The value of the investment exceeds 140 million euros.

Zagreb, August 22, 2024 - On Wednesday, August 21, 2024, at the exploitation field "Slatina 2," located 15 km from the town of Slatina, Enna's company Geo Power Zagocha began work on the development well Podravska Slatina GT-6 (PSGT-6). The time of exploration in this part of the Pannonian Basin, geologically extremely favorable for the exploration and exploitation of geothermal water, is entering a new phase, and the Geothermal Power Plant Zagocha (GTE Zagocha) project is becoming the geothermal project at the highest stage of development in Croatia. GTE Zagocha will generate electricity from the hot water beneath the power plant's location. The expected drilling depth is an impressive 5000 meters, and this demanding operation is being carried out by the company CROSCO.

The previous day on August 20, the company Geo Power Zagocha entered into an Agreement with the Ministry of Economy for the exploitation of geothermal water at the "Slatina 2" exploitation field for a period of 25 years with the possibility of extension. The conclusion of this contract allows the company to carry out operational works.

Just a year ago, the site of the future power plant was an empty field. With the demanding works carried out so far, it has become a place where high engineering knowledge of highly specialized fields meets. The exploitation field "Slatina 2" is today one of the geologically most exciting locations in the country, a place of innovative technology.

The planned power of the future power plant is 20MW, making it the largest ORC (Organic Rankine Cycle) power plant in the European Union, and the investment value exceeds 140 million euros. ORC technology guarantees a closed, and therefore the cleanest, electricity production system.

ENNA Group has been developing this project since 2022, and the power plant could begin operations as early as 2028. Ivana Ivančić is the director of the company Geo Power Zagocha, and Boris Vidoš is the project manager for the construction of GTE Zagocha. They lead Enna's team that has brought the project to its current phase.

An ideal renewable energy source

Geothermal energy is an ideal renewable energy source. It enables to Croatia to use its own electricity production and thereby contributes to the country's energy independence.

Its advantage over other renewable sources is that electricity production is continuous - 24 hours a day, 365 days a year, and does not depend on weather conditions such as the amount of sun or wind. This fact makes GTE ideal for balancing the power system, which is increasingly connecting unstable RES. Namely, GTEs can decrease or increase electricity production capacity almost in real-time from 100% to 30% capacity, depending on the needs of the power system.

For the local community, GTE is an ideal investment because it occupies a very small land area (the smallest land occupancy relative to its power output, 8 times less than solar and 3.5 times less than wind).

At the same time, GTEs are the most environmentally friendly energy source because they do not affect the surrounding land, meaning there is no pollution or waste to be managed.

For our economy, an additional benefit is the fact that more than 60% of the total investment amount spent on construction remains in Croatia (drilling, construction works, administration and documentation, design…).

At the local level, new jobs are being created, directly impacting the demographics of the local community (15 to 20 employees per power plant, holding a university degree or a high school diploma).

The already used hot water, after the production of electricity and before it cools down, could be used once more for the needs of the local community – in greenhouses, plastic tunnels, drying facilities, fish farming, heating, etc.

It should be particularly noted that compared to other renewable energy sources, GTE provides the largest contributions to the state and local community over the longest period, as the lifespan of the power plant is at least 40 years. Namely, they are allocated 5% of the revenue from the sale of electricity, as well as a fixed fee for land occupancy. In the specific case of GTE Zagocha, it involves annual revenues of more than 500,000 euros in the case of the state and municipality, and around 300,000 euros in the case of the county.

Geothermal potential of Croatia

The natural potential of Croatia for exploiting geothermal energy is extremely large. The Croatian part of the Pannonian Basin, with its geological structure, is an exceptionally favorable area for the exploration and exploitation of geothermal water. According to the data from the Hydrocarbon Agency (AZU), the average geothermal gradient value in the Republic of Croatia is as much as 60% higher than the European average. The rich history of exploration for oil and gas deposits in the Croatian part of the Pannonian Basin has resulted in a large amount of high-quality geological, geophysical, and well data, which can be used to unlock the great geothermal potential of Croatia. Croatia should utilize its natural potential and strategically commit to producing electricity from geothermal sources.

Potential in itself is not sufficient for success

However, the unquestionable potential of the geothermal sector is not sufficient for the successful development of projects. Unlike other forms of renewable energy, primarily solar and wind power, geothermal energy also carries a significant geological risk. Drilling exploratory geothermal wells in search of geothermal water reservoirs underground often means drilling up to 5,000 meters deep, which represents a complex undertaking both technically-technologically and investment-wise. Large and intensive initial capital investments in geothermal energy represents the biggest challenge for investors and the development of the geothermal energy sector itself.

Investment in GTE is significantly greater compared to other renewable energy sources—wind and solar—and the return on investment is longer. Now, the advantages of this renewable resource, which Croatia is rich in, even outweigh those obstacles. Precisely because of the huge initial investment, only large companies appear as investors in geothermal projects. In Croatia, there are only 4 or 5 of them. Namely, the cost of constructing a geothermal power plant per 1 MW of installed capacity is more than 6 million EUR, for solar power it is 0.6 million EUR/MW, and for wind power plants 1.3 million EUR/MW.

The investigative phase lasts 5 years and is extremely expensive. The investment in a single well amounts to around 15 million euros, and typically there are 4 or more wells in one exploration field. This phase is also high-risk because the discovery of a geothermal reservoir is not entirely certain. Precisely due to the aforementioned risks and the complex structure of the investment itself, geothermal projects are unable to attract bank financing during the exploration phase. The exploration phase is fully financed by the investor, while banks are willing to support geothermal projects with loans only once the risky phase has been undertaken, i.e., after the signing of the exploitation agreement and the premium power purchase agreement (PPA).

In Croatia, there are currently around 10 geothermal projects in different stages of development, and last year, 5 new permits for the exploration of geothermal waters were issued.

The only existing geothermal power plant in Croatia, Velika I, is not in operation.

The obstacles that currently prevent the development of geothermal projects, the state, could relatively easily be solved by the end of 2024. The Ministry of Economy (by the end of September) should adopt and accept the NECP (Integrated National Energy and Climate Plan of the Republic of Croatia for the period 2021 – 2030) and in that plan ensure sufficient quotas for the development of geothermal projects. These quotas need to be aligned with the Permits for geothermal water exploration that have already been issued by the Ministry of Economy. Additionally, it is necessary to ensure a premium incentive model for which HROTE should announce a Public Tender for the allocation of a market premium to encourage the production of electricity from renewable sources.

In contrast, due to the complexity of developing geothermal projects, it will not be possible to produce electricity from geothermal sources in Croatia at all before 2030.