Retroactive solar tax shocks Czech PV industry

The political battle over consequences of the solar boom in the Czech Republic has resulted in a new legislation which will harm the local photovoltaics industry significantly. The Czech government is keen on punishing so-called solar barons (a popular nickname, which mass media use for operators of PV systems over 30 kW) which are to be blamed for a possible increase in electricity prices from 2011.

At the end of October 2010 the Czech parliament took the first set of restrictive measures for local photovoltaics:

  • It stopped the tax holidays for all operators of PV plants and changed the write-off scheme to be applied retroactively.
  • A new FIT will be applied only on rooftop PV installations with a maximum capacity of 30 kW from March 2011.
  • The FIT for off-grid PV systems and for ground-mounted PV plants will be abolished from January 2011 on.
  • The fees paid to the authorities for using land are increased by 500 % to discourage building ground-mounted PV plants.

    Furthermore, the Czech government approved the introduction of a new solar tax. This 26 % tax will be imposed on income generated from ground-mounted solar installations with an installed capacity over 30 kW in order to recycle the proceeds to curb retail power price inflation at 5.5 %. A solar tax of this kind is unique within the EU. This solar tax will be applied retroactively to all ground-mounted PV installations in question built in 2009-2010 in the Czech Republic. Basically, it means a decrease of purchase prices of solar energy (FIT) that were supposed to be guaranteed to investors for 20 years by the Czech government.

    According to banks, there will be many defaults as many solar investors will probably not survive an imposition of the solar tax. The Czech photovoltaic association (CZEPHO) is of the same opinion: “We are convinced that over 50 percent of all large-scale installations will go bankrupt as a result of the new solar tax,” said Jan Hlavac, the speaker of CZEPHO last week. “The taxation will cause that a payback of the solar projects will exceed 20 years”.

    The new legislation of the Czech government has already resulted in a cancellation of many large scale solar installations in the country. Jakub Hajek, a legal advisor of the Czech legal office Glatzova and Co., said: “In this respect we expect a new boom of legal disputes and arbitrages between foreign investors and the Czech state. Experts estimate the value of imminent arbitrages will be well over € 10 billion. Since the new proposal of the solar tax is retrospective and has certain legal drawbacks, the odds are high that the investors will succeed in the arbitrages against the Czech Republic. The government officials and politicians found the new legal measures on figures presented solely by energy distribution companies. This data is criticized to be biased and overestimated.

    The final decision will be taken by the Czech Parliament by mid-November 2010. Since there is a general consent amongst the Czech politicians over this issue, the odds are extremely high that the solar tax will be shortly approved.

    Jaroslav Dorda, solarninovinky.cz
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