for cooperative members; cooperation between cooperatives and care for the community. The state, local and regional self-government encourage the development of cooperatives through measures of economic and social policy and other measures to improve the development of cooperatives and the cooperative system.

A cooperative may establish at least the Seven Founding Fathers fully operational natural persons and legal persons. With the establishment of the cooperative, the founder of the cooperative becomes a member of the cooperative and is entered in the directory of cooperative members. The founding assembly shall be convened by the founders of the cooperative. The founding assembly shall be chaired by one of the founders. The persons who have signed a declaration of acceptance of the cooperative rules shall have the right to vote at the founding meeting. The founding assembly takes decisions by a majority vote of the founders of the cooperative and adopts the rules of the cooperative. The rules of the cooperative are adopted when the number of founders required for the establishment of the cooperative signs a declaration of acceptance of the rules, which must contain the name and surname, date of birth, domicile, OIB, number and mark of the personal identification document of a natural person, i.e. the company, registered office and OIB of a legal person. After adopting the rules of the cooperative, the founding assembly of the cooperative elects the bodies of the cooperative and the rules of the cooperative, makes a decision on the entry or payment of the role of members and other decisions related to the establishment of the cooperative.

Cooperative rules contain provisions on the company, registered office and object of business; internal organisation; conditions and manner of acquiring membership, form and amount, entry and return of member roles, rights, obligations and responsibilities of members, conditions and manner of termination of membership and other issues related to membership in the cooperative; Cooperative bodies: their competence, rights and obligations, the procedure for election and revocation, the mandate of members, the method of decision-making and other issues related to the work of cooperative bodies; the representation and representation of the cooperative and the rights and powers of the manager; the assets of the cooperative and the manner in which the assets are to be disposed of; the use of profits, i.e. surplus revenues, the coverage of losses, i.e. operating deficits; the part of the profit or surplus of income allocated to reserve requirements; status changes and dissolution of the cooperative; information to members and business secrets; the manner and procedure of amending the rules and the like.

A member of a cooperative may only be a person who participates directly in the work of the cooperative, who operates through the cooperative or uses its services or otherwise directly participates in the achievement of the objectives for which the cooperative was founded and cannot transfer its membership to another person.

Cooperative assets constitute the members’ roles, the assets acquired through the activities and other activities of the cooperative and the assets acquired through other means, which belong to the cooperative and serve to carry out its activities and meet its obligations. Assets that are not in the function of performing the activities of the cooperative may be sold or leased by the cooperative by a decision of the assembly, and the realized funds shall be directed to the operation of the cooperative.

Bet a member of the cooperative can be a basic and additional bet. The amount of the basic bet is the same, and its amount is determined by the assembly and may not be less than HRK 1,000.00. An additional bet is a bet that a cooperative member can make with a basic bet. The amount of the additional stake is the same, and its amount is determined by the cooperative's assembly. The role of a cooperative member shall be entered in the name of the cooperative member in the directory of cooperative members. As a rule, the bet is made in cash. If the bet is placed in items or rights, the monetary value of the item or right is assessed by a court expert. If a member of the cooperative enters as a stake a thing or right that is given into the ownership of the cooperative, the member of the cooperative is liable for the real and legal defects of the thing as if it were a sale.

A cooperative may carry out an activity with a view to making a profit, and may perform activities in order to meet the needs of its members with no intention of making a profit. From the profit determined by the annual calculation, the cooperative is obliged to cover losses from previous periods, and after covering losses from the previous period, from the profit determined by the annual calculation – the cooperative allocates and separately records at least 20% for the development of the cooperative and at least 5% to reserve requirements until those reserves reach the total amount of members' contributions.

The process of establishing and operating an energy community can be summarized into three groups of processes:

1. Determining the legal personality of the Energy Community;
2. Registration of energy activity and
3. The business of the energy community.

Each of these groups of processes has its own sub-processes that need to be implemented in order to achieve the final goal of the community business.

Determining the legal personality of the Energy Community

The Energy Community, as stated above, will most fiercely be established as a cooperative or association. If the community acquires legal personality as an association, at least three founders will be required, while in the case of a cooperative, seven founders will be required. Interested members will need to gather and express their intention to form a community and define the purpose and goals of establishing a community. Then, in accordance with the provisions of the law governing the chosen legal form, it will prepare a list of founders with personal data, determine the company and define the rules that end with the signing of the declaration of acceptance of the rules. It is followed by the convening of the founding assembly and the entry in the register of associations, that is, cooperatives in the register, which acquires final legal personality.

Registration of energy activities

Once the energy community has become a legal person, it will apply for a licence to carry out an energy activity. The application is submitted on the Application form for the issuance of a license for performing energy activities (ZDOED) and submitted to the Croatian Energy Regulatory Agency (HERA). The application form shall be as set out in Annex IV. Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities. The application shall be accompanied by:

• Completed and certified application form for obtaining a license for performing energy activities;
• Statute of the selected community formation from which it is plausible that it is registered for energy activities;
• The founding act, i.e. the act on the basis of which the legal person is registered, as well as other documentation showing that the citizen energy community meets the requirements for citizen energy community from the law governing the electricity market;
• List of all shareholders and all members in the citizen energy community from which they are for each shareholder or member;
• Notarial certified statement of the responsible person regarding the control of medium and large enterprises;
• Extract from the relevant register by which the applicant proves that the citizen energy community operates on the basis of the law governing the financial operations and accounting of non-profit organisations;
• Evidence of technical qualification;
• Proof of professional competence and
• Proof of financial qualification.

The technical qualification shall be demonstrated by:

• Proof of ownership or right to use the business premises on the basis of a lease agreement or other contract concluded with the owner of the business premises;
• Description of information, communication and other systems for performing energy activities of organizing citizen energy community;
• Existing contracts with other legal entities having an impact on the technical qualification of the applicant;
• a three-year development and investment plan for the performance of energy activities, and
• Conditions for participation in the citizen energy community adopted by the citizen energy community.

Special attention is drawn here to the three-year development and investment plan, which presents in the nature of projections of the production and consumption of energy produced at the level of all members of the energy community and the balance of planned energy produced and consumed based on historical consumption analysis and projections in the planning period.

Professional competence shall be demonstrated by:

• the organisational chart or part of the applicant’s organisational chart relating to the energy activity;
• a list of workers, community members or shareholders in the energy community who perform tasks in the energy activity of organizing an energy community of citizens, with an indication of the level of education, workplace and job description according to the systematization of jobs and jobs signed by the responsible person in the legal person;
• Existing contracts with other legal entities that have an impact on the professional competence of the applicant.

Since, at least in the first period of the formation of the market of energy communities, it will have a smaller number of members, inter alia because the energy community can be formed exclusively around one, the same transformer station, it will be economically irrational to expect employment of workers and meet the goals in terms of economic and financial justification of investments in energy plants. Professional competence is likely to be demonstrated mainly through the qualifications of members or shareholders, most often through a contract (outsource) with companies specializing in the establishment, registration, installation and maintenance of energy plants, monitoring, business records and reporting on the operation of energy communities. Financial qualification is evidenced by the BON-1 and BON-2 forms, i.e. the commercial bank's statement on the solvency of the legal person.

Energy Community Business

Once it has been established and acquired legal personality and has obtained a licence to carry out an energy activity, the energy community may start operating. Although entities (citizens, companies and public authorities) can come together in the energy community after having procured PV facilities individually, it is most likely that, in practice, entities will only acquire and set up facilities once the community has been set up. The reason for such an attitude will be the benefit in the form of a lower unit purchase price of the plant if a larger quantity is procured, as well as the reduction of risk due to the pooling of knowledge and experience on the choice of the plant, installation, testing and commissioning, and the financing and management of community business.

However, the energy community (cooperative, association) is by no means a static formation that requires the activity of its members exclusively at the stage of establishment and installation of the plant. The Community, as pointed out above, operates according to the principles of a non-profit organisation, which means that it is necessary to keep records on an ongoing basis in accordance with the accounting of non-profit organisations. Although a large number of monthly transactions is not expected, it is still not known how energy sharing processes will be treated and how they will be recorded in the accounts. They will also need to convene and participate in the assemblies of the association or cooperative, prepare reports and adopt them, and archive documents. Also, when obtaining permits, a business plan should be prepared, so it will periodically be necessary to compare the achieved business financial values with the planned ones and in case of deviations decide on activities.

Problems of infrastructure maintenance

The operation of the plant implies not only its installation, but also its maintenance. Given the long economic period of use (20, 25 and more years), this facility will need to be maintained. And here it is possible to take advantage of the effects of economies of scale where unit maintenance costs could be lower when this maintenance is contracted by the community compared to the individual prosumer. It will certainly be necessary (usually around the age of 12) to replace the inverter, which also needs to be acquired in the future. Purchasing more inverters could result in a lower unit price. Finally, at the end of the life cycle, questions can be raised regarding the termination of operations and the launch of a new investment cycle, as well as questions regarding the disposal of worn-out photovoltaic panels. All these activities are easier to carry out in the community.

Although the community is founded by a group of citizens, during the life of the facility and operation of the energy community, the interests of involving new members of the community are possible. This inclusion, if initially contractually well regulated, can be simple, as a result of which all members of the community will benefit more than the costs of including a new member. These effects are linked to software that manages monitoring and energy sharing. A greater degree of digitalisation of dwellings can produce greater effects of maneuverability and efficiency in energy consumption. In order to achieve this, the members of the community will consider, at the beginning of their activity, the benefit of installing components of so-called smart apartments or houses.

Profiling of households

It seems that the establishment of an efficient energy community today is inseparable from the process of profiling households, which includes the identification of the properties of consumers (household appliances) and the way in which they are used by the household. Such profiling of households is done through the sensory and metering infrastructure of a smart home, and allows precise planning and optimization of energy production and consumption. In addition to energy, economic optimization is also important, ie the use of energy or its sale when it is most economically justified as the standard functionality of platforms for managing energy communities. It will also be good to consider the possibility of contracting for the supervision of these processes outsource service. Eventually, the community will have some website of its own that it will also need to maintain in order to be functional and useful to its members. The activities of the business phase of community life do not include those related to possible energy aggregation and operations in the energy market, which represents a whole range of additional activities that need to be managed professionally.

Financing the procurement of energy generation and sharing facilities

Photovoltaic power plants, smart housing (home) components, energy management and sharing programmes, business records systems, etc. can be procured in a number of ways depending on how energy communities organise themselves in relation to property ownership and risk sharing and, depending on this decision, how the procurement is financed. In practice, energy communities will most likely be organised in one of the three ways shown in scheme 1:

In Model A, members of the community purchase photovoltaic plants (FNE – photovoltaic power plants) individually. After installation or before, they come together in an energy community. Under Model B, entities first establish an energy community and then the energy community invests in facilities (usually on the roofs of its members). In Model C, citizens establish an energy community and contract the purchase of the availability service (ECaaS – Energy Comunity as a Service) photovoltaic installations in which the supplier installs its photovoltaic power plants on the roofs of members of the community and keeps them in the available state for the energy production of a member of the community.

Depending on the procurement model of the plant, an acceptable financing model will also emerge. The financing models are shown in schema 2:

In the case of model A, community members finance the installation of the plant from their own or others' equity and debt sources. In the case of model B, the sources of financing are obtained by the energy community (legal entity). These sources can be partly equity (from the roles of members of the community) and partly debt (from commercial banks or financial instruments of the European Union if they are programmed by the ministry responsible for European Union funds). In the case of model C, neither the members nor the legal entity have any connection with the sources of financing. They shall be acquired by the supplier of the availability service and shall become the property of the member or legal entity of the Energy Community upon expiry of the availability procurement contract.

Open points

Although regulations are in force on the basis of which it is possible to establish an adequate energy community, in practice there are a number of issues related to its lawful operational operations and issues related to hidden costs that often cannot be predicted due to creative surprises of the legal person responsible for connecting the photovoltaic power plant to the distribution electricity system. Below are a few questions.

Cost of sharing energy between members

Depending on the calculated total living costs of each individual installation of a member of the community and the intensity of production, the prices of energy produced by each member will be relatively similar or with minimal differences. Deviations from the average price will also depend on the chosen procurement model. However, it is very likely that the prices of electricity produced will be lower than the price of electricity from the grid. For illustration purposes, it will be assumed that the price of grid energy is 0.152 €/kWh and the price of FNE energy is 0.091 €/kWh. This is the difference of 0.061 €/kWh between power from the grid and FNE. When community members share electricity, they share services that have their own purchase price (producer price, in the example 0.091 €/kWh), this service is produced by community members and exchanged in a closed market bounded by the community.

In this regard, it is unclear at what value will citizens record shared energy? Will it be at the cost of production? Why should citizens not have a price difference (in the space between the production price of 0.091 €/kWh and the price of energy from the grid of 0.152 €/kWh, it is a space of significant 0.061 €/kWh that will, such expectations are in the future, increase)? This is an important issue related to community business. If members of the community are not allowed freedom in forming billing prices for shared energy then this should be clearly emphasized in order to reduce the risks of the establishment and operation of energy communities.

Tax treatment of energy sharing

The difference in the price of the movement of products, goods and services is subject to taxation. The price difference will be achieved by a member of the community when he/she shares the energy produced with the member at a higher price than his/her production price. The question to be clearly answered is whether this difference will be subject to value added tax and whether any difference between revenue (from shared energy) and expenditure (from the price of energy produced) will be subject to income or profit tax? Perhaps the solution would be to clearly communicate the view that energy sharing within the energy community, regardless of sharing prices and energy production prices, is not taxed. An important mission of civic energy or energy communities in the world is to reduce energy poverty, for example, many energy communities deliver energy to their needy members completely free of charge as part of a wider context of reducing social differences, and it is important to consider in this regard potential tax breaks for community members.

Capacity of the facility in relation to the member and the community

Quite simply, citizens who produce a greater amount of annual energy than the average annual consumption will be penalized by a reduced cost of taking over excess energy produced and/or a change of status. Does this rule apply when such a case occurs within an energy community? In an energy community, citizens can come together who, due to the technical conditions of the roof, are unable to produce the amount of energy they consume. On the other hand, some members of the community have the technical conditions to produce a significantly larger amount of energy than the amount they consume in a year. Can one member generate energy for themselves and the other(s) members of the community.

In such a case, can a citizen who produces for himself/herself and for the members of the community charge the shared energy at a higher price than his/her production price (his/her interest) but at a lower price than the network price (the interest of the non-energy producing member of the community)? If energy must be shared free of charge, then all members of the community will have an interest not to produce but to receive energy free of charge from another member, and the member who produces will have no interest in producing for another.

Cost of using the network in sharing processes

When members of an energy community share the energy produced, they share it through a distribution network, a network that connects a member of the community to a transformer station. After all, the energy community, as determined by our regulations, can only be formed by members connected to the same transformer station. This restriction is certainly not stimulating, nor socially justified because community members, citizens do not use hedging instruments against the risk of geographical distribution of sunlight. For example, it would be more efficient if members of an energy community were dispersed over a wider geographical area so that when one member is cloudy, the other is shining the sun and energy is used more efficiently.

An even better protection instrument is combined with wind generators and battery energy reservoirs. Such a restriction appears to be economically rational only for a distribution system operator who, after 30 years, is still unwilling to innovate. This is not only a matter of energy communities, but also of a large number of property owners on the Adriatic coast (almost 400,000 facilities) who would find it attractive to connect the production of a holiday home with their facility in the location of residence. In addition to the issue of national "connection" of production on their own facilities, it is similar to international connections within the EU (over 100,000 foreign real estate owners from Slovenia and Germany would welcome the option to use renewable energy from their facilities in Croatia in their home countries. It should be said immediately that there are no technical obstacles because they are such EU initiatives are in the research phase or have already been implemented within several transnational energy communities operating in the territories of several EU countries, so it is stated: evidently possible.

Will the shared energy be additionally burdened by the use of the distribution network or, possibly, the transmission network? These are issues of particular importance for the calculation of the financial profitability of a photovoltaic power plant because if the production price of energy from a photovoltaic power plant is increased by a potential fee for the use of the network, the difference highlighted above could be completely neutralized, so sharing will not be financially justified. The legislator has not yet commented on this. Moreover, the question of technically correct interconnection of community members with a private network should also be raised. If the price of a technically sound grid per unit of energy would be lower, why would such an option not be acceptable?

Qualification criterion

Another important issue is unclear. It concerns the professional qualifications referred to in Annex IV. Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities. Namely, the Ordinance stipulates that the energy community must have persons qualified to lead the community. It can be understood from the wording that this professional qualification is proven either by professional employed workers, or by a professional member of the community, or by a contract with an external supplier who is competent to perform the tasks that the community is engaged in. most likely, this statement in the previous sentence is correct, but it cannot be completely certain.

Also, the question remains what does it mean to be “professional”? Whether it is expertise in installing photovoltaic power plants, whether it is professional community management, whether it is professional business record keeping or professional maintenance. This remains an issue and it would be of great importance for citizens to have a clearer definition of the issue of expertise. 

Hidden costs – a practical view

One of the problems in forming energy communities is the problem of a large number of hidden costs for investors. They largely stem from inconsistencies and illogicalities in HEP's procedures, and then completely unrealistic projections of the economic profitability of investments appear. Such hidden (or unexpected) costs may reach 10-15% total capital value of the project This has a significant impact on the financial justification. Below is a description of one example from recent practice that points to numerous illogicalities, but also the possibilities for improving the process of connecting a photovoltaic power plant.

Installation of FN power plant on a family house

On a family house with two floors (ground floor and first floor) it is planned to install a photovoltaic power plant that would supply energy to the entire building. The apartments are separated and each has its own meter (thus and OMM - Accounting Measurement Place). All common appliances are also connected to the apartment on the ground floor - equipment in garages, boiler room for central heating, taverns and outdoor garden facilities. The initial idea was to connect the photovoltaic power plant to one of the OMMs according to the current HEP procedure, and the other OMM billing “join” as an energy user. The starting point is the creation of a ‘micro’ energy community within the building – the same principle could be replicated to larger multi-apartment buildings (multi-apartment buildings, but also to buildings owned by the same person, such as holiday homes in another location, etc.).

It should be stressed that, in such cases, it is unnecessary and ineffective to establish formal energy communities as described in the previous chapters – this is a very simple aggregation at facility level – which, of course, in perspective, may or may not participate in a regular energy community. In principle, this “aggregation” could be carried out in HEP’s accounting system, in such a way that the two OMMs form a “micro-community” and the calculated total energy produced from the FNE is divided into both OMMs according to a key (say 60% for ground floor and 40% for the floor in the observed case). Ultimately, this means that both apartments benefit from the energy produced by the FNE, although the FNE is physically connected to only one OMM. This principle is completely replicable for larger facilities or apartments, and even for geographically remote facilities, and does not require any additional infrastructure other than a small modification of HEP's accounting system.

Legal (in the introduction to mention Electricity Market Act) this area is clearly defined through form the ACTIVITIAL BUYER, and defines the obligation System Operator:

Active customer is a final customer, or a group of jointly acting final customers, who consumes or stores electricity generated within its own premises located within defined limits or who sells self-generated electricity or participates in flexibility provision or energy efficiency schemes, provided that those activities do not constitute its primary commercial or professional activity;

Article 3 Paragraph 5

End-customer group jointly referred to in paragraph 1 of Article 25 shall be the metering points of final customers in the same multi-apartment building and/or business premises to which the generating or energy storage facility is connected through the metering point; an individual final customer, a collective consumption metering point or through a dedicated metering point for a generating or energy storage facility.

Article 25 Paragraph 4

The system operator shall enable the group of jointly acting final customers referred to in paragraph 1 of Article 25 and measurement data users; metering data of the metering point of an individual final customer, a collective consumption metering point or a specific metering point for a generating or energy storage installation, necessary to account for electricity taken from the grid or for electricity fed into the grid; depending on the arrangement of use of the production facility i.e. energy storage facilities contracted between final customers acting jointly referred to in paragraph 1 of this Article.

Article 25 Paragraph 9

However, it turns out that the Active Buyer currently impossible to implement in practice because such types of unification and sharing are not supported by HEP's applications, regulations, implementing doluments, etc. (?!). However, it is even more problematic that the existing processes of HEP are completely sequentially arranged, and a good part of the necessary documentation is illogical and, in fact, – unnecessary! Therefore, there are two options, wait for the change of regulations and HEP applications (the deadlines for this operation are completely unclear) or follow the existing procedure.

Proces

According to the applicable HEP procedures, two solutions are possible for the observed case:

1. Unification of both OMMs into one new OMM, replacement of meters and installation of FNE of required power and
2. Retain separate OMMs, but install two separate FNEs to be connected to each OMM – two completely independent systems.  

The second variant implies unnecessary technical complexity and costs because for each OMM the same HEP procedure has to be followed (cost of replacing two existing meters, two inverters, more complicated installation in the facility, etc.). Finally, the first variant was chosen, but immediately at the beginning it was noticed that although the entire operation is started due to the installation of the FNE, such a unified "roof" process in HEP does not actually exist, but it all boils down to Sequential series of individual processes which all require practically the same data set Repeated from form to form, where, of course, there are also illogicalities even though the processes themselves are forms correctly explained on HEP's website.

The first illogicality is that the unification of OMMs cannot be done. if the owners are different persons. This is a serious obstacle in the case of multi-apartment buildings where the owners of apartments are different, so the existing procedure for this case is unusable. In the observed case, it is a family, the owner of one OMM is the father and the other the son. Therefore, the first step is the procedure of transferring the OMM to the selected person. The process is sequential, so the next step can be taken only after the end of this activity (by submitting several forms at HEP's counter). The key part is the accompanying documents - the application for the issuance of electricity approval, statements of co-owners that they agree to change the relationship, evidence of ownership of the facility, cadastre extracts, etc., even though it is an OMM for which there are Fifty-Year-Old Historical data in HEP.

There is no specific process for ‘old’ and ‘new’ customers. The application requests the unification of the OMM, and the total required power of the new connection is slightly less than the total sum of the two OMMs, which is regulated by the issued electricity consent. But due to proedura (they say that the problem is applications), energy consent is released on the unified power, which will later create additional problems. A new Supply Contract is also being concluded – but given the strength of the Exceeding 22kW – automatically switches to the red tariff model (which is for the economy and of course means significantly higher prices). HEP employees claim that it is so procedurally complex and that only after unification can the OMM be given new power reduction requirement and back to the white model.

Switching OMMs takes a few days and now both OMMs are on the same person, so surrender can continue a new request to merge the OMM. But surprises don't end there. Only the ‘new’ OMM is active while the old one is ‘archived’, so no readings can be provided. There may be a problem if the process takes time because one meter is ‘inactive’. HEP solves this case by issuing a multiple-increased invoice for the archived meter and by making a final settlement later.

And this part did not go without problems because double invoices were issued for both OMMs of unusually large amounts, so this also required an additional visit to HEP's counter and explanations. An interesting fact is that the consent of the owner of the object certified by a notary is required for unification. Such certification was not required at the first step, although this first step was in fact the change of the contractual relations and their transfer from the existing customer to the new one.

Technical (and financial) complications

The technical process of unification of OMMs is reduced to the dismantling of existing meters and setting up a new (i.e. in the observed case, a more modern existing meter from one of the apartments was used). This is where the first part of the completely unplanned costs comes in. Namely, since the building was built in the mid-1970s, electrical installations were realized according to the technical requirements of the time, in other words, the existing meters are located inside the apartment in the corridors. However, since a new meter is now being installed, it cannot be installed in the apartment according to the regulations, but must be installed on the outside of the building.

This is probably a situation that occurs in most facilities in the Republic of Croatia, and represents a potentially serious cost of several thousand kunas for the typical installation of a new outer cabinet, change of installations and their certification. And now we come to the most absurd part: although this activity is carried out due to the installation of a photovoltaic plant, nthis OMM will not receive an electric meter which will be immediately ‘two-way’ and to be used for the purpose of joining the FNE.

In HEP, this situation is explained by the fact that these are separate business processes and that do not install bidirectional meters (as they are not required in 99% cases), and when set FNE then be in the frame Requests for verification of the possibility of connecting a household with its own production are resolved and the issue of a ‘two-way’ meter. Of course, these operations are not free and the price is several thousand kuna per meter for assembly and dismantling. Undoubtedly, there is a need to simplify the process and eliminate unnecessary steps – in other words create a special process for the installation of FNE This will bring together potential steps and drastically reduce the number of arrivals and the necessary documents.

An additional problem is that each step means filling in several forms, submitting them to the competent HEP service, then waiting at least ten days in each step. In the observed case, almost three months were spent on these steps, all before the installation and connection of the power plant even took place. It should be emphasized that in the whole process, the support of HEP employees was correct and very professional, and that they themselves consider that the process could be significantly improved, but they are limited by rigid ordinances.

Activities for this investment (which is not even close to completion) you can follow at the following link.

Conclusion and recommendations

Developed countries of the European Union where citizens have fought for a simpler and more functional implementation of energy communities enjoy the benefits of energy independence, affordable and more accessible green energy, reduction of energy poverty and the like. The regulations were passed, but they remained vague, so that process of fighting with us is still in its infancy. Therefore, it is of particular importance to open public debates with the Ministry of Economy and Sustainable Development and Hrvatska elektroprivreda in order to overcome obstacles that make it difficult for citizens to organize themselves in energy communities and install photovoltaic power plants on roofs in a constructive and stimulating atmosphere as soon as possible. Today, it is particularly important to communicate with the Ministry of Regional Development and EU Funds regarding the programming of specific financial instruments in order to make the financing of such projects more economically justified and financially sustainable.

To this end, the following recommendations are highlighted:  

1. The Ministry of Finance should be clearly defined regarding the tax treatment of energy sharing within the energy community;
2. The Ministry of Economy and Sustainable Development should clearly communicate at what price energy is shared within the community and how the FNE capacity of an individual member is treated in relation to the capacity of the community and the amount of energy consumed;
3. Competent authorities should be consulted on the cost of using the grid that shares energy;
4. Ask HEP to change its application (estimating a few days of work for IT engineers who configure the system) and enable the administrative grouping of OMM into communities that would ACCOUNTably share the energy produced by one or more participants: in accordance with the provisions for the Active User. The key to division would be defined when requesting the creation of such a community. This would radically simplify the creation of energy communities in family houses, apartments or multi-apartment buildings and nullify the need to create additional parallel accounting systems. This would completely eliminate the need for the current OMM unification process, which is practically unusable for multi-dwelling facilities with various owners if a common FNE is to be set up;
5. On the technical side, the need to install a new meter in the cabinet on the exterior of the facade of the building is completely unnecessary and creates serious additional costs for older buildings. All new two-way meters have remote readings, so the argument that the meter must be outside the apartment for this reason is unfounded.

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