Czech Republic - Investment bombshell hits suffering sector

CZECH REPUBLIC: Investment in wind and other renewables in the Czech Republic suffered a major blow at the start of the year when parliament's upper house approved a draft law that undermines the renewables support mechanism included in all existing contracts between plant operators and the Czech grid companies. The law is now awaiting approval by the lower house to become final.

"It is almost without doubt that all existing investors in the sector will be affected, especially those that have linked these grid contracts with project financing," says Jakun Hajek, a legal adviser for the Platform for Renewable Energy, an organisation that supports renewables expansion in the Czech Republic.

The new law only adds to the woes of a sector already hit by shrinking feed-in tariff rates payable for 20 years after commissioning, and falling bonuses within the alternative form of support - the green premium - that supplements the market price of electricity. Last year just 2MW of capacity was added, taking the country's total to 217MW.

The Czech government is still heavily reliant on lignite and coal, and has confirmed its faith in the long-term future of nuclear power. A draft national energy strategy aired last September by the industry and trade ministry foresaw a fourto five-fold increase in nuclear-power generation by 2060, with renewables playing only a minimal role.

Martin Kuba, the industry and trade minister, said in December that the country expects to achieve its commitment to source 13% of its total energy consumption - covering electricity, transport and heating - from renewable sources by 2020. This means renewable electricity would have to rise to 14.3% from 4.5% in 2005. "But beyond that, further development will not be supported but will have to be possible according to market principles," he says. Hydropower and combined heat and power appear to have the edge over wind in that context.

The 2010 Czech National Renewable Energy Action Plan foresaw 293MW of wind energy operational in 2011, growing to 493MW by 2015 and 743MW by 2020.

The country is already significantly behind schedule and faster progress is unlikely in view of the latest political developments.