Czech state support for renewables likely to fall as restrictions approved by lower house today

State support for renewables provided from the state budget may be reduced. The law is likely to introduce more precise, individual assessments of the profitability of solar power plants with a capacity of more than 30 kilowatts that were commissioned in 2009 and 2010. Their operators will, for example, have to inform the market operator every year by 15 December whether they will be entitled to support in the following year. These measures are included in government amendments that the Chamber of Deputies added to an amendment to the Energy Act today. They still need to be approved by the Senate and signed by the president. The amendment was originally intended mainly to introduce rules for electricity storage and aggregation into legislation.

The state plans to allocate 8.5 billion koruna to renewable energy sources next year, the same as this year. Not only the opposition ANO movement opposes the reduction in state support; representatives of the renewable energy sector have also warned against it. Some investors are already seeking to initiate arbitration proceedings against the state as a result.

Support was set to fall even further, but today MPs rejected a proposal to reduce the maximum internal rate of return—essentially the return on an investment—to 8.4 percent. This is the threshold up to which support for energy sources is still considered reasonable. The current law sets a higher threshold for support, at 8.4 to 10.6 percent.

Another change MPs added to the law today is that the return on investment in a renewable energy source will henceforth be calculated over the entire lifetime of the facility, rather than the period during which it is entitled to support. Ivan Adamec (ODS), chairman of the Economic Affairs Committee, then withdrew his proposal, drafted by the Ministry of Industry, which would have denied solar power plants commissioned by the end of 2012 operating support during periods of negative electricity prices. Adamec said it was poorly drafted.

Finance Minister Zbyněk Stanjura (ODS) said in October that he was not concerned about possible arbitration proceedings. All the measures are in line with European legislation and Czech law, he said. Today, he stressed that the state does not want to change the rules, but merely to ensure they are rigorously enforced. „At most, we will take money away from those receiving more than the Czech and European rules allow,“ he said.

Former Deputy Prime Minister Karel Havlíček (ANO) warned against the government proposal. „Today, this is ultimately about preserving the credibility of the investment environment in the Czech Republic,“ he said. Prime Minister Petr Fiala (ODS) said earlier that if the reduction in support failed to win approval, the state would make up the difference during the year.