Energy transition in the Republic of Croatia in relation to the European Union's energy framework

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Energy Transition in the Republic of Croatia in Relation to the

European Union’s Energy Framework

MSc Thesis Political Science: International Relations Research Project: The Political Economy of Energy University of Amsterdam – Graduate School of Social Sciences

Amsterdam – June 21st_{, 2019}

Author: Supervisor and second reader:

Ivana Zelalic Dr. M.P. (Mehdi) Amineh

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Abstract

Energy transition, defined as the transformation from fossil fuels to renewable energy sources, has become one of the main priorities of the 21st century. Fossil fuel reserves are diminishing and renewable energy is becoming crucial for a cleaner and sustainable planet. The topic of climate change has become more severe in the last few years, with clear signs that the world needs to switch towards renewable energy. This thesis is based on energy transition in the Republic of Croatia. The EU has established an overall policy for the production and promotion of energy from renewable sources in the EU. Member States, such as Croatia, have the task of accomplishing these specific goals by 2020 and 2030. The focus is on analyzing how far Croatia has come in regards to reaching these goals - whether they are lacking behind or whether they are on their way to reaching the goals on time. Croatia has also been faced with challenges in regards to the EU policies that have to be implemented.

Keywords: Republic of Croatia, renewable energy transition, energy security, European Union, 2030 climate and energy framework

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Acknowledgements

I would like to express my sincerest gratitude to my supervisor, Dr. Mehdi Amineh, for introducing me to the subject of geopolitical economy of energy in his elective course during the first semester. His profound knowledge of the subject has inspired me and made me interested to further expand my knowledge on the topic of energy and in particular, on energy transition. Likewise, without his endless support and feedback, this dissertation would not have been possible.

I would also like to thank my second reader, Dr. Wina Crijns-Graus, for commenting on my work. Thank you also to all my interviewees whom have taken their time to meet with me and have offered me with additional information on Croatia’s energy transition.

Last, but not least, I would like to thank my family and friends for their unlimited love and support. They always believed in me and kept me motivated throughout this five-month journey.

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Maps

Map 1: Member States of the European Union (EU28)

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Map 2: The Republic of Croatia

Source: United Nations (2008) Udine Maribor Kaposvár Pécs Novi Sad Tuzla Banja Luka Bosanska Gradiska Bihac´ Mostar Trieste Dvor Ogulin Josipdol Novi Vinodolski Senj Prozor Jablanac Plavca Draga Bunic´ Karlobag Gospic´ Lovinac Udbina Gracac Obrovac Benkovac Knin Vodice Zadar Sibenik Trogir Sinj Split Omis Imotski Makarska Ploce Metkovic´ Dubrovnik Gruda Hrvatska Dubica Porec Umag Pula Baderna Klana Vojnic Karlovac Sisak Cakovec Koprivnica Varazdin Vrbovec _Bjelovar Virovitica Pavlovac Daruvar Cazma Kutina Popovaca Novska Durdevac -Pakrac Nova Gradiska Pozega Nasice

Slavonski Brod Vinkovci Vukovar Osijek Batina Rovinj Rijeka Sarajevo Ljubljana Zagreb Dri na Tara P iva Ner_etv a Drina Sav a Bos na V rb_a s Una Sa_na Adriatic Sea D un_{ay (Danube)} Duna D ra_va Dr ava Kupa Sav_a K v a n er ic Krk Ciovo Bisevo Unije Cres Rab Pag Ilovik Silba Olib Premuda Ist Molat Dugi Otok Kornat Murter Susac Hvar Vis Mljet Lastovo Svetac Pa_sm an Korcula Brac Solta Losinj Zirje Sipan Peljesac I s t r i a V e l e b i t S L A V O N I A D A L M A T I A K a p e l a I T A L Y H U N G A R Y B O S N I A A N D H E R Z E G O V I N A S L O V E N I A SERBIA MONTENEGRO

The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.

Map No. 3740 Rev. 6 UNITED NATIONS

January 2008 Department of Peacekeeping OperationsCartographic Section

C R O A T I A

0 0 60 km 20 40 mi 20 40 National capital Town, village Major airport International boundary Republic boundary Highway Road Railroad CROATIA

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List of tables and figures

List of tables:

Table 2.1 Oil, natural gas, and coal reserves in the European Union in 2007 and 2017 and in between brackets share in global reserves

Table 2.2. Oil, natural gas and coal reserves in the Republic of Croatia, 2005, 2010, 2015 and 2017

Table 3.1 Installed capacities for heat and electricity generation from renewable energy sources in Croatia for 2017

Table 4.1 Main energy corporations in the Republic of Croatia List of figures:

Figure 1.1 The Multi-Level Perspective on Transitions

Figure 2.1 Total energy production in EU28 by energy source from 2000 to 2017, in mtoe Figure 2.2 Total energy consumption in EU28 by energy source from 2000 to 2017, in mtoe Figure 2.3 Total energy consumption per sector in EU28 from 2000 to 2017, in mtoe

Figure 2.4 Gross inland energy consumption by fuel in EU28 from 2000 to 2017, in mtoe

Figure 2.5 Extra-EU imports of natural gas from main trading partners in 2017 and first semester

Figure 2.6 Share of renewable energy sources in EU28 in 2017 in percentage

Figure 2.7 Croatian production breakdown by energy source from 2004 to 2017, in mtoe Figure 2.8 Yearly relative change of the EU28 and Croatian energy production (%mtoe) Figure 2.9 Total energy supply in Croatia from 2004 to 2017, in mtoe

Figure 2.10: Imports by sources in Croatia from 2004 to 2017, in mtoe

Figure 2.11 Exports by sources in Croatia from 2004 to 2017, in mtoe

Figure 3.1 Overview of shares in the electricity production of eligible producers in 2016 by technology in percentage (%)

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Figure 3.2 Wind cumulative installed capacity by percentage (%) from 2004 to 2017 in Croatia

Figure 3.3 The medium annual irradiation of the horizontal surface with the total solar radiation in the territory of Croatia

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List of Abbreviations

BP British Petroleum

DG ENERGY Directorate-General of Energy

EU European Union

HDZ Hrvatska Demokratska stranka

HEP Hrvatska elektroprivreda

HR Hrvatska (Croatia)

HRK Croatian Kuna currency

HROTE Croatian Energy Market Operator

IEA International Energy Agency

INA Industrija nafte INA (Oil Company INA)

JANAF Jadranski Naftovod

kWh Kilowatt hour

kWp Kilowatt-Peak

MLP Multi-level Perspective Theory

Mtoe Million tonnes of oil equivalent

R&D Research and development lab

RES Renewable energy sources

SOEs State-owned enterprises

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Chapter 1: Research Design

1.1 Introduction

The world currently covers its energy needs mainly through nonrenewable sources of energy, mostly fossil fuels – coil, oil and gas. However, these energy sources cannot last forever and will be consumed at a certain point in time. Throughout the last decades, the increase in population growth and development has caused energy demand and consumption to vastly increase. As such, fossil fuel reserves have been diminishing, leading to fossil fuel scarcity. Fossil fuels are also

highly harmful to the environment due to the release of large amounts of carbon dioxide (CO2) and

pollution of the environment. At present, perhaps the worst negative effect of fossil fuels is global warming – the biggest challenge that humanity has encountered in its history.

Energy has become a vital aspect in today’s world, either for the basic needs of people but also for a state’s survival. In the European Union as well as the rest of the world, renewable energy sources have been increasing, while fossil fuels have slowly moved towards stagnation. Renewable energy sources provide a way of using or extracting energy that is not harmful for the environment, and the use of such energy sources have huge potential in solving the issue of climate change.

The Republic of Croatia has been transitioning towards a more sustainable and eco-friendly way of producing energy. Political actors, business actors and green movements have been involved in the policy-making process regarding the transition towards renewable energy sources. The country has immense potential for the use of wind, solar, hydro and biomass as energy sources. As a member of the European Union, Croatia has pledged to accept the European Climate Energy Package and is further obliged to increase the use of renewable energy sources.

1.2 Objectives, time frame, social entities and actors

The overall objective is to analyze the progression of energy transition in Croatia throughout the last 13 years and the challenges of implementing EU policies on the Republic of Croatia.

• To assess past and current usage of renewable energy sources, obstacles and other components influencing the development of renewable energy.

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• To assess Croatia’s and EU’s energy policies in order to reach a conclusion whether the Republic of Croatia is in alignment with the EU policies on renewable energy or if the domestic policy of Croatia prevails over the EU’s policy.

• To assess the growth in energy transition once Croatia entered the European Union in 2013.

• To assess the domestic set of forces within Croatia that deal with the energy sector. • To assess the sectoral energy consumption of the Republic of Croatia.

The time frame of this research is from 2004 – 2017. Croatia became more involved with renewable energy around 2004. By looking at when they started using renewable energy until 2017, I will have a clearer image of how much Croatia has improved throughout the years with renewable energy sources. Close attention will be made from 2013 and onwards since that is when Croatia joined the EU and had to impose EU policies regarding energy.

The main actors involved will be actors from the public, private and social sector. The two main state actors areHrvatska elektroprivreda (HEP); translated: “Croatian Electricity Transmission and Distribution Operator and the Ministry of Environmental Protection and Energy. HEP is the main state owned company in Croatia and is contributing in the production of RES with projects regarding biomass and solar panels. The Ministry of Environmental Protection and Energy provides “Annual Reports” about the energy situation in Croatia. This research will mainly focus on state actors since the private actors involved in the energy sector in Croatia have not evolved that much and do not play such an important role as the state actors. Some of the private actors involved are Adria Wind Power and Končar. Adria Wind Power is the largest local developer of wind power in Croatia. Končar, a Croatian electrical, energy and transport company, provides services in the planning process of renewable energy sources (RES) in Croatia. Lastly, Green Action is the main non-governmental voluntary association of citizens for environmental protection. They provide information about the wanted improvement of environmental protection system in Croatia through campaigns, projects and participation in the public for in decision-making.

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1.3 Social Relevance

The social relevance of this research is that Southeastern Europe is an important region in the context of energy security and energy transition. Renewable energy has become a source of increasingly competitive energy. They benefit our planet principally due to their diversity, abundance and potential for use anywhere in the world in comparison to fossil fuels. Likewise, renewable energy is the solution to stopping climate change. The European Commission has come up with 2030 targets for each Member State to reduce its greenhouse gas emission and to become more sustainable with other sources of energy – mainly clean renewable energy. The Republic of Croatia has huge potential in renewable energy, especially solar but also in wind, biomass, hydropower, etc. A successful transition to renewable energy would reduce Europe’s dependency on imported energy.

1.4 Research Question and Sub-Questions

How has the implementation of renewable energy sources, addressed in the European Union’s energy framework, influenced the policy and development of energy transition in the Republic of Croatia?

• What is the current energy situation in the European Union and in the Republic of Croatia? • What are Croatia’s and EU’s policies on renewable energy sources?

• How is the Republic of Croatia transitioning towards renewable energy sources?

• What are the main actors (state, private, social) that influence the energy policy making of the Republic of Croatia?

• What are the challenges with regard to energy transition in the Republic of Croatia? 1.5 Literature Review

In order to carry out this research, it is crucial to know what existing justifications have been made by different scholars on the topic of the EU’s energy framework and the transition towards renewable energy in the Republic of Croatia. First, it will be discussed how the EU has been progressing with its energy framework but yet still has to adjust its governance framework in order to have a fully successful energy transition. Second, the Republic of Croatia’s energy transition towards renewable energy sources will be explained through political and institutional incentives.

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In recent years, renewable energy for the European Union has become a crucial point of the European energy policy since it could cover a large share of the European Union’s energy needs. The European Commission enforced the 2020 package, a set of binding legislation to ensure the EU meets its climate and energy targets for the year 2020. The energy transition in the EU has increased significantly as the use of renewable energy has gone up to a share of 14% in the gross final energy consumption and is predicted to further increase to 20% the share gross final energy consumption in 2020. As argued by Scarlat et al. (2015) since 2005, the EU has made immense progress on the implementation of renewable energy and has the chance of reaching the 2020 targets.

In 2014 the ‘2030 Climate and Energy Policy Framework’ was adopted to further impose goals in reducing greenhouse gas emissions and to tackle the issues of climate change. Capros et al. (2018) analyzed the 2030 targeted goals by the European Commission and believe that the energy efficiency improvements by 2030 are ambitious in all sectors (residential, transport, etc). Many scholars argue that there is great potential in using renewable energy through bioenergy. It is the largest source of renewable energy and has recently been envisioned in becoming the main RES contributor. Scarlat et al. (2015) claim that bioenergy production has a massive potential in significantly increasing the development of a more sustainable, low carbon economy. Furthermore, Trainer (2013) argues that biomass is the best solution in managing the redundancy problem of electricity. Going towards a 100% renewable energy supply system would mean that there would have to be enough supply of solar or wind energy even when there is not enough wind or sun. The use of biomass could greatly benefit Member States in becoming more energy efficient. Carrosio (2019) analyzed the energy transition process through the ‘Multi-Level Perspective Theory’ and came to a conclusion that socio-technical regimes cause the transition process to happen at different points in time “depending on the territorial contexts that influence the modalities of spread of technological energy devices across national local contexts” (Carrosio, 2019: 690).

Nonetheless, as much as the EU has been expanding its energy policy framework, many scholars have suggested that the EU needs to improve its policy making. Veum and Bauknecht (2019) analyzed the 2030 energy framework through the multi-level governance approach and came to the conclusion that in order for Member States to reach their RES goals, the governance framework of the EU needs to be adjusted in a way for Member States to implement such policies. Some Member States do not believe that the use of renewable energy is a main priority for their

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country. Since the policies are not fully binding, it is uncertain whether the energy transition in the EU will achieve its 2020 and 2030 goals. There is a lack of agreement between Member States in obtaining the same goals when the topic of renewable energy is addressed. Such disagreements make it harder for the EU to obtain its future goals. Carvalho (2012) also argues that Europe needs major investment through public and private financing mechanisms in order to provide energy efficiency and low carbon technologies.

Over the last decade, the Republic of Croatia has been undergoing a transition towards renewable energy. It was a slow process at first but once Croatia was part of institutional agreements like the Kyoto Protocol, Croatia started to seriously commit towards renewable energy sources. In the year 2010, Croatia focused its policies and measures on three targeted sources of energy: electricity, biofuels and the usage of RES in heating and cooling. Institutional cooperation has helped Croatia throughout the years to improve and become well on its way towards the EU target goals.

It has been argued that Croatia has a few barriers to renewable energy usage. It is true that Croatia has technical and economic potential of RES in order to achieve 100% renewables in energy consumption, but according to Luttenberger (2015), the Republic of Croatia is not stimulating in a proper way the use of energy from the sun nor from other RES. The main issues come from the lack of government initiative on sustainability, the lack of academic knowledge, and not enough investment projects. Luttenberger concludes that through the role of social and economic development the state could, in a short period of time, implement the use of renewable energy. Local authorities should play a crucial role in the regulation of RES and the production of local energy.

In order to promote RES in the Republic of Croatia, a few support mechanisms for the production of electricity have been enforced, one of them being the feed-in tariffs. This is how renewable energy generation is mainly supported in Croatia. Granić et al. (2007) emphasize how important education is in order for energy sustainability to be achieved. The public needs to be aware of the various forms of energy efficiency. Such actions would later influence the policy making on renewable energy sources.

Over the last few years the sources of renewable energy in Croatia massively increased. According to Schneider et al. (2007), the greatest potential for RES in Croatia has come from solar, thermal solar systems, the use of biomass, wind, and hydro power. A proposal from Hadźič et. al

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(2014) is the development of an offshore renewable power plant in Croatia. Not only is it environmentally friendly but it could also increase Croatia’s economy and society. It would reduce emissions and would lead to diversification and more independence of the Croatian energy system. Nonetheless, such a project is still non-existent in Croatia. Researchers and professionals should consider such a project as it would greatly benefit the country in all aspects (economic, social, environmental) and it would increase the achievement of reaching the 2020 and future 2030 energy strategy. The use of RES in Croatia is very favorable as it is achievable through all types of resources: wind, sun, water potential, biomass and biogas. Keček et al. (2019), analysis indicate that the use of RES in Croatia has been creating positive economic effects.

Throughout this literature review, many scholars have argued how the European Union has put an emphasis on the implementation of renewable energy sources on EU Member States but nonetheless, the issue still remains to be the lack of binding legislation from the EU policies. Furthermore, scholars have come to a conclusion that the Republic of Croatia is positively transitioning towards renewable energy sources but a vast amount of improvement still needs to made in increasing the potential use of all renewable energy sources and not just relying on a few (solar and wind).

Few studies have conducted research on Croatia’s energy transition in relation to the European Union’s Energy Framework. Therefore, this research will further examine how Croatia has been achieving its targeted RES goals and the measures the state needs to take in order to reach its goals. The transition towards renewable energy in Croatia has mainly been occurring through ‘socio-technical transitions’ as well as cooperating with institutions, which will be examined throughout this research.

1.6 Delineation of the Research

This research analyzes the energy transition towards renewable energy in the Republic of Croatia over the period 2004-2017. The geographical space that will be examined during the research will be that of the Republic of Croatia and that of the EU. Since the Republic of Croatia joined the EU in 2013, an emphasize will be placed from that time period and onwards in order to have a better understanding of how far along has Croatia advanced with renewable energy transition since entering the EU. The year 2004 has been chosen as the year where energy transition started to rise in Croatia. For the analysis of the European Union’s energy situation the time frame will be from

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2000-2017. The year 2000 is significant as that is when the first ‘Green Paper’ of the European Commission has been published in relation to a European strategy for the security of energy supply.

1.7 Theoretical Framework

The research aims to analyze the progression of energy transition in Croatia in relation to the EU’s energy framework. As discussed previously, Croatia is moving towards a positive energy transition through the use of new policies, markets, investments and technologies. The EU, which implemented energy goals by 2020 and 2030 has forced Croatia to further improve its RES. The theories that are planned on being used for this research are the ‘Multi-Level Perspective Theory’ (MLP) by Frank W. Geels (2011) and ‘Liberal Institutionalism’ by Robert O. Keohane (2012). The reason for these theories are that they provide explanations to how Croatia has been able to transition towards renewable energy sources, which in MLP are considered to occur through ‘socio-technical transitions’. Liberal institutionalism provides explanation on how the EU functions. It acts as a mechanism for Member States to implement specific policies, in this case the switch towards renewable energy sources. Lastly, the need for an energy transition towards renewable energy will be explained through the concept of resource scarcity examined by Amineh & Houweling (2007).

The topic of energy transition and existing environmental problems that are occurring, such as climate change, can be explained through the Multi-Level Perspective Theory (MLP). MLP has been explained through Frank W. Geels, claiming that the transition to sustainability resulted from ‘socio-technical transitions’. They involve changes in “the overall configuration of transport, energy, agrifood systems, which entail technology, policy, markets, consumer practices, infrastructure, cultural meaning and scientific knowledge” (Geels, 2011: 24). These transitions are then formed through actors such as firms, policy makers and civil society. Long-term targets that regard sustainability are more difficult to obtain and as such require socio-technological changes for successful transformations.

The Multi-Level Perspective theory (MLP) looks at changes in institutional and technological aspects. It looks at how energy transition is formed through the interaction process between socio-technical levels. According to MLP, transitions are formed through three levels (Figure 1.1): a) niches (where vital innovations occur); b) regimes (the places of established

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practices and rules that stabilize existing systems); c) landscape (the background in which broader social processes take place). Combined, these three levels produce growths in technology and promote social changes. The niche-innovations are the driving force, while changes at the landscape level create pressure on the regime, and the weakening of the regime then creates new opportunities for niche-innovations.

Niches are protected areas such as R&D laboratories, which develop brand new processes or products that sit outside the mainstream, like solar panels or wind generations. It is not easy for niche-actors to succeed in their innovations since the existing regime is pacified by numerous lock-in mechanisms. Nonetheless, the niche stage is crucial for transition as they have the biggest potential in causing systematic change.

The socio-technical regime refers to the “semi-coherent set of rules that orient and coordinate the activities of the social groups that reproduce the various elements of socio-technical system” (Geels, 2011: 27). It refers to the initiation of the transition stage. The regime is influenced by trends and changes in the society and globally, which, in this case is energy infrastructure. The technology and market practices are linked through actors. The socio-technical regime aims to capture the meta-coordination between different sub-regimes.

Lastly, the landscape influences the niche and the regime. The landscape level emphasizes on “the technical and material backdrop that sustains society as well as demographical trends, political ideologies, societal values, and macro-economic patterns” (Geels, 2011: 28). The changes in the landscape usually happen after a longer period of time. The trends in the landscape (such as climate change) make it stronger and put pressure on the regime of the traditional energy sector.

The scheme below helps to explain how transitions occur through the Multi-Level Perspective theory. Socio-technical transitions can be explained through the issue of climate change. Climate change is an environmental problem that is trying to be fixed by shifting towards new sources of energy. Such a shift is called a socio-technical transition because it not only involves changes in technology, but also in policies, infrastructure culture, science (Geels, 2018). This process is complex, long-term and non-liner but in the long run is supposed to be useful in reaching the long-term goal of transitioning towards renewable energy sources in the EU. This scheme shows the complexity of switching towards renewable energy sources, but nonetheless describes how within the three levels of MLP, change towards RES is achievable.

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Figure 1.1: The Multi-Level Perspective on Transitions. Source: F.W. Geels (2012)

Energy transition is a process that takes a long time to achieve, with changes that occur in the market, society, politics and technology. The correlation between the three transitions is clear: niche levels are the basis of where innovations occur, leading to regime level which uses existing technology in combination with some of the new technologies and the socio-technical landscape level which puts pressure on existing regimes, which creates new windows of opportunities. The structure of MLP can be used to describe a potential transformation of mainstream society, in this case energy transition.

Furthermore, in order to have a better understanding of international organizations such as the European Union, the theory of liberal institutionalism is crucial. The theory presumes that domestic and international institutions play central roles in facilitating cooperation and peace between nation-states. As argued by Robert O. Keohane, multilateral institutions that are based on liberal principals can enhance cooperation in world politics. International institutions can provide clear focal points which can make cooperative outcomes prominent when many states are involved. Institutional liberals argue that international institutions make cooperation easier and

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that the states are not the main actors of International Relations. Keohane claims that “institutions are important in the context of social purpose because they are essential for constant cooperation that will enhance the interests of most people” (Keohane, 2012: 127).

The issues of political economy and security can be applied through the institutionalist theory. Keohane argues that institutions play a key role in security issues as they provide information. This comes from a realist view of security, assuming that states will always assume the worst about others’ intentions in an anarchic world. Worst-case analysis entails “following policies that do not maximize expected utility for the sake of avoiding terrible outcomes” (Keohane & Martin, 1995: 44). Nonetheless, by securing more information, there is a higher probability to follow policies that will maximize utility.

The Republic of Croatia which is a member of the European Union, is to some extent bound to EU law and obliged to incorporate certain policies. As such, the EU is able to act as a driving force for the state’s action, leading to increasing cooperation between states and Croatia furthermore increasing its set energy targets.

In order to understand the current energy situation in Croatia as well as its energy security concerns, the concept of resource scarcity will be used for this research. According to Amineh and Guang, energy security is “the availability of energy at all times in various forms, in sufficient quantities, and at reasonable and/or affordable prices, without any unacceptable or irreversible impacts on the environment” (Amineh & Guang, 2014: 341). The European Union has put an enormous emphasize on energy security since its awareness of limited domestic reserves and is willing to diversify its supply of energy. The threat of energy security can be caused by different types of scarcity. Amineh & Houweling (2007) distinguish three types of scarcity: demand, supply and structurally-induced scarcity. Demand-induced scarcity is defined as the lack of production while global consumption is increasing, which is triggered by three factors: a) population growth; b) rising per capita income; c) technological change. Since demand-induced scarcity varies for groups at different levels of per capita income, it is more likely that demand-induced scarcity will appear last for the high-income societies (Amineh & Houweling, 2007: 374-375). Technological change since the 1850s, has augmented the significance of access to fossil fuels in order to maintain wealth-power structures (Ibid: 375). Supply-induced scarcity is caused by the dwindling of fossil fuel supply, the increased concentration of fossil fuels in impulsive areas, and the limited likelihood of finding new fossil fuels reserves (Ibid). The anticipation of supply-induced scarcity

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will most likely cause competitive power projection by import-dependent regions to gain control over territory where stocks are located (Ibid). Lastly, structural scarcity is justified as “supply-induced by the considered action of a major power, by non-state actors such as oil companies, or by producing cartels” (Ibid).

The concept of resource scarcity is useful in understanding the energy situation in Croatia. Croatia has limited energy sources and is heavily dependent on imported oil and gas. As such, economic and political changes occur in the state due to resource scarcity. Nonetheless, Croatia is rich in renewable energy sources which reverses the issue of energy scarcity by using RES to enhance the state’s energy security. Overall, Croatia has vast potential in using solar, wind, hydro, biomass as energy sources. Not only does the state benefit economically but it also makes the state less dependent on imported sources of energy.

Consequently, there is a clear correlation between the Multi-Level Perspective theory (MLP) and liberal institutionalism. Institutions are needed in order for renewable energy to successfully work. The MLP theory is significant as it explains how energy transitions occur through socio-technical transitions. When looking at long term targets of renewable energy that the European Commission addressed, the MLP theory makes it clear in understanding why such targets take a lot of time to obtain and why MLP uses a holistic approach. Liberal institutionalism will be used as a tool in explaining how the role of international institutions, in this case the European Union, are important for the transition of energy to become fully effective throughout the upcoming years.

1.8 Brief Argumentation and Hypothesis

The transition towards renewable energy sources is primarily due to energy security. Fossil fuel reserves are becoming harder to obtain due to high competition, making EU Member States take actions towards developing their own resources in order to secure their energy of supply. The concept of energy supply security is crucial in understanding Croatia’s motivation towards transitioning to renewable energy sources. Most of Croatia’s energy sources are imported from resource rich countries, such as Russia (70% import of gas in 2018)1

. As such, one of Croatia’s priorities is to secure its energy supply which would benefit their economy as well as its domestic

1_{Quoted by Russian Ambassador in Zagreb, Anvar Azimov, retrieved from:} https://www.kyivpost.com/ukraine-politics/russian-ambassador-croatia-to-import-70-percent-of-gas-from-russia-in-2018.html

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political power. By enforcing a transition towards renewable energy sources, Croatia will rely less on imported sources of energy supply and will increase its energy supply security.

The concept of energy scarcity acts as a basis for the reasoning behind the energy study of Croatia. This model will be used in order to analyze the energy situation in Croatia and how renewable energy sources have become a priority for the country. Furthermore, the European Union has put a push towards renewable energy and for each Member State to try and achieve the target goals of 2020 and 2030. The institution (European Union) in this case is trying to guide and cooperate with EU Member States towards energy transition, as explained by liberal institutionalism. It will be argued that the Republic of Croatia has been able to achieve its renewable energy targets due to the fact that the European Union has been acting as a sort of “support” mechanism. In order to examine socio-technical transitions, state, market and civil society actors are the main actors that will be observed. These actors form the connection between the different types of technologies, formal and informal rules, and markets, as displayed by the Multi-Level Perspective theory (MLP) on transitions. All these actors influence the energy transition in Croatia. Moreover, such actors also play an important role in the energy policy making process of the state.

Hypothesis 1:

The socio-technical transition in the Republic of Croatia has been progressively increasing due to the interaction between the government of the Republic of Croatia and the different actors involved in the energy sector, pushing for further development towards a successful energy transition.

Hypothesis 2:

The Republic of Croatia has enhanced its production of renewable energy sources by implementing the EU framework on energy transition.

1.9 Concepts and Data

This research will use a qualitative research design. The qualitative data will derive from main data sources such as the U.S. International Energy Agency (US IEA) in order to have a general overview of the energy demand and supply. The U.S. International Energy Agency (U.S. IEA) provides the World Energy Outlook 2016, World Energy Outlook Summary 2017. Furthermore,

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Eurostat Statistics Database provides data on the EU’s energy transition throughout the years, as well as looking particularly into Croatia’s energy transition. Eurostat provides dataset on supply,

transformation and consumption of renewables and waste, natural gas and electricity prices, Europe 2020 indicators – resource efficiency indicators, and market structure indicators.

The British Petroleum (BP) Energy Outlook provides future predictions and are found in BP

Energy Outlook 2017 Edition, BP Energy Outlook 2018 Edition. The World Energy Outlook, and

official EU Commission documents will be used as well.

Energy supply security in the EU will be addressed through looking at the Green Papers

Towards a European Strategy for the Security of Energy Supply (European Commission, 2000); A European Strategy for Sustainable, Competitive and Secure Energy (European Commission,

2006); and Towards a secure, sustainable and competitive European Energy Network (European Commission, 2008). Later documents that have been published by the EU will also be used which discuss the primary usage of renewable energy sources, such as the Green Paper: A 2030

framework for climate and energy policies (European Commission, 2013). The latest statistical

pocketbook provided by the European Commission, EU energy in figures will also be used for this research. Country reports from the EU Commission, specifically on the Republic of Croatia, which provide energy data will be used.

Energy transition in the Republic of Croatia will be analyzed through official documents from the Ministry of Environmental Protection and Energy, looking especially at “Annual Reports” on energy throughout 2005-2018. Most recent report being Energija u Hrvatskoj 2017

(translated to: “energy in Croatia 2017”). Further analysis will be looked through state owned

companies such as “Hrvatska elektroprivreda” (HEP) which provides yearly data on energy consumptions and observations about the switch towards renewable energy, as well as implemented projects.

Interviews will be made according to the key issues that have to be addressed in regards to renewable energy in the Republic of Croatia. The interviews will be made in the format of semi-structured interviews, where several questions will be asked. Three interviews, all based in Croatia, will be made for this research. Two interviewees are academia professors from the University of Zagreb – Faculty of Mining, Geology and Petroleum Engineering, experts on renewable energy sources, and one interviewee is from the Ministry of Environmental Protection and Energy in Zagreb, Croatia, as head of service for energy efficiency and renewable energy sources.

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Peer-review journals, most of them published by “Energy Policy”, “Renewable and

Sustainable Energy Reviews” and “Thermal Science” will be used, which mostly focus on

environmental, energy, and sustainability issues. They provide in-depth explanation for the analysis of the current energy situation and also go more in detail about the situation in the EU and in the Republic of Croatia. A key article comes from Science Direct titled as: Energy revolution:

From a fossil energy era to a new energy era. EU policies and Croatian policies will be explored

through official governmental documents such as EU Commission reports from DG ENERGY.

1.10 The Organization of the Thesis

Following Chapter 1, chapter 2 provides an overview of the current energy situation in the European Union and in the Republic of Croatia. Here the focus is on giving a general picture of the energy reserves, production, consumption, and energy imports and exports in the EU28 and later on in Croatia. Therefore, this chapter answers the following sub-question: What is the current

energy situation in the European Union and in the Republic of Croatia? This chapter will also

give a general overview of the transition towards renewable energy sources in the EU and in Croatia. The time frame for the EU is from 2000 to 2017, while for Croatia the time frame is from 2004 until 2017. The purpose of this chapter is to give a general overview of the energy context which will then be elaborated more specifically in the upcoming chapters.

Chapter 3 discusses in depth the transition towards renewable energy sources in the Republic of Croatia. First, a brief overview of the main renewable energy sources will be discussed (wind, solar, hydro, biomass). Following, an analysis of how these renewable energy sources in Croatia have been developing throughout the years (2004 to 2017). This chapter will compare Croatia’s RES transition to the EU framework of the 2020 and 2030 goals. The purpose of this chapter is to analyze how the energy transition in Croatia has been progressing throughout the years, if it has been compatible to the EU framework once Croatia joined the EU, and if Croatia has been facing challenges towards the energy transition. The main sub-questions of the third chapter are: How is the Republic of Croatia transitioning towards renewable energy sources?

What are the challenges with regard to energy transition in the Republic of Croatia? In answering

these questions, this chapter analyzes Croatia’s position and progress towards energy transition throughout the last decade.

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Chapter 4 examines the energy policies of the EU and of the Republic of Croatia. These policies will be reflected through the governmental actors, private actors and green movements in Croatia. The EU policies will be based on the Energy Framework of 2020 and 2030 in order to illustrate the goals each EU Member State, including Croatia, should achieve. The main sub-questions that will be answered in this chapter are: What are Croatia’s and EU’s policies on

renewable energy sources? What are the main actors (state, private, social) that influence the energy policy making of the Republic of Croatia? In answering these questions, this chapter

analyzes what policies Croatia has implemented in order to achieve specific RES goals. Furthermore, it also analyzes the position of the government, the roles of business actors and the influence of green movements in the Croatian energy sector.

Chapter 5, and the final chapter, is the conclusion and gives policy recommendations for Croatia. This chapter will summarize the findings of the previous chapters and will answer the main research question.

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Chapter 2: The structure of the current energy situation in the Republic of

Croatia and the European Union

2.1 Introduction

This chapter focuses on the current energy situation in the European Union as well as in the Republic of Croatia. Specifically, it will first analyze the current energy reserves of the European Union. Then, an analysis of the production and consumption of the 28 EU Member States will be studied, leading to the imports and exports situation in the EU. Following, a short analysis of the renewable energy production in the EU will be examined. The time period for the EU will be based from 2000 to 2017, as that is the latest data available. Next, an analysis on the current energy situation in the Republic of Croatia will be studied. Here the focus will be on analyzing Croatia’s reserves, energy production, energy consumption, energy imports and exports, the current economic trends and an overview of the development of renewable energy sources. The time period will be from 2004 to 2017. This is important as this chapter will provide a general overview of the energy situation in the EU and Croatia which will then be further elaborated in the upcoming chapters. The central question of this chapter is: What is the current energy situation in the

European Union and in the Republic of Croatia?

This question will be answered in the next four sections of this chapter, which are divided into subsections. In subsection 2.2.1, the energy reserves of the EU will be analyzed. Specifically, oil, natural gas, and coal reserves will be discussed. In subsection 2.2.2, the EU’s energy production will be examined. In subsection 2.2.3, the EU’s energy consumption will be discussed. Subsection 2.2.4 will be dedicated in analyzing energy imports and exports. Lastly, subsection 2.2.5 will discuss the current renewable energy sources production in the EU. After analyzing the situation in the EU, the next sections will be dedicated to the energy situation in Croatia. In subsection 2.3.1, the energy reserves (oil, natural gas, and coal) of Croatia will be examined. Subsection 2.3.2 will look at the energy production. In section 2.3.3, the energy consumption of Croatia will be discussed. In section 2.3.4, energy imports and exports will be analyzed. In section 2.3.5, an overview of economic trends in Croatia will be assessed. In section 2.3.6, a brief analysis on the development of renewable energy sources will be discussed. The chapter will end with a conclusion in section 2.4.

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2.2 Energy situation: European Union

2.2.1 Energy reserves in the European Union

Table 2.1: Oil, natural gas, and coal reserves in the European Union in 2007 and 2017 and in between brackets share in global reserves.

Year Oil (thousand

million barrels)

Natural gas (trillion cubic meters)

Coal (million tones)

2007 6.4 2.6 29570

2017 4.8 (0.3%) 1.2 (0.6%) 76329 (7.4%)

Source: Compiled by author, data extracted from BP (2018).

The table above displays the European Union’s position in regards to energy reserves. Oil reserves in the last 10 years have decreased in the European Union, which, in comparison to the total global reserves, only amount to 0.3 percent (BP, 2018: 12). The data on natural gas is not very optimistic either. In 2017, natural gas reserves totaled 1.2 tcm, or 0.6 percent of global reserves and will keep on decreasing (BP, 2018: 26). Thus, the EU does not hold sufficient amounts of oil and natural gas reserves to meet future demand.

In terms of coal reserves, the situation is altered. Coal reserves have greatly increased in the past decade, representing 7.4% of global reserves with 76329 million tons of coal, sufficient to meet more than 150 years of coal production in the EU (BP, 2018: 37).

2.2.2 Energy production in the European Union

Throughout the past decade, the European Union has been increasingly dependent on imported sources of energy, particularly oil and gas, which has led to a decrease of domestic production. Primary production of energy within the EU-28 in 2017 was 759.74 mtoe, while in 2016 it was 760.48 mtoe, leading to a decrease of 0.09% that year (Eurostat, 2018b).

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Figure 2.1: Total energy production in EU28 by energy source from 2000 to 2017, in mtoe. Source: Compiled by author, data extracted from Eurostat (2018b).

Figure 2.1 shows the development of energy production in the period 2000 to 2017, by energy source. Since the year 2000, the total production of primary energy in the EU has significantly decreased, especially in the period after 2011. The greatest decrease in production since 2011 came from natural gas, resulting a 28% decrease. The production of coal decreased by 22% while crude oil production in that same time period decreased by 15%. Nuclear energy production has decreased by 9% since 2011. Renewable energy is the only source in the EU that has vastly increased its production, accounting to a 64% increase throughout the last decade. Solid fossil fuel production in 2017 amounted to 16.4% of total production, 9.8% of total production of oil and petroleum products, 13.5% of natural gas, 27.8% of nuclear energy and 30% from renewable energy sources. Among the EU Member States, in 2016, France had the largest amount of primary energy production, with a 17.3% share of the EU-28 total, followed by the United Kingdom (15.8%) and Germany (15.3%) (Eurostat, 2018b).

The general descending growth of EU-28 primary energy production can partly be explained by the depletion of raw materials and/or the high expense costs when exploiting limited resources.

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2.2.3 Energy consumption in the EU

In order to have a good understanding of the energy consumption in the EU, it is necessary to first analyze the primary energy consumption and then to look at the sectoral energy consumption.

Figure 2.2: Total energy consumption in EU28 by energy source from 2000 to 2017, in mtoe. Source: Compiled by author, data extracted from Eurostat (2018c).

As shown in Figure 2.2, the EU energy mix is dominated by fossil fuels. The share of oil and petroleum products in the total energy consumption dominates the EU consumption, averaging a total consumption of 394 mtoe in 2017 compared to 239.28 mtoe of natural gas consumption that same year (Eurostat, 2018c). Electricity accounts for the third largest source of energy that is consumed in the EU. In 2017, the consumption of electricity totaled to 240.58 mtoe, in comparison to 217.36 mtoe in 2000. In the past decade, the consumption of coal, oil and petroleum products, natural gas, and electricity in all 28 Member States have been decreasing, yet renewable energy

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sources and biofuels have increased and are becoming one of the primary sources of consumption in the EU.

Figure 2.3: Total energy consumption per sector in EU28 from 2000 to 2017, in mtoe. Source: Compiled by author, data extracted from Eurostat (2018d).

Figure 2.3 presents the energy consumption in the EU per sector, clearly demonstrating that the flow of consumption from 2000 to 2008 was constant, averaging around 303 mtoe for the industry sector, 321 mtoe for the transport sector and 302 mtoe for the residential sector. From 2009 onwards, all three sectors decreased their energy consumption, especially in the industrial sector which resulted in a total energy consumption of 260.64 mtoe in 2017 (Eurostat, 2018d). The latest data provided by Eurostat of the final energy consumption of natural gas by sector claims that households consumed 105.2 mtoe, industry 79.2 mtoe, services 46.3 and transport 3.3 in 2016 (EEA, 2018). Final energy consumption of solid fuel by sector that year was much lower than that of natural gas. Industry consumed 33.7 mtoe, services 0.9 mtoe, households 9.4 mtoe, and transport 0 mtoe (EEA, 2018). In the EU, the consumption of natural gas overpowers the consumption of solid fuels in all sectors.

The decrease of energy consumption by sectors is influenced by the EU’s shift towards saving more energy in the transportation sector, which has led to the improvement of fuel efficiency in order to reach the set energy targets of the EU. The decrease in the industry sector is

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partly due to the reallocation of ongoing industries which could lead to a smaller manufacturing sector in the EU (EEA, 2018). The figure below (Figure 2.4) depicts that oil is still the most important energy source for the EU despite the negative trend, while natural gas remains the second most important energy source. Gross inland consumption in the EU-28 in 2017 was 1,667 mtoe, 1.6% higher than in 2016. The gross inland energy consumption was relatively stable from 2000 – 2009, but then the economic crisis caused a robust reduction (European Commission, 2019b). In 2010, there was a period of recovery where energy consumption increased by 3.8% which followed a consecutive decrease until 2015, when it started increasing again. Comparing the data from 2017 with 2000, fossil fuel consumption decreased by 27% and oil and petroleum products decreased by 12%, while renewable energies greatly increased by 134%.

Figure 2.4: Gross inland energy consumption by fuel in EU28 from 2000 to 2017, in mtoe. Source: Compiled by author, data extracted from European Commission (2019b)).

Nonetheless, in 2017, renewable energy represented 17.5% of energy consumed in the EU. Since 2000, when the first Green Paper was published, the EU has been increasing its production of renewable energy sources throughout the years in order to enhance its security of energy supply. The consumption of renewable energy more than doubled between 2004 and 2017, especially from the use of solar and wind energy. It is clear that the EU is seeking to have a 20% share of its gross

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final energy consumption from renewable energy sources by 2020 and that it is moving towards the 2030 goals as well. Solar and wind power have become the most important renewable sources in the EU.

2.2.4 Energy imports and exports in the European Union

This section is dedicated to analyzing the trade of energy sources between the EU and the rest of the world, looking at who the main suppliers of natural gas are to the EU and analyzing the exports of the EU.

The European Union is known for being a net importer of energy products, especially having Russia as its main supplier. In addition, most of the EU Member States are depended on a single supplier. Crude oil is the largest source of import to the EU with a share of 70% in the first semester of 2018 (European Commission, 2018: 3).

Figure 2.5: Extra-EU imports of natural gas from main trading partners in 2017 and first semester 2018 in percentage.

Source: Eurostat, Statistics Explained (2018).

As shown in Figure 2.5, Russia is the biggest supplier of natural gas to the EU, further increasing its supply to the EU by 2% in the first semester of 2018 since 2017. The other significant

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supplier to the EU is Norway, amounting to a share 38.8%, while Algeria (10.7%) and Qatar (4.9%) amount to a smaller share of import to the EU (Ibid: 4).

Thus, the EU is heavily dependent on imported energy sources, accounting to 1,528.47 mtoe in 2017. This explains why the EU does not export as much, only 580.65 mtoe in 2017. Throughout 2000 to 2017 the exports in the EU have been fairly stable, only increasing by 144,56 mtoe by 2017. On the other hand, imports increased by 21% throughout those years.

2.2.5 Renewable energy development in the European Union

Figure 2.6: Share of renewable energy sources in EU28 in 2017 in percentage. Source: Eurostat (2018e).

In 2017, the share of energy from renewable energy sources in gross final consumption of energy in the EU reached 17.5%, in comparison to 17% in 2016 and more than doubled since 2004 (8.5%), One of the main priorities of the EU is to reach the 2020 targets which consist of obtaining 20% of energy in gross final consumption of energy from renewable sources and at least 32% by 2030 (Eurostat newsrealease, 2019: 1).

The highest share of renewable sources in 2017 are from Sweden (54.5%), Finland (41%), Latvia (39%), Denmark (35,8%) and Austria (32.6%). The lowest share of renewables is displayed in Luxembourg (6.4%), the Netherlands (6.6%), and Malta (7.2%). Among the 28 EU Member

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States, 11 have already reached the level required to meet their national 2020 targets – Croatia being one of them (Ibid: 2).

Furthermore, renewable energy sources are the main solution for diversifying energy supply in most EU Member States. Therefore, increased investment in renewable energy sources leads to the best outcome in reducing the dominance of fossil fuels (Chalvatzis & Ioanmidis, 2017: 475).

2.3 Energy situation: The Republic of Croatia

2.3.1 Energy reserves in the Republic of Croatia

Table 2.2: Oil, natural gas and coal reserves in the Republic of Croatia, 2005, 2010, 2015 and 2017.

2005 2010 2015 2017 Oil (1000 m3 ) 9.330,9 10.481,6 11.932,1 10.230.3 Natural Gas (106 m3 ) 30.358,6 31.587,1 14.928,6 10.286,3 Coal (thousand metric tons) 45.149,0 45.149,0 45.149,0 45.149,0

Note: Since 1999, coal reserves are classified as non-exploitable. Furthermore, the coal reserves consist of hard coal, brown coal and lignite.

Source: Compiled by author, data extracted from the Ministry of Environment and Energy, (2012 and 2017). Oil and natural gas reserves in the Republic of Croatia have both been decreasing throughout the years. As it will be discussed below, the production of oil and natural gas have also been decreasing, which explains the decrease of reserves as well. On the other hand, coal reserves have been the same since 1999 due to the fact that coal reserves are classified as “non-exploitable” (Ministry of Environment and Energy, 2012: 179).

2.3.2 Energy production in the Republic of Croatia

The Republic of Croatia, a country with a population of only 4,284,889 inhabitants in 2017, has throughout the last decade decreased in energy production but nonetheless has shown to have huge potential for renewable energy sources which have, on the contrary, been increasing. As displayed in Figure 2.7 the production of coal in Croatia is non-existent, while oil and petroleum products amounted to a total of only 0.77 mtoe (18.3%) in 2017 in comparison to 1.10 mtoe (26%) in 2004, a decrease of 30%. Natural gas production has declined by 32% since 2004 (Eurostat, 2018g).

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Figure 2.7: Croatian production breakdown by energy source from 2004 to 2017, in mtoe. Source: Compiled by author, data extracted from Eurostat (2018g).

The average annual decline in oil production is around 10%, while gas production is declining even faster, around 15% per year, and if investments for new research and production are not attainable, production by 2035 will completely vanish. It is predicted that by 2050 oil production will go below 25000 barrels and consumption will then amount to 15 thousand barrels per day (Poslovni.hr, 2018). Experts argue that potential energy reserves amount to about 830 million tons of equivalent oil, of which up to 53% refers to oil and has already proven to be worth around 130 million tons of oil and 70 billion cubic gasses (Ministry of Environment and Energy, 2017: 134).

However, the production of renewable energy has greatly augmented since 2004. In the past decade the production of renewable energy increased by nearly 40%. In 2017, the production of renewable energy amounted to 52%, of which 36.6% came from solid biofuels, and 10% from hydro power. It is expected in the future that the production of fossil fuels will continue to decrease while the production from renewable energy sources will increase (D. Karasalihović Sedlar et al. 2011: 4193).

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Nonetheless, as displayed below in Figure 2.8, the Croatian energy production, in comparison to the EU-28, remain at the same level from 1990 to 2017. The graph indicates that there is no upward or downward trend in energy production for the EU28 nor for Croatia. Furthermore, Croatia has larger variations of the energy production from 1990 to 2017.

Figure 2.8: Yearly relative change of the EU28 and Croatian energy production (%mtoe). Source: Compiled by author, data extracted from Eurostat (2018g).

2.3.3 Energy consumption in the Republic of Croatia

In order to understand the situation of energy consumption in Croatia, first the total primary energy supply will be discussed and then the amount of consumption by source used in each sector will be analyzed.

Figure 2.9 represents the total primary energy supply during the period from 2004 to 2017. In 2017, total primary energy of supply totaled 8.72 mtoe, while in 2016 it was 8.44 mtoe. The total primary energy of supply in Croatia increased by 3% in comparison to the previous year. The consumption of oil and petroleum products increased by 6%, natural gas by 14% and electricity

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consumption augmented by 25% while fossil fuel consumption decreased by 40%. The primary energy supply of oil and petroleum products in 2017 was 38.2%, solid fossil fuels were only 4.5% of total energy supply, natural gas totaled 28.5%, renewable and biofuels 21.7% and electricity 6.9% of total energy supply (Eurostat, 2018h).

From 2012 to 2017, the total primary energy supply increased at an average annual rate of 0.8%. Here, the consumption of renewable energy sources, heat, hydropower, and natural gas increased. It is important to note that the consumption of renewable energy sources during this period increased at an average annual rate of 23%.

Figure 2.9: Total energy supply in Croatia from 2004 to 2017, in mtoe. Source: Compiled by author, data extracted from Eurostat (2018h).

Electricity and oil and petroleum products have been increasing throughout this decade. The annual electricity consumption increased by 3.2% compared to 2016. Nonetheless, electricity consumption in agriculture and construction decreased by 1.1% while it increased in the transportation sector by 6.9%, in industry by 5.5%, service sector by 6.2% and in households by 2.2% (Ministry of Environment and Energy, 2017: 69). The total consumption of liquid fuels consumption also increased by 2.6% compared to 2016. In the specific sectors mentioned above, the consumption of oil and gas increased while the consumption of liquid fuels decreased. Oil and gas increased by 9.5% and 3.5% while liquid fuels decreased by 0.1%.

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The gross inland consumption by source in Croatia varied, but most of the consumption originated from oil and petroleum products, natural gas and renewable energy sources. In 2017, oil and petroleum products amounted to 42.1%, natural gas by 30.2%, and renewable energy sources by 22.9% (Eurostat, 2018).

The largest energy consumer in Croatia is the residential sector, accounting for 34% of final energy consumption, followed by 29% from transport, industry at 15.5%, and commercial/services sector at 11% (World Bank, Croatia Energy Sector Note, 2018: 9). In the residential sector, the main fuel being used is biomass, consisting of 47%, electricity at 22%, natural gas at 19% and oil at 6%. Nearly half of the residential sector uses firewood as a source for heating, which explains why there is such a large share of biomass in the residential sector.

According to Eurostat, the share of renewable energy in gross final energy consumption in 2016 was 28.3%, in which heating and cooling amounted 37.6%, electricity of 46.7%, and in transport 1.3%, compared to 3.6% in 2015 (Eurostat, 2018e).

2.3.4. Energy imports and exports in the Republic of Croatia

This section is dedicated to analyzing the energy imports and exports in Croatia. First, energy imports will be discussed. Then, energy exports from Croatia will be analyzed.

Figure 2.10 shows energy import in the period from 2004 to 2017. In 2017, energy import in Croatia increased by 9.5%, compared to 2016. Oil and petroleum products in the last decade have mostly been decreasing, but from 2014 until 2017 imports started to rise again. Most of the import in Croatia comes from oil and petroleum products, which in 2017 amounted to 5.23 mtoe (63.7%), compared 62.5% the previous year. All sources of energy increased since 2016. Overall, Croatia’s import dependency in 2017 totaled to 53.3% while in 2016 it was 48.5% (European Commission, 2019b).

For decades, Croatia has not build a power plant and thus has not been able to secure energy independence. A prime example is that Plomin C, a thermal power plant and Ombla, a hydro power plant, have never ended up being built. The authorities failed to explain to the local community the reasons for these investments, and non-governmental organization and the local community were more successful in stopping these projects into becoming a realization. These three investments would have cost in kuna currency (HRK) 9.8 billion and would have secured 20% of energy in the country. Therefore, it is not surprising that Croatia imports around 7.8 to 11.96 billion

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HRK every year, depending on the price of oil barrels or the price of electricity on the European markets (Dnevnik.hr, 2018). Furthermore, Croatia’s imports of oil and petroleum products vastly increased after 2013 since that is the year Croatia joined the EU, giving it access to the EU single market.

It has been stated that the Croatian production-import ratio is around 60:40 (D. Pavlović et al., 2018: 31). Numerous projects have been considered since the end of the 1990s in order to decrease Croatia’s dependence on natural gas imports. As a result, in 2011 the Croatian gas system received a second input by completing the Croatian Hungarian gas interconnection pipeline. Connecting the Croatian gas system in the region is important for competitiveness as well as for the security of gas supply (Ibid: 32). Nevertheless, this pipeline cannot facilitate natural gas supply security without the operational LNG terminal on the island of Krk which is predicted to be in operation in 2019. It is a project of common interest for the EU as well since the LNG terminal in Krk is an important Adriatic LNG hub for other countries in the EU (Ibid: 37). The future Croatian LNG terminal will in the long-run influence the diversity and security of natural gas supply, will reduce CO2 emissions in the region, facilitate economic growth and increase employment (Ibid:

38).

Figure 2.10: Imports by sources in Croatia from 2004 to 2017, in Mtoe.

Energy transition in the Republic of Croatia in relation to the European Union's energy framework