Czech Republic

Czech Republic

Wheeling and dealing behind the scene -- Czech Republic's renewables obligation

The main beneficiary of future Czech renewable energy policy could be the state-controlled energy company CEZ, if it chooses to fully meet the national renewables mandate by burning wood chips in its coal power stations. In that case, fears Neela Winkelmann of the Czech Republic division of Germany's Ökologische Beratung Deutschland, there will be no market left for private sector renewables initiatives. Nonetheless, a Czech-German "co-operative" wind project of 1.8 MW could go ahead this year and work may begin on a major project developed by Czech Venti backed by British interests.

When it joins the EU in May, the Czech Republic must fulfil a commitment to raise its proportion of green electricity to 8% from about 3% today, creating a theoretical market for about 500 MW of renewables by 2010. But the proposed legal framework "is likely to make it ten times more difficult to get new projects installed compared with the current system, which is bad enough," comments Winkelmann. In 2003, just two Enercon 600 kW turbines, one Repower 1.5 MW unit and one Fuhrländer 100 kW turbine (all from Germany) were commissioned, bringing the national total to about 10 MW, she says.

This year there is an obligation on electricity companies to buy all renewables power at EUR 0.086/kWh, compared with EUR 0.095/kWh in 2003. Payment is adequate to stimulate investment, but the rate is fixed annually. The uncertainty has kept investors away.

Whether the proposed renewable energy law will help is not clear. It was rubber stamped by government in November but the first parliamentary reading has been postponed from mid-December to spring. The draft proposes that the existing system runs until the end of 2005 and that today's turbines and those brought online before then are guaranteed a fixed purchase price for 15 years.

Renewables quota

From 2006, the draft law proposes introducing a renewable energy quota on energy companies, combined with a trading system for green certificates. Key elements, including the certificate price, size of the quota and the extent to which the quota fulfilment can be postponed to successive years would be fixed each year by the regulatory authority. This annual state interference combined with a vague promise of "an economic return on the usual costs of electricity generation from renewable energy sources," is not likely to make projects bankable, says Winkelmann. She predicts that CEZ could substantially meet the national renewables target "perhaps within just a couple of years" by replacing up to 25% of coal with wood chips.

While the Czech legal framework looks unsavoury for commercial wind projects, developments with government involvement look more likely. A German/Czech co-operation project involving construction of a small wind station at Loucna could go ahead this year. It would comprise three Dewind 600 kW machines from Britain. The German federal environment ministry is to contribute a grant of EUR 800,00 towards its EUR 2.7 million cost.

On a grander scale, a British/Czech joint venture could be implemented partly thanks to bi-lateral trading interests between Britain and the Czech Republic. A joint venture, owned equally by Czech Venti and the British Virtual Utility, are developing the Chomutov 325 MW project of about 180 turbines at sites in the Erzgebirge mountains that form part of the country's northern border. The cost of the project is around EUR 426 million.

Czech Venti says its official partner is British Aerospace, prompting speculation that the wind project could be a rider to a potential upcoming major deal in which the Czech government leases fighter planes from British Aerospace. The wind project might be anticipating an adequate feed-in tariff if the main fighter plane business is clinched.

Turbine manufacturer Dewind, part of the British FKI group, expects to supply 105 of its 2 MW turbines to the project, delivering an initial 38 at the end of 2004. Denmark's NEG Micon is also in the frame to supply 105 MW using 1.5 MW machines. The wind plant is planned for three sites, Medenec, Vysluni and Hora Sv Sebastian, located close to the Czech/German border.

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