The Czech government is considering the elimination of subsidies that currently finance solar power plants as part of a consolidation package. This decision poses a significant challenge for owners of solar energy facilities and has raised concerns within the industry.

During the “solar boom” period between 2008 and 2010, many loans were taken out to fund solar projects with the assurance of a 20-year support period from the government. However, the government is now contemplating the removal of these subsidies, which amount to 18 billion Czech korun annually. If implemented, solar energy investors would be left responsible for repaying their loans without the expected financial support.

The cancellation of subsidies primarily targets solar projects built during the notorious solar boom of 2009-2010. However, the process of undoing these subsidies is complex due to legal issues, the nature of loan repayments, and the potential for lawsuits and arbitration.

Although the termination of renewable energy support has been proposed in the past, it has not 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 specifics of this decision.

The potential removal of solar subsidies is causing concern among solar entrepreneurs and banks that financed these projects. Banks fear that their clients will struggle to repay their loans without the subsidies they were initially promised. Moreover, the structure of loan repayments agreed upon during the solar boom period further complicates the situation.

These loans often have annuity profiles, meaning the most significant principal payments are made towards the end of the repayment period. Additionally, the amount of outstanding loans is 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 underway to assess the impact of canceling renewable energy subsidies, with banks planning 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 fully repay their loans.

Solar industry representatives are expressing their concerns, highlighting that their loans extend for 15 years and that removing subsidies would have immediate devastating effects. The government acknowledges the possibility of legal challenges and arbitration threats but is prepared to face them based on the analysis conducted by the Ministry of Industry and Trade. However, specific findings from this analysis have not been disclosed by either ministry at this time.

Article by Prague Forum