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| October 11, 2017

Photovoltaic power plants under close inspection

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Headlines such as “The State to Limit Profitability of Green Energy, Will Draw Away Excess Profit” or „State Authorities to Look into Photovoltaic Power Plants” suggest that the topic of photovoltaic power plants is becoming relevant in the course of the year 2017 again. In the following article, we would like to inform about the changes, which are being prepared in this area.

In September 2017, the Czech government approved a proposal of the ministry of industry and trade for introducing a mechanism for inspection of the adequacy of support for renewable energy sources (RES). The commitment to implementation of this mechanism is part of the notification decisions on the Czech model of support of energy from renewable sources, which were issued by the European Commission at the end of last November. The aim is to find out, if overcompensation does not occur during the provision of support.

The term overcompensation refers to acquiring revenues of such height that would lead to return on the investment exceeding admissible scope. The admissible scope is set in a decision of the European Commission as the maximum value of internal rate of return (IRR).

Overcompensation may arise mainly due to accumulation of support for electricity from RES with other operating or investment support or overvaluation of one of the items of production costs, which are reflected in the calculation of support of electricity from RES.

The basic tool of the mechanism of adequacy inspection will be the monitoring of the total level of support. Most photovoltaic power plants only receive support for production of electricity from RES. Such electricity producers will not be subject to individual inspection, but will be divided into groups based on the year of launch into operation and on the output of their system. At least 5 samples from each group will undergo inspection. Overcompensation will be assessed according to the height of internal rate of return (IRR). For solar power plants, the proposed rate is 8.4%.

Control is to take place within 10 years from the launch of systems into operation, for sources launched into operation between 2006 and 2008 by the end of February 2019. Inspection will relate to production premises launched into operation from January 1, 2006 to December 31, 2015, for which the total of support of the individual recipients in three consecutive years exceeded EUR 200,000 (approximately CZK 5m). In case of identifying overcompensation, the state will proceed to reduction of support for overly profitable power plants, either by reducing future support, shortening the time, during which support will be paid, or in case of necessity by reclaiming part of the support.

The above-mentioned changes of course do not relate only to photovoltaic power plants but to all producers of electricity from RES. Examination of support adequacy will probably be carried out mainly through the market operation in cooperation with the ministry of industry and trade and the Energy Regulation Office. It will affect more than 3,000 sources. More than 700 larger sources, for which operating and investment subsidy occurred simultaneously, will be subject to detailed examination.

As we have stated above, the return on investment, that is the value of profitability of the project, will play the key role. In case you are interested in more detailed information on the above-mentioned topic, do not hesitate to turn to us.