The actual relaxing of the Grid-freeze is just the first step, but does not address the further development of renewable energy sources in the Czech Republic. The Czech parliament is currently in the process of passing the new Act on Supported Sources of Electricity, which is scheduled to come into force as of January 1, 2013. But this bill contains a lot of mistakes and shortcomings, which, despite the Grid-freeze being relaxed, does not allow for the connection of new roof PPS to the network and will in practice prevent their further development in the Czech Republic.
By Ales Spacil
Photovoltaic History in the Czech Republic
Renewable Energy Sources (RES) were partially supported in the Czech Republic even prior to the adoption of Act No. 180/2005 Coll., Act on the Promotion of the Use of Renewable Energy Sources. Some key pieces of legislation pertaining to power engineering, savings and effective use of energy use date back to 2000. Since 2002, in addition to investment subsidies and the Sun into Schools program, the Energy Regulatory Office (ERO) has announced buyback prices for individual categories of Renewable Energy Sources (RES).
In 2004, the Ministry of Industry and Trade (MIT), first separately and later in cooperation with the Ministry of the Environment (MoE), prepared a government bill on the promotion of renewable energy sources with a limitation of the year-on-year decline in buyback prices to 10%. In the Explanatory Report to the bill, an installed capacity of merely 15 MWp was planned for Photovoltaic Power Stations (PPS) in 2010. The act did not take photovoltaics into account as an important RES.
The Act on the Promotion of Electricity from Renewable Energy Sources (Act No. 180/2005 Coll.) was approved the following year. In the final wording of the legislation, the year-on-year decline in buyback prices was limited to 5% per annum, which was the value corresponding to the setting for the subsidy extended to roof photovoltaics in the similar German law.
For 2006, the ERO announced support for PPS at a rate of CZK 13.20/kWh (approx ¢æ 0.46/kWh), without a distinction being made between output and placement, subject to a buyback period of 15 years. At the end of 2007, there were four PPS with a power output in excess of 500 kWp operating in the Czech Republic, with the total installed capacity reaching 3.4 MWp. Based on these developments, the MIT adjusted the estimate of installed capacity to 10 MWp at the end of 2010.
In 2008, an amendment was made to the German act supporting the RES. The decline in the buyback price for PPS was linked to the installed capacity in the previous year, with these prices to decline for the years 2009-2011 by 8 to 11% year-on-year. The Czech legislation did not react at all to this change. Even though the ERO divided photovoltaic power stations into two power categories (up to 30 kWp and over 30 kWp), but the buyback prices differed by less than 1%. The installed capacity at the end of the year reached 39.5 MWp, as a consequence of which the MPO increased the plan for the end of 2010 to 185 MWp. During the course of 2008, indications were already starting to appear that the development of photovoltaics could become unsustainable. One of these indications was a huge increase in applications for reservation of output connection to the network. It was clear that, in large part, these applications were speculative in character, lacking even such particulars as documentation of the contractual relationship to the relevant land. In discussions with representatives of ?EZ and the ERO at the 3rd Czech Photovoltaic Conference, held in November 2008, proposals were voiced for the limiting of the validity period for reservations and the introduction of a fee of CZK 1000/kWp (approx. ¢æ35/kWp) for reserved capacity, with this fee to be returned upon a project¡¯s implementation. These proposed measures could have quickly eliminated speculative reservations. However, they were not adopted, which soon had an effect. On account of the depreciation of the Czech crown, the collapse in photovoltaic panel prices, brought about by market restriction in Spain, price pressure exerted by Chinese manufacturers and, in particular, a marked decline in the price of silicon, manifested itself in the Czech Republic in the second quarter of 2009, i.e. with practically a half-year delay. In this period, society¡¯s mood and view of photovoltaics was already influenced by the strong negative media campaign, associated with often dubious or false information, exaggerating the impact the development of PPS and RES themselves will have on the stability of the electricity system or on customers¡¯ bills. This negative campaign was clearly stoked by the traditional large companies. Even the braver estimates made at the end of September 2009 in respect of installed output for the end of 2009 put the maximum at 300 MWp. As the situation was not critical from the legislators¡¯ perspective, the amendment of Act No. 180/2005, announced at the end of August 2009, enabling the ERO to reduce buy-back prices for energy generated from PPS at a faster rate as of 1 January 2010, was postponed. The government approved the ¡®small amendment¡¯ of Act No. 180/2005 Coll. in mid-November 2009, but this amendment was not confirmed by the Senate until the end of April 2010. This amendment enabled the ERO to reduce the buy-back price of power generated by sources whose payback period has fallen below 11 years. This amendment, however, only came into effect as of 1 January 2011. It is clear that this change could have been implemented sooner had there been political will, and could have come into force as of 1 January 2010, which would have allowed a more marked reduction in buy-back prices and acted as an effective brake on photovoltaics.
A shock was felt at the beginning of 2010. The ERO announced that the final value for installed output as at the end of 2009 was 465 MWp. On this basis and citing a potential grid overload and ensuing failures (black-out), ?EPS a.s., the operator of the Czech power transmission system, requested distribution companies in February to suspend the issuance of favorable standpoints on applications for the connection of photovoltaic power plants. Distribution companies (which, together with ?EPS a.s., are members of ?SRES, the Czech Association of Regulated Energy Companies) complied with this request as of 16 February 2010. This state of affairs, referred to as a ¡®Grid-freeze¡¯, probably had the greatest impact on approvals for small roof system installations. There was already a volume of concurring standpoints for implementing large parks at that time and their boom could continue practically unhindered.
A decree prescribing that power stations with an output in excess of 100 kWp must be equipped with a remote control device came into force on 1 April, and in June the ERO approved further changes, prescribing that power sources with an output of 100 kVA or over must also be equipped with a remote control device and that power sources with an output of 30 kV or over must be equipped with a simplified remote control device.
At the end of August, the government approved the NREAP¦¡National Renewable Energy Action Plan. Growth in all categories of RES until 2020 is planned so as to meet (but not to exceed) the binding target of 13% of energy generated from RES in terms of gross final energy consumption, in accordance with the value negotiated by representatives of the Czech Republic in the EU.
At the beginning of November 2010, the Senate approved the ¡®quick little¡¯ amendment of Act No. 180/2005 Coll., under which support is acknowledged as of 1 January 2011 solely for PPS connected to the network (in-grid), with support as of 1 March 2011 acknowledged solely for systems of up to 30 kWp installed on roofs or facades of buildings recorded in the Real Estate Register. This amendment was adopted within a month of its first reading. Had the previous government and parliament proceeded at a similar rate, the whole problem could have been resolved a year earlier, with significantly lower costs and without the threat of arbitrage proceedings. Less than a week later, the ERO published a new pricing decision setting buyback prices for electricity generated by PPS. CZK 7.50/kWh (approx ¢æ0.31/kWh) for systems up to 30 kWp, CZK 5.90/kWh (approx ¢æ0.24/kWh) for systems up to 100 kWp and CZK 5.50/kWh (approx ¢æ0.22/kWh) for systems in excess of 100 kWp. The Green Bonus (a plan under which an energy producer can apply the energy it generates to cover its own energy consumption) is CZK 1.00/kWh (approx. ¢æ0.04/kWh) lower than the buyback price for all categories. Then in mid-November, the Senate approved an amendment to the relevant legislation, under which the five-year income tax exemption granted to producers of energy from RES is abolished and a duty to depreciate PVP over a period of 20 years using a straight-line method is newly implemented. Both of these changes impair the business fundamentals of such projects, especially during the first ten years, a period critical to loan repayment. Two days later, parliament, due to an unfounded fear of a sharp rise in the price of electric power, approved another amendment to Act No. 180/2005 Coll., introducing multi-source funding for the support of electricity production from RES, including an extraordinary tax on revenues generated by PPS with output in excess of 30 kWp installed in 2009 and 2010 at a rate of 26% for the buy-back price and 28% for the Green Bonus.
The situation, full of paradoxes, is fleshed out by the fact that during the time that this law was being discussed in the Chamber of Deputies, EON, one of the major energy companies in the CR, notified its business customers of a reduction in the price of electric power of up to 20%, with households being notified of a 10% reduction. The overall increase in electricity prices for 2011 will thus be lower than the annual growth during the 2005-2009 period, a time when RES were in their infancy in the Czech Republic.
Photovoltaics in 2011
Although the legislation valid for this year sets tariffs for the support of ¡®green¡¯ energy from PPS, in reality it was impossible to connect any new power plant to the grid and thus to receive the support, due to the ¡®Grid-freeze¡¯ described above. As a result, approximately 15 MWp completed at the beginning of the year was added to the installed output level as the end of 2010 of 1,959 MWp, and the sector has practically come to a halt. It is a pity that the solution to the problem caused by the boom in large parks has also resulted in a halt in applications for plants, where the risk to the network is close to zero due to the fact that the energy produced by these power plants is usually consumed directly at the source of its generation or in the close vicinity thereof, within the local low voltage network. Only about 4% of output is generated by way of roof PPS, on account of the Czech Republic¡¯s poor regulation of PPS construction. In neighbouring Germany, by contrast, where development was subject to more carefully control, output from PPS accounts for more than 50%. At present, high demand can be seen from both entrepreneurs, who use PPS to cover part of their consumption needs, as well as from residential customers, who want to reduce their dependence on energy monopolies. Czech companies, who gained unique know-how in 2009 and 2010 during the course of the PV boom, were forced to respond to the abrupt changes in the business environment occurring in 2011 in one of three ways:
-Close the business,
-Start operations in another market (neighboring Slovakia, with great interest shown in Italy or the UK),
-Switch to other sectors.
Another meeting in the series of ¡®Round Table¡¯ discussions, attended by representatives of the Czech Photovoltaic Industry Association (CZEPHO) as well as other RES associations, distribution companies, the MIT, and the ERO, was held on 19 September 2011. Representatives of ?EPS and distribution companies informed the participants of the results of measurements conducted during the summer. Even though these entities did not voice their unconditional satisfaction with these measurement results (especially in the case of the ¡®flicker¡¯¡ªvoltage fluctuations during changes in network conditions), there was a clear shift in that distribution companies will no longer issue across-the-board negative standpoints on applications for the connection of photovoltaic power plants. Although individual distribution companies have shown varying degrees of tolerance, all have promised that every application received will be assessed on a case-by-case basis with regard to the size, location of the planned source limit and the grid balance limit. The current grid balance limit should allow for the limited connecting of family PPS, but this is a dynamic parameter, which will increase with respect to the structure of domestic consumption, composition of sources, export options, intraday market opportunities and the availability of support services and also with respect to how the number of large PPS and wind power stations not equipped with an instrument for supervisory control will decline.
Even in the event of a relaxing of the grid-freeze, the implementation this year of new PPS is, however, questionable. Under the existing rules for the connecting of new generating plants, three months may pass from the filing of an application to the conclusion of a contract, and it can take another six months for the new photovoltaic power station to be connected. So this will almost certainly not happen until next year. That said, nobody knows what next year¡¯s buyback prices for electricity from photovoltaic power stations will be.
Recent Developments in Policies/Legislation Supporting the PV Market in the Czech Republic
The actual relaxing of the Grid-freeze is just the first step, but does not address the further development of RES. The Czech parliament is currently in the process of passing the new Act on Supported Sources of Electricity, which is scheduled to come into force as of 1 January 2013. But this bill contains a lot of mistakes and shortcomings, which, despite the Grid-freeze being relaxed, does not allow for the connection of new roof PPS to the network and will in practice prevent their further development in the Czech Republic. This is the reason why the RES association has prepared a comprehensive draft amendment of this legislation, which addresses these shortcomings.
Key shortcomings of the bill:
-PPS output limit is equal to the power already installed
-Weakening of the guarantee for the market deployment of electricity produced
-Zero support for new island power systems
-Solar tax, which retroactively interferes with entrepreneurs¡¯ rights
Adoption of the new act is absolutely key for the further development of PPS, as it will allow electricity produced from RES to be traded (currently, electricity produced from RES may only be used to cover losses, and cannot be traded), thus facilitating the production and sale on the market of this clean electricity in greater volumes. In conjunction with the adoption of this new act, it is also necessary to update the National Action Plan (NAP), as referred to in this act. The NAP sets the volume of supported renewable energy sources. But the connection limit for photovoltaics as prescribed in the NAP is (according to ERO data) already exhausted until 2020. It is, therefore, necessary to adjust these limits to create room for the construction of roof power installations. There is no threat of a rampant development in photovoltaics in the future. The sector is no longer attractive for big investors, thanks to a fundamental reduction in the buy-back price and the limitation of support solely to small rooftop power installations. But the sector remains very interesting for citizens who do not wish to get rich on photovoltaics, but simply to reduce their electricity bills.
The Development of the Czech PV Market in 2012 and the Future Outlook
Developments in neighboring countries, especially in Germany, have a very significant influence on the shift in the perception of photovoltaics and stimulate interest in photovoltaics for citizens. Unfortunately, the Czech government is taking an anti-European stance, with the ruling parties viewing the shift towards RES as a good way to show that unlike in ¡®Europe, which has gone crazy over RES¡¯, ¡®common sense¡¯ prevails in this country.
The State Energy Policy, created in line with this view, and based on the maximum expansion of nuclear energy and the suppression of RES to zero by 2035, has the state tacitly agreeing to a ¡®Grid-freeze¡¯ ordered by the energy companies. For this reason, an act has been proposed which states that the given type of RES will no longer be supported if the numbers published in the NREAP are exceeded. The NREAP, which is perceived to be the minimum objective in any other European country, is viewed in the Czech Republic as the maximum achievable objective, over and above which it ¡®is not in the interest of the state¡¯ to go.
The year 2012 will, under the legislative limit, be characterized by roof installations up to 30 kWp. Assuming that the distribution system will be accessible for connecting new sources and that adjustments are made to the provisions of the above legislation which, as they currently stand, are a red light, the CZEPHO is of the view that it is realistic to assume that small rooftop installations with output of up to 100 MWp will be connected throughout the country within one year. In terms of the promotion of these renewable energy sources, this will mean a negligible increase in electricity prices of only CZK 0.01/kWh (¢æ0.0004/kWh).
The buyback tariff for the year 2012, a figure that nobody knows at this moment, will of course influence actual development. The current version of Act No. 180/2005 Coll., on the Promotion of the Use of Renewable Energy Sources, as amended, still guarantees a maximum decline in buy-back prices of five percent. The Energy Regulatory Office should, on the basis of this legislation, specify the buyback price at around CZK 7.125/kWh (¢æ0.29/kWh) and the corresponding Green Bonus of around a crown lower, i.e. around CZK 6.10/kWh (¢æ0.25/kWh). In the government bill of the Act on Supported Sources of Electricity currently under discussion, the buy-back price or green bonus is restricted to CZK 6.00/kWdh (¢æ0.24/kWh). This means that operators would, for economic reasons, be forced to use the green bonus system, the level of which would nearly approximate the value stipulated in current legislation. However, in its comprehensive draft amendment of 8 September, the Economic Committee of the Parliament of the Czech Republic actually proposes that the maximum amount of support be limited to a mere CZK 4.50/kWh (¢æ0.18/kWh).
Ales Spacil is Managing Director of Conergy Ceska republika, s.r.o. and President of the Czech Photovoltaic Industry Association (CZEPHO).
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