Immature and new technologies such as geothermal energy still face considerable barriers in acquiring bank loans. Relatively high technology uncertainty and lack of experience contribute to a rather conservative attitude and reluctance of financial institutions in financing such projects in Croatia.

The knowledge of financial institutions and project developers about the financing conditions for geothermal projects should be strengthened. This could be achieved through demonstration projects and targeted training programs for financial institutions and project developers.

Biomass projects face barriers in accessing the financing because it is often difficult to ensure legally binding and continuous supply of necessary feedstock, particularly wood. This barrier has been present since the inception of the support scheme. The increasing interest in implementing biomass projects for electricity production in Croatia is making pressure on the existing system and requires better management over biomass feedstock. The Croatian Forests, a public utility responsible for managing public forests resources, in January 2019 canceled the contracts for the supply of wooden biomass with twenty planned biomass projects. The indicated reasons for the cancelation of contracts are the expired deadlines for submitting the usage permit for the projects. The Croatian Forests also pointed out the intention to change the criteria for signing the contracts for wood supply stating new payment and sustainability criteria. This shows a considerable lack of long-term market stability.

Production and distribution of biomass feedstock could be improved through, for instance, establishing regional logistic and trade centres. The transparency of public tenders for the supply of forest by-products by Croatian Forests Ltd. (Hrvatske Šume) should be improved to ensure that all stakeholders are timely informed. The long-term plans for the supply of forest by-products by Croatian Forests Ltd. should also be better aligned with the national energy goals and the demand for forest by-products for energy production.

There is a lack of predictability of the final grid connection costs, due to the lack of transparent regulations. This negatively affects the planning of renewable energy projects. This barrier has been long standing and it affects virtually all renewable energy projects.

The deep approach to connection costs in Croatia implies that renewable energy producers must cover the costs of connecting to the grid and even reinforcing the grid if necessary. This poses considerable costs on renewable energy producers particularly on smaller projects such as roof-top solar PV installations where the connection costs make up a large share of the overall investment. This barrier has been long present and negatively affects the investment costs of renewable energy projects.

Smaller RES-E installations such as roof-top solar PV could be exempted partly or fully from grid connection costs in order to make such projects more attractive for households.

Long-term plans for expanding and reinforcing the grid exist but there is substantial political and monopolistic influence involved in designing the grid development plans which hinders larger deployment of some renewable energy technologies such as wind. Integration of new small RES-E plants (e.g. roof-top solar PV) at a larger scale is also not considered in the grid development plans. In addition, the implementation of the adopted grid development plans is questionable as they are hardly enforceable. There is also a challenge of managing and planning grid development due to the undefined status of many projects which have been registered for grid connection but have not made progress in implementation. Overall, the lack of long-term targets for different RES-E technologies and poor administrative execution of the registered RES-E projects creates confusion and prevents effective planning of the grid development.

Grid development plans should be developed in a transparent and inclusive manner. The financing and legal deadlines for implementing the plans should be clearly stipulated and respected. The grid development plans should enable predictable and comprehensive deployment of renewable energy sources across different technologies.

Although the access to financing for renewable energy projects in Croatia has improved recently, the costs of capital are still higher than in other more mature EU economies, which is due to the higher country and currency risks in Croatia. The soft loans from the Croatian Bank for Reconstruction and Development are available but not in the scope and scale necessary for larger deployment of renewable energy sources.

The government should strive to improve macro-economic conditions and facilitate the entry in the Eurozone, which would significantly improve the financing conditions in the country. More soft loans through the Croatian Bank for Reconstruction and Development would also enhance larger utilization of renewable energy sources.

Lack of long-term goals for different renewable energy technologies and insufficiently transparent and predictable process of defining quotas for different technologies increases investment risks and costs and jeopardizes planning of new projects. This barrier has been present since the inception of the support scheme for renewable energy sources but it is becoming even more relevant in the light of the fact that national targets for 2020 are virtually fulfilled. The Croatian government has outlined renewable energy targets for various technologies until 2030 in the draft of the National Energy and Climate Plan but these targets are yet to be formally adopted and translated into annual quotas for renewable enery auctions. and further development targets beyond 2020 have not been formulated.

There is obvious need for ensuring higher policy stability and long-term policy predictability. The policy-makers should develop a more predictable regulatory environment with a specified long-term development trajectory for different RES technologies beyond 2020.

Favourable locations for renewable energy projects are not consistently identified and integrated into the local spatial and environmental plans. The integration of renewable energy projects into the local spatial and environmental plans is often time consuming and the procedure vary from one local government to the other.

Potential locations for RES-E projects should be transparently and consistently integrated into the local spatial and environmental planning. This would greatly facilitate the development and implementation of RES-E projects.

The duration of administrative procedure is partially connected to complicated procedures, however the procedures themselves would not be a problem in an efficient administrative environment. The real problem is a lack of know-how of the administrative personnel at different levels of government, who are often not trained enough to efficiently assess the given framework for RES projects. Virtually all renewable energy technologies are affected by this barrier. The situation has only been somewhat improved for small renewable energy projects, particularly roof-top solar PV. The barrier has existed since the inception of the legal framework for renewable energy sources.

The transparency of administrative procedures should be increased. It should also be ensured that legal deadlines for issuing administrative permits are respected by public authorities. Further training of the administrative personnel in public institutions in renewable energy matters should be provided.

The energy decision-makers and some other stakeholders in Croatia have often publicly expressed the hesitance towards larger deployment of renewable energy sources, particularly wind and solar PV. Such attitude has been often narrowly based on the notion that these energy sources are expensive, and in case of wind and solar PV unreliable and dependent on foreign investors and technologies. This, in turn, increases the negative perception about renewable energy among the broader population, leads to rather conservative caps for wind and solar PV installations and decreases the interest and confidence of investors. The negative effects are thus visible on both legal and operational level. This barrier is long-standing and has been present to a lesser or greater extent since the inception of the support scheme.

There is a need for a more balanced and accurate reporting from the decision-makers and stakeholders about the value and costs of renewable energy sources, especially wind and solar PV. The public discourse should go beyond the short-term focus on the price of renewable energy projects to include other positive environmental and socio-economic effects of these projects. For instance, the positive effects of biomass plants (biogas and forest by-products) for balancing the power as well as their positive environmental impact (the impact of biogas use for electricity on decreasing waste pollution) should be better acknowledged and incorporated in policy measures.

The information exchange among decision-makers and stakeholders has somewhat improved during the procedure of drafting the Renewable Energy Act and associated regulation, but it is still not sufficient in terms of transparency and inclusiveness. Many government decisions are still taken in a top-down ad-hoc manner without the proper consultation and collaboration with stakeholders.

The policy deliberation process should be more transparent. A wide range of relevant state and non-state actors should be involved in the policy deliberation process in a meaningful way. Substantial policy changes should be discussed and communicated in an inclusive and timely manner.

The recently introduced sliding feed-in premium support system combined with the auctioning scheme contributes to higher revenue uncertainty with the risk of increasing the cost of capital or even making some projects non-bankable. This applies to projects larger than 500 kW and CHP projects larger than 30 kW. Large RES-E and RES-H&C installations which are able to place their electricity and heat through long-term bilateral contracts or by selling electricity to themselves will be able to avoid this risk. The regulatory framework entered into force in January 2016.

The policy-makers could ensure higher predictability of revenues for renewable energy facilities under the sliding feed-in premium scheme by introducing, for instance, a minimum or ‘floor-price’ at which the electricity from renewable energy source will be remunerated. This will give greater security for banks to provide financing for renewable energy projects.

Collecting all necessary permits and documents is very time consuming and costly. In addition, the costs of certain permits are not sufficiently transparent. Small hydropower plants are particularly negatively affected by the costs related to the large number of necessary permits and environmental standards that have to be fulfilled.

It is important to define the costs of different administrative documents and procedures for RES-E projects in a more transparent manner. The reduction of costs of certain permits should also be considered, particularly for smaller and administratively demanding projects such as small hydropower plants for electricity generation.

The Renewable Energy Act adopted in 2016 stipulates that all renewable electricity projects need to take part in the tendering system. This increases the administrative costs and likely makes many small projects difficult to finance and implement due to administrative and financial costs of preparing for and participating in the tenders. The exact costs of participating in the tenders will be known after necessary by-laws are adopted.

In order to make the tenders for RES-E projects attractive and accessible for different investors, it is important not to make the financial and administrative requirements for participating in the tenders overly demanding. It is worth considering to exclude smaller projects of less than 30 kW from the tendering system in order not to place too much administrative and financial burden on such projects.

The quality of pellets and wood chips on the Croatian market is sometimes not responding to the official specification of the product. Certification is existing but sometimes not properly implemented and monitored.

It is important to implement more effective mechanisms for controlling the quality of forest by-products in the Croatian market.

The procedure for collecting all necessary permits is complex. There is neither a one-stop-shop, nor the general possibility of submitting the applications for renewable energy projects online. The spatial and environmental planning requirements are particularly demanding for small hydropower plants.

The administrative procedures for RES-E projects should be simplified by creating a one-stop shop for all necessary permits and enabling online applications. The environmental and spatial planning standards for small hydropower plants should be streamlined in order to ensure high environmental standards but facilitate more effective implementation of projects that meet all requirements.

The regulation which entered into force in 2016 has retroactively imposed balancing costs for renewable energy installations, which to some extent undermines the credibility of the support scheme and increases the costs of the already implemented projects. The balancing costs do not apply to the already installed RES-E projects of 30 kW or less power, which in practice only includes solar PV.

It is necessary to ensure better policy planning and avoid the introduction of retroactive measures which decrease the credibility of the regulatory framework and increase the costs of the already realized projects.

The strategic framework for promoting renewable energy sources has proved unreliable as many objectives and provisions related to the electricity market and the support scheme have not been implemented in practice. The Renewable Energy Act entered into force in January 2016, but necessary by-laws which should enable the implementation of the Act have not yet been adopted. This creates uncertainty and legal void for renewable energy projects, since the old regulatory framework is no more in place and the new one has not yet been concertized and enforced. This barrier has been present since the adoption of the Renewable Energy Act.

It is necessary to speed up the procedure for adopting necessary by-laws in order to create stable legal conditions and enable the implementation of the Renewable Energy Act.