Czech Solar Subsidies High

Following recent reports that electricity prices in the country could go up significantly to pay for government solar subsidies, a number of government measures are in the works that would reign in the solar industry while meeting goals to produce 13 percent of energy from renewable resources by 2020.

The National Action Plan (NAP), passed in draft form last Wednesday by the Cabinet, would set output limits for renewable energy sources. Once the caps are exceeded, further renewable energy plants would be ineligible for subsidies.

In addition to the NAP, the Environment Ministry recently proposed to raise the fee misusing potentially arable land sixfold. Although the Environment Ministry told The Prague Post in an e-mail the change was to protect agricultural land from overdevelopment in general, not just from the use for solar companies, the measure would de facto discourage solar companies from buying large tracts of land to install solar panels.The two measures come on the heels of forecasts that electricity bills next year are expected to grow around 10 percent to 20 percent for households, and 30 percent for businesses, the result of the government's growing bill for paying out subsidies to renewable energy plants.

Eva Nováková, a spokeswoman for ČEZ, said the NAP would allow the renewable energy market to stabilize. Currently, she said, the solar boom has forced ČEZ to pay an additional 2 billion Kč for electricity from solar plants, as mandated by the government.

"The main benefit of [the NAP] should be the stabilization of the business environment in the area of renewable energy sources, an increase of the attractiveness of these sources for investors and creating conditions to balance the development of renewable energy sources in the Czech Republic," Nováková said.

According to Pavel Vlček, a spokesman for the Industry and Trade Ministry, the government spent a total of 3.08 billion Kč on renewable energy subsidies in 2009, is expected to pay 7.76 million this year, and will pay even more next year, because of the solar boom. These increases, Vlček said, will raise electricity bills for families who use electricity for lighting only by 2,800 Kč per year, and for those who use it for additional utilities, bills will go up another 6,300 Kč.

Jarmila Lehnerová, a spokeswoman for the Energy Regulation Authority (ERÚ), the body that sets the fees on electricity bills that support subsidies, said in an e-mail that the fee consumers will see on their bills in 2011 has yet to be calculated. The ERÚ expects to receive a higher number of applications for licenses to produce solar energy this fall, which will contribute to a significant increase in solar capacity by the end of the year, she added. Production from solar plants this June, she said, was 8.8 times greater than the same time last year.

The Czech Republic experienced a boom in solar plants, becoming the third-largest producer of solar energy in Europe because of feed-in tariffs created for the promotion of renewable energy. However, the tariffs had a built-in price decrease of 5 percent per year for solar plants, based on the anticipated decrease in solar technology prices. Those prices, however, dropped much faster than anticipated, about 30 percent to 40 percent since the tariff was introduced, said Jan Tomaník, an analyst at Prague-based brokerage Wood & Company. That made investment into the solar industry extremely lucrative and attracted multitudes of foreign investors and a flood of investment.

"The lawmakers made a mistake by setting a maximum year-on-year decline for feed-in tariffs and now the money, for the next 20 years, is coming out of the consumers' pockets and going into the pockets of people who secured the land, construction permits and funding to build up these solar power plants," he said.

The government is currently weighing a draft amendment to the renewable policy that would further limit the solar industry. The ERÚ has said it would cut feed in tariffs for solar power to 6 Kč/kWh from the current 12 Kč/kWh. By the end of the year, Tomaník said he expects 1,200 megawatts will be added to the solar capacity in the rush to take advantage of the current situation. Those plants that are established before the end of the year will have the original feed-in tariff conditions for the next 20 years.

As of Aug. 1, there were 9,600 solar plants in operation in the country, Vlček said, with a total capacity of 620 megawatts. He said it was expected that the number of solar plants in 20 years is expected to reach 21,000, with a total capacity of 1,650 megawatts.