Solar industry faces eclipse, even though capacity grows

By Clare Speak

For The Post

The Czech Republic's total solar power capacity has passed the 2-gigawatt mark, but the industry faces an uncertain future as producers lay off staff amid foreign competition and a shake-up in subsidies.

The latest figures from the Czech Energy Regulatory Office (ERÚ) show that photovoltaic (PV) unit installations at the end of 2012 pushed the country's cumulative installed capacity to 2,085GW - higher than the power capacity of Temelín, the country's largest nuclear plant.

This growth comes at a time when many Czech producers and operators of PV units are experiencing financial woes, for which they are blaming cheaper Asian PV unit producers as well as changes in government policy at home.

"Solar power production is not yet profitable without subsidies," said energy industry analyst Petr Bártek from Erste Group Bank.

"There is significant overcapacity in the solar panel industry at present, and it's difficult for manufacturers in developed countries to compete with production from China."

Several producers have been forced to lay off staff in the past year, including Schott Solar, the country's largest producer of solar panels, which closed its production facility in Moravia in June 2012 with the loss of 500 jobs.

Christina Rettig, a spokeswoman for Schott Solar, cited the dramatically deteriorating market situation, characterized by falling prices and excess capacity, as the reason for the company's decision to shut the plant.

The Czech Republic experienced a boom in solar energy between 2009 and 2011, when the government sought to attract investors to the sector with generous incentives in line with European legislation.

The feed-in tariff was created to offer a subsidy on the sale price of solar energy per kilowatt-hour. This tariff meant 2010 saw a surge in PV unit installations, but at the end of the year the government moved to stem the sudden tide of investment, removing the subsidy for large PV systems and reducing it by 50 percent for smaller installations.

The sector has since seen an equally dramatic decrease in investment, expected to decline further in light of plans by the state regulator and government to remove the feed-in tariff entirely.

The ERÚ stated last February that it wanted to eliminate almost all renewable energy subsidies as early as 2014. Industry and Trade Minister Martin Kuba agreed with the position of the ERÚ, saying "the excessive promotion of renewable sources increased the price of electricity and threatened the industry."

"The planned cut-off of the subsidies will further deter new investors and operators," said Jan Rovenský, a climate and energy campaigner for Greenpeace. "The effect on Czech producers of PV technology will be indirect, but also substantial. In principle, they will lose the chance to place most of their products on the national market."

According to Rovenský, if the cuts go ahead as planned, the industry "could see stagnation for some 5 to 15 years."

He explained that existing operators would not be harmed by the cuts, as feed-in tariffs initiated earlier would be guaranteed for the next 20 years. However, there are concerns about the 26 percent retroactive tax imposed in 2010 on these previously introduced tariffs, which must be paid by all owners of PV installations put into operation in 2009 and 2010 with a capacity of 30 kW or higher.

The moves were defended as necessary emergency measures needed to protect the government and electricity users from the cost of the sudden surge in investment. However, some foreign investors now plan to file an arbitration lawsuit against the state in the first quarter of 2013.

The International Photovoltaic Investors Club (IPVIC), a group of mostly Germany-based companies that invested heavily in Czech solar power during the boom, are seeking "compensation for considerable financial loss suffered by investors as a result of the unfair retroactive discriminatory change in Czech legislation," according to a statement from IPVIC spokesman Frank Schulte.

The new tax also raised fees for plants built on agricultural land, meaning fewer such installations are expected. However, interest remains high in domestic installations of solar panels on the roofs of houses, with around 13,000 new applications filed to have these panels connected in the second half of 2012.

According to a recent Greenpeace study, the Czech Republic could generate more than 16 percent of its electricity using solar units by 2030.

"A long-term increase in solar power in the Czech Republic is inevitable, despite the harshness of the state policy," Rovenský said.

However, Bártek does not expect to see growth in the PV unit production sector.

"Solar power production will continue to grow in regions with favorable weather conditions. However, this is not the case in most of Europe, including the Czech Republic," he said.

"Only producers with a significant technological advantage will be likely to withstand the pressure, in spite of the projected growth of the whole industry."

Clare Speak can be reached at business@praguepost.com