CTE/CEE Bankwatch Comments 16 Small Hydros in the Czech Republic

Friday, April 1, 2005

Comments on Non–Additionality of 16 Small Hydros in the Czech Republic (World Bank PCF Joint Implementation Project)

Submitted to Det Norske Veritas (DNV)

We raise our concerns about the additionality of the proposed 16 small hydropower plants projects in the Czech Republic.

The country is according to the EU Accession Treaty oblidged to meet the target of 8% renewables in its gross electricity consumption in 2010. This target is also being adopted in other energy– and environment–related policies and documents. The target can be considered quite ambitious and thus the parliament recently adopted a Renewables Act, which is in fact a transposition of the EU Renewables Directive 2001/77/EC into the Czech legal system. The Renewables Act came in effect in April 2005 and guarantees stable prices for the electricity from renewables for 15 years and is set in a way that the pay–back time is less than 15 years. So called "feed–in tariffs" are guaranteed regardless the installed capacity. With this instrument in place many of the proposed small hydropower projects would not pass the "additionality test" – the revenue is guaranteed by the law and the project would be viable and profitable without PCF’s financial involvement.

We also draw your attention to the fact that the renewable energies, including small hydro, were supported to some extent in the past years as well:

  • Since 1992, a five year income tax relief on renewable energy sources has been in place. Before 1 January 2004 a lower VAT was also applied for renewable technologies. Unfortunately, due to accession conditions of the EU, the VAT has increased from 5% to 22%.

  • Investment support is provided by the State Environmental Fund. The support programme is grant based, with no mandatory obligation for the Fund to financially support all installations. The maximum amount of financial support depends on the applicant’s status (individual/NGO or municipality/enterprise) and the nature of the project, and varies from 30% to 80% of investment costs.

  • In January 2002 feed–in tariffs were introduced for renewables by the Energy Regulatory Office. The tariffs were quite high in the sense of allowing a pay–back time of less than 10 years.

From the above mentioned reasons we strongly urge the DNV as a validator of the projects to strictly apply additionality criteria to all of 16 projects. Though we in general believe that a special financial support for renewable energies is essential, this is not the case. There are many investment opportunities lacking finances (especially in the field of energy efficiency) and there should be the focus of PCF’s JI activities.

Klara Sutlovicova, Centre for Transport and Energy
Prague, Czech Republic
E–mail: cde@ecn.cz

Petr Hlobil, CEE Bankwatch Network
Prague, Czech Republic
E–mail: petr.hlobil@ecn.cz

April 2005