Czech government moves to end support for renewables

Photo: European Commission

In one of its major decisions since assuming office in July, the Czech government has decided to end support for most renewable sources of energy. The draft legislation, triggered by relatively high electricity prices, would scrap state support for new solar and biogas plants as of 2014. It would also cap the subsidies paid by consumers in support of renewable energy sources.

Photo: Radio Prague
For several years now, the Czech Republic has been struggling with the high costs of its generous programme of subsidies for renewable sources of energy. In 2009 and 2010, the government approved large subsidies for solar plants and other producers of energy from renewable sources to meet the country’s international commitments of producing 13 percent of energy from renewables by the year 2013.

What followed has been called a solar boom, with the installed photovoltaic capacity skyrocketing from around 500 MWh at the end of 2009 to over 2,000 MWh by the end of the following year. For reasons that are now under investigation by the authorities, the government failed to react to the dynamic development. The bill so far has been enormous: subsidies have risen ten-fold, with industrial firms having paid over 160 billion and households another 35 billion crowns in support of renewable sources of energy.

Jiří Cienciala,  photo: Archives of the Czech Government
At an extraordinary session last week, the Rusnok government moved to end the massive subsidies. Jiří Cienciala is the minister of industry and trade.

“We have decided to level the prices of electricity. I believe everyone will be happy with that, including those who run solar plants. We decided against cancelling the solar tax altogether, as we originally planned, but we brought it down from 26 to 10 percent. So we want to cap the increase of prices of solar electricity.”

Under the government bill, solar and biogas plants put into operation after January 1, 2014, would receive no subsidies. Other renewable sources of energy, including hydro and wind power plants, would lose state support in 2015. The legislation also caps the subsidies paid by consumers. Instead of the current 583 crowns per MWh, end users would pay 495 crowns per MWh. That should help the Czech industry, says Finance Minister Jan Fischer.

Jan Fischer,  photo: Jana Šustová
“The prices today cause serious problems for firms and factories, and negatively affect employment. We would face big problems if these companies get into a critical situation. Naturally, high prices are also problematic for Czech households. So I hope we will curb the support in a way that will not bring any drastic changes.”

The government also plans to prolong the so-called solar tax, introduced in 2010 for a three-year period in an attempt to get some of the subsidies back to the state budget. The government wants to keep the tax in place for now, lowering it at the same time from the current 26 percent to 10 percent. The government’s proposal should reach the lower house in the coming weeks. It has been praised by several MPs including Communist Kateřina Konečná who is on the environment committee.

Kateřina Konečná,  photo: KSČM
“The support for renewable sources of energy has cost us relatively large amounts of money. I therefore welcome this move. I understand the need to support renewable energy as well as the fact that the Czech Republic has committed to support them. But I think it’s better to stop the support for some time rather than run into much more serious problems.”

Ms Konečná says this radical move is better than inaction which could incur more costs in the future, with all the negative effects that go with it.

“I agree that in this case, we are moving from one extreme to another. But if we don’t know how to level the support correctly, we better stop it for some time, and let’s talk about what to do to make sure Czech tax payers do not pay much more than they are already paying. If the government says they don’t know how to arrive at a suitable formula, I think it’s better to go for the extreme. Otherwise, we might wonder in a year’s time how much there is to pay.”

Vojtěch Kotecký,  photo: Ondřej Vrtiška,  ČRo
However, the decision to end state subsidies for all renewable sources of energy has been condemned by environmentalists who say the move goes too far, and could undermine the country’s commitments. Vojtěch Kotecký is the programme director of Hnutí Duha, an influential Czech environmental NGO. He says the draft legislation misses its declared goal.

“What the government is doing is that it specifically targets renewable energy projects that would put into use by families, communities or small companies. It will continue support for big corporate projects such as waster incinerators or gas mining operations. This is legislation that will remove communities and small companies from the market, keeping it open for corporations.”

Photo: European Commission
The government says the support for renewables is too high and damaging for the industry. What do you think of this argument?

“We believe that we do need some reform of our energy market and making renewables cheaper would be an important part of that reform. We have in fact proposed a solar energy support scheme which would not involve any subsidies at all but the government rejected it. We believe the government’s motivation is to protect the market for big companies.”

Photo: Kristýna Maková
So you say the effects will be devastating for small solar projects but do you think the bill will bring the desired effect in making electricity cheaper for consumers?

“Over the short term, it will definitely cut costs. But over the long term, we believe it is a short-sighted approach because it will keep the Czech Republic dependent on fossil fuels which are getting ever more expensive while the renewables are getting cheaper and cheaper. We will also remain dependent on huge energy corporations which seems to be the government’s goal.”

Štěpán Chalupa,  photo:
Other groups argue the costs could be driven lower without having to cut all subsidies. Štěpán Chalupa is the head of the Chamber of Renewable Source of Energy, an association of energy producers.

“It’s not true that now, the support is unlimited. The limits for the support of the individual renewable sources are set down by the national action plan. That was introduced precisely to curb the payments. We believe the government should stick to the plan which according to our calculations would only increase the payments by 1.4 billion crowns.”

Mr Chalupa says that according to their calculations, subsidies for renewables could continue with the end users paying less.

Photo: Radio Prague
“Rather than ending the support completely, we propose a reasonable cut in costs of combined production of electricity and heat from today’s two billion to around half a billion. We also propose to introduce another solar tax which could yield some two billion crowns. Compared to the government’s plan, our proposal would keep the support in place with the end users’ contributions reaching around 511 crowns per megawatt hour.”

The draft legislation should be discussed in Parliament in the coming weeks. It seems that it will easily win backing from both MPs and Senators although some changes to the bill might yet be made. Social Democrat Milan Urban is the head of the lower house’s economy committee.

Milan Urban,  photo: Radio Prague
“I think this is yet to be discussed in the lower house. In any case, the principle of these measures is correct, and I would leave the details for later. The lower house will certainly not try to postpone its decision on this. As far as the solar tax is concerned, I think the government should not drop it because it will cause problems for the state budget next year which will pay more for the support than it does now.”