Recent research published in the journal ‘Energies’ has shed light on the profitability of solar power investments in Slovenia, revealing critical insights into how financial support mechanisms and geopolitical factors shape the energy landscape. The study, led by Iztok Gornjak from Borzen, Power Market Operator, emphasizes the growing importance of solar energy as the European Union pushes for a transition away from fossil fuels.
As Slovenia recently surpassed 1 GW of installed solar capacity, representing only a fraction of the EU’s cumulative total, the research raises pertinent questions about the sustainability of these investments amid fluctuating market conditions. Gornjak noted, “The choice between guaranteed purchase (GP) and operational support (OS) systems is crucial for investors. While GP offers stability with fixed prices, OS allows for greater adaptability to market fluctuations, which can lead to higher returns.”
The analysis covers the period from 2009 to 2024, during which significant global events, including the COVID-19 pandemic and the ongoing conflict in Ukraine, have influenced electricity prices. Interestingly, the pandemic had minimal impact on the market, while the Ukraine conflict has led to soaring electricity prices, reaching as high as 512 EUR/MWh before regulatory adjustments brought it down to 180 EUR/MWh in 2023. This volatility has prompted a reassessment of the effectiveness of the GP and OS systems in fostering investment.
The findings indicate that the OS system has outperformed GP by an average of 5,480 EUR (4.6%) over the analyzed period, a trend attributed to the rising market prices. “In times of economic instability, the OS model has proven to be more profitable, especially with the current energy market dynamics,” Gornjak explained. This adaptability is crucial, as it allows investors to capitalize on favorable market conditions while navigating the uncertainties that geopolitical tensions can create.
However, the study also highlights the potential pitfalls of the OS system, including concerns about over-rewarding investors as prices surge. The challenge lies in balancing support mechanisms to ensure they remain sustainable in the long term. Gornjak suggests that “adjusting fixed tariff rates in line with inflation or linking them to market benchmarks could enhance the attractiveness of GP, especially if market conditions stabilize.”
As Slovenia and the broader EU aim for a decarbonized future, understanding these financial dynamics becomes increasingly vital. The research calls for a nuanced approach to support mechanisms that not only incentivize investment but also align with the overarching economic goals of sustainability and fairness.
This exploration into the profitability of solar investments in Slovenia not only informs local stakeholders but also provides a valuable framework for other nations grappling with similar challenges in the renewable energy sector. As the landscape evolves, the insights from Gornjak’s research will undoubtedly influence future policy decisions and investment strategies, ensuring that the transition to renewable energy remains both economically viable and environmentally responsible.
