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The brief and wondrous life of solar energy development

For a few years, the sun was shining on the Czech Republic’s alternative energy industry. From 2009 to 2010, the world watched as the small Central European country rose from virtual solar obscurity to become one of the biggest producers of photovoltaics in Europe. Then, just as quickly as it grew, things started to go wrong.


Just two years later, drastic shifts in solar energy legislation squelched development and forced a standstill within the industry, leaving investors in disarray. Coming out of this turbulent period, renewable energy remains integral to the energy mix in the Czech Republic, but the need to improve storage technology and continued governmental support of nuclear plants has made it clear that solar energy is no longer fit to steal the spotlight.


Boom and Bust

The initial rise in photovoltaics occurred thanks to massive government incentives in the form of subsidies, fixed purchase prices, and decreasing costs of technology. In 2010, the country’s feed-in tariff for solar was at a titanic 12.15 CZK per kWh, all to achieve the goal of 13% solar-produced electricity by 2020. In the final year of the boom, the Energy Regulatory Office reported that the Czech Republic stood as the third highest country in photovoltaic installations after Germany and Italy with 1489.8 MWp of new on-grid capacity in a single year.


Germany in particular, has been a longtime model for solar energy in Europe. Unlike the Czech Republic, the country has been steadily curtailing its nuclear output while emphasizing renewable energy sources (RES). A study from Ruhr University estimated subsidies at up to $130 billion for 1.1 million solar power systems. Nevertheless, Germany now faces its own share of problems with its PV investments. In a recent article by Slate magazine published this year, minister of economics Philipps Rösler described the lofty subsidies as a “threat to the economy.”


The brief period of excitement over solar energy in the Czech Republic came to a jarring end in November of 2010 with the approval of a solar tax and a withdrawal of governmental support for large installations. High tariffs coupled with rapid development meant sharp increases in energy costs that pressurized the market. To compensate, Act no. 1880/2005 Coll. put a 26% tax on photovoltaic plants producing over 30kWp and a 28% levy for green bonuses. Spokesperson for ČEZ Group, the generator and distributor of approximately three-quarters of the country’s electricity, explains, “it is clearly necessary to set the support for renewables with regard to their impact on end-users electricity prices…the increasing number of photovoltaic installations also means increasing costs of connection to the grid and costs of grid operation.”


However, the new legislation did more than just cool down the boom—it flat out ended development for about a year and a half. The moratorium resulted in protests by the Czech Photovoltaic Association and legal entanglements as solar investors sued the Czech state. Ira Rubenstein, Founding Chairman of the Czech Green Building Council and an expert in clean energy financing explains that the regulations sent a strong message: “The Czech Republic is not beyond changing policy in a way that is technically legally after the fact but functionally retroactive.”


Legislation in the Aftermath

This year, the Czech government is set to implement a new energy law that will allow for solar energy development under tight restrictions. Most notably, it limits subsidies for new projects to under 4500 CZK/MWh, and maintains the solar tax with very little change. PV installations will be limited to a capacity of 30 kW per building.  Meanwhile, the limit under the National Action Plan for PV plants (and the commitment to 13% RES by 2020) is nearly full. 


An important component in the new law by the Energy Regulatory Office is an emphasis on the green bonus over the feed-in tariff, which increases the market price of environmentally friendly electricity. ČEZ explains that under this scheme, “the producer can receive a higher price per unit of the sold electricity than within the system of fixed purchase prices.” After their annual report on net profit, Chairman of the Board of Directors and Chief Officer of the ČEZ Group announced that CEZ itself is prioritizing nuclear power, specifically the expansion of the Temelin Nuclear Power Plant. The organization’s net profit exceeded expectations by 0.7 billion CZK in 2011, which corresponds to a 1% increase in its nuclear power generation and a 17% decrease in renewables.


ČEPS, the government-run operator of the Czech Transmission System has also taken a cautious stance towards solar energy. A representative explains, “It is necessary to keep a balance between production and consumption…RES, mainly PV stations and wind stations, belong to sources that do not fully meet this requirement.”


Proceeding with Caution

While it is clear solar energy will need to be developed in a controlled and reliable way, it will remain increasingly important to domestic and exported energy in the Czech Republic. Photovoltaics play a major role in the energy mix of the Czech Republic as counterweight to carbon generation. In addition, despite international criticism, nuclear power has always received heavy support by both the Czech government and the public as a clean and efficient energy source.


Despite the fact that the cost of production is waning, the solar industry is not yet at the point where it can operate on market value. In the last two years, ČEPS has connected over 2250 MW of RES capacity to the grid, 1903 MW of which includes PV installations. Promotion costs for renewables this year alone amounted to 38 billion CZK, and ČEZ estimates that support will reach 1000 billion CZK in 20 years. Rubenstein explains, however, that the success of small, residence-based systems will be a way forward towards independence from government subsidies.


The logistical problems involving the technology itself should also be taken into account. Solar projects can be completed from start to finish relatively quickly, but development of storage and grid technology takes more time to improve. In the area of green energy, ČEZ is compensating for fast-approaching limits on PV by attempting to increase the efficiency of hydroelectric power plants.


ČEPS adds that given the inherent volatility of energy sources like wind and solar that are based on weather, RES generation has higher output requirements and cannot be viewed as the sole answer to energy production. Weather and the lack of sunshine, for instance, is one of the primary factors that rendered German subsidization of PV so unprofitable in recent years. Rubenstein supports this argument, explaining, “There’s a great tendency to associate clean energy as being something that if you are in favor of it, you’re opposed to nuclear and vice versa…To transit that into black and white illustrates a fundamental lack of understanding.”


The dramatic rise and fall of the solar energy industry offers an important lesson for the Czech Republic. To avoid another production boom and crash, the government should focus primarily on making the solar technology for both storage and generation more efficient before switching the lights back on. In the meantime, nuclear energy is here to stay.


Lisa Han is an English major with a film theory focus at Princeton University. She studied abroad in Prague in the Spring 2012 semester with the Undergraduate Program in Central European Studies, and plans to pursue a career in journalism after graduation.


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