An amendment of the Act on Supported Energy Sources penned by the Ministry of Industry and Trade has reached the Chamber of Deputies. One of its main topics in it is overcompensation of operating aid for production of electricity from renewable energy sources (RES). The amendment is planned to take effect as of 1 January 2021.

Control will apply to power plants launched in the period of 1 January 2006 to 31 December 2015. The threshold value of the internal rate of return is set up as follows:

• power-generating facilities that use the energy of water – 7 %
• power-generating facilities that use the energy of wind – 7 %
• power-generating facilities that use geothermal energy – 7 %
• power-generating facilities that use solar energy – 6.3 %
• power-generating facilities that use biomass energy – 9.5 %
• power-generating facilities that use biogas energy – 10.6 %

Sector inquiry

The Ministry of Industry and Trade will examine the adequacy of support for electricity by means of a sector inquiry. All producers from a given sector will be addressed and asked to fill in a report sent to them. The individual surveys will be started after 10 years will have elapsed since the first day of the calendar year following the year, in which the given facility was launched, according to the data in the system of the market operator. The Energy Regulatory Office (ERO) may impose a fine up to CZK 50,000,000 on producers, who will not communicate accurate and complete data in this stage, but not higher that their annual entitlement to support.

The ministry will publish a report about the sector inquiry performed and about its result in a form enabling remote access and will inform the government about it annually by 30 June. If it detects a risk of excessive support, it will also state by how much the detected internal rate of return exceeds the threshold levels. If a risk of excessive support is detected in a sector, the ministry will also notify, within 15 days of publication of the report, all producers in the given sector known to it, who have concurrent support of energy from RES and investment support, about the result of the inquiry.

General adjustment of support                                      

In case a risk of excessive support (overcompensation) is detected, the ERO will set up another feed-in tariff for power-generating facilities in the given sector, so that in case of support by a feed-in tariff set up in this way, the usual internal rate of revenue would be achieved during the remaining time of entitlement to support. Similarly in the case of setting up green bonuses.

Measures chosen by the producer

If a risk of excessive support (overcompensation) is detected, the producer may voluntarily choose an individual measure against excessive support, if he announces it through the market operator within 30 days from the publication of the price decision of ERO according to the previous paragraph (general adjustment of support).

An individual measure may consist in termination of payment of this support. It will be performed at the beginning of the twelfth calendar year since the launch of the power facility, with validity for the entire period of duration of entitlement to support of electricity.

In case of concurrence of support from RES and investment support or another form of operating aid, the producer may apply support lowered by the sum of provided investment support, unless the investment support exceeds the expected sum of support from the beginning of the twelfth year of support after the year, when the power facility was launched, for the entire period of duration of entitlement of support.

Within two months after the price decision of the ERO according to the previous paragraph (general adjustment of support) has taken effect, the producer may also request individual conditions of support to be set up; the State Energy Inspection (SEI) decides about this request.

Concurrence of support

If a producer with concurrence of support (support from RES and investment support or another form of operating aid) does not announce an individual measure within the deadline, the SEI will initiate a proceeding for setting up conditions ex officio, within 3 years from the publication of the results of the sector inquiry, even in case no risk of overcompensation has been detected.

In case excessive support is detected, the SEI will:

1. withdraw entitlement to support of electricity produced in the power-generating facility; and
2. will impose the duty to return resources to the state budget reaching the sum corresponding to excessive support provided to the producer.

Conclusion

The passing of this amendment may mean a reduction of support for many electricity producers (especially with photovoltaic power plants, where the threshold value is set up the lowest), it may shorten the time of provision of support or it may mean an obligation to return a part of support already used. For a number of operators of photovoltaic power plants, this will mean fundamental existential difficulties. Banks, which finance these projects often, will feel these difficulties as well. This is while European legislation considers an 8.4 % internal rate of return adequate compensation even for this type of production facilities. It may thus even represent discrimination of these operators. The key things will be now, in what form the amendment will be approved in the legislative process.

Veronika Odrobinová