The biggest obstacles are of an administrative and financial nature. The registration procedure is expensive and complicated, and the economic profitability is uncertain because the regulations that determine the fees are vague, the default conditions represent a high cost, and a specific support system is unavailable.
According to the Ordinance on permits for the performance of energy activities and keeping a register of issued and revoked permits for the performance of energy activities, which is under the jurisdiction of the Croatian Energy Regulatory Agency (HERA), the prescribed procedure defines a total of 18 different documents/evidence that must be prepared and submitted for registration.
There is also an additional condition, which applies to all legal entities seeking a license for any activity, which is the employment of “professionally trained workers for the performance of energy activities”. This condition is not a practice in any other EU member state and creates an insurmountable barrier for most potential communities because the cost of hiring a person makes the project economically unprofitable.
More about the obstacles faced by initiatives that want to become energy communities:
Administrative
There are two important limitations in the legal definition of Croatia, which have so far proved to be a major obstacle to the establishment of energy communities of citizens.
- The first limitation is that EZG must act on the basis of the law regulating the financial operations and accounting of non-profit organizations. This reduces the equality of communities in the market compared to other participants, and thus reduces the possibility for their sustainable business.
- Another limitation is that EZG should perform its energy activities based on the issued permit. The law defines the obligation to obtain a permit for an energy activity that does not exist in the official list of court activities, nor in the list of the National Classification of Activities (NKD), and cannot currently be entered in the court register. The requested activity, which is impossible to register, is called “Organizing energy communities of citizens”.
Financial
Energy communities are usually faced with a lack of initial capital for establishment and obtaining initial documentation, and we have already mentioned the requirement of hiring a professionally trained person to perform energy activities full-time. This is an insurmountable obstacle for communities that are just emerging because they do not have resources saved in advance, nor do they have active projects that would generate income.
Seeking co-financing and inclusion in various entrepreneurial programs can open access to additional financing, and it is also necessary to provide financial support to energy communities from available funds with the application of state aid rules in order to reduce the riskiness of energy community projects and encourage their development and stable growth.
Other obstacles
- Unfavorable market position
According to the new laws and directives, energy communities are equaled with large market players and can engage in energy services. Citizens’ energy communities are usually “young” organizations with little professional experience, with an uncertain business model and no political protection. Initially, they rest on activism, where community members do not have the large and solid organizational structure necessary to participate in the electricity market. In order for energy communities to flourish, it is necessary to define what activities they can engage in and under what conditions they can gain an advantage over existing energy companies and actors.
- Access to data
Energy data at the level of a facility is needed to enable new innovative business models such as energy trading and “flexibility service provision” (e.g. turning off and on larger appliances when the energy price is lower or at a time that suits the supplier in order to achieve a balance in network, for which compensation can be obtained). Often, own data is charged from the operator or is not available at a satisfactory resolution to be able to stimulate new energy network management services.
- Lack of trust towards energy communities and lack of recognition
In Croatia, it is particularly difficult to motivate fellow citizens and gain their trust in order to join an initiative if there are no clear financial indicators for which they would join. Therefore, it is important to continuously inform and educate citizens and involve them in civic energy projects from the very beginning.
Also, new market actors such as energy communities often do not enjoy the trust of banks and local authorities because they are not yet recognized, and thus have a lower chance of getting credit and support from local authorities when, for example, obtaining permits or providing public support.