## 3 Results and Discussion  
### The Merit Order of Power Plants  
After the start of the War in Ukraine, Europe has been affected by growing gas and electricity prices. The cost of gas has significantly increased because Russian gas has been replaced with more expensive alternatives, mainly liquefied natural gas (LNG). Although less than 40% of the EU's electricity is generated by fossil fuels, electricity prices went up, too, following the merit order principle. Figure 2 depicts the merit order of electricity producers in Croatia, assuming fuel and carbon prices from the last quarter of 2024.  
Renewable energy power plants (wind, solar PV, and hydro) achieve marginal costs near zero and are the first to be brought online. Nuclear energy has low marginal costs, second only to renewable energy power plants. Figure 2 includes the Croatian half (348 MW) of the nuclear power plant in Krsko (Slovenia), a co-owned venture by Slovenia and Croatia. Since nuclear power is a baseload energy source with continuous and predictable output, they are price-takers on the energy market. The marginal cost of nuclear energy is around 20 \(\epsilon/\mathrm{MWh_{el}}\)[47; 48]. Price-taking is particularly risky in a market with increasing shares of low-cost variable renewable energy. This is the reason why small modular and flexible nuclear reactors (SMR) are currently under development and should gradually replace traditional nuclear power plants.  
Fossil-fired power plants are the last to be brought online because of high marginal costs. In Q4/2024, the average cost of hard coal was 16 \(\epsilon/\mathrm{MWh_{th}}\)[49], while that of natural gas was 41.5 \(\epsilon/\mathrm{MWh_{el}}\)[50]. This is converted into 42 \(\epsilon/\mathrm{MWh_{el}}\) for hard coal and 83 \(\epsilon/\mathrm{MWh_{el}}\) for natural gas, assuming average efficiency of 38% for coal-fired units and 50% for CCGT units. Carbon emissions were priced at 68 \(\epsilon/\mathrm{t}\) in Q4/2024 [51]. The carbon intensities are 0.232 \(\mathrm{t_{CO2}}/\mathrm{MWh_{th}}\) for natural gas and 0.368 \(\mathrm{t_{CO2}}/\mathrm{MWh_{th}}\) for hard coal [52]. The costs of carbon emissions for electricity from natural gas and hard coal were 27 and 68 \(\epsilon/\mathrm{MWh_{el}}\), respectively. Electricity generation from CCGT and coal fired units achieve comparable marginal costs: 108-115 \(\epsilon/\mathrm{MWh_{el}}\) and 117 \(\epsilon/\mathrm{MWh_{el}}\), respectively. The marginal costs of oil-fired and OCGT units are higher: between 170 and 290 \(\epsilon/\mathrm{MWh_{el}}\) and around 210 \(\epsilon/\mathrm{MWh_{el}}\), respectively.  
At the moment, the fossil-fired capacity in Croatia includes 800 MW in CCGT, 200 MW in one coal-fired power plant, 350 MW in oil fired units, and 100 MW in OCGT. Only the four most efficient CCGT units (700 MW) and one coal-fired power plant (200 MW) are operational since they achieve the lowest marginal costs. When renewable energy generation is low, the necessary demand is met by import electricity. The oil-fired and OCGT units, of which the generation is more expensive than import electricity, would operate only in case of emergency.  
Figure 2: Marginal costs of power plants in Croatia (CCGT: combined cycle gas turbine, and OCGT: open cycle gas turbines).  
The intersection between the cost and the demand curves determines the last power plant to enter production according to the merit order principle. This power plant is also called the marginal power plant and does not operate at a profit but only recovers its variable costs. Power plants generating below the marginal cost are inframarginal power plants and the difference between the market price and the marginal costs is the profit which enables them to recover the fixed investment costs. Above the marginal costs, supramarginal power plants remain offline because they would generate electricity at a loss.