Solar power companies, lawyers predict fight back against government measures to snuff out photovoltaic power boom

Solarpark in Ostrožská Lhota

Czech lawmakers have taken a big step to put a lid on the country’s solar power boom. The lower house has voted through a package of taxes hitting solar companies and power producers to curb electricity price rises next year.

A massive last minute lobbying campaign by solar power companies and demonstration in front of parliament could not prevent the worst for solar power companies on Tuesday. A three-pronged set of measures comprising a 26 percent tax on solar power firms for the next three years, 32 percent tax on free carbon emissions allocation in 2011 and 2012 and tax on agricultural land used for solar panels was voted through the lower house unscathed.

Prime Minister Petr Nečas and other top members of the government stepped out after the victory and said the measures would keep electricity rises next year below 5.5 percent. Without them, they said households would have faced rises of 12 percent and industry of 18 percent in 2011.

But solar power companies say the changes have undermined their business and investments, often based on bank loans. Michal Gärtner is manger of the company Photon Energy which has around a dozen ongoing solar power projects in the country.

“The effect will be quite dramatic in the first three years. Either we will have to renegotiate the loan deals we have with the banks or we will have to cough up some extra money to put into the power plants as equity.”

He says Photon’s solar business will be loss making but it can survive if cash is transferred from other parts of the company. But other firms might not be so lucky and could hit the wall.

Mr. Gartner also says the Czech government is likely to face a challenge to its latest move at the European Commission in Brussels for abruptly changing the rules.

“The indications we have from EPIA, the European Photovoltaic Industry Association, are quite clear in this respect and they will take it to the European Commission. And I think they will be successful because it is a retroactive step and singles out the investors and says they are responsible for the increase in electricity prices.”

In a similar case, he says the Commission challenged similar steps taken by Spain after it tried to snuff out its solar power boom.

Photo: European Commission
And local legal companies are also bracing themselves for a spate of arbitration cases being launched by Czech and foreign solar power companies claiming that the government has broken investment protection treaties.

One legal company advising solar power companies says it expects the government will in the long term have to pay out more in compensation to those companies once the arbitration rulings start rolling in than it collected from the new taxes. The sun is not likely to set soon on this one.