This report is one of a series on the renewable energy sector in Turkey and central and eastern Europe, including Poland, Romania, Bulgaria, Hungary, Slovak Republic, and—the focus of this issue—Czech Republic. The report summarizes political and market developments in the sector in Czech Republic through end-2013.

A relatively small market for renewables compared to its regional peers, Czech Republic has nevertheless witnessed a massive expansion of photovoltaic plants, spurred by its feed-in tariff system. The side effects have been multiple, prompting lawmakers to eliminate the subsidies for solar power plants. In exchange, the tax on solar power generation has also been reduced. In 2013, the state allocated CZK 44.4bn (EUR 1.7bn) in support for renewables, of which CZK 11.7bn will come from the budget and the rest will be paid by consumers in their electricity bills.

In August 2013, as part of measures aimed at limiting electricity-price increases for consumers, the parliament approved a bill that cuts the state’s support for most renewable energy sources as of 2014. Under the new law, solar plants connected to the grid after December 31, 2013, will no longer receive subsidies. Hydro, wind, and biomass power plants that received building permits in 2013 will be eligible for support if they are completed before end-2014. Hydro power plants with an installed capacity of up to 10MW will be eligible for subsidies. The new legislation retains the tax on solar power generation, but reduces its rate to 10% from the current 26%.

Key Points:

• European national governments, including those in Poland, Romania, Czech Republic, Hungary, Slovak Republic, and Bulgaria, are at a critical point in regard to their renewable energy policies. They have reached the moment when they need to radically reshuffle their support schemas for renewable energy.

• Turkey’s market more recently turned very attractive to investors (even without a national action plan) due to official commitments for renewable energy and particularly with a sharply growing electricity market.

• Czech Republic is the only country among those analyzed in the report to offer the option of a bonus tariff on the top of market price as an alternative to standard FIT.

• Czech Republic slipped down to 37th position (of 40) in Ernst & Young’s renewable energy attractiveness index as the impact of the severe subsidy reduction program flows through to a weaker project pipeline.