Czech committee fails to adopt recommendations on curbing payments to supported energy sources

The Chamber of Deputies’ Economic Affairs Committee today failed to adopt any recommendations on four amendments to the Energy Act that are intended to help limit payments from the state budget to supported energy sources (POZE). The government has earmarked 8.5 billion crowns for them next year. Not enough MPs voted either for or against the proposals. Regardless of the outcome of today’s committee vote, the full Chamber of Deputies will decide on them at the third-reading stage. This could take place at the Chamber’s next session, which begins on Tuesday, 19 November.

Among other things, the government wants to assess the profitability of operating solar power plants more precisely and on an individual basis, particularly those commissioned in 2009 and 2010. Subsidies will be provided only after that assessment. For example, operators of solar power plants commissioned between 2009 and 2010 will have to inform the market operator each year by 15 December whether they will be entitled to support the following year.

However, the proposals to reduce support have met with opposition from industry representatives and photovoltaic operators. Three foreign investors are already preparing lawsuits against the Czech Republic over the plans. The parliamentary opposition has also warned against cutting support. Prime Minister Petr Fiala (ODS) told the Chamber of Deputies last week that if the support cannot be reduced through a change to the law, the state will have to make up the difference next year.

Committee chair Ivan Adamec (ODS) confirmed that he had submitted the amendments at the request of Industry Minister Lukáš Vlček (STAN) and Finance Minister Zbyněk Stanjura (ODS). He noted that every government had tried to roll back support for renewable energy sources.

Representatives of the Confederation of Industry and Transport, the Solar Association and the Czech Chamber of Commerce rejected the amendments at today’s committee meeting. A representative of the Solar Association said, among other things, that the proposals contained factual errors. According to Zuzana Krejčiříková of the Chamber of Commerce, the proposals do not pass the constitutional review. František Chaloupecký of the Confederation of Industry and Transport said they would seriously damage the business environment.

However, Stanislav Kouba, a senior director at the Ministry of Finance, said that the measures selected meet constitutional and legal requirements. In response to a question from ANO MP Berenika Peštová, he said the documents that energy-source operators would need for individual assessments would be the same as those required for sector-wide assessments. Peštová pointed out that solar installations are located, for example, at kindergartens and social care facilities, and questioned how such organisations would calculate their internal rate of return.

The Supported Energy Sources Act currently stipulates that electricity support is reasonable if the internal rate of return on investments over the period of entitlement to support—in other words, the return on investment—does not exceed a range of 8.4 to 10.6 percent. Support above this level is considered unreasonable. The government has now proposed, through Adamec, that the internal rate of return be determined by the type of energy source and the period in which it was commissioned.

Last year, the state provided 25.3 billion crowns in subsidies for the operation of supported energy sources, according to data from the Electricity Market Operator (OTE). This was the lowest amount since 2010, nearly 14 billion crowns less than the year before.

The amendment to the Energy Act, nicknamed Lex OZE III, changes the rules for electricity storage and for aggregating its generation and consumption. The amendment is also expected to give customers an independent electricity price comparison tool and introduce other consumer protection measures. The comparison tool will allow users to compare electricity and gas supply offers, including contracts with spot prices.