The Czech government is considering eliminating subsidies that finance solar power plants as part of a consolidation package, posing a significant challenge for owners of solar energy facilities.
Many loans taken out during the “solar boom” between 2008 and 2010 remain unpaid, as the state had promised a 20-year support period for these projects. However, the government is now contemplating removing the subsidies, which amount to 18 billion Czech korun annually, leaving solar energy investors responsible for loan repayments.
The cancellation of subsidies primarily targets solar projects built during the infamous solar boom of 2009-2010. However, undoing these subsidies is a complex process due to legal issues, the nature of loan repayments, and the potential for lawsuits and arbitration.
While the termination of renewable energy support has been proposed in the past, it has never been successful due to legal constraints and existing contractual agreements. The Ministry of Industry and Trade is expected to provide a list of the subsidies to be canceled, but uncertainties surround the details.
The potential removal of solar subsidies concerns solar entrepreneurs and banks that financed these projects. Banks fear that their clients would struggle to repay their loans without subsidies. The type of repayments agreed upon during the solar boom period could further complicate the situation.
These loans were often structured with annuity profiles, where the most significant principal payments are made towards the end of the repayment period. Furthermore, the amount of outstanding loans is also influenced by the government’s confirmation in 2022 that there is no overcompensation in the sector and that the supported energy prices for solar power plants are reasonable.
A study is currently being conducted to assess the impact of canceling renewable energy subsidies, with banks intending to use the results for internal discussions with the government. The consequences of such a decision could potentially lead to bankruptcy for many solar energy companies that have yet to repay their loans fully.
Solar industry representatives express concern, emphasizing that their loans extend for 15 years and that removing subsidies would have immediate devastating effects. While the government expects legal challenges and arbitration threats, they are prepared to face them based on the analysis conducted by the Ministry of Industry and Trade. However, the specific findings of this analysis have not been disclosed by either ministry.