Amendment to the Czech Supported Energy Sources Act to introduce auctions alongside overcompensation checks

At its Monday meeting, the government discussed an amendment to the Supported Energy Sources Act, introducing several new types of support for renewable energy generation facilities. The amendment is now awaiting the prime minister’s signature and will subsequently be submitted to Parliament. It is expected to take effect on 1 January 2021.

The amendment was included in the government’s legislative plan as early as 2018. Its delay resulted in the material being split into an amendment to the Energy Act (which was to have formed part of a single package) and an amendment to the Supported Energy Sources Act.

As our website previously reported, the amendment includes a reduction in support for solar facilities. For other sources, support remains at the average level required by the European Commission.

However, the amendment does not include, for example, rules on guarantees of origin for biomethane, which were removed from the amendment during the legislative process. It also lacks provisions for supporting community energy. Their introduction is required by the RED II directive on supported energy sources, and they will therefore have to be addressed by a subsequent amendment. The deadline for transposing the directive is already June next year.

Overcompensation checks and auctions

The amendment provides for checks on so-called overcompensation.  This responds to European Union rules requiring such checks. The compatibility of support for energy from renewable sources and other supported energy sources with the European Union internal market will be assessed – under the new law, the profitability of supported power plants will therefore be evaluated using the so-called internal rate of return (IRR).

Support for clean sources will in future be paid through so-called green bonuses. The state will effectively make up the difference between the market price and the feed-in tariff. The amount of the bonus will be set annually by the Energy Regulatory Office (ERÚ).

The amendment also introduces a rule requiring support for medium-sized and larger facilities to be competitively awarded through special auctions. For example, Slovakia has already announced an auction for renewable energy support under the new RED II rules, but the ministry has postponed it for the time being due to COVID-19 measures. The government will be able to intervene quite significantly and directly in the design of the auctions. It will issue regulations specifying, for example, the types of supported sources, the type and capacity of the facility, or whether an auction will be held to support new or modernised generation facilities, etc.

New types of support

From 2021, the state will support electricity generation in so-called modernised facilities, meaning those that undergo refurbishment but were commissioned before January 2021. However, whether support is granted will depend on the government. Support for a modernised facility will also have to be awarded through an auction.

The amendment also introduces so-called maintenance support (for both electricity and heat). This is a residual category of support for sources that meet the conditions set by secondary legislation and are no longer eligible for any other support. The purpose of the support is to preserve existing facilities that use renewable energy sources and therefore face higher operating costs than when using fossil sources. This type of support will not be auctioned.