Zagreb, August 22, 2024 - On Wednesday, 21 August 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 exploration in this part of the Pannonian Basin, a geologically extremely favourable location 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 most advanced geothermal project 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 20 August, the company Geo Power Zagocha signed an Agreement for the Exploitation of Geothermal Water with the Ministry of Economy for the "Slatina 2" exploitation field for 25 years, with the possibility of extension. Signing this agreement allows the company to carry out exploitation works.
Just a year ago, the site of the future power plant was an empty field. Today, due to the demanding work carried out so far, it has become a place where advanced engineering knowledge from various highly specialized fields converges. The exploitation field "Slatina 2" is one of the geologically most exciting locations in the country today, and it is 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 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 power system's needs.
GTE is an ideal investment for the local community 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 because they do not affect the surrounding land, meaning there is no pollution and no waste to be managed.
An additional benefit for our economy is 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 local community's demographics (15 to 20 employees per power plant, holding a university degree or a high school diploma).
After the production of electricity, and before the already used hot water cools down, it could be used once more for the local community's needs – in greenhouses, plastic tunnels, drying facilities, fish farming, heating, etc.
It should be 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 power plant's lifespan 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. The specific case of GTE Zagocha 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
Croatia's natural potential for exploiting geothermal energy is exceptionally high. The Croatian part of the Pannonian Basin, with its unique geological structure, is an especially favourable area for the exploration and utilisation of geothermal water. According to 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. A rich history of oil and gas exploration in the Croatian part of the Pannonian Basin has resulted in a wealth of high-quality geological, geophysical, and well data, which can be leveraged to unlock Croatia's considerable geothermal potential. Croatia should take advantage of this natural asset and strategically commit to producing electricity from geothermal sources.
Potential Alone Is Not Sufficient for Success
However, the undeniable potential of the geothermal sector is not, on its own, sufficient for the successful development of projects. Unlike other forms of renewable energy, such as solar and wind power, geothermal energy carries significant geological risks. Drilling exploratory geothermal wells to locate underground reservoirs of geothermal water often involves drilling as deep as 5,000 metres, a highly complex undertaking both technically and financially. The substantial and intensive initial capital investments required for geothermal energy represent the greatest challenge for investors and the development of the sector itself.
Investment in geothermal energy is significantly greater compared to other renewable energy sources, such as wind and solar, and the return on investment takes longer. Nonetheless, the advantages of this renewable resource, of which Croatia has an abundance, even outweigh these obstacles. Due to the substantial initial investment, only large companies are capable of investing in geothermal projects. In Croatia, there are currently only four or five such companies. For instance, the cost of constructing a geothermal power plant per megawatt (MW) of installed capacity exceeds €6 million, compared to €0.6 million/MW for solar power and €1.3 million/MW for wind power plants.
The exploratory phase lasts five years and is extremely costly. The investment required for a single well is approximately €15 million, and typically four or more wells are needed within a single exploration field. This phase is also high-risk, as the discovery of a geothermal reservoir cannot be guaranteed. Because of these risks and the complex investment structure, geothermal projects are unable to secure bank financing during the exploration phase. This phase must be entirely financed by the investor, while banks are only willing to support geothermal projects with loans after the high-risk phase has been completed—specifically, following the signing of an exploitation agreement and a premium power purchase agreement (PPA).
Current Status and Future Development
In Croatia, there are currently around 10 geothermal projects at various stages of development. Last year, five new permits for the exploration of geothermal waters were issued.
The only existing geothermal power plant in Croatia, Velika I, is not operational.
The obstacles currently hindering the development of geothermal projects could, in theory, be resolved by the state relatively easily by the end of 2024. The Ministry of Economy should, by the end of September, adopt the NECP (Integrated National Energy and Climate Plan of the Republic of Croatia for the period 2021–2030). This plan must ensure sufficient quotas for the development of geothermal projects, aligned with the exploration permits for geothermal water already issued by the Ministry of Economy. Furthermore, a premium incentive model must be introduced, for which HROTE should announce a public tender to allocate a market premium and thereby encourage electricity production from renewable sources.
If these measures are not taken, the complexity of geothermal project development means that producing electricity from geothermal sources in Croatia will not be feasible before 2030.
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