New legislative provision for renewable energy in the Czech Republic

After more than one year of discussing and arguing in the Czech Parliament its MPs approved an act supporting the production electricity from renewable energy sources. The act will come into force three months after the president’s seal of approval which is expected still in April. Most of the preparatory works has been done by team of expert coordinated by Martin Bursik, ex-minister of Ministry of environment. CZ Biom was mandated to give an expertise in biomass utilization during the process and now has welcomed with relief the new act which establishes probably the most progressive renewable energy legislation in all of the eight new EU member states.

The Act defines a dual pricing system offering a choice of either fixed feed-in tariffs or green bonus under the strictly defined conditions. For electricity from biomass, so-called clean biomass will get a higher price than for electricity from co-firing of biomass with fossil fuels. A passage regarding the admixing of biofuels in fossil fuels was added.

The aim of this act is to guarantee investment rate return in the 15 years horizon. This will be insuring by fixed feed-in tariffs for each kW of electricity made from renewable energy sources.

The Renewables Act should ensure an 8% share of renewable energy in the Czech Republic’s gross domestic electricity consumption by 2010, a target laid down in the Czech Republic’s accession treaty with the EU. The new act transposes the 2001/77/EC directive into the Czech legal system. The adopted support scheme provides 15-year guarantee of solid feed-in tariffs, differentiated by technology. It is estimated that today’s new legislation will lead to the creation of 4,000 new jobs in fuel (mainly biomass) production and maintenance and about 23,000 new jobs in the production of technologies and engineering for the projects.

New investment in the Czech economy as a result of the new law is estimated to exceed EUR 1.5 billion in the next five years. The Renewables Act may also lead to a saving of approximately 4 million tons of annual carbon dioxide emissions by 2010.

Miroslav Safarik, President of the Czech Biomass Association CZ BIOM, commented: “This is the utmost compromise we could deal for to have a functional Act. It may lead to long expected systematic development of renewable energy in the Czech Republic. The long-term guarantee of green electricity purchase price is a crucial condition that ensures the pay-back of the investments and that allows renewables operators to gain access to bank loans for their projects. Despite the fact that a part of the Act, which might have established support to heat from renewables was cut off from the Act in the Parliament, this part still could be a good example for preparing heat support on European level.”

The act also has weak points. Its success partly depends on what practice the Energy Regulatory Office (ERO) will use for setting prices which are not stated directly in the text of the law. The ruling states that it should be in such a fashion that the pay-back time of installations is less than 15 years. There is also a rule that for new installations the price cannot drop less than 95% against the level of those installations which started in the previous year.

As an each type of renewable energy sources has different per unite investment cost as well as investment rate return, ERO should take this fact into consider. Since the beginning of formulation of this Act is to support all renewable sources to boost development of the technology of all different sources, even those which are recently more cost ineffective. The fixed feed-in tariffs is differentiating for each technology to insure future technological development, which may bring more cost effective solutions.

Table: Current and expected production of renewable electricity in the Czech Republic by technologies (the production of electricity in hydro-power plants depends heavily on precipitation levels for a given year):

Elektricity from RES	2004 (GWh)	2010 (GWh) (roughly estimated)
Elektricity from Biomass in total	560	2 200
Co-combustion	305	(600)
From pulp and paper industry	200	(220)
Clear biomass combustion	28	(1180)
Biogas plant (excl. sewadge and landfil gas)	27	(200)
Wind energy	20	930
Small hydro	740	1120
Large hydro	1246	1200
Geothermal	0	15
Photovoltaic	0	15
Total RES	2 536	5 480
% of gros domestic consumption	(4.2%)	(8 %)

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