Czech Solar Energy Industry Must Struggle with Retroactive Change in Support

June 11th, 2012 by Zachary Shahan

I received the following news release just yesterday from the Alliance for Energy Independence in the Czech Republic. It covers a shocking policy change in the Czech solar industry that seems like it should be illegal (if it’s not), has almost no public support, and yet might hold. This is a very depressing thing to hear about on a Monday morning, but I think it’s important, warrants some citizen activism, and worth a share, so here’s the full piece:

Czech politicians have created conditions for investing in green technologies that are similar to conditions in other countries in the European Union. Despite this, the Czech Republic has become the only country that has decided to hamper the solar energy industry with a retroactive tax.

As part of an amendment to the Renewable Energy Act intended to reduce feed-in tariffs for solar energy, representatives have adopted a retroactive 26-28 percent tax that all owners of 30 kW and above solar energy plants put into operation in 2009 and 2010 must pay to the state.

“Retroactively changing the law and disrupting guaranteed investment returns and equality before the law may create a dangerous precedent which subsequent governments may abuse in other business sectors or for financial products intended for the public. It will not matter that the Constitutional Court’s ruling was made in regards to solar energy,” says Pavel Šich, the director of the Alliance for Energy Independence.

Those introducing the bill have been influenced by CEZ energy group’s negative campaign against solar power plants. Martin Roman, the former general director of CEZ (who is currently suspected of awarding overpriced contracts to “friendly” companies), warned of up to a 22 percent increase in the price of electric energy as a result of growth in fixed price photovoltaic energy. At the same time CEZ has hushed up the fact that they purchased solar power plants that together have an output of more than 120 mW; these purchases were funded in part by loans from the European Investment Bank. Some of these projects cost double the price of the average solar power plant.

This tax however does not take into account differing project expenses in 2009 and 2010, nor differing investment costs based on whether the power plant is located on land or on rooftops. Paradoxically, this blanket tax most affects investors who have made efforts to incorporate cutting edge technology, including highly efficient panels, inverters and transformers.

Constitutional Court upholds the tax

On May 16 the Constitutional Court denied the objections of senators to the special tax on 30 kW and above solar power plants constructed in 2009 and 2010 (also known as the solar tax). This group of senators objected as they considered such a tax to break faith in the state’s actions, decisions and laws.

Solar energy investors have only two ways to protect their investments. Foreign companies may get back promised funds through arbitration. Czech companies may protect themselves in court, but only if the return period exceeds the state guaranteed fifteen years as a result of this tax.

It seems that this intervention may make investing in clean technology an unstable affair. The Czech energy sector is dependent on fossil fuels and coal. Together these two sources produce almost 90 percent of electricity in the Czech Republic. Modern, renewable energy must fight for its place in the sun against the disinterest of politicians. For example, President Klaus vetoed a bill supporting renewable energy, which was then overridden by vote of the Chamber of Deputies. Prime Minister Nečas has been drumming up support for nuclear energy in the EU. The head of the Energy Regulatory Office has called for a stop to funding all renewable energy sources to go into effect in 2014; she has done so even though she lacks legal authority to make such a decision.

Martin Sedlák from the Alliance for Energy Independence describes the situation in the energy sector: “Support for renewable energy sources helped new market sectors develop in a market that had up that point been ruled by power company monopolies. Clearly, this support must be eventually gradually eliminated, but only for future projects.

A stable environment would ensure clean energy growth, through which we will be able to lower our independence on fossil fuels, clean the air of harmful pollutants, and in the long-run reduce the high price of electricity. The solar tax will turn the Czech Republic in to a living history museum of energy”.

The state has not dealt with any other regulated components contributing to the price of electricity

Since proponents of this special “tax” on solar power plants use the argument that they are trying to avoid increases in electricity prices, then it is surprising that they have not made any attempts to intervene in the price of electricity distribution.

Data from the Energy Regulatory Office indicate that support for renewable energy sources is not the most expensive item contributing to overall electricity rates. In 2011 support for all types of renewable resources, including cogeneration and support for cofiring wood chips and brown coal, made up 10.4 percent of total electricity costs. This is while, according the very same Energy Regulatory Office data, the “line” owners (E.ON, CEZ and PRE depending on the region) eat up 35.6 percent of the total cost for distribution. In Germany distribution costs make up only 18 percent of the price of electricity.

Retroactive changes in business conditions have met with public resistance:

Only 9 percent of people think that the government should be allowed to retroactively change conditions for example by changing subsidy rules. Nearly 60 percent of the Czech population is directly against such changes. These are the findings of a survey that the Alliance for Energy Independence had the SCaS Agency conduct before the Constitutional Court’s ruling.

The ruling to uphold the solar tax will have negative impacts on the business atmosphere in at least one industry, if not more in the future.

It lowers the promised returns on generated electricity guaranteed by the Energy Regulatory Office’s Price Decision, and the fact that is has been upheld has impacted the legitimate expectations of affected businesses.

The blanket solar tax applies to projects from 2009 and 2010, although it does not take into account differing investment costs, nor the location of solar power plants.

The state is legally bound by the Renewable Energy Act to guarantee returns for at least fifteen years. Investors thus have a right to this support and this right arises on the date of bringing solar power plants into operation. The law however now limits the rights of investors and also limits the guaranteed returns, and thus a retroactive change in the legal system has been made.

The Alliance for Energy Independence (hereinafter the Alliance) is a non-governmental organization that connects renewable energy producers and energy efficiency experts with universities and the public sphere. The Alliance’s aim is to maximize the utilization of clean energy sources in combination with highly efficient technology. Our activities are focused on awareness raising, promoting modern trends and education. The Alliance endeavors to gradually transform the Czech economy so that it is driven by an independent, clean, and, when suitable, local energy system.

Image: Czech solar farm via Shutterstock

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Tags: Alliance for Energy Independence, Czech Republic, czech republic solar, czech solar, quickies, solar policy

About the Author

Zachary Shahan spends most of his time here on CleanTechnica as the director/chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media. You can connect with Zach on any popular social networking site you like. Links to all of his main social media profiles are on ZacharyShahan.com.

Omharisai

This is plainly corruption being practiced by the Czech politicians, who may be receiving payments, perhaps from the oil lobby headed by the Russian GASPROM. Very retrograde thinking and stupidity to tax solar power systems in this way.
Captivation

Political power is mysterious to me. Governments cannot function without some public support, but the amount of support required seems to change from region to region and era to era. How did Germany create enough consensus to completely eliminate its entire nuclear industry? Why can’t the US generate enough consensus to take even the smallest steps towards even a tiny reduction in CO2? And I note that the current American CO2 reductions were the result of the recession and not regulation.
Matt

When coal and gas run your goverment this is what you get. Maybe it is a little peak at where some people want to take the US.
Ross

Klaus is a known AGW denier and in-bed with the Russian’s oil and gas lobby.
- http://cleantechnica.com/ Zachary Shahan
  
  yeah, i’ve seen some crazy quotes from him.
  - Steven
    
    I have to agree that it’s only fair that a tax be put in place, given grid connected solar PV system are taking power from the network. Fact is, grid inverter used main power to operate produce large amounts harmonics into the network as feedback. Taxing grid connected solar system should start as low as 1.5kw systems and additional charge’s like system access charges of $400 dollars quarterly. On bigger systems grid PV solar system would get larger system access charges.
    - http://ronaldbrak.blogspot.com.au/ Ronald Brak
      
      Oh my god! Imagine what I am going to be charged for plugging in my computer and its power box into the mains! Arrrhhh!
    - Snehasis Mishra
      
      Respected Sirs
      I am Sri Snehasis Mishra, B.Tech in Electrical Engineering, Recently study from different book, i am interested in makeing a solar power Plant. But i not very much known above subject noted matter, As such you are kindly requested to you Financially & Technically help.
      
      Yours Faithfully
      Snehasis Mishra
      West Bengal
      Kolkatta-700056
      Mob No 9434532124