Slovak Republic: Trends In The Support Of Renewable Energy In Slovakia: Biomass Currently Favoured
Following the introduction of a new Renewable Energy Act in September 2009, the Slovak renewable energy sources (“RES”) sector has seen some abrupt changes, including in government policy. As a result there has been an unprecedented increase in interest in building new solar and wind power plants. However government policy seems now to be shifting from solar and wind power towards power produced from biomass.
The Slovak transmission grid operator (“SEPS”) and the regional distribution grid operators have introduced significant restrictions on solar and wind power production. At the moment, it is impossible to acquire SEPS’s or distribution companies´ affirmative statement to new solar or wind power projects. It should be noted that such an affirmative statement is necessary to build a new solar or wind power plant in Slovakia.
Some legislative changes have just now been prepared, which, if passed into law, will soon slow down development in the solar and wind power sector. Currently, a new draft law has been passed by parliament and, if the Slovak President signs it and it becomes law, will have effect as from 1 April 2011. The draft states, that:
(i) the “additional payment” (the Slovak form of feed-in tariff) will only be provided as a form of support for solar power if the relevant power plants are located on buildings and have a total output of no more than 100 kW;
(ii) electricity prices for solar power will be determined by the Slovak Regulation Office for Network Industries (RONI) in such a way that the provision under the previous law by which the price for each subsequent period, which shall not exceed three years, must not be lower than 90% of the price applicable in the previous period, will not apply to solar and wind production facilities; in practice it would mean that the electricity price for solar and wind plants determined by RONI may vary by more than 10% for each particular regulatory period; and
(iii) responsibility for divergence between anticipated output and actual output will be born by the operator of any solar plant with a total output more than 100 kW (currently it is born by the regional distribution grid operator).
Under the new draft law RONI is not obliged to fix prices for solar and wind power in such a way that return on investment would be expected within a certain period.
It is clear that currently it is more reasonable for investors to opt for investments in RES other than sun or wind power, e.g. biomass.
On 6.10.2010, the Slovak government adopted a National Action Plan for energy produced from RES. Under the action plan Slovakia is bound to increase its use of renewable energy resources in relation to the gross final energy consumption from 6.7% in 2005 to 14% in 2020.
The plan also provides that energy from biomass should be given preference. According to the opinion of the Slovak government, biomass can be an efficient substitute for energy produced from fossil fuel and can contribute to a reduction in the amount of natural gas used in heat production.
The promotional measures for electricity produced from biomass vary depending on the type of renewable resource and the capacity of the production plant. In general, power plants with lower installed output are promoted more than large facilities.
The Renewable Energy Act stipulates that producers of electricity from biomass have:
(i) the right to priority connection of the facility used for electricity production into the regional distribution grid, if the power plant meets relevant technical requirements and the grid operator’s business terms and conditions have been accepted.
(ii) the right to priority access to the transmission and distribution grids, and to offtake of electricity. Priority access to the transmission/distribution grid involves grid operators being required to reserve some capacity and to distribute the agreed volume of electricity via the relevant grid.
(iii) the right to sell electricity for the “electricity price on loss”. The electricity producer has the right to have all the electricity it produces purchased by the regional distribution grid operator, to which the facility of the electricity producer is connected directly or through the local distribution system, and that for the electricity price on loss. The “price on loss” is the arithmetical mean of the electricity prices paid by all regional distribution grid operators for the purpose of covering losses, and is determined by RONI.
(iv) the right to “additional payment”. The electricity producer has the right to an additional payment to be paid by the regional distribution grid operator, which corresponds to the difference between the regulated price of electricity for the determination of the additional payment determined by RONI and the electricity price on loss determined by RONI. Effectively, the additional payment is determined by RONI.
(v) the right to have the liability for divergence taken over by the regional distribution grid operator in case of facilities with the total output up to 4 MW; if the draft law referred to above becomes law, then from 1 April 2011 this right will only apply to the facilities with the total output up to 1 MW.
The price of electricity produced from biomass is regulated by RONI by way of a generally binding decree and is provided as a fixed price. The 2010 price of electricity (that includes the additional payment and the price of electricity for loses) produced from biomass was determined by RONI as follows:
Electricity produced from:
1) combined cycle combustion (i) of purposefully created biomass (113.10 EUR/MWh) (ii) other waste biomass (127.98 EUR/MWh),
2) combined cycle combustion of biomass or biologically degradable components jointly with combustion of waste with fossil fuel (126.14 EUR/MWh),
3) combustion of fermented biomass (144.88 EUR/MWh)
This article was written for Law-Now, CMS Cameron McKenna’s free online information service. To register for Law-Now, please go to http://www.law-now.com/law-now/mondaq
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The original publication date for this article was 23/12/2010.
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