Double KO for Czech solar industry

It was executed despite of protests, a petition and legal analysis, proving that such an amendment is not in keeping with both EU and Czech Republic’s legislation. On the same day, the energy regulator officially announced a new feed-in tariff (FIT) for 2011, which represents a 50 percent drop compared to current prices.

The solar tax will be charged from FIT revenues to be paid to solar investors who commissioned their solar plants with installed capacity over 30 kWp in 2009 and 2010 respectively. It will be valid only for three years (2011-2013). The tax will vary from 26 percent (FIT for sold power to grid operators) to 28 percent (so-called Green Bonus payments for electricity produced and consumed in the consumption place).

According to analyst Dirk Morbitzer of Renewable Analytics, who spoke with pv magazine at the Forum Solarpraxis, currently being held in Berlin, "with the introduction of the solar tax, the Czech PV market is dead". He added that the investors lose confidence in both policy and legislation. According to his estimates, around 1.5 gigawatts (GWs) of PV has been installed in the Czech Republic over the last two years, of which 1.2 GWs was installed this year. In the coming year, he said, it is to be assumed that no more considerable investments in PV are to be expected in the country.

Shock for investors

Czech investors have been actively protesting and acting against the imposition of the tax for over three weeks. They organized a live protest in front of the seat of the Czech Parliament and initiated a petition, which was signed by more than 500 solar companies in the country. In doing so, they had hoped the Parliament would not pass this controversial amendment.

Senate will decide

Despite both protests from EPIA and a written legal analysis performed by Prague law office Glatzova and Co., the lower house of the Czech Parliament approved the solar tax on November 9.

In the course of next few days the relevant piece of solar legislation will be discussed and approved in the Senate (the upper house of the Parliament), before it is finally approved by the President of the Czech Republic.

Czech senators are likely to pass this solar legislation soon.

New electricity tariffs will decrease

The Czech public has been scared by a possible increase in the electricity prices by 20 percent due to the solar boom in the country. This "anti-PV" campaigning has been fed by mass media since November 2009.

However, E.ON (one of the biggest electricity distributors) has announced that its new electricity tariffs for 2011 will be largely reduced. That means that the Czech public has been cheated. The solar boom will have only marginal impact on electricity prices. The strange fact is that E.ON reported the new (lower) tariffs shortly after the decision of the Czech Parliament regarding the solar tax.

FIT reduction

The Energy Regulation Office (ERU) of the Czech Republic declared new FIT for 2011 on November 9 – 30 minutes after the Czech politicians approved the solar tax. The timing of this act of ERU looks like a double KO for Czech PV.

The first reason is the very questionable solar tax, the second reason is the reduction of new tariffs by 50 percent for PV systems over 100 kWp. According to ERU, current investment costs of such systems are on the level of 50 000 CZK/kWp. Therefore, ERU set the price to CZK 5,50/CZK, which is by far the lowest in Europe.

Additionally, many investors and developers feel it is impossible to construct such PV systems at the above listed costs provided that they are made of good quality components. It looks like that ERU set this price in order to discourage new investors from building big PV systems in the near future.

The tariff for small PV systems of CZK 7,50/kWh is also relatively low, but acceptable. It corresponds to similar prices in Germany. “I think this tariff is OK for small rooftop systems and it will enable a reasonable development of this segment in the Czech Republic in 2011,” Gerhard Travnicek, managing director of IBC Solar CZ said in a short interview.

Investor uncertainty

The introduction of the solar tax and other retroactive measures (e.g. end of tax holidays, change of write-off schemes for existing and new PV plants) has triggered outrage among the owners and operators of PV systems, and caused investors to flee solar energy investments.

I have heard that several investors decided not to continue in their plans to build new PV plants in the Czech Republic, despite the generous current FIT.

Over 500 Czech and foreign investors that also signed the petition against the imposition of the solar tax, have warned the politicians that rewriting the rules would jeopardize confidence in all Czech assets. They also confirmed that they will initiate arbitrages against the Czech Republic due to the solar tax.

Will EU intervene?

Many investors hope that EU will soon intervene (like in Spain in May 2010) against the decision of the Czech government to impose the solar tax. The local photovoltaic association has already written a letter to European Commission asking for its intervention.

At this point of time, it is impossible to predict whether the EU will intervene before the new amendment is approved by the Senate during next several days.

But there is one sure thing: all damaged investors will be fighting intensively against the imposition of the solar tax till the very end. Should the solar tax be approved, the Czech Republic will be facing the biggest wave of solar arbitrages in its history. Unfortunately, such a piece of legislation is already undermining confidence in the Czech Republic as a safe and predictable place for foreign direct investment.