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Renewables in Czech Republic

Renewables in Czech Republic

Czech Republic
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Contributed by Kocian Solc Balastik

1. SUMMARY 

As the Czech Republic is a member of the European Union (EU), its legislation, including legislation relating to renewable energy sources, is to a significant extent based on EU law. The Czech Republic is continuously adapting its legislation to contribute to the EU’s goals set out by the Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources (Directive 2018/2001) and Regulation (EU) 2018/1999 on the Governance of Energy Union and Climate Action (Regulation 2018/1999). The respective goal is to collectively ensure that the share of renewable energy in gross final consumption in the EU reaches 32%. European legislation is further advancing its targets on reducing greenhouse gas emissions under the Green Deal and Fit for 55 policies with an ambitious goal to become a climate-neutral continent. It should be emphasized that the Czech Republic is taking a very responsible and consistent approach to meeting its renewable energy targets. Proof of this is the fact that the Czech Republic has reached the binding renewable energy target set for 2020, where the Czech Republic reached this target seven years earlier than required by European legislation. 

The specifics of the Czech Republic are related to its geographical and climatic conditions and economic possibilities. Currently, the proportion of renewables in the Czech Republic’s energy mix is relatively small, with fossil fuels dominating. However, this situation is set to change with the above-mentioned EU and Czech objectives. Renewable energy is set to play a key role in the energy transformation that the Czech Republic is facing in the coming years. Therefore, the untapped potential of renewable energy sources in the Czech Republic is huge. Instead of coal, the state plans to make greater use of wind, hydro, biogas, and solar energy. It is clear that the Czech Republic is trying to run renewable energy projects more and more. This is done by financial support for the construction of such projects, by speeding up the process of obtaining all the permits for the construction of the projects, or by ensuring that the electricity generated by these projects is collected. For this reason, investment in this area appears to be very prospective.

Of particular note, to support the construction of renewable energy plants, there is also a so-called Modernization Fund, from which funds can be drawn for, among other things, the production and use of electricity from renewable sources. One of the programs financed by the Modernization Fund in the Czech Republic is the program to support new non-fuel renewable energy sources (Nove obnovitelne zdroje v energetice; RES+). Beneficiaries of support under this program can be owners of power plants, existing or future holders of a license to operate in the energy sector, and the so-called Renewable Energy Community under Article 22 of the Directive 2018/2001.

2. OVERVIEW OF THE COUNTRY’S RENEWABLE ENERGY SECTOR 

2.1. Legal Framework

a) Support schemes in the Czech Republic

In the Czech Republic, there is support in the form of feed-in tariffs and green bonuses, and auction bonus support. The return on investment in relation to the construction of new renewable energy projects is made easier by various subsidy programs that contribute to the implementation of climate protection policy and energy targets in the Czech Republic.

b) Capacity allocation and grid access in the Czech Republic

The electricity producer has the right to connect to the grid if it meets the conditions set out in the relevant legislation, in particular Decree No. 16/2016 Coll., on the conditions of connection to the electricity grid, of the Energy Regulatory Office (Energeticky regulacni urad) (ERO). The electricity producer has the right to transport the produced electricity and sell it to other entities. In addition to the sale of electricity to traders, the producer can provide so-called support services to the transmission system operator (the state-owned company CEPS, a. s.) which consist of an increase or decrease in the supply of energy on the instruction of the dispatching center, which regulates the balance in the system by these interventions.

According to Section § 25 Act. no. 458/2000 Sb., Energy Act (EAct), distribution system operators are obliged to publish annually the expected development of the distribution grid for at least five years. They are also obliged to publish on an ongoing basis information on distribution possibilities, including data on available distribution capacity at different times of the year, or for different types of days on 110-kilovolt lines and 110-kilovolt high voltage transformers. This is because the possibilities of electricity distribution are not constant over time. They can be variable with respect to a large number of different influences (condition of equipment, construction activity, repairs, upgrades, natural conditions, etc.).

c) Environmental impact assessment in the Czech Republic

The environmental impact assessment in the Czech Republic is governed by Act No. 100/2001 Sb., on Environmental Impact Assessment, according to which the renewable energy project could be assessed in terms of their environmental and public health impact assessment (EIA Act). In some cases of construction of production plants, for example, hydropower projects with a total capacity of more than 10 megawatts or wind power plants with a mast height of more than 50 meters, the assessment under this act is a mandatory part of the construction procedure.  

d) Interconnectivity and power purchase agreements in the Czech Republic

The sale of electricity produced by renewable energy projects on the basis of bilateral and corporate power purchase agreements (PPA) is allowed and possible in the Czech Republic. For the record, this type of contract has even recently started to be widely used in the Czech Republic. As the PPAs are most often concluded for a period of 10 to 30 years, there is a considerable advantage for the producers of the long-term security of supply at a pre-agreed price, thanks to which the producer has a secure income and return on the investment. Another major advantage is that it is easier for an investor to obtain financing for their project if they have a pre-agreed PPA with a guaranteed power purchase. As for the conditions of such contracts, the only mandatory obligation is for the electricity supply contract to include an imbalance responsibility clause.

e) Operation and maintenance of renewable energy projects in the Czech Republic

Renewable energy projects have to comply with the regulations that apply to their operation and maintenance and meet all the specific requirements set out for them. These requirements and conditions are set out, especially in Act No. 165/2012 Col., Supported Energy Sources Act (SESAct), EA, Decree No. 79/2022 Coll. on technical-economic parameters, Decree No. 166/2022 Coll. on reporting energy from supported sources, and a number of others. If they fail to do so, they risk fines, revocation of the necessary license for their business, or withdrawal of the relevant state support.

f) Distribution/transmission tariffs and additional overheads in the Czech Republic 

In general, the distribution and transmission tariffs are a regulated component of the prices of electricity. These prices are set annually by a price decision of the ERO and consist of a number of items. First, there is the price of providing electricity distribution to individual customers, i.e., charges for the use of the distribution network, which is multi-component and consists of the price for power input and the price for the quantity of electricity distributed. Second, there is a price for system services (Czech korunas/megawatt hour) which covers the costs of the transmission system operator for the purchase of so-called support services from electricity producers providing these services. Third, there is a price for the activities of the OTE (i.e., the Market Operator – the state-owned company that is the operator of the electricity/gas market in the Czech Republic) that covers the costs of the activities of the OTE and the ERO, which is multi-component and consists of price for activities related to the clearing of imbalances, price for activities related to the payment and administration of support from supported energy sources and fee for the activities of the ERO. Lastly, there is a component of the price for support for electricity from supported energy sources.

Prices for producers of electricity, in general, are regulated by Decree No. 16/2016 Coll., on the conditions of connection to the electricity grid, the ERO. These are the costs associated with the connection and the provision of the required input or output. They include the categories which consist of necessary legitimate costs incurred in connection with the acquisition, construction, or modification of the transmission or distribution system, which is caused by the applicant’s request in relation to the location and method of connection of its equipment, the cost of project documentation, surveying and other directly related investment costs, including costs directly related to the acquisition of the easement and payment of the cost of construction, modification or acquisition of the transmission system or distribution system.

The electricity producer is usually also obliged to pay the so-called electricity tax according to Act No. 261/2007 Coll. on the stabilization of public budgets and value-added tax according to Act No. 235/2004 Coll. on value-added tax.

g) Electricity storage options and requirements in the Czech Republic

As far as electricity storage options are concerned, the only way to store more electricity in the Czech Republic is currently pumped storage plants. There are three of them that have been operating in the Czech Republic for some time – Dlouhe Strane, Dalesice and 

Stechovice. In addition, large-capacity battery systems for storing electricity are being developed in the Czech Republic. One of them is the installation of a 4-megawatt battery located on the premises of the Tusimice power plant. However, in general, the Czech Republic has a lot of opportunities and potential for development in the field of electricity storage.

As regards the requirements of electricity storage for the electricity providers, they are not specifically regulated by law in the Czech Republic. However, this does not apply to the obligations relating to electricity storage facilities concerning the construction procedure and also the obligations concerning the disposal of batteries or accumulators at the end of their useful life, which are regulated, as specifically described below.

h) Most common approaches in securing land for projects in the Czech Republic

The most common approaches in securing land for the renewable energy project in the Czech Republic would be the acquisition of lands or the acquisition of building rights. 

i) A brief highlight of the most recent trends in the market in the Czech Republic

As set out above, the Czech Republic has committed itself within the EU to participate in binding national targets for the overall share of renewable energy in gross final energy consumption and for the share of renewable energy in transport. 

As for Directive 2018/2001 and Regulation 2018/1999, are included in the package of energy legislation presented by the European Commission called Clean Energy for All Europeans. Directive 2018/2001 introduces new measures for various sectors of the economy, particu-larly on heating and cooling and transport, where progress has been slower (for example, an increased 14% target for the share of renewable fuels in transport by 2030). It also includes new provisions to enable citizens to play an active role in the development of renewables by enabling renewable energy communities and the self-consumption of renewable energy. It also establishes strengthened criteria to ensure bioenergy sustainability.

In July 2021, the EU Commission proposed a revision of the directive (COM/2021/557 final) with an increased 40% target as part of the package to deliver on the European Green Deal. In May 2022, the Commission proposed in its Communication on the REPowerEU plan (COM/2022/230 final) to further increase this target to 45% by 2030.

As regards the specific laws in the Czech Republic in which the European legislative acts are implemented, these are mainly the following acts: 

  • SESAct, which, in relation to renewable sources, regulates their support, rules for development and regulation, and financing of support for electricity, heat, and biomethane from renewable sources; 
  • EAct, which regulates the conditions of doing business and the exercise of state administration in the energy sectors, including renewable energy; 
  • EIA Act, the implementing regulations to this Act, and price decisions of the ERO.

As regards other current trends in the Czech Republic, Government Decree No. 298/2022 Sb. on the determination of electricity and gas prices in an exceptional market situation is currently in force until the end of 2023. This regulation sets the maximum prices for electricity and gas supply. If the determined price does not cover the justified costs of ensuring the sup-ply of electricity or gas, the electricity or gas market participant supplying the electricity or gas is entitled to reimbursement of the proven loss incurred due to the supply of electricity or gas at the determined price and a reasonable profit. 

Currently, due to the prevailing energy crisis in 2023, there is an obligation under the EAct to pay a levy on the excess revenues of electricity producers. The subject of this levy is the so-called excess income, which means the positive difference between the market income and the established cap on market income from electricity sales for the levy period of 2023.

According to a recent amendment to the EAct, the threshold, where a license for electricity production is required for a power generation plant, has been increased from 10 kilowatts hour to 50 kilowatts hour (at the same time, the construction procedure for such plants has been simplified). This matter is described in detail below. 

In addition, another amendment to EAct is to be adopted, which will allow community electricity sharing. This could result in increased local production and consumption of renewable electricity, increasing energy security and self-sufficiency for communities, businesses, and households.

2.2. Domestic Sales and Imports/Exports 

According to the SES Act, a new system of support settings for renewable energies for the period 2021 to 2030 is designed. The supports apply to both the renewable energy plants that shall be newly put into operation and renewable energy plants that are already in operation.

No specific plan regarding import/export has been determined in the Czech Republic at this time. However, in general, the Czech Republic has so far been an energy-exporting country. At the moment, fossil fuels represent the largest percentage of energy sources mix in the Czech Republic, followed by nuclear sources. Renewable energy accounts for a relatively small percentage of the Czech energy mix. However, this is expected change, and the increase in renewable energy is expected in light of the current EU and related Czech legislation. The official plan for future development in the Czech Republic should be determined by the so-called State Energy Concept (Statni energeticka koncepce). However, the current concept from 2015 is now outdated. The new State Energy Concept should be adopted by the end of 2023.

In regards to the need for investment into grid capacities, there is a significant challenge in the Czech Republic as well as in the EU. Currently, investments are mainly in renewable energy sources themselves, and therefore in the coming years, investments will also be needed in the capacity of the grid, whose current capacity might be sufficient in the future. 

2.3. Foreign Investment and Participation 

There are no special limitations or requirements on acquisitions of interests in the respective renewable energy sector by foreign companies in the Czech energy legislation. In general, the EAct requires that entities may only operate in the energy sector in the Czech Republic on the basis of a license granted by the ERO. In order to hold a license in the case of a legal entity with its registered office outside the Czech Republic, it is necessary for that entity to have an organizational unit established in the Czech Republic. 

Also, generally, i.e., not exclusively in relation to the renewable energy sector, the Czech Republic has a relatively new law that deals with the requirements and restrictions for the acquisition of shares by foreign companies. It is Act No. 34/2021 Coll., on the screening of foreign investments and on amendments to related acts (the Foreign Investment Screening Act). According to this act, if a foreign company were to express an intention to invest in the Czech Republic in the renewable energy sector in such a manner and to such an extent that the particular investment could disrupt the Czech Republic’s critical infrastructure which would have a significant economic impact for the Czech Republic, then such an investment could only take place if it is granted a special permit by the Ministry of Industry and Trade of the Czech Republic.

2.4. Protection of Investment 

As mentioned above, Czech energy legislation is strongly influenced by EU legislation. There are also many international treaties concerning nuclear safety, for example, the Nuclear Safety Convention or Vienna Convention on Civil Liability for Nuclear Damage or bilateral agreements between the Czech Republic and its surrounding states, e.g., the treaty between the Czech Republic and Slovakia about cooperation in the field of state supervision of nuclear safety of nuclear installations and state supervision of nuclear materials. As regards other international energy treaties with non-EU countries, there are only a few treaties regulating the use of nuclear energy but none of those are strictly related to renewable energy.

3. DEVELOPMENT OF RENEWABLE ENERGY PROJECTS 

3.1. Granting of Grid Connection Rights 

The main legal and organizational framework for the development of renewable energy projects is outlined in Act No. 183/2006 Sb., Building Act (Building act), which is going to be replaced, step by step, by the New Building Code No. 283/2021 Coll. State authorities responsible for regulating the development of renewable energy sources include both authorities under the Construction Act and authorities under other legislation, in particular the ERO, whose competence is enshrined in the EAct.

As for the current major initiatives or policies of the Czech government in relation to renewa-ble energy production, there is the National Energy Plan of the Czech Republic and Climate Plan (Vnitrostatni plan Ceske republiky v oblasti energetiky a klimatu). This plan has been prepared on the basis of the requirement of Regulation 2018/1999 of the European Parliament and of the Council on the governance of the Energy Union and climate action. A key part of this plan is the setting of the Czech Republic’s contribution to the EU’s so-called energy and climate targets in the area of reducing emissions, increasing the share of renewable energy sources, and increasing energy efficiency.

At the end of 2022, the EU Council adopted Regulation 2022/2577, which sets out a temporary framework for accelerating the permitting and deployment of renewable energy projects. The regulation introduces urgent and targeted measures to focus on specific technologies and project types with the greatest potential for rapid deployment and the least environmental impact. According to the new regulation, the planning, construction, and operation of power plants and renewable energy installations are presumed to be in the overriding public interest. For example, for solar energy installations, the length of the permitting procedure should not exceed three months. The expiry date of this regulation is June 30, 2024, but it is possible that it will be extended. This regulation is expected to speed up the permitting process. In addition, the Czech Republic approved an amendment to the EAct, which accelerated the construction of renewable sources of electricity up to 50 kilowatts hour, as these constructions will no longer require a building permit or notification under the Building Act. Also, these constructions do not need a license from the ERO under the EAct anymore.

3.2. Ownership by Foreign Companies 

As mentioned above, it is only possible to operate in the energy sector in the Czech Republic on the basis of a license granted by the ERO in the case of an activity that falls within the scope of activities covered by the obligation to have a license under the EAct (which includes also electricity generation). In the case of a legal entity with its registered office outside the Czech Republic, it is necessary for that entity to have an organizational unit established in the Czech Republic in order to hold a license.

There are no specific restrictions to the transfer or disposal of renewable energy development rights or interests. However, the transfer of a license is generally not possible. In the case of a change of operator of an energy plant (including a renewable energy plant), the current operator must apply for cancellation of its license and the new operator must apply for a new license. This can be avoided, for example, by the way of transferring a share in the company that operates the energy plant. A special (much more advantageous) system applies in the case of mergers/divisions of energy companies, etc.

3.3. Stages of the Development Process 

The conditions for the construction of renewable energy production, i.e., renewable energy plants and related need of different authorizations depend on many factors. In particular, the type and scale of the renewable energy plant is determinant. In general, every construction in the Czech Republic must meet the requirements of the legislation and go through a complex permitting process. 

To be more particular, for example, if the electricity generation plant exceeds an electrical capacity of 1 megawatt, an authorization under the EAct containing consent for the construction of the electricity generation plant must be retrieved. The developer has to submit an application for authorization before the commencement of the procedure according to the Building Act. 

The other example of the procedure is that in some cases when the renewable energy plant is considered a project within the meaning of the EIA Act, the application for zoning decision must be accompanied by the documents that include the outcome of the environmental impact assessment process. After the opinion of the concerned state administration bodies, a zoning decision is issued, and subsequently a building permit (stavebni povoleni). In more complex projects, the issuance of the approval of the building permit is conditional on a successful test run, during which the functionality and characteristics of the completed building are verified. When the approval of the building permit is granted, it is necessary to apply for a license under the EAct. Subsequently, a contract is concluded for the connection of the applicant’s facility for the generation, distribution, or offtake of electricity to the transmission system and the contract for the connection of the applicant’s facility for the generation of electricity to the distribution system. The permitting process is concluded by the approval of the building permit (kolaudacni souhlas), which finally allows the project to be put into operation

However, renewable energy plants are nowadays seeing a substantial simplification and facilitation of the conditions for construction. For example, according to the latest amendments to the Building Act and EAct (referred to as the Lex OZE 1). Thanks to these amendments renewable energy plants over 1 megawatt established and operated in the public interest were classified as public technical infrastructure that can be placed in undeveloped areas and therefore it is not necessary to amend the zoning plan (uzemni plan). Moreover, for the construction of small renewable energy plants up to an installed capacity of 50 kilowatts hour a building permit is no longer required under certain conditions. This amendment is based on Regulation 2022/2577 which is introducing a new temporary emergency regulation to accelerate the deployment of renewable energy sources with a particular focus on small-scale projects with an installed capacity of 50 kilowatts hour in order to secure energy supply, reducing volatility in the market and lowering energy prices.

As regards the length of the procedure, according to the above-mentioned EU Council Regulation 2022/2577, the time limits for issuing permits for the construction and operation of renewable energy plants are now significantly reduced, regardless of the planned installed capacity. The same applies to grid connection and, as far as the technical parameters of the connection allow, there should be no delay on the part of the distributor. The respective time limits also cover the environmental impact assessment process, if required.

For example, in the case of solar power plants located on buildings, the time limit may not exceed three months. It is also worth noting that the process of installing solar power plants will also be exempted from the previous requirement for an environmental impact assessment. As regards the above-mentioned buildings up to 50 kilowatts hour, the deadline is one month. If the authorities fail to take a decision on the permit within the deadline, it will be deemed to have been granted.

3.4. Obligatory State/Public Participation 

In the Czech Republic, the state participates in the development of renewable energy projects mainly in the form of various subsidy programs that contribute to the implementation of climate protection policy and energy targets in the Czech Republic. Generally speaking, support for financing renewable energy in the Czech Republic is broad. The main sources of funding are national programs, programs financed from the proceeds of the sale of emission allowances, EU operational programs, and other support programs.

Of particular note, there is the so-called Modernization Fund, from which funds can be drawn for, among other things, the production and use of electricity from renewable sources. One of the programs, financed by the Modernization Fund in the Czech Republic, is the program to support new non-fuel renewable energy sources (Nove obnovitelne zdroje v energetice; RES+). Beneficiaries of support under this program can be owners of power plants, existing or future holders of a license to operate in the energy sector, and the so-called Renewable Energy Community under Article 22 of the Directive of the European Parliament and Council (EU) 2018/2001 of 11 December 2018 on the promotion of the use of energy from renewable sources.

There are no specific benefits from the state in case of foreign participation in the renewable energy sector in the Czech Republic. However, the general rule of conducting business as a foreign entity in the Czech Republic applies, especially in relation to taxes. Also, the general rules for license fees, access to the grid fees, caps on offtake prices, etc. apply.  Likewise, as a general rule, the provision of some form of state subsidy does not confer a right on the state to data produced as part of the development process. In specific cases, the conditions of the form of subsidy in question will depend on specific terms of the subsidy.

3.5. Risks to be Considered

The main risks related to the development of renewable energy projects in the Czech Republic include in particular far too long return periods of investment, the administrative complexity, and risks associated with the processing of the application for subsidies, the level of competitiveness of individual technologies, the conservative attitude of part of the population to new technologies related to renewable energy and in general uncertainty about the future development of the energy sector (especially in terms of the future price of power electricity).

4. RENEWABLE ENERGY CONSTRUCTION AND PRODUCTION 

4.1. RTB Status 

As stated above, it is generally necessary to obtain a number of construction law and environmental law permits (e.g., zoning permits, building permits, and binding opinions on landscape intervention). Some of the renewable energy projects may also require an EIA (Environmental Impact Assessment) binding opinion as well. The number of obligatory permits can vary with the particular project. Also, in general, an entity can start a business in any energy sector regulated by the EAct only with an energy license issued by the Energy Regulatory Authority.

4.2. Construction of Renewable Energy Projects 

The main risks related to the construction of renewable energy plants in the Czech Republic include in particular the administrative complexity with the processing of obtaining required construction law and environmental permits. In general, the duration of this processing usually takes a long amount of time in the Czech Republic. However, thanks to the abovementioned Regulation of EU Council 2022/2577, this situation might be improved, because of the obligatory time limits of the approval process that are designated to be around 3-6 months long.

4.3. Granting of Renewable Energy Production Licenses

The main legal and organizational framework for granting renewable energy production is outlined by the EAct. The government authority responsible for the regulation of renewable energy production and granting of renewable energy production licenses is the ERO. Its superior authority of it is the Ministry of Industry and Trade (Ministerstvo prumyslu a obchodu).

There are no special conditions for renewable energy production licenses. The standard license conditions for renewable energy production for the applicant as a natural person include being 18 years of age, having legal capacity, integrity, and professional competence. If the applicant is a legal person, the conditions for natural persons must be met by the members of the statutory body. In addition, the appointment of a responsible representative is another condition for granting a license to a legal person. A responsible representative also has to meet the conditions set out for a natural person but must not be a member of the supervisory board or other controlling body of the legal person. The responsible representative of the licensee shall be approved by the ERO

In addition to the above conditions, the applicant must demonstrate that they have the finan-cial and technical capacity to carry out the licensed activity. Furthermore, the ownership or use of the right to the energy equipment to be used for the licensed activity must be provided, or the owner of the energy equipment must agree to its use for the following purposes. 

The license can be granted if the respective conditions are met and if the relevant documents, such as the ownership of the energy equipment, are provided. The license for the production of electricity, gas, and thermal energy is granted for a maximum period of 25 years. The li-cense for the distribution of electricity and gas is granted for an indefinite period of time, while the license for the trade with electricity and gas is granted for a period of five years with the possibility of extension. 

The main grounds for early termination are that the license holder no longer meets the conditions for its granting, or in case the holder has breached the obligations laid down in the EAct, or in case the holder in the performance of a licensed activity endangers life, health, or property, seriously violates legal regulations related to that activity. 

4.4. Renewable Energy Production by Foreign Investors 

In order to be granted a license, the foreign investor as a legal entity with its registered office outside the Czech Republic needs to have an organizational unit established in the Czech Republic. The transfer of a license is generally not possible according to Czech legislation. Therefore, for example in the case of a change of operator of an energy plant, the new opera-tor must apply for a new license. However, as stated above, this can be avoided, for exam-ple, by the way of transferring a share in the company that is the operator of the energy plant.

4.5. Operation and Maintenance of Renewable Energy Projects

In addition to the general obligations that all energy production plants must comply with, there are some specific things that are set for renewable energy projects. These specificities concern, in particular, the parameters they must comply with in order to receive support. They are laid down, for example, in Decree No. 166/2022 Coll. On the reporting of energy from supported sources; Decree No. 110/2022 Coll. On the determination of types and parameters of supported renewable sources and criteria for sustainability and greenhouse gas savings for biofuels and biomass fuels.

4.6. Decommissioning Process 

There may be particular requirements for the removal of the construction and restoration of the field in question to its original state specified in the building permit that is issued for the relevant construction. 

In the case of photovoltaic panels in the Czech Republic, their take-back and recycling can be secured by the manufacturer or importer. There is no further charge for this handover and recycling as this recycling fee is already paid in advance. In the Czech Republic, producers of electrical and electronic equipment associate themselves with so-called collective (EPR) systems that provide take-back, recycling, and disposal for their members. 

These collective systems are regulated by Act No 542/2020 Coll., on end-of-life products, the aim of which is to ensure high environmental protection against the negative effects of waste from selected products, in accordance with European Union regulations. Selected products include, for example, electrical and electronic equipment, batteries, or accumulators.

4.7. Risks to be Considered

The main risks related to the construction, production, operation and maintenance, and decommissioning of renewable energy projects in the Czech Republic include the administrative complexity and risks associated with the processing the permitting process of the plant construction, increasing requirements for maintenance of the plant in order to maintain the possibility of its operation or to maintain the possible existing subsidy provided by the state, risk related to the capping of prices for energy sales, the need to spend large amounts of funds for the disposal of the plants.

5. BALANCING OF RENEWABLE ENERGY PROJECTS, STORAGE, SALES 

5.1. Balancing of Renewable Energy Projects 

In the Czech Republic, there is no legislation that would aim to limit or balance the production or offtake from renewable energy projects in particular. Nor are there for renewable energy projects. Quite the contrary, the construction of renewable energy projects is strongly supported in the Czech Republic. However, there is a general regulation applicable to all electricity generating plants (i.e., including renewable energy projects) with a total installed electrical capacity of 1 megawatt or more according to which these projects are only possible to build on the basis of state authorization for the construction of a power generation plant. The authorization shall not be granted by the Ministry if the envisaged electricity generation plant does not comply with it. Additionally, each entity trading in electricity must be held responsible for the deviation it causes in the grid so that it can subsequently pay for the regulatory energy that had to be used for the sake of balance because of its deviation.

5.2. Storage 

In the Czech Republic, there are no specific legislative requirements in relation to electricity storage that would relate to obligations to store the electricity during its production. Therefore, there are not any obligatory electricity storage requirements to be followed for the design and operation of renewable energy projects in particular. The storage solution for the operation of renewable energy plants is the choice and options of the operator. 

However, there are some laws in the Czech Republic that may affect electricity storage de-vices or facilities in relation to their permitting process and construction procedure according to the Building Act and also their recycling or disposal. These include Act No. 541/2020 Sb., on Waste and Act No. 542/2020 Sb., on End-of-Life Products. The latter regulates the han-dling of end-of-life electrical equipment, batteries and accumulators, and also the solar panels.

5.3. Sales 

The sale of electricity produced by renewable energy projects on the basis of bilateral and corporate power purchase agreements (PPA) is allowed and possible in the Czech Republic. For the record, this type of contract has even recently started to be widely used in the Czech Republic. As the PPAs are most often concluded for a period of 10 to 30 years there is a considerable advantage for the producers of the long-term security of supply at a pre-agreed price, thanks to which the producer has a secure income and return of the investment. Another major advantage is that it is easier for an investor to obtain financing for their project if they have a pre-agreed PPA with a guaranteed power purchase. As for the conditions of such contracts, the only mandatory obligation is to include a deviation liability clause. Otherwise, the contracting parties have wide contractual freedom in negotiating the content of the PPA and therefore they can set the terms of the contract according to their needs. 

6. ROOFTOP, OFFSHORE, FLOATING, AND AGRICULTURAL RENEWABLE EN-ERGY PROJECTS 

6.1. Offshore Wind and Floating Photovoltaic Projects 

Offshore wind farms are out of the question due to the absence of a sea, therefore, only “floating” photovoltaic power plants can be considered. Their implementation in the Czech Republic is at an early stage, as only in recent years has the very first model of this kind began to be tested. 

The Czech legislation does not provide specific regulations for the permitting procedures connected to offshore wind and floating photovoltaic projects. Consequently, the general permitting process described above shall apply.

The floating photovoltaic technology is being debated in relation to the flooding of disused brown coal mines. As the newly created water surfaces provide ideal technical conditions for the construction and operation of floating photovoltaic power plants, we could see a rise in the technology in the near future in the Czech Republic. 

6.2. Rooftop Photovoltaic Projects 

The Building Act is relevant for photovoltaic power plants in terms of legal regulation. This act views a rooftop photovoltaic power plant as either a new independent building or a building modification. The fundamental difference between the above lies mainly in the requirement to obtain a building permit.

In the first case, where the rooftop PV plant is a stand-alone building, the building on which it is located is considered to be only a supporting structure and is thus a case of building on a building. In such a case, the photovoltaic plant typically performs the role of an energy production plant that is fed into a distribution system and therefore must meet all the conditions for the issuance of a building permit (it must be allowed by the zoning plan, be in line with other interests protected by the Building Act, etc.). At the same time, the owner of such photovoltaics may be a person different from the owner of the building.

In the second case, if the rooftop photovoltaic power plant is only a structural modification, it is considered a building installation that ensures the use of the building for the purpose for which it was established. Such a photovoltaic plant therefore mainly serves the building on which it is located. If the installation of such a plant complies with the conditions of the Building Act, the permitting process is much more straightforward and efficient.

Legislation changes effective as of January 2023 also significantly reduced the obstacles for the operation construction and operation of rooftop photovoltaic powerplants which are to be located on buildings owned by multiple entities (typically residential buildings). The updated Electricity Market Rules finally enable residents to effectively share the electricity produced by such power plants as well as the profit for the surplus of the electricity distributed to the distribution system. Henceforth, a significant increase in the construction of new rooftop photovoltaic powerplants can be expected.

6.3. Agrivoltaic Projects 

The current situation is only in the state of intensive preparation of the amendment to the Act on the Protection of the Agricultural Soil Fund (No. 334/1992 Sb.), which is in charge of the Ministry of the Environment. The purpose of the forthcoming amendment is primarily to create easier access to agrivoltaic support for growers of selected crops. The amendment will also need to ensure that the construction of the agrivoltaic power plant can take place without agricultural land having to be removed from the land fund, which is currently an obstacle to the development of such projects.

7. TRADING OF GREEN CERTIFICATES/CERTIFICATES OF ORIGIN 

7.1. Certification 

In the Czech Republic, there is general support in the form of feed-in tariffs and green bonus-es and auction bonus support.

In the case of feed-in tariffs, the obligatory purchaser is obliged to buy from the renewable energy producer all the electricity measured at the transmission point of the electricity production plant and the distribution or transmission system and delivered to the electricity system at the price set by the current price decision. The 15-year simple payback guarantee applies only to the support in the form of the purchase price, provided that the technical and economic parameters set by the Decree on technical and economic parameters are met. This price is maintained as a minimum price for the lifetime of the production, with a regular 2% indexation, except for plants using biomass, biogas, or bioliquids.

The green bonus for electricity produced from renewable energy sources is paid by OTE for all electricity produced and measured by a specified meter, with the exception of technological self-consumption of electricity. In the case of support in the form of green bonuses, the producer must find its own electricity customer and negotiate a price with them. It is also possible to use part of the electricity produced for self-consumption and to negotiate a contract with the trader only for the supply of the unconsumed surplus. The green bonus is generally associated with a higher yield corresponding to the increased risk of selling the electricity produced compared to the purchase price.

The support in the form of auction bonuses aims to minimize the costs of supporting renewable energy production. The act lays down the procedure and conditions concerning the announcement of the auction, the financial security, the evaluation of bids, the decision to grant or not to grant the right to auction support, the use of the financial security, and the withdrawal of the right to auction support.

Also, there is the system of so-called guarantees of origin (Zaruky puvodu) which can be issued to certify the “green” origin of power (generated in green power plants). The rules for issuing/trading with Origin Certificates are mainly governed by the SESAct.

7.2. Trading 

As far as guarantees of origin are concerned, their issuance in the Czech Republic has been handled by OTE, a state-owned company, since 2009. All the activities related to the issuance were mainly paper-based, but in 2013, following the Directive 2009/28 EC of the European Parliament and of the Council, the Guarantees of Origin Register (Evidence zaruk puvodu; EZP) was created and launched, which was integrated into the price-trade information system of OTE (CS OTE). The EZP draws mainly on metered data from distribution system operators and on data filled in by electricity producers according to the relevant legislation. All activities such as issuing, transfer, use, or cancellation are therefore carried out electronically.

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Guide Contributors For the Czech Republic

Tomas Sequens

Partner

tsequens@ksb.cz

+420 224 103 316

Tomas Travnicek

Associate

ttravnicek@ksb.cz

+420 224 103 316

Klara Dvorska

Junior Lawyer

kdvorska@ksb.cz

+420 224 103 316