Czech Republic: New Law On The Support Of Renewables

Last Updated: 15 February 2012
Article by Lukáš Janíček and Radim Kotlaba

Last week the Czech Parliament approved the Bill on supported energy sources, which will introduce a new regime supporting renewable sources of energy in the Czech Republic and which also sets out the legal framework for the support of so called "secondary sources" of energy (e.g. waste). The Bill is expected to be signed by the president and published as a law in the first quarter of 2012 and to become effective from 1 January 2013 (with the exception of some provisions which will become effective later or will have already become effective during 2012).

The new law is generally considered to be less favourable in the support of renewables as compared to the current legislation. It introduces various changes to the principles of current legislation, including the following: 

  • National Renewable Energy Action Plan: The support of renewables shall be linked to the National Renewable Energy Action Plan (NREAP) approved by the government in line with the Czech Republic's commitment that 13% of all energy used in the Czech Republic will be from renewable sources by 2020. NREAP will include limits for the installed capacity of various sources of energy. It is expected to be updated from time to time and thus enable the government to be more flexible in regulating the sector.
  • Market Operator and Obligatory Purchaser(s): A new method for the payment of support shall be introduced. The market operator will be responsible for the payment of a green bonus and there will also be an obligatory purchaser who will be responsible for the payment of the feed-in tariff. The "obligatory purchaser" will be selected by the Ministry of Industry from electricity trading licence holders. Until the obligatory purchaser is selected, last resort purchasers (grid operators) will act as obligatory purchasers of electricity produced by renewable sources. This mechanism replaces the current scheme where support is being paid by the grid operators.
  • New agreements: The existing agreements on the payment of feed-in tariff/green bonuses between producers and the grid operators shall expire, by law, on 31 December 2012. The producers will need to enter into new agreements with the market operator (if the subsidy is in the form of a green bonus) or the obligatory purchaser (if the subsidy is in the form of a feed-in tariff). However, save for this obligation, the conditions for the support of existing electricity generating power plants shall remain intact.
  • Green bonuses: The Act introduces a new concept of energy buy-out, which significantly modifies the current feed-in tariffs/green bonuses system with preference being given to green bonuses. If the subsidy is in the form of green bonuses, the producer may offer its electricity to the obligatory purchaser and the obligatory purchaser is obliged to buy-out the electricity and pay the producer the difference between the green bonus and feed-in tariff.
  • Feed-in Tariff: A subsidy in the form of a feed-in tariff can only be granted to the producers of electricity from a renewable energy source where the installed capacity amounts up to 100 kW (or 10 MW in the case of water power plants). The feed-in tariffs shall be determined in accordance with the "15 year simple return of investment" general rule. The feed-in tariffs for the following year can only be higher than 95% and lower than 115% of their amount in the current year (except when the simple return of investment of the respective kind of renewable energy source is less than 12 years, then the feed-in tariff for the following year can be lower than 95% of the amount in the current year). The producers who are entitled to the feed-in tariff under current law will continue to be entitled to the feed-in tariffs, but the conditions of support will now be set out in the new legislation.
  • Limitation of the Subsidy: For new projects the maximum subsidy cannot exceed CZK 4,500/MWh (approx. EUR 175/MWh) in relation to both the feed-in tariffs and green bonuses for all facilities generating electricity from renewable resources. The subsidy for the production of bio-methane cannot exceed CZK 1,700/MWh (approx. EUR 68/MWh). The green bonus for heat from renewable sources should amount to CZK 50/GJ (approx. EUR 2/GJ).
  • Solar tax maintained: The heavily criticised solar tax shall be retained without substantial changes, i.e. electricity generated in solar power plants that were put into operation in 2009 and 2010 with an installed capacity of 30 kW and higher shall be subject to a levy in the amount of 26% in respect of feed-in tariffs and 28% in respect of green bonuses until the end of 2013.
  • Solar panel waste disposal: For solar panels used and marketed before 1 January 2013, owners of power plants will be responsible for the financing of waste disposal. Owners of such panels will be obliged to conclude an agreement on waste management with the designated entity by 30 June 2013 and as of January 2014 will pay regular contributions on waste disposal so that the financing is fully secured by January 2019. In the case of solar panels marketed after 1 January 2013 the producers of the solar panels shall be primarily responsible for the financing of waste disposal. Further details will be set out in a decree of Ministry of Environment, which has not been yet published. For various reasons this provision is already subject to intense criticism from plant owners and it is expected that it will be amended in future.

The above is only a brief summary of main principles set out in the new law, which is relatively complex and also governs various other aspects of the promotion of alternative sources of energy. 

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 07/02/2012.

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Authors
Lukáš Janíček
 
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