VIABILITY OF BIOMASS-FIRED POWER PLANTS IN CROATIA

Although the prices of fossil fuels are at historically low levels, the dependence on fossil fuels, the high volatility in their prices and the pursuit of sustainable economic development foster the drive to build power plants that use locally available and renewable energy sources. Among the more popular types of power plants using renewable energy sources, which have a great potential in the Slavonia region of Croatia, are the biomass-fired power plants. Instead of the traditional financial valuation methods such as net present value or internal rate of return we use the levelised cost of electricity (LCOE) method to calculate the profitability of biomass-fired power plants. It allows us to calculate the level of electricity prices at which a certain type of power plant is profitable. The purpose of this paper is to investigate the price level of electricity produced in biomass-fired power plants and to compare it with the wholesale prices and feed-in tariffs of electricity produced from biomass in Croatia. The LCOE offers an insight into the production cost of electricity by taking into account the investment costs, cost of capital, fixed and variable operations and maintenance costs and the cost of fuel. We perform the sensitivity analysis by varying the inputs in the LCOE formula. The main objective of this paper is to see whether it is viable to further subsidize power plants using biomass in Croatia, as a type of power plant using renewable energy sources. Based on the obtained LCOE figures, we can conclude that this type of renewable source fired power plant is the most expensive type and that its level of electricity prices is significantly above the market wholesale price. If Croatia wants to increase the production of electricity generated in biomassfired power plants, it should be aware that these cannot function in the open market without continuous and significant feed-in tariffs.