Czech Republic

Czech Republic

Czech uncertainty in new law

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Although rejected by the country's president, Vaclav Klaus, and with the details as yet unpublished, the Czech Republic's new renewable energy law -- designed to meet an initial target for 8% of electricity to come from renewables by 2010 -- is to take effect in August. The implementation was confirmed in the official government journal.

The law provides for a choice of payment options, similar to the system that has functioned in Spain. Wind plant owners can choose whether to receive either a fixed purchase price for renewables generation, set annually by the energy regulator and varying according to renewable technology type, or a green energy bonus, in which an additional payment per kilowatt hour is added to the price they can sell their generation for on the open market.

In both cases the aim is for owners to recoup their investment over a 15 year period. Project operators are allowed to switch support systems once a year, on January 1.

Fixed purchase rates for 2005 have been set, but although the new rules kick off in just three months, the wind industry remains in the dark about what will be on offer in 2006. Neither the size of the fixed payment nor the green bonus have been made known. Under these circumstances, securing financing for future projects is almost impossible, stresses the industry.

What is certain is that an industrial price index will be taken into account, although which one is yet to be specified -- and from 2007 the fixed price option can be reduced each year by up to 5%. Moreover, while network operators are obliged to take all renewables power generated, they will only be held to that requirement if there is sufficient grid capacity to do so. There are no arrangements for ensuring network expansion.

The pay rates for this year, published in a decree issued by the Czech energy regulator in November are: CZK 2600/MWh (EUR 85.8/MWh) for capacity installed after January 1, 2005; CZK 2720/MWh (EUR 89.76/MWh) for turbines online in 2004; and CZK 3020/MWh (EUR 99.66/MWh) for those commissioned before 2004. Renewables plant operators had to register expected generation for the year 2005 by December 10, 2004 to qualify for this year's premium payments.

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