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Feed-in tariff and market electricity price comparison: The case of cogeneration units in Croatia

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  • Uran, Vedran
  • Krajcar, Slavko

Abstract

In August 2007, the Government of the Republic of Croatia instituted a feed-in tariff system, requiring the Croatian Electricity Market Operator (HROTE) to off-take the electricity produced from renewable energy sources or cogeneration units fueled by natural gas. Analysis of the off-take electricity price range, which depends on the net electrical output and electricity market trends, indicates that it is more cost effective for cogeneration units greater than 1Â MW to sell their electricity on the exchange market. This was confirmed by developing a mathematical model to calculate the cost-effectiveness ratio of a cogeneration unit. This ratio represents the relation between the profit spread, i.e. the difference between the profit generated from selling the electricity on the exchange market and the profit made from dispatching the electricity to HROTE, as well as the total investment costs. The model can be applied for changes in certain parameters, such as the net electrical output, volatility and spot electricity price. The Monte Carlo method is used to obtain the most probable cost-effectiveness ratio and average future electricity price. Together with these two economic parameters and market price analysis, it is possible to calculate and calibrate an acceptable off-take electricity price.

Suggested Citation

  • Uran, Vedran & Krajcar, Slavko, 2009. "Feed-in tariff and market electricity price comparison: The case of cogeneration units in Croatia," Energy Policy, Elsevier, vol. 37(3), pages 844-849, March.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:3:p:844-849
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    References listed on IDEAS

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    1. Uran, V., 2006. "Optimization system for combined heat and electricity production in the wood-processing industry," Energy, Elsevier, vol. 31(14), pages 2996-3016.
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    5. Westner, Günther & Madlener, Reinhard, 2010. "The benefit of regional diversification of cogeneration investments in Europe: A mean-variance portfolio analysis," Energy Policy, Elsevier, vol. 38(12), pages 7911-7920, December.
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    7. Ramli, Makbul A.M. & Twaha, Ssennoga, 2015. "Analysis of renewable energy feed-in tariffs in selected regions of the globe: Lessons for Saudi Arabia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 649-661.
    8. Radulovic, Dusko & Skok, Srdjan & Kirincic, Vedran, 2012. "Cogeneration – Investment dilemma," Energy, Elsevier, vol. 48(1), pages 177-187.

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