From a group of spiders to a pack of starfish: a critique of the Croatian energy strategy (2010 version)

November 20, 2017

Photo credit: jafsegal (Thanks for the 3 million views) via Visualhunt / CC BY-NC-SA 

 

The Croatian Energy Strategy (CES) is based on building a centralized energy system where power is being generated in few locations, far from end users, in huge facilities. Weather these are run on coal, gas or uranium; all of them have a common weakness; they tend to generate noticeable distribution losses and create a national energy system vulnerable to sudden disruptions in their daily operation. Apart from that, building them takes a lot of time and capital, which is especially true of nuclear reactors.

 

What the Croatian Energy Strategy needs to incorporate is the notion that decentralization is the new trend in energy generation; and a much more efficient one. A distinction between these two different systems can be found in biology.[1]  Centralized systems act like spiders whose neural system is centered in the head. Considering this characteristic, its legs cannot function by themselves. And if we would to cut a spiders leg of we would simply get a less functional spider. However, if you cut a starfishes leg of it will grow back or in some cases evolve into a completely new organism. This is because its neural system is not located in one location but decentralized. Evolution has enabled it to adapt more efficiently to its ever changing environment and survive thorough the years. How does the Croatian energy strategy reflect the above-mentioned metaphor involving spiders and starfish?

 

Building a nuclear power plant as the primary focus of the Croatian Energy Strategy would be like creating just another big spider, with its legs being extended all over the Croatian industry, homes and buildings. Instead, CES should focus on creating incentives for Croatian companies and households to become self-sustained energy units that could rely on energy from the sun, wind, water and earth. In addition, they could use the otherwise discarded thermal energy by converting it into heat for warming homes and buildings or creating electricity and steam in big industrial operations. This energy system would enable Croatia enough flexibility to adapt to an ever changing and worrisome energy future. In addition, there are reasons to believe it would be more economically wise than the strategy currently being proposed. Most importantly, it would have a clear aim at lowering Croatian dependence on fossil fuels and increasing energy efficiency.

 

Although proposing a centralized energy system, the current Croatian Energy Strategy does envision increasing domestic electricity production and has clear goals that stress lowering Croatian dependence on fossil fuels. Its emphasis on increasing renewable energy production is also evident as well as increasing use of cogeneration technologies. However, does the strategy set goals that are reachable given the current economic situation and “paralysis” of the Croatian bureaucratic apparatus? Have there been any developments concerning the proposed objectives? What could be the most promising starfish like alternatives? Looking at the Update/upgrade of the Energy Strategy (UCES 2008) is in order.

 

The Croatian energy strategy (CES)

 

According to the most recent Update/upgrade of the Energy Strategy (UCES 2008, p7), in 2006 Croatia was importing 50% of its primary energy needs, among which 80% accounts for crude oil imports.[2] In order to lower our energy dependence, the new strategy envisions increasing domestic electricity production to levels around 70% of total electricity production. [3]  Currently half of electricity is being generated from hydroelectric power plants, which does not have a considerable potential for growth due to the lack of new locations to construct dams and environmental concerns. Given the projected growth in energy demand, shares of individual sources of electricity production are supposed to change considerably. In achieving that change, the strategy doing so, it proposes constructing a nuclear reactor till 2020 and increasing the share of hydro, solar, wind and biomass. In fact, renewables are supposed to account for 14% of total energy generation among which wind takes up a hefty 1200MW or 77%. In addition to nuclear energy, which is supposed to account for 36% of electricity, the strategy envisions putting its bet on a 600MW coal powered thermal plant. The logic behind this goal is coals vast availability in politically stable parts of the world and its assumed lower price variability. 

 

At first glance, the strategy increases domestic energy production. Nevertheless, with a projected yearly raise in energy consumption of 3,83% and a decrease in domestic fossil fuel production, imported fossil fuels will in 2020 still account for approximately half of Croatia’s energy consumption. Although going in that direction, the energy strategy is far from achieving a much-needed decrease in Croatia’s energy dependence. Interesting to note is the fact that the strategy does not propose any action plan on how the Croatian government plans on achieving its proposed goals. And in the past two years there have been no developments regarding reaching the projected targets. The energy strategy leaves an impression that its creators did not take into account the inert Croatian bureaucratic apparatus.

 

To take a few examples, the Update/upgrade of the Energy Strategy (UCES 2008,p 89) sets a goal to achieve by 2020, the current per capita level of Spain in installed photovoltaic system capacity, which implies an annual growth rate of 68 per cent. [4] Moreover, it is assumed that solar thermal systems capacity will increase at a rate of 47% annually starting from 2010, and converging near the current levels of Germany by 2020. Although, there is significant progress made “on paper” the actual outcomes are intangible. Moreover, the strategies goal to construct 1200MW of wind power by 2020, from the current 17MW, should at least raise a few eyebrows. Although Croatia is blessed with vast natural wind power potential, the above-mentioned goal seems unreachable given the lack of stimulating policy, huge paperwork and the current pace of progress. From 1995 till 2005 the world increased wind capacity by a factor of 12. [5]What makes Croatian policymakers think they can increase it by a factor of 70 in the same time frame and existing environment?

 

Although the natural potential of new renewable energy sources is vast, relying mainly on them to meet our growing energy demand is unlikely. [6] In that respect, alongside Croatia’s ambitious goals in developing renewable energy, the Update/upgrade of the Croatian Energy Strategy focuses on constructing a nuclear power. Although nuclear energy is by far the most productive carbon free energy source, is building a nuclear reactor a feasible option given the state of the Croatian economy?

 

According to the latest figures, Croatia’s economy shrank 5.8 percent last year and would contract a further 1.5 percent this year.[7] Nevertheless, Croatia has managed to finance its budget deficit and past debts by borrowing at foreign capital markets. However, with Croatian bonds being valued close to junk[8], the cost of borrowing is relatively high and might increase if Croatia does not lower its indebtedness. Currently, it is running a public debt of 52,5% of GDP[9] and at the end of 2009 foreign debt was at 95% and the current account deficit at 5,2% of GDP.[10] This means that constructing a nuclear power plant would have to be financed trough further borrowing. A typical nuclear reactor of the size planned by the Croatian government could cost around 5 – 10 billion euro or as much as 10% of current Croatian GDP. Such a huge capital investment would put a large strain on Croatian government finances and endanger the already fragile Croatian economic stability. Thereby, UCES's reliance on domestic nuclear energy production puts in confrontation two Croatia’s strategic goals - securing energy supply and alleviating the current fiscal crisis.

 

In assessing the cost effectiveness of building a nuclear power plant, the strategy assumes nuclear energy to be the cheapest source of electricity. However, is this in alignment with recent findings on the price of nuclear in comparison to other energy sources? Recent data compiled from a number of US government agencies, Wall Street rating agencies and individual researchers indicates that there are a number of low carbon sources that are less costly than nuclear energy;[11] these include cogeneration, biomass, geothermal, wind, solar thermal and natural gas. The research argues that nuclear reactors end up being up to four times more expensive than initial investment projections. This is due to “high capital costs and long construction lead times, which makes nuclear reactors a risky source of electricity, vulnerable to financial, market and technological changes”. In addition, another research indicates that the price of nuclear energy increased because of 1) an escalation in the price of building materials (nickel, copper, cement and steel) 2) lack of educated work force and 3) there are only two companies that provide build and install some specific parts of a nuclear reactor which gives them the ability to increase prices. [12] In addition, some studies that compare the price of solar and nuclear energy indicate that these have equaled in price.[13] Although, these conclusions are based on the US energy market it should provide an incentive to revise the current energy price estimates provided by UCES.

 

Another concern is the feasibility of constructing a nuclear power plant till 2020, as projected by UCES. Since the strategies acceptance in 2008 there have been no developments that would signal the start of construction.  In addition, the public is very averse to a nuclear reactor being built in their vicinity, which is generally known as the “Not In My Back Yard” syndrome. This might delay construction even further, which could have negative effects on our economy and energy independence. Until 2020, Croatia will decommission around 30% of its current capacity (UCES p 36). Delays in constructing the nuclear plant would cause the Croatian current account deficit to deteriorate, as we would be forced to import more energy. But as the article arguments, the very outcome of the project would be further deterioration of Croatian public finances.

 

From a group of spiders to a pack of starfish 

 

Instead of relying on huge capital investments, the Croatian government might focus on increasing the proximity of energy sources to its end users. A greater use of decentralized energy sources, such as efficiency technologies and renewable energy would have various positive effects.

 

One of the main advantages are huge energy savings, that are achieved trough smaller distribution losses and more efficient burning of fossil fuels. For instance, a typical coal-powered power plant, such as the ones advocated by the Croatian energy strategy, turns only 30 – 40% of fuel consumed into electricity.

These large, centralized power plants generate losses by producing a huge amount of “waste heat” that is being discarded. This thermal energy cannot be put into good use since the power plants are located far from end users. On the other hand, Combined Heat and Power (CHP) or Cogeneration facilities can generate electricity and useful heat at the same time, and use it for hot water of space heating. This is because they are located near end users, which is why we associate them with decentralized energy production. Micro Combined Heat and Power units can even be installed in homes or small commercial buildings. In effect, these technologies can increase the efficiency of energy generation to levels in the range of 60 to 90%. In an energy importing economy such as Croatia, using energy more efficiently can add to lowering our dependence on fossil fuels from politically unstable parts of the world.

 

Another use of “waste heat” can be found in energy intensive industries such as cement, blast furnace coke, glass and petrochemical production. These industrial processes generate heat losses that can be reused to produce steam or electricity in a process called Industrial Waste Energy Recycling.  Electrical energy so generated can be used in the industrial process itself, thus substantially increasing its energy efficiency, or sold thus generating an extra profit for the technologies owners. In fact, some companies like Mittal Steel, the biggest steel-making producer in the world, have recognized the potential of this technology and are using it in their blast furnace coke making facility in Gary, Indiana. It is estimated that this facility alone can produce up to 90MW of electricity, which would be enough to power around 77000 US homes. [14]   

 

Since these technologies generate much more useful energy from the same amount of fossil fuels and decrease distribution losses, generated trough delivering energy over long distances, they are far more cost effective than centralized energy production. Moreover, they are more cost effective than other low carbon energy sources.[15]   

 

The potential of energy recycling technologies is vast as some countries with large demand for heat, like Denmark, rely on it for more than 50% of generated energy. Currently Croatia utilizes cogeneration for 18% of total electricity production.[16] However, there is still substantial room for growth. Electricity production in industrial cogeneration could increase the most, with growth of up to 53% till 2020. The largest potential is seen in the most energy intensive industries such as chemical refineries and production of building materials, where Industrial Energy Recycling could be utilized. According to some estimates energy efficiency technologies could provide 30% of electricity needs in 2020.[17] However, a lack of crystal clear and stimulating policies hinder any larger investments. 

 

The largest downside of a wider use of CHP and Industrial Waste Energy Recycling is their reliance on natural gas as a fuel source. Since Croatian natural gas reserves are expected to decline, a wider use of these technologies would increase natural gas imports. However, this could then prompt a greater use of biogas derived from waste as a substitute fuel. With a set of right policies Germany has increased its biogas CHP tenfold in the last 10 years and it plans to do the same until 2020.[18]

 

However, renewable energy technologies do not operationally rely on fossil fuels, which is why their wider use could be even more beneficial if their price continues to decline and research and development bears fruit. The natural potential of these sources, especially energy from the Sun, is the largest among renewables (Nature, Vol 454/14 August 2008), which is why the above-mentioned goals set by the Croatian energy strategy, could even be reached with a change in policy. According to some estimates solar energy accounts for 55,7% of unused economic potential of renewable energy in Croatia (Potočnik, 2006). The largest potential for its development lies along the Croatian coast, since it is highly insulated and the peak of the summer tourist season, when energy demand increases the most and coincides with the peak of solar radiation. When it comes to decentralizing energy production, this energy source is attractive because it can be installed piecemeal – house by house and business by business. Given the fact highlighted in UCES (2008, 20), that household are the biggest individual energy consumer in Croatia, providing a greater financial and legal stimulus to installation of solar thermal systems and photovoltaics could lead to great energy savings.

 

Over the last two decades, the cost of manufacturing and installing a photovoltaic solar-power system has decreased by about 20 percent with every doubling of installed capacity. Additionally, the rapid development of solar energy industry in China and India, as well as their lower production costs, could stimulate a further drop in solar energy prices which would lead the industry, in order to stay competitive, to decrease the production cost of photovoltaics and solar thermal power. Also, the fight for market share is inducing companies to invest heavily into R&D. Increased research is expected to solve solars current technical disadvantages; increasing the currently low capacity factor and address the problem of high variability in energy production, due to changing weather and darkness.

 

Conclusion

 

Apart from more efficient energy use and lowering Croatia’s dependence on fossil fuels, decentralized energy production would benefit the economy by creating a chain of larger added value for local communities. In other words, Croatian companies might reap larger benefits than would be the case if Croatia would build the currently proposed centralized power plants.[19] Further, it would create a more flexible energy system that is less vulnerable to exogenous changes and lower greenhouse gas emissions thus benefiting the environment.

 

Weather these technologies might be relied upon to ensure Croatian energy future is not certain. However, with a change in energy policy that would make decentralized energy technologies more price competitive, the Croatian government could create an environment where Croatian energy independence and low carbon energy future might be more likely. With these changes the Croatian energy system could start its metamorphosis from being a group of spiders to becoming a pack of starfish.

 

*This article was first published in Tipping Point of the Heinrich Boell Foundation in September 2010

 

 

[1] Brafman O., Beckstrom R., 2006, The Starfish and the Spider:The Unstopable Power of Leaderless Organizations,

 

[2] Primary energy is energy found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels as well as other forms of energy received as input to a system

 

[3] Includes 22% from hydro, 14% from solar, wind, biomass and geothermal energy, and 36% from nuclear. The rest would be derived from coal and natural gas which would mainly be imported. 

 

[4] Spain was in 2008 second in Europe with 3400 MWp of Photovoltaic total capacity

 

[5] Horvath L., Karadža N., 2007, Primjena i korištenje energije vjetra, Energetski institut Hrvoje Požar

 

[6] MacKay, 2009, Sustainable Energy – without the hot air

 

[7] UPDATE 1- Croatia GDP to keep shrinking - central bank head, http://in.reuters.com/, July 7, 2010

 

[8] http://www.hnb.hr/

 

[9] Ukupni javni dug raste, sada je već na 52,2 posto BDP-a, http://www.vecernji.hr/, August 12, 2010

 

[10] http://www.hnb.hr/statistika/hstatistika.htm

 

[11] Cooper M., 2009, The Economics of Nuclear Reactors, Renaissance or Relapse?, World Information Service on Energy

 

[12] Harding J., 2008, Overnight Costs of Nuclear Reactors, Green Energy Coalition

 

[13] Blackburn J., Cunningham S., 2010, Solar and Nuclear Costs – The Historic Crossover, Waste Awareness & Reduction Network

 

[14] Đukan M., 2010, Mitigating Industrial Black Carbon Trough Energy Recycling, Climate Alert Volume20, No 2, Spring 2010, The Climate Institute 

 

[15] Casten T., 2010, Using Energy Twice – How energy recycling curbs both global warming and power costs, Recycled Energy Development

 

[16] Ministarstvo gospodarstva, rada i poduzetništva, 2009, Nacionalni potencijal kogeneracije u Republici Hrvatskoj

 

[17] Potočnik V., Unused Energy Resources of Croatia, Croatian Energy Society

 

[18] CHP/DHC Country Scorecard: Germany, The International CHP/DHC Collaborative

 

[19] Preveden V., Energetska neovisnost uz nove poslove i izvoz, http://www.liderpress.hr/, April 2009

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