Imminent comeback, imminent trouble – pv magazine International

From pv magazine 01/23

Arguably the most politicized and stigmatized energy source in Czechia, solar looks set for a long-awaited comeback. The nation’s first wave of PV growth came in 2019 on the back of a generous feed-in tariff (FIT). Almost overnight, Czechia became Europe’s third-biggest solar market, with some 2 GW of generation capacity. However, progress was nipped in the bud by retroactive interventions which eroded the solar business model, including a 26% solar tax introduced, the government said, to harness retail power price inflation.

“In 2010, the government mismanaged the green energy regulations,” says former minister of environment Martin Bursik, who established the Czech green investment subsidy scheme. “The coal and nuclear industries, and some politicians, have used this for a big offensive against renewables. Consequently, we have only a 14.5% renewable energy share in our electricity mix today.”

That is partly because utility scale PV projects have been banned for years and excluded from large scale renewables auctions. “With current energy prices, even if the government launched solar auctions there would be no interest from investors,” says Jan Krcmar, chairman of the Czech Solar Association (CSA). The CSA’s data indicates only 158 MW of solar was added over a five-year period from 2017 – with a measly 5 MW installed in that year for the entire country.

The International Renewable Energy Agency estimates the 2.1 GW of solar in Czechia at the end of 2020 was 13 MW less than it had a year earlier, making it one of only two European nations with a shrinking PV fleet. Former minister Bursik, now chairman of the Czech Renewable Energy Chamber, says “there has been a sort of mental barrier that there is not enough solar and wind in the Czech Republic to cover our electricity needs and to decarbonize. That is, all until now.”

Multiple factors

Two factors are driving the Czech solar recovery: high energy prices and robust subsidies. Czechia last year approved CZK 14 billion ($613 million) in solar funding across key support programmes. The New Green Savings Program established in 2015 provides capital subsidies for residential rooftop PV. Cash for commercial and industrial (C&I) arrays is available from the Recovery and Resilience Fund launched in March 2022, and has stocked up several times since, with €300 million ($318 million) available at present.

One local engineering, procurement, and construction services company says C&I rebates offer a three-year return on investment so “the question arises if the money would be better used elsewhere, since solar is not really a high-risk investment.” Lengthy delays in processing the 4,000 or so C&I subsidy applications lodged to mid-October can be a deterrent.

“I wouldn’t say the rebates are too generous,” says Radek Orsag, CEO of local distribution company SolSol and a member of the presidency of the Accumulation and Photovoltaics Guild. We are currently getting up to 35% capex [capital expenditure] subsidy for solar installations and up to a 50% rebate for storage systems. However, this can look generous under the optics of today’s energy prices.”

Demand for battery storage is high, driven by an aged grid network. “The Czech low voltage grid is still running on an asymmetric rate and has phase metering installed in homes, which means each of the phases is measured individually, and that makes it very difficult to make any good economics on self-consumption without the battery, Orsag says.

“Therefore, 95% of rooftop solar installed in the Czech Republic comes with a battery. We’re talking about some 50,000 batteries in 2022, each at least 10 kW, so this is some 500 MW of storage capacity only in the residential sector. There’s also a combination of subsidies for heat pumps and photovoltaics which can reach up to some €11,000 to €12,000 and this is quite an interesting proposition.”

New legislation

The Czech government is looking to beef up regulation to accelerate the development of rooftop PV. The limit for mandatory building permits rose from 20 kW to 50 kW in December, and an amendment enabling energy communities and energy sharing is expected to be introduced mid-2023. The energy community business model is being trialed in Prague with 20 households permitted to share surplus solar electricity and only pay distribution charges. The Prague energy sharing community is expected to drive more than 500 MW of rooftop solar and include 10,000 EV chargers this decade.

Net metering is also anticipated, with suburban areas offering large rooftop potential. “Dating back to the Communist time, the Czechs have a tradition of building chalets and cottages where they usually spend their weekends,” says the former minister Bursik. “As we introduce the concept of a prosumer, they will be able to install PV on their weekend houses and benefit from selling that solar electricity during the week, in their apartments in the cities. We expect a big boom from these micro and mini-installations, and this will also be important for building trust in renewables.”

Interest in utility-scale solar is also building, thanks to the Modernization Fund set up by the EU in 2021 to help 10 member states upgrade grids and meet 2030 energy targets. Amid high energy prices and pressure on manufacturers to improve environmental, social, and corporate governance performance, CSA Chairman Krcmar says big solar is competitive even without subsidy.

The result is that companies that had built projects some 12 years ago in Czechia are now returning. “They’ve been building all over the world, from Poland to Australia,” says Krcmar, “and they’re now coming back to build here in Czechia and have already applied for subsidies. But while a few have broken ground, most of the projects are now at the pre-permitting stage.”

Big PV plans

EU modernization funds are assigned through competitive calls and prioritize projects in former coal mining areas. Projects can secure up to half the cost of buying and installing solar panels to a maximum of €280,000 per megawatt of generation capacity.

Czechia secured funding for 622 MW of projects in the first funding round, ranging in scale from hundreds of kilowatts to dozens of megawatts. More than 200 sites sought more than CZK 10.4 billion in EU cash in the second call for projects, which closed in October.

“The utility scale sector is quite hard to predict but at the moment we have around 6 GW of reservations on the grid,” says SolSol chief Orsag. Some of these projects will not be built because of permitting issues. However, we can safely say that next year Czechia will become a gigawatt-scale market and that some 2 GW to 3 GW installations will be built between 2023 and 2025.”

For now, almost 98% of Czech solar arrays are on rooftops. Some 50,000 households applied for New Green Savings subsidies last year, according to government data, more than four times as many as in 2021. A year described as “absolutely groundbreaking” by the government saw 380 MW of residential applications, with an average size of 7.5 kW. Commercial systems are expected to have delivered more than 100 MW, and could take off this year. “Homes and businesses are finally seeing solar as the best way to lower their energy prices,” Krcmar says.

Trouble brewing

The sudden increase in demand has led to a shortage of skilled workers, especially installers. CSA Chairman Krcmar says the solar association is working on certifications and training programs to address the growing problem of untrained “YouTube installers.”

The utility scale PV sector is also not without problems. While the Czech electricity transmission system operator and distribution system operator were saying 11 GW of solar could be connected to the grid by 2030, it is difficult to say how much of the generation capacity presently in the pipeline is down to investors probing the grid.

Czechia does not have a transparent system where investors can check whether there is or isn’t grid capacity available in a specific location. As a result, they sometimes apply for connecting lots of capacity across the country to see where they should buy land and this can, in turn, block up the system.

“Another problem is spatial, or zoning plans, which are a local political decision,” Krcmar says. Some local politicians don’t want solar or wind in their backyard. So once you pass that stage, which can really kill off projects, you then enter the classical permitting procedure where not everybody in the Czech Republic on the local councils and permitting offices has received the memo that the Czech Republic wants to build more renewables.”

Krcmar adds that there are reports that project developers are facing “ridiculous hurdles” when they try to get projects permitted. “We really fear that maybe half of the projects that have already been chosen to receive subsidiaries, through the Modernization Fund, will not be built,” he says. “That, in turn, will deter investors from entering the Czech Republic and it could kill the Czech solar market before it even takes off properly.”

Krcmar says the government should act quickly and cut through red tape to avoid such a nightmare scenario materializing. Under the terms of its national energy climate plan, the government is aiming for some 4 GW of solar capacity to be installed by 2030, up from today’s 2.6 GW. Prague has acknowledged that the target was rather conservative and is likely to be surpassed by some distance. While there is still some catch-up needed to boost public acceptance and ease regulations, the clock is ticking on Czechia’s energy transition.

“This decade is the last great window of opportunity for the Czech Republic,” adds Bursik. “Never, ever in the future will there be such huge funding available for the transformation of our dirty, fossil fuel-dominated energy sector.”

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