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In addition to the green bonus, i.e. an incentive for self-marketed or self-consumed electricity, feed-in tariffs have been the main incentive for renewable energy in the Czech Republic. This type of the incentive has been the main driver of the expansion of renewables in the Czech Republic. Renewable energy systems put into operation after 31 December 2013 are no longer eligible for this incentive (PV systems already in operation since 31 March 2011)1. Renewable energy systems that were already in the project planning phase back then, expired on 30 September 20192. PV systems were not covered by any transitional period.
In the past, photovoltaics was particularly hit by retroactive interference in the feed-in tariffs when solar tax was introduced.3 The Czech legislator has committed itself vis-à-vis the EU Commission to check whether the FiT incentive leads to overfunding. The check will be carried out 10 years after commissioning of the renewable energy system. The law that will provide the legal basis for the check has not been adopted yet.
In general, it is possible to sell renewable energy also after the incentive period expires. The electricity generation license and the grid access right do not expire.
Because this form of the incentive is no longer granted, this business model is of relevance only for the existing renewable energy systems.
2 Art. II Act No. 310/2013 Legal Gazette amending Act No. 165/2012 Legal Gazette on incentivised energy sources
3 § 14 – 22 Act No. 165/2012 Legal Gazette on incentivised energy sources – current structure of the solar tax
Because no incentives for the operation of renewable energy systems are currently granted, the self-consumption model has had the biggest share in the market volume. There are various incentive programmes available for households, in particular, to promote the installation of PV systems that also use storage systems, if needed. Companies may currently use only incentive programmes as part of the energy efficiency framework. It is, however, expected that corporate incentive programmes promoting the installation of renewable energy systems will be put in place again.
In general, there are currently no major administrative hurdles. For power systems of up to 10 kWp, it is not even necessary to apply for the electricity generation license with the energy regulator4. In contrast, power systems of over 1 MWp require a license from the Ministry of Trade and Industry5. Where the public electricity grid has available capacities, grid priority is given to renewable energy systems6. Grid priority is granted to projects that are consistent with the national energy policy, the national action plan for renewable energy sources and the land use plan, and meet the requirements concerning energy efficiency, safe and reliable operation of the electricity system, safety of persons and property, security of supply of electricity, expected future demand for electricity, and assurance of the balance between supply and demand for electricity in the Czech Republic. If excess electricity is produced, the producer is required to find an off-taker, because otherwise the injection of the electricity into the public electricity grid will be considered illegal. The off-taker is normally the electricity supplier of the owner of the renewable energy system, but it can also be the electricity trader.
It should be assumed that the installation of decentralised renewable energy systems for self-consumption will increase in importance even more in the future – also due to the constantly falling component prices. Large electricity suppliers already have a strong presence in the market of rooftop PV systems and offer not only the installation but also the financing of such systems or of the so-called virtual electricity storage systems, which is a form of net metering.
5 § 30a Energy Act No. 458/2000 Legal Gazette.
6 § § 7 (1) Act No. 165/2012 Legal Gazette on incentivised energy sources
Because of the incentive model adopted by the Czech Republic, i.e. the feed-in tariffs or the green bonus, direct marketing of electricity through the public electricity grid or self-consumption have been possible since 2006. The great majority of operators of renewable energy systems subsidised in this way sell their electricity by themselves and do not make use of the feed-in tariff, whereas most of this electricity is bought up by large energy suppliers. Even though the Czech Republic does have a legal framework for direct marketing of electricity also without using the public grid (off the grid), only a few PPAs have so far been concluded with power producers operating renewable energy systems that do not also receive an incentive in form of a green bonus.
Every power producer holding a license to generate electricity under the Energy Act is authorised to supply the generated electricity through the public electricity grid and since 1 January 20167 also directly to other market participants, and thus also to electricity consumers8. Power systems of less than 10 KW may generate and consume electricity also without a license9 if certain conditions are met. Power systems to be used for direct marketing of electricity must hold a license to generate electricity, though.In the case of direct marketing of electricity off the grid (on-site PPAs), no network charges generally apply and no EEG levy must be paid by the customer; the latter applies if the electricity is consumed using off-grid systems and the customer can evidence this fact10. Therefore, there are no major administrative hurdles. The same applies to the self-consumption model. Only in the case of direct marketing of electricity off the grid (on-site PPAs), it might be difficult to structure the cooperation between the power producer and the electricity supplier or the electricity trader whose services the PPA customer uses to cover the need for residual electricity. This is because in such cases the electricity supplier or the electricity trader would have to grant their consent to the supply of electricity by the power producer before the latter may supply it directly to the customer. The question is whether the electricity supplier or the electricity trader would grant such consent at all and, if so, on what conditions. For this reason, such a solution – a PPA between the power producer and the customer, where the customer is still connected to the public electricity grid, seems hardly feasible. In the case of direct marketing off the public electricity grid, the power producer would have to fulfil not only the license-related obligations of a power producer11 but also obligations of an electricity trader12. Most of such obligations could be fulfilled by the power producer alone and are only an additional administrative burden. However, the generalized reference to the obligations of the electricity trader does not do justice to the special position of the power producer in direct marketing, such as the assumption of the function of the supplier of last resort within the meaning of § 12a of the Energy Act. A supplier performing such a function may be required from time to time to supply electricity to customers at the request of the electricity market operator.
This model will increase in importance once grid parity is achieved. Also renewable energy systems whose incentive periods will have ended will enter the market using feed-in tariffs because, at that time, they will already have been depreciated. It should also be expected that the enactment of the EU Winter Package will lead to a further simplification of the applicable regulatory framework and the related procedures.
8 § 23(1) Energy Act
9 § 3 (3) and § 28 (5) Energy Act No. 456/2000 Legal Gazette
10 § 28 (5) Act No. 165/2012 Legal Gazette on incentivised energy sources
11 Regulated in § 23 (2) Energy Act No. 458/2000 Legal Gazette
12 Regulated in § 30 (2) Energy Act No. 458/2000 Legal Gazette
The Energy Act does not state that the power producer must be the owner of the renewable energy system13. Therefore, the lease model is also available in the Czech Republic as an alternative model for financing subsidised power systems. This model, however, has rather been applied only in exceptional cases. There is no specific legal framework that would regulate the operation of leased power systems.
The only challenge is to correctly structure the agreements and to correctly depreciate the power systems for tax purposes to avoid the risk of the lease costs being classified as non-tax-deductible under certain circumstances.
This model is the only alternative form of financing in the Czech Republic. Therefore, much depends on the financial viability of the business model underlying the project.
13 § 5 (3) Energy Act No. 458/2000 Legal Gazette
Direct marketing of electricity to non-corporate customers is currently non-existent. Here, the primary focus is on the self-consumption model. Direct marketing also off the grid is, however, generally possible, as discussed in the PPA model.
see PPAs
The current incentive programmes are aimed at promoting high self-consumption rates of power systems. Direct marketing of electricity generated in decentralised systems is not a business model, which could be seen as worthy of incentivising from the point of view of the energy policy. Only when grid parity is achieved, if necessary taking into account price advantages offered by direct marketing off the grid (no network charges, no EEG levy) will direct marketing be likely to increase in importance.
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Olaf Naatz, LL.M.
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