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Development of support system for RES-E in the
Czech Republic Experiences and lessons
learned Jaroslav Jakubes, ENVIROS, Prague
New Europe, New Energy International Conference
Milton Keynes, UK, 26. September 2006
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Contents of presentation

• Background situation of the CR - structure of
  electricity supply/demand, energy
  policy/indicative targets, current use and
  potentials of RES
• Overview of development of system of RES-E
  support in the CR
• Key features of new RES Law and current system of
  RES-E support
• Conclusions - potential problems and barriers in
  the current system of RES-E support and lessons
  learnt from RES-E support development in
  2002-2005
• Contact

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Czech Republic electricity supply (2004)
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Czech Republic background situation

• One of largest European net electricity
  exporters, el. production portfolio primarily
  based on local coal and nuclear energy
• Availability of local coal limited to the next 15
  20 years - nuclear option is already being
  evaluated
• State Energy Policy (2004) - focus at
  independence (self-sufficiency), safety and
  sustainability gt role of RES will be increasing
• Large share of hydro in current RES-E portfolio
  dependence on natural conditions
• Share of wind energy still negligible but growing
  (currently 49 turbines/ 30MW, next year another
  50-80 new turbines expected)
• Total share of RES-E on gross electricity
  consumption 4,04 in 2004 vs. indicative target
  8 in 2010 !!!

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Potentials for RES-E in the Czech Republic

• Existing, but limited by natural and other
  conditions
• Large hydro - practically no potential
  (environmental limitations)
• Small hydro most favourable locations already
  utilised (almost 1400 SHPP) remaining approx.
  150 MW higher unit investment costs
• Wind - limited by natural conditions and nature
  landscape protection - estimates of potential
  vary in wide range 500 3000 MW
• Solar PV limited mainly by the cost of
  technology
• Biogas, sewage/landfill gas estimates of
  potential 50 200 MW
• Geothermal low potential suitable for RES-E
• Biomass highest potential but large part used
  for decentralised heat production co-firing
  max. 300-400 GWh/y (20 contribution to
  indicative target)

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Current situation vs indicative target global
overview
Source Ministry of Industry and Trade
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Current situation vs. indicative target
detailed overview
?
Source Ministry of Industry and Trade
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RES-E support in the CR until 2005

• Until 1998 same price for RES-E as for fossil
  electricity
• 1999 2001 - Voluntary agreement between power
  distributors and RES-E producers feed-in price
  approx. 5-10 higher than for fossil electricity
• 2002 2005 - Fixed feed-in tariffs for RES
  electricity set annually by Energy Regulatory
  Office
• Compulsory purchase of electricity from RES and
  CHP and guaranteed access to the grid
• Investment subsidies for RES-E projects in a
  limited extent
• Key problems
• No long-term guarantee of feed-in tariffs
• Incorrect initial setting of feed-in tariffs (no
  differentiation of co-firing of biomass and 100
  biomass generated electricity)
• Missing indicative target (until 2004) and clear
  framework legislation

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RES-E support in the CR since 2006

• New Renewable Energy Law (180/2005 Coll.) - May
  2005 set of implementing legislative Decrees -
  end 2005 amended Energy Law (91/2005 Coll.)
  priority access to grid for RES
• Long and dramatic history of development (first
  draft in 2003) result of combination of
  pressure from EU (Directive 2001/77/EC) RES
  investors and compromise between politicians,
  interest and lobby groups
• Original draft quota / green certificate scheme
  attempt to introduce RES-heat support scheme -
  not acceptable
• Final version - compromise variant - combined
  feed-in tariff / green bonus scheme
• Support of RES-E production from wind, solar,
  hydro, geothermal and ambient heat energy,
  biomass, biogas, landfill and sewage gas

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New Czech RES Law (1)

• 2 support schemes available since January 2006 -
  choice is optional
• Fixed feed-in tariffs - mandatory purchase of
  RES-E by distribution/transmission system
  operator (DSO/TSO)
• Green bonuses to market price of electricity
  sale of electricity directly at the market, bonus
  is provided by DSO/TSO
• Increased costs for DSO/TSO projected into end
  user price of electricity (0,028 CZK / 0,1 c
  per kWh in 2006)
• Stability of support guaranteed minimal level
  of level of support for 15 years - max annual
  decrease of feed-in tariffs/green bonuses is 5

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New Czech RES Law (2)

• Feed-in tariffs/green bonuses differentiated by
  year of installation, type of RES-E / type and
  parameters of biomass stimulating use of energy
  crops and other waste biomass
• Level of feed-in tariffs/green bonuses set so
  that technology with indicative parameters has
  simple payback of 15 years
• Indicative technology parameters example wind
  at least 6m/s at the hub height unit investment
  costs lt 36500 CZK/kWe load factor gt1800 h/year)
• RES-E production for own consumption - eligible
  for green bonus
• Biomass co-firing in power plants - eligible only
  for green bonus
• Guarantees of origin in accordance to Directive
  77/2001 EC

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Development of feed-in tariffs for RES
electricity (CZK and cents / kWh)
Note for reference in printed materials, to be
skipped in oral presentation
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Development of feed-in tariffs for RES
electricity (CZK and cents / kWh)
13,2 CZK/kWh (0,46 /kWh)
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Problems, barriers and lessons learned (1)

• Stability is more important than actual level of
  support
• - no long-term guarantee of stability of feed-in
  tariffs was the key barrier
• - before RES Law gt too risky for project
  developers / investors / financial institutions
• - after RES Law gt big push for viable RES-E
  projects waiting on the shelf for stabilisation
  of conditions - in particular wind and biomass
• Market is very sensitive to setting of conditions
  in support schemes
• - problems with large scale biomass co-firing in
  2003/2004 - serious influence on local biomass
  market (increase of price, limited availability
  of biomass for small end users)
• - necessary to carefully distinguish between
  technological options and consider indirect
  impacts to the market. Biomass co-firing yes,
  but preferably using energy crops

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Problems, barriers and lessons learnt (2)

• Influence of subsidies/grants on RES-E
  investments is only supplementary and sometimes
  counterproductive
• - Direct investment subsidies pressure of
  technology suppliers gt low economic efficiency
  of projects (overpriced, oversized, inadequate
  technology, overestimated production etc.) gt
  more suitable ways of support soft loans,
  guarantees for commercial loans, support to
  project development
• Indicative target of CR (8 RES-E in 2010) or
  unrealistic expectation?
• - Very ambitious and close to available RES
  potential - result of unrealistic requirements
  of EU to new members during accession
  negotiations
• - Will the conditions set by support schemes be
  sufficient for meeting the indicative target?
• - Will the investments into RES-E be spent in
  efficient and sustainable way?
• Other RES support schemes necessary
• - Scheme for RES-heat support?
• - Future role of tax incentives, environmental
  tax reform?

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Thank you for your attention
Contact Jaroslav Jakubes Enviros, s.r.o Na
Rovnosti 1 130 00 Praha 3 Czech
Republic tel. [phone] fax 420
284 861 245 e-mail jaroslav.jakubes_at_enviros.cz
web www.enviros.cz