27th January 2021

ERO begins public consulting proces on the proposed parameters for setting 2022 subsidies

The ERO states in its press release that as a result of the still ongoing legislative process, the RES Bill is anticipated to take effect only as of January 1, 2022. This means that the Proposed Decree would first be used to set subsidies for 2022, although work has already begun.

The information on when the RES Bill will take effect is still of interest for operators of facilities currently receiving subsidies, because it means that any (announced) measures to lower subsidies for current facilities should take effect only in 2022. This will all depend on how quickly the RES Bill is discussed, however.

The Proposed Decree introduces new technical and economic parameters

The Proposed Decree is one of several implementing regulations that must be enacted in connection with the RES Bill. Another key implementing regulation for investors is that of the Ministry of Industry, which will set the specific conditions and requirements for modernization of production facilities and the scope of document archiving to demonstrate said modernization took place.

The Proposed Decree introduces several changes to the current technical and economic parameters. The most striking changes are the reduction of the anticipated lifespan for small hydro plants from 30 to 20 years, the WACC for all facilities receiving subsidies (new and modernized) of 6%, and the decrease in anticipated investment LCOE with the exception of facilities using geothermal energy. The Proposed Decree also unifies fuel LCOE for biomass facilities. The measures laid out above should reflect the current situation on the market with the construction and operation of new facilities; the change in technical and economic parameters should not affect existing facilities at all.

The ERO is currently assessing comments on the Proposed Decree. According to the ERO, the legislative process for the Bill should take place around summer 2021, well before the RES Bill is expected to take effect. 

It is clear from the Proposed Decree, however, that operating subsidies for new or modernized photovoltaic power plants are not under discussion. Photovoltaic power plant construction will still most likely receive some form of investment subsidies. The first proposal (including the subsidies for construction of wind, small hydro, and geothermal power plants) was presented in late 2020 by the Czech State Environmental Fund here. The current deadline for submitting project plans for submitting a project application and obtaining financial support from the modernization fund - RES + (downloadable under this link) runs until 1.2.2021 (12:00 hrs.).

We will continue to keep you informed of the latest developments and will be happy to discuss any questions you may have. 

Members of the American Chamber of Commerce in the Czech Republic