HROTE promoted by CCRES

CROATIAN ENERGY MARKET OPERATOR (HROTE)

promoted by



CROATIAN CENTER of RENEWABLE ENERGY SOURCES (CCRES)

About HROTE
Croatian Energy Market Operator (HROTE) started to operate on 4 April 2005. HROTE performs activities of organizing the electricity market as a public service, under the supervision of the Croatian Energy Regulatory Agency (HERA).

HROTE's main responsibilities include:

issuing Electricity Market Rules,
registration of contractual obligations among market participants,
keeping records of eligible customers,
keeping records of suppliers,
preparation of a day ahead market plan,
settlement of balancing energy,
collecting fee for incentivizing the renewables and cogeneration from suppliers and its distribution to eligible producers,
analysing the electricity market and recommending measures for its improvement.
The company is financed according to the Decision on fee for electricity market organization (Official Gazette 94/2007). The fee is determined by the Croatian Government at the proposal of the Ministry of Economy, Labour and Entrepreneurship.

Croatian electricity market
Adoption of the Energy Act, the Act Amending the Energy Act, the Electricity Market Act and the Energy Activity Regulation Act created necessary conditions for gradual opening of the national electricity market.

There is only one electricity market in Croatia. In the initial phase of the market opening, the model of bilateral market has been chosen and the electricity trading has been carried out through bilateral contracts.

Electricity Market Rules regulate relations and activities in the electricity market, as well as determine obligations and duties of market participants in the process of electricity trading.
These Rules are binding for all electricity market participants.

Market model
The framework for performing energy activities in the electricity market is established by energy related acts, while secondary legislation elaborates legal provisions.

In Croatia we distinguish:

public service obligation of tariff customers' electricity supply,
electricity market.
According to the Electricity Market Act, tariff customers are supplied by the energy entity having public service obligation of tariff customers' electricity supply. This task is performed by HEP Group. Electricity prices for tariff customers are regulated by the Energy Act and the Tariff System for Energy Activities Performed as Public Services. The number of tariff customers shall decrease by gradual market opening.
More info at http://solarserdar.blogspot.com/.

Model of bilateral market, which is chosen in Croatia, is based on electricity trading through bilateral contracts. Contractual parties in the electricity supply contract are the customer and the supplier. Bilateral contracts concerning electricity trade (purchase or sale) are concluded between the supplier, the trader or the producer. Besides the supply contract or the electricity trade contract, the eligible customer and producer shall conclude a contract for using the network with HEP-Operator prijenosnog sustava (HEP-TSO) or with HEP-Operator distribucijskog sustava (HEP-DSO) depending on the voltage level the eligible customer is connected to.

HEP-TSO is in charge of procuring electricity necessary for system balancing. Each producer, supplier and trader is responsible to HEP-TSO for deviations from its contractual schedule.

Market participants
A market participant in the Croatian electricity market is any producer, supplier, trader or eligible customer.

A producer, supplier and trader must have a license for performing energy activity, issued by the Croatian Energy Regulatory Agency.

The organization of the electricity market, electricity transmission and distribution are regulated activities performed as public services:

HROTE is responsible for the organization of the electricity market,
HEP-Operator prijenosnog sustava (HEP-TSO) is responsible for electricity transmission, maintenance, development and construction of transmission system, and power system control,
HEP-Operator distribucijskog sustava (HEP-DSO) is responsible for electricity distribution, maintenance, development and construction of distribution system.
Regulated energy activities performed as public services also include electricity production for tariff customers and electricity supply of tariff customers. Both activities are performed by HEP Group as a part of a common and integral task of the energy entity having public service obligation of tariff customers' electricity supply.

Change of supplier
Procedure for change of supplier is prescribed by the General Conditions of Electricity Supply (Official Gazette 14/2006). Procedure is free of charge unless nonstandard services of HEP-TSO or HEP-DSO are required. In such a case, all nonstandard services have to be paid according to the price list for nonstandard services, which is published by HEP-TSO or HEP-DSO.

Balancing energy
During realization of bilateral supply contracts and electricity trade contracts deviations between realized and scheduled values are present. Since the power system operation is based on the balance between the electricity demand and supply, there is a constant need for system balancing. The real time system balancing is responsibility of HEP-Operator prijenosnog sustava (HEP-TSO).

In order to cover power system deviations in each hour, HEP-TSO offers balancing energy for sale or purchase to market participants. HROTE calculates the balancing energy, and HEP-TSO according to the calculation charges balancing costs from balance responsible parties. Balance responsible parties are any producer, supplier and trader. Each of them shall enter into the balancing energy contract with HEP-TSO. Calculation and billing of balancing energy are carried out in accordance with Balancing Energy Rules.More info at http://solarserdar.wordpress.com/.

Renewables and cogeneration

“You see, we should make use of the forces of nature and should obtain all our power in this way. Sunshine is a form of energy, wind and sea currents are manifestations of this energy. Do we make use of them? Oh no! We burn forests and coal, like tenants burning down our front door for heating. We live like wild settlers and not as though these resources belong to us.“

Thomas A. Edison, 1916

The incentive fee for electricity production from renewable energy sources and cogeneration
According to the Ordinance on Fees for Incentivizing Electricity Production from Renewable Energy Sources and Cogeneration (Official Gazette 33/2007),), that was passed by the Government of Republic of Croatia, the incentive fee is collected from all electricity customers in Croatia starting from 1 July 2007.

The collected fees are used by Croatian Energy Market Operator for payment of incentive price to eligible producers for electricity delivered to the power system, in compliance with the Tariff System for the Production of Electricity from Renewable Energy Sources and Cogeneration (Official Gazette 33/2007).

The incentive fee is collected through usual electricity payments, hence from tariff customers through money order of HEP-Operator distribucijskog sustava d.o.o. (by specific distribution area) and from eligible customers by their suppliers.

The amount on electricity bills due to incentive fee for year 2010 is 0.005 kn per kilowatt-hour (kn/kWh) + VAT, according to the Ordinance on the Amendments to the Ordinance on Fees for Incentivizing Electricity Production from Renewable Energy Sources and Cogeneration (Official Gazette 155/2009). Every customer can easily calculate the amount he/she pays for incentivizing electricity production from renewable energy sources and cogeneration by multiplying the electricity consumed (kWh) and the incentive fee (kn/kWh).More info at http://solarserdar.blogspot.com/.

Eligible producer
An eligible producer is an energy entity producing both electrical and thermal energy in a single production facility, using waste or renewable energy sources in an economically appropriate manner harmonized with environmental protection.

HEP–Operator prijenosnog sustava and HEP–Operator distribucijskog sustava shall take the entire amount of generated electricity from any eligible producer. The energy entity responsible for electricity supply shall off-take a minimal share of electricity generated by incentivized eligible producers in accordance with the conditions prescribed in the Ordinance on a Minimal Share of Incentivized Electricity Production from Renewable Energy Sources and Cogeneration.

The status of eligible producer is acquired by the decision of the Croatian Energy Regulatory Agency in accordance with the Rules on Acquiring the Status of Electricity Eligible Producer prescribed by the Minister of Economy, Labour and Entrepreneurship.

An eligible producer, apart from hydropower plants larger than 10 MW, can acquire the right to the incentive price prescribed by the Tariff System for the Production of Electricity from Renewable Energy Sources and Cogeneration.

According to the Ordinance on Fees for Incentivizing Electricity Production from Renewable Energy Sources and Cogeneration eligible and tariff electricity customers shall pay the incentive fee for electricity production from renewable energy sources and cogeneration. The incentive fee shall be specified on electricity bill, as well as other fees according to the Energy Act.
Croatian Energy Market Operator:

enters into electricity purchase contracts, with incentivized eligible producers, for electricity produced from renewable energy sources and cogeneration,
enters into contracts with all the suppliers in order to implement Ordinance on a Minimal Share of Incentivized Electricity Production from Renewable Energy Sources and Cogeneration,
collects from suppliers the incentive fee for electricity production from renewable energy sources and cogeneration,
settles and allocates the incentive price to eligible producers in accordance with concluded contracts. More info at http://solarserdar.wordpress.com/.

Learn more

"Knowledge is of two kinds. We know a subject ourselves,
or we know where we can find information on it. "

Samuel Johnson (1709 - 1784)

Renewable Energy Sources
Renewable Energy Sources (RES) are energy sources that are preserved in nature and can be completely or partially renewed, in particular, hydropower, wind energy, non-accumulated solar energy, biofuel energy, biomass energy, biogas energy, geothermal energy, wave energy, tidal energy, landfill gas or sewage treatment plant gas energy.

One of European Union (EU) strategic objectives is to incentivize the use of RES as it is in accordance with the sustainable development strategy and it helps to accomplish the goals of the Kyoto Protocol regarding reduction of greenhouse gases emissions. On 27 September 2001, the EU adopted an important legislative document – Directive 2001/77/EC of the European Parliament and of the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market.

The purpose of this Directive is:

to improve security of supply by means of reducing dependence on imported fuels,
evironmental protection,
to enable regional development thereby increasing the employment by creating new jobs.
The Directive requires from Member States to accept the measures and incentives in order to reach the objective of 22.1% share of electricity produced from RES in the total EU gross electricity consumption by the year 2010.

The Ministry of Economy, Labour and Entrepreneurship, in the Regulation on a minimal share of incentivized electricity production from renewable energy sources and cogeneration, has set a goal to achieve 5.8% as the minimum share of electricity produced from RES in total consumption in Croatia by 31 December 2010. Since "green energy" includes the electricity generated by hydropower plants, about 50% of electricity generated in Croatia comes from RES.

However, since the share of other RES is minimal, the intention is to incentivize electricity production from RES through support mechanisms.

Cogeneration
Cogeneration (Combined Heat and Power, or CHP) is a simultaneous generation of two useful energy forms (electrical and thermal) in a single process. Thermal energy, which remains unused in a conventional power plant (or is released into the environment affecting it adversely), is used in numerous industrial processes or, more often, for heating buildings or even entire blocks. Thermal energy can be used for steam production, water or air heating. One way to use cogeneration is also trigeneration where some energy is used for cooling. They can be fired by natural gas, biomass, lumber or hydrogen (for fuel cells). The choice of cogeneration technology depends on fuel availability and price.

Basic cogeneration advantage is increased fuel efficiency in comparison with conventional power plants which are used only for electricity production, as well as industrial systems which are used only in steam or hot water production for technical processes. Total cogeneration efficiency ranges from 70 to 85% (27-45% electricity and 40-50% thermal energy) while total efficiency in conventional power plants ranges from 30 to 51% (electricity).More info at http://solarserdar.blogspot.com/

Cogenerations have a significant role as a distributed energy source due to their positive effects: lower network losses, decrease of transmission congestion, improvement of voltage quality, increase of electricity supply reliability. Negative environmental effects are also diminished. Commercially available CHP technologies include steam and gas turbines, microturbines, reciprocating engines, Stirling engine and fuel cells with a wide capacity ranging from 1 kW for Stirling engine to 250 MW for gas turbines.

On 11 February 2004, an important European energy legislative document was adopted – Directive 2004/8/EC of the European Parliament and of the Council on the promotion of cogeneration based on a useful heat demand in the internal energy market.

The purpose of this Directive is the following:

promoting high-efficiency cogeneration based on useful heat demand (savings of primary energy of at least 10% obtained by combined production instead of separate production of heat and electricity),
decreasing network losses,
decreasing greenhouse gases emissions.
In accordance with the above mentioned, the Ministry of Economy, Labour and Entrepreneurship, in the Regulation on a minimal share of incentivized electricity production from renewable energy sources and cogeneration, has decided to achieve a minimal share of 2% of electricity produced from cogeneration in total electricity consumption in the Republic of Croatia by the 31 December 2010.

Support mechanisms for RES
The price of electricity produced from renewable energy sources is significantly higher than an average price of electricity produced in conventional power plants. For this reason the Directive 2001/77/EC of the European Parliament and the Council on the promotion of electricity produced from renewable sources in internal electricity market binds every EU member state to legally define a support mechanism.

Two most usual support mechanisms used nowadays in Europe are: feed-in tariff system or pricing system and system quota obligations.

Feed-in-tariff system defines the following obligations:

TSO and DSO obligation of connecting eligible producers to the network,
obligation to purchase electricity produced from renewable energy sources,
obligation to implement a tariff system for producing electricity from renewable energy sources.
This support mechanism is currently the most common in Europe, in states where the largest number of facilities using renewable energy sources are present (e.g. Germany, Spain, Denmark, the Netherlands, France, Portugal).

System quota obligation is a legally defined energy entity’s obligation to produce or off-take a specified amount of electricity generated from renewable energy sources. The quota fulfillment is supervized by a responsible body authorized and registered by the state.More info at http://solarserdar.wordpress.com/

Green certificates can acknowledge the fulfillment of the prescribed quota. Prescribed quotas are fulfilled when an energy entity shows proof of purchasing an appropriate number of green certificates to a responsible body. Green certificate market is parallel to electricity market. A producer of electricity from renewable energy sources sells its produced electricity for a market price in parallel with selling the green certificate gotten/awarded for each MWh of electricity produced from renewable energy sources. This additional green certificate sales income enables covering most of its larger production expenses which a producer might have in comparison with other producers.

Green certificates are issued by a body responsible for certificate issuing, authorized and registered by the state. Since a green certificate represents an electronic record containing all required data including “the guarantee of origin”, it is necessary to introduce a single register for keeping record of green certificates in order to provide a transparent and non-discrimatory market. Green certificates have a certain “life cycle” which includes the process of their issuing by a responsible body, certificate trading – since the same certificate can change several owners - and finally its utilization in case when the electricity amount covered by a certain green certificate has been sold to the end-customer. Such support mechanism is market oriented and has been applied in only six European states: Great Britain, Sweden, Belgium, Italy, Romania and Poland.

HROTE Croatian Energy Market Operator
Miramarska 23 10000 Zagreb Croatia
T +385 1 63 06 700 F +385 1 63 06 777

CROATIANCENTER of RENEWABLE ENERGY SOURCES (CCRES)
Zeljko Serdar
Head of business association
solarserdar@gmail.com