Current Croatian Energy Policy and Future Outlook

The conversation addresses Croatia’s approach to domestic energy resources, key legislation regarding energy production, the status of the LNG terminal operation on the island of Krk, and the country’s future energy strategy.

Croatia’s energy policy, influenced by the war in Ukraine, is pivoting towards renewables and LNG to reduce dependency on foreign supply due to limited domestic oil and gas resources. The government is focusing on renewables project development and LNG terminal expansion to secure energy supply and aims for Croatia to become an LNG hub in Europe. A new regulatory framework introduced by the New Electricity Market Act in the second half of 2021 aims to increase the share of renewable energy in total energy production and facilitate project development.

The discussion highlights the challenges investors and lawyers face in navigating the new, sometimes unclear, regulatory and permitting processes for renewables. The energy approval process, critical for project development, presents legal uncertainties, particularly around energy production permitting for energy service companies (ESCOs) and similar business models.

Dominik Lazic notes the market’s concerted effort to implement renewable energy projects, with solar power plants having fewer geographical constraints than wind power plants and expected to see significant expansion. The development of other technologies, such as geothermal power plants and green hydrogen systems, is also discussed. Grid capacity and the need for further investment to accommodate renewable energy are identified as challenges, alongside the importance of power purchase agreements for renewable energy projects.

Geothermal resources in Croatia, particularly in the Pannonian basin, represent untapped energy potential. The government and the Croatian Hydrocarbon Agency are facilitating exploration and exploitation activities, offering investors data on geothermal potential.

The LNG terminal on the island of Krk, operational since the beginning of 2021, has seen full capacity bookings until October 2037 following the war in Ukraine. The government has decided to double the terminal’s capacity with a EUR200 million investment, highlighting the terminal’s importance for gas supply security.

Lazic underscored the significance of the LNG terminal for Croatia and neighbouring countries, pointing to the need for improved interconnections with Slovenia and Hungary to maximise the terminal’s potential. The discussion concludes on an optimistic note for Croatia’s energy sector, emphasising dynamic opportunities for renewable energy projects, particularly in solar and wind, and the expected importance of geothermal resources alongside the LNG terminal for regional energy security.