Czech Senate approves 26% solar tax, breaks investor confidence

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The Czech Senate has approved a new law, which will add a 26% tax on solar energy production over the next three years, as well as 32% tax on carbon credits awarded to solar companies in the next two years. The new taxes will apply to all photovoltaic plants that were guaranteed to receive a fixed feed-in tariff (FiT) for a period of 20 years.

The solar production tax on revenue will not apply to solar plants placed on top of buildings with a capacity lower than 30kW. This solar tax will be retroactively applied to all ground-mounted PV built in 2009-2010 in the Czech Republic. Basically, it means a decrease of the purchase prices of solar energy under the FiT that were supposed to be guaranteed to investors for 20 years by the government. The proceeds from the taxes will be used to reduce the increase in household and industrial electricity prices next year.

National photovoltaics associations, including EPIA, condemn this decision, arguing that the retroactivity changes the conditions guaranteed to the operators of solar power plants already on the grid in 2009 and 2010. Current law guarantees these operators a FiT already set for these years. A special tax of 26% retroactively reduces that guaranteed subsidy and breaks investor confidence. The associations also state that the tax substantially interferes with the legitimate expectations of operators of solar power plants. Solar generators can therefore expect a number of litigations and arbitrations against the Czech Republic government.

EPIA Secretary General, Eleni Despotou said, “The Photovoltaic sector unanimously condemns the measure; investors have based their confidence on the stability that the Feed-in-Tariff scheme brings since it is guaranteed by the law. This decision will clearly break their trust in the renewable technology as a reliable investment and in the reliability of Czech republic as a safe place for investment.”

“The Czech decision largely compromises its capacity to reach the mandatory target set by the RES Directive. Today we are calling on to the European Commission, currently evaluating the way Member States are implementing the RES Directive to ask the Czech government and any other EU government with similar intentions to reconsider their decision,” concluded Eleni Despotou.

In his previous blog on this issue, Jaroslav Dorda of outlines how the tax was expected due to the impact the FiT will have on electricity prices next year. Dorda points out that during the past months, the biggest electricity utility in the country, CEZ, has presented several forecasts of the dramatic price increase of electricity due to the continuing boom of renewable power in the Czech Republic. However, these estimates vary considerably.

“According to PV experts, the estimates from CEZ are 'deliberately' overestimated and are based on strange figures related to the size of new PV installations, which would be connected to the grid by the end of 2010.”

“At the moment it is almost impossible to assess the impact of the current FiT on the future prices of electricity,” explains Dorda.

The law requires the Czech President's signature before taking effect in 2011.

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