Czech Republic plans cuts on renewable subsidies in 2014

20 August 2013 18:11 Source:ICIS

Subsidies and feed-in tariffs for newly installed renewable electricity capacity will be limited in the Czech Republic from January 2014.

This is despite the country producing 2.9TWh of electricity from renewables in the second quarter of this year, doubling the amount from the previous quarter, according to information provided by the Czech parliament on Monday.

The bill to cut support for renewable power plants coming on line in 2014 was approved by the lower house of parliament on Friday, but is yet to be approved by the Senate and signed by the president.

The bill hits the photovoltaic (PV) installations in particular, extending the 26% tax previously imposed on solar capacity installed between 2009 and 2010 for at least another year from 2014.

Most market participants welcomed the news:

"The state has already given far too much capacity to solar investors," one source said.

"For me this vote is more about getting some political power for the next election than something that will help anyone," he added.

Another market participant said: "The incentives were initially pretty rich and it had really bad impact on retail prices.

The electricity bills were growing but at the same time the wholesale prices were falling," he added.

Market impact

Some sources dismissed an instant impact on the wholesale market prices but added that with less capacity coming on line, it could have an impact on prices later on.

One trader suggested that if the same law were passed in Germany, the market would be affected. "If it happened [in Germany], we would soon see [support for the] bottom levels for the Cal '14 price," he said.

" [The Czech Republic is] heavily influenced by the surrounding markets, which are still in favour of renewables," he added.

CEZ welcomed the new cap on subsidies, despite the company operating some 14 solar power plants.

"CEZ Group was the one who since 2009 repeatedly warned [about] the negative effect of the solar boom on the electricity prices," a CEZ spokeswoman said on Tuesday.

However, some solar electricity investors already challenged the Czech government (see EDEM 20 December 2012) and called on the EU to act against those who backtrack on support for renewables (see EDEM 17 December 2012).

The Czech Republic has an EU target to have 13% of its generation produced from renewable sources in 2020.

The total installed renewable generation capacity in the Czech Republic stood at 2.5GW in July 2013, according to the Czech energy regulator. Karolina Zagrodna

By Karolina Zagrodna