The Czech Photovoltaic Industry Association and the Alliance for Energy Self-Sufficiency have expressed their fears about planned retroactive changes to legislation guaranteeing support for renewable energy in the Czech Republic in letters addressed to the European Commission and Members of the European Parliament and have asked for an independent assessment of related materials and documentation.
Suspicions about retroactive changes of the support scheme were confirmed by a March draft of the report in which the European Commission assessed the legitimacy of the Czech public support for renewable energy and which contained also description of the retroactive measures the Czech government planned to commit itself to. According to available information, the European Commission should complete this assessment by 11 June 2014 (today).
Renewable sources were supported in the Czech Republic mainly via feed-in-tariff granted to the installations at the time of their commissioning, non-decreasing and valid for a prescribed lifetime, which is 20 years in case of solar or wind. In the past there were already several changes to the support scheme for most solar installations, namely 26% levy (tax) on their income valid in years 2011-2013 and 10% levy on their income valid from 2014 onwards, that retroactively changed the economics of these projects so that most of the owners are still waiting to see some profits from their investments.
This time however the Czech Ministry of Industry and Trade is preparing a more radical change that would dramatically affect all existing renewable installations. The plan is to introduce a review mechanism that would retroactively adjust the guaranteed investment conditions individually for each project after 10 years and level the return on investment for all projects to about 3.5% p.a.. This plan is based on a wilfully incorrect interpretation of the existing legislation and violates basic principles of Czech and European law. Its main defects are as follows:
•   The review mechanism would be fully at odds with existing Czech legislation on support for renewable sources (including previous and current laws) which guarantees specific feed-in tariffs for different types of renewable resources that are valid for a set period of time (mostly 20 years).
•   It would go against the long-term position of the European Commission which emphasizes that the Member States should not interfere in the guaranteed terms and conditions for already existing projects – see the MEMO/13/948 from 5 November 2013: “Governments must avoid unannounced or retroactive scheme changes. Investors’ legitimate expectations concerning the returns on existing investments must be respected”.
•   The vast majority of renewable projects is financed by bank loans with average tenure of 15 years and with long-term interest rate swaps that were planned based on a 20 years lifetime of the projects – the 10-year review mechanism would threaten these bank loans with unpredictable domino effect on Czech and European banking sector.
•   More expensive or less effective projects would be supported for a longer time.
•   The review mechanism would create a huge corruption potential.
“If these retroactive amendments come into force, the stability of investments in renewable energy, both Czech and European, will be threatened, the Czech Republic will be in danger of not fulfilling its obligation of increasing the percentage of energy sourced from renewable resources by 2020 and it will also significantly affect the trust of investors in projects of public and EU interests all over the Europe,” says Marek Lang of the Alliance for Energy Self-Sufficiency. “We do believe, however, that any interference with support for renewable energy will not be allowed by the EU, as meeting climate targets would be put at risk and interest in utilizing local resources would be reduced, resources that could lower our dependence on Russian energy imports,” adds Marek Lang
“In particular, solar parks have already had to deal with the so-called “solar tax”; if they are hit with another retroactive change, this time in the form of a 10-year review mechanism, it will put banks that have provided investors with loans for financing renewable energy projects in a precarious situation. They will most likely shorten repayment dates, causing many investors to become insolvent,” says Veronika Knoblochová of the Czech Photovoltaic Industry Association. “Therefore we believe that the European Commission will stand by its long-term position that Member States should not interfere with conditions guaranteed for existing projects and that they should respect the legitimate expectations of investors concerning the returns on existing investments,” adds Veronika Knoblochová.
(Source: Czech Photovoltaic Industry Association;Â the Alliance for Energy Self-Sufficiency)