Association: New conditions for solar power plants are ruinous, Czechia faces arbitration

Czechia faces arbitration proceedings with foreign investors over the newly approved amendment to the Energy Act, the Solar Association of the Czech Republic says. The amendment, which introduces new conditions for operators of older solar power plants, is, it says, in breach of Czech and European legislation and will threaten the future development of renewable energy sources in Czechia. The Ministry of Finance has previously said the measure merely strengthens checks and that it is not concerned about potential arbitration proceedings.

On Tuesday, the Chamber of Deputies approved an amendment to the Energy Act that, among other things, introduces new requirements for operators of domestic solar power plants. Solar power plants with a capacity of over 30 kilowatts commissioned in 2009 and 2010 will now be subject to individual profitability checks.

The government says the measure is intended to save money from the budget for supported energy sources (POZE). The state plans to allocate 8.5 billion crowns to renewable energy sources this year, the same as last year, significantly less than in the original proposals. The state has paid subsidies for POZE since 2006, disbursing a total of more than CZK 538 billion by 2023. Consumers have paid hundreds of billions more through their electricity bills; according to calculations by XTB analyst Jiří Tyleček, the amount was approximately CZK 364 billion excluding VAT.

„Czechia has made it clear that there is no predictability here and that laws are changed without a coherent approach, at the last minute and without any consultation. In this environment, we want companies to invest in new power plants – not only renewable ones, but also gas-fired and other plants. This move threatens the state with losses of billions, undermines companies’ competitiveness and delivers an unprecedented shock to banks. Three foreign investors are already preparing arbitration proceedings,“ said Jan Krčmář, executive director of the Solar Association, today.

According to the association, the amendment imposes bureaucratic requirements that most entities cannot meet, under threat of losing support and facing fines of up to 50 million crowns. Krčmář said the state had already conducted checks between 2019 and 2021. „Even then, hundreds of entities had enormous difficulty compiling the large amount of documentation required for the report,“ he noted.

The new conditions were also criticised by Jan Fousek, head of the AKU-BAT Association for Energy Storage. „The amendments will have a devastating impact on thousands of business owners and entities with their own solar installations,“ he said. Fousek said the amendment could have a critical impact on the further development of domestic renewable energy sources, as investors may prefer to choose other destinations in the future because of the changes to the conditions.

Operators of the solar power plants concerned will, for example, have to inform the market operator by 15 December each year whether they will be entitled to support in the following year. The profitability of investment in a renewable energy source will now be based on the lifetime of the equipment, rather than the duration of the right to support. The law currently in force sets the support threshold at a rate of return ranging from 8.4 to 10.6 per cent.