Czech Republic Caught Between the Devil & the Deep Sea?

December 14, 2010 / 1 Comment

The Czech Republic is being dogged by several issues as it attempts to reduce its carbon footprint.  As part of the European Union’s pledge to reduce greenhouse emissions by 20% by the year 2020 from the levels that existed in 1990, the Czech nation has been taking several steps to ensure that the people are switching to more renewable power sources.

solar Czech Republic Caught Between the Devil & the Deep Sea?

Subsidies have been announced that will be effective from the beginning of 2011 for any solar installation producing zero-emission photovoltaic electricity, that will be linked to the country’s power grid by the end of 2010.

This move will definitely contribute greatly to the reduction of the country’s dependence on fossil fuels. Currently almost half of its energy needs are being met with coal consumption.

So why is all this bad news? Simply because the consumer in Czechoslovakia now has to pay more when to comes to power bills. A law passed in 2005 created huge subsidies in the nation due to which electricity bills are now rising by almost 20%.

What makes this even harder for the consumers to digest is that the actual market price of electricity has fallen by about 20% during the past two years. Accompanying this trend are the fears that these price increases will adversely affect economic growth in the nation.

In an attempt to cushion the price rise, the government has decided to have a new windfall tax, which will be placed on solar profits for three years, and will be used to keep the price rise in check.

The government hopes to be able to keep the price rise to a figure of 5% a year and give the consumers time to get used to it over time.

This is being met with a lot of opposition by the solar power investors, who find it hard to accept that this kind of a taxation has been placed on them after all of their infrastructure has been put up and bank terms settled.

So now the government is caught between the investors and the public, in a situation that could send out the wrong signals to future investors and thereby hurt the economy.

(Via WSJ)