Croatia - the most recent member of the EU and what this means for connecting to European energy markets
How can Croatia's neighbouring countries benefit from Croatia's experience in market liberalization?
14.02.2017.Unlike the Western European market, which has diversified supply routes and developed infrastructure, Southeast Europe lacks interconnection with a bidirectional flow and access to the LNG market; national markets are relatively small and transmission networks are not harmonized from a technical and legal point of view. The entire region also depends on one source of gas - Russian.
Realising the set goal under such conditions is a complex and time consuming process.
Activities related to the liberalization of the gas market in the Republic of Croatia began in the second half of the last decade and they are still in progress (households).
From a legal standpoint Croatian natural gas market has been liberalized since 2008, but it has remained closed in the subsequent years due to a number of factors; lack of secondary legislation, regulated prices and presence of a single supplier of household and business customers. This de facto monopoly situation disappeared when two key requirements were achieved: the construction and the commissioning of the second Croatian interconnector with Hungary (Drávaszerdahely) and further development of regulatory framework which removed existing problems of legal provisions in real situations.
From our experience market deregulation in Croatia allowed competition in the open market; introduced new knowledge, created new jobs, contributed to further business growth, allowed Croatian companies entry into European energy markets, lowered prices and improved contractual conditions for customers (new products introduced into the market).
Besides these obvious advantages of the market liberalization, Croatian gas market still faces a series of challenges such as a lack of daily consumption diagrams and low level of technical development of certain distribution systems which presents a barrier to full market liberalization.
These challenges point to the inevitable question - is the current number of suppliers/distributors sustainable as existing problems in the gas market are already resulting in potential bankruptcies which leave the stability of gas supply vulnerable.
We can say that energy regulations in Croatia, and up to a certain point in the region, did manage to achieve the primary aim - compliance with the Third Energy Package. However, it is essential to appreciate realistic market conditions. Legislative framework should be planned in advance taking into account impacts that new regulations have on all market stakeholders.
It is necessary to invest in distribution systems and natural gas transport (bidirectional flow) in order to develop gas markets in the neighbouring countries. It is crucial to enable sustainability of market actors and to regulate and control realisation of investments in the system. Gas consumption is steadily decreasing which has lead to falling revenues for all market subjects. Poor economic conditions and adverse financial situation of business subjects inevitably leads to iliquidity. Unfavourable financial environment inhibits development making market opening even harder.
Further development of gas markets in the neighbouring countries members of the Energy Community will be enhanced with when national virtual trading points become operational and when balancing energy market is established.
All stakeholders must invest in software development in order to meet new standards in service provision. Development of IT systems in these new business conditions is a prerequisite of market development. Additionally, we must engage in planned education and training for all stakeholders.
Besides these real operative challenges Croatian market also suffers from the absence of national energy strategic framework. The shortage of key infrastructure as well as the ability to reach the desirable level of gas supply stability must be managed by national energy strategic framework. Stronge
