Czech state to allocate CZK 8.5 billion for renewables again next year

The government will allocate CZK 8.5 billion from the state budget next year to support renewable energy sources. The subsidy will therefore be the same as this year. If it becomes clear during the year that the amount is insufficient, the finance ministry will make spending cuts in other areas, Finance Minister Zbyněk Stanjura (ODS) told reporters today. The state’s costs of supporting renewable energy sources should fall, he said, thanks to better assessments of the profitability of their operation.

Stanjura and Industry and Trade Minister Lukáš Vlček (STAN) presented a proposal to reduce the amount the state pays to support renewable energy sources. The government wants to assess the profitability of operating solar power plants more accurately and individually, especially those commissioned in 2009 and 2010. Subsidies will be paid only after this assessment.

Government MPs will submit the proposal on Thursday as an amendment to another bill being debated in the Chamber of Deputies. Stanjura expects final approval before the third reading of the state budget. He believes the measures will also win support from opposition MPs, as their aim is to save taxpayers’ money. The National Budgetary Council had previously criticised the government because the draft state budget assumed different rules for paying support for renewable energy sources than those in force under current laws.

As part of the reduction in subsidies, operators of supported power plants will have to submit data on the profitability of their facilities, whereas until now the sector for each type of power plant has been assessed as a whole. The plants’ so-called internal rate of return will also be assessed taking into account their operation after state support ends. The government will also pay support at a lower level than before, to bring it into line with the state aid approved for Czechia by the European Commission. From 2026, older renewable energy sources will also be subject to a rule under which operating support is not paid when electricity prices on the market are negative.

The government will also pay support at a lower level than before, to bring it into line with the state aid approved for Czechia by the European Commission. The internal rate of return for solar power plants commissioned in 2006 and 2012 is currently set at 8.4 percent, but according to the finance ministry this is the upper limit, and the rate may fall as low as 6.3 percent in line with European rules.

Stanjura said he was not concerned about possible arbitration proceedings against Czechia by solar power plant owners. „All the measures comply with European legislation and Czech law,“ he said. Czechia is not fundamentally changing the rules for support, he added, but will monitor compliance with them more thoroughly.

XTB analyst Tomáš Cverna noted that the planned CZK 8.5 billion is the same amount as this year, so there will be no significant changes. „Cost-saving measures in renewable energy may slow the development of energy capacity on the one hand, while on the other, the state is acting as a responsible steward by focusing on the efficiency of spending,“ Cverna commented.

According to Radim Dohnal, an analyst at Capitalinked.com, retroactively changing or reducing support for solar power plants from 2009 and 2010 would be inadmissible. „This would further increase doubts in the business community about the reliability of agreements with the state, or the enduring validity of laws,“ he explained. In that case, banks would be most at risk, he said, with more than CZK 25 billion in credit exposure. „Such a restriction would probably lead to zero income tax receipts from banks for several quarters,“ Dohnal added.