Frequently asked questions (FAQ) - Renewable Energy Resources

1) I want to produce electricity from renewable sources; what legislation applies to me, what requirements do I have to meet to obtain support for electricity generation from renewable sources?
2) What is a green premium (bonus)?
3) What is the difference between the green premium (bonus) and feed in tariffs?
4) What are the pluses and minuses of opting for green premiums (bonuses)?
5) What was the approach to the setting of green premiums (bonuses) and feed in tariffs?
6) When and how often is it allowed to opt between green premiums (bonuses) and feed in tariffs?
7) Can you combine green premiums (bonuses) and feed in tariffs?
8) To whom can electricity be sold in the event of going for green premiums (bonuses)?
9) For how long are feed in tariffs and green premiums (bonuses) for renewable electricity guaranteed?
10) What will be the development of feed in tariffs going forward?
11) Can feed in tariffs for renewable electricity drop?
12) What is the difference between a 15-year payback period required by Act No. 180/2005 and the guarantee for the duration of support?
13) Am I entitled to support for electricity generation from renewable resources in the case of failing to meet the parameters required in Appendix 3 to ERO public notice no. 475/2005?
14) Is a renewable electricity producer connected to a local distribution system entitled to select the form of support?
15) What reports must a producer of renewable electricity fill for the Energy Regulatory Office?
16) What is meant by the date of the commissioning of a generating plant?
17) What is the approach to a generating plant the installed capacity of which has been increased by the addition of a new unit?
18) Can support be claimed for the so-called other house load?
19) Can support be claimed for the so-called process house load?
20) Is it possible to claim green premiums (bonuses) for ‘other house load' in the case of applying feed in tariffs in respect of a regional distribution system operator?
21) What regulated charges are paid by a renewable electricity producer who at the same time uses the produced electricity for ‘other house load'?
22) Is a renewable electricity producer connected to a local distribution system entitled to claim green premiums (bonuses) for ‘other house load'?
23) What price can I apply to a hydroelectric power station commissioned on or after 1 January 2008?
24) Under what conditions can an existing small hydroelectric power station claim feed in tariffs or green premiums (bonuses) applicable to refurbished small hydroelectric power stations?
25) How do things work in the event when a power station does not have control equipment?
26) Is a wind power plant commissioned on or after 1 January 2006 and incorporating renovated process equipment entitled to feed in tariffs?
27) Where are biomass and biogas categories set out?
28) How do you report electricity from biomass and fossil fuel co-firing?
29) Is it true that the service life has been extended for photovoltaic, and therefore the time for which feed in tariffs are paid has been extended too?
30) What is the approach to single-phase connection of a generating plant (for example, photovoltaic) and what is the applicant's unit share of the connection in this case?
31) What is the basis for calculating support for combined heat and power generation (CHP) and secondary resources?

The following legal regulations, which are available on the ERO's website in the Legislation section, apply to producers of electricity from renewable resources.

• Act No. 458/2000 as amended (the Energy Act);
• Act No. 180/2005 on support for the use of renewable resources;
• ERO public notice no. 475/2005 implementing certain provisions of the law on support for the use of renewable resources, as amended;
• Ministry of the Environment public notice no. 482/2005 on determining the types, methods of use and parameters of biomass in support for electricity generation from biomass, as amended;
• ERO public notice no. 502/2005 on methods for reporting electricity quantities in respect of biomass and non-renewable fuel co-firing;
• ERO public notice no. 541/2005 on the Electricity Market Rules and principles of pricing the electricity market operator's activities and on the execution of certain other provisions of the Energy Act, as amended;
• ERO public notice no. 150/2007 on regulatory methods in the energy industries and procedures for price control.

Another document that is important for renewable electricity producers is ERO price decision No. 8/2008, which sets out the feed in tariffs and green premiums (bonuses) payable to renewable electricity producers for their electricity.

Certain legislative requirements must be met to become eligible for support for electricity generation from renewable resources. The first requirement is to obtain a licence for electricity generation. Electricity generation licences are awarded by the Licensing Department of the Energy Regulatory Office.

Holding an electricity generation licence and, simultaneously, an agreement on electricity supply is a precondition for electricity supply to the electricity grid. Licences are awarded also for the trial operation of the generating plants.

Another requirement is to report the selected method of support for electricity generation from renewable resources no later than one calendar month before starting electricity generation proper. To report the selected form of support please use the report that is appended to public notice no. 475/2005 as amended.

Once these requirements have been met, support for renewable electricity can be obtained. Every month, the producer transmits a report on electricity generation from renewable resources to the distribution system operator or, as applicable, the transmission system operator; this report is appended to public notice no. 541/2005 as amended.

2) What is a green premium (bonus)?

The green premium is a premium on top of the market price of electricity, which a producer of electricity from renewable resources can obtain. The system of green premiums is provided for in Act No. 180/2005 on support for electricity generation from renewable energy resources and on changes to certain laws. When a renewable electricity producer opts for support for its renewable electricity in the green premium regime and sells its own electricity at a market price to any final customer or electricity trader it shall have the right to collect green premiums from the respective regional distribution system operator on the basis of a report provided to the operator. The level of the green premium, in CZK/MWh, is adjusted on an annual basis for each type of renewable sources, and published in the ERO's price decisions.

3) What is the difference between the green premium (bonus) and feed in tariffs?

In the case of support for electricity generation from renewable sources in the form of feed in tariffs, the regional distribution system operator or, as applicable, the transmission system operator is obliged to buy the entire quantity of the renewable electricity from its producer. In the case of support in the form of green premiums, the producer itself has to find its customers for the electricity it produces. Feed in tariffs and green premiums are at all times paid to the producer by the regional distribution system operator or the transmission system operator, depending on to which system the producer is connected.

4) What are the pluses and minuses of opting for green premiums (bonuses)?

The key advantage of green premiums is the generator's opportunity to directly influence the revenues from its electricity, thereby achieving higher revenues than in the feed in tariff regime.

A green premium, which is fixed by the Energy Regulatory Office, is paid to the producer on top of the electricity market price. A disadvantage of the green premium regime is a degree of uncertainty, because the producer does not have any guarantee of selling 100% of its electricity on the market the way it has in the feed in tariff regime. In the green premium regime, the producer must proactively find customers for its electricity.

5) What was the approach to the setting of green premiums (bonuses) and feed in tariffs?

Feed in tariffs have been calculated with regard to Section 6 of Act No. 180/2005, and have been set so as to guarantee a 15-year period of return on investment plus reasonable profit over the service life of the various types of renewable electricity generating plants. In comparison with feed in tariffs, green premiums have an advantage because their level reflects the increased risk related to the opportunities for marketing the electricity produced. Green premiums for each of the categories also reflect the level of electricity market prices for the various types of renewable sources.

6) When and how often is it allowed to opt between green premiums (bonuses) and feed in tariffs?

You can switch between the green premium and feed in tariff regimes once a year; the dates and the details of selecting the method of support for renewable electricity are set out in ERO public notice no. 475/2005 implementing certain provisions of the law on support for the use of renewable resources, as amended.

In the event of switching between the feed in tariff and green premium regimes, the same date of the commissioning of the generating plant continues to apply to the producer, and the producer therefore stays in the same category, but with a different method of support.

The date by which the selected method of support must be notified to the regional distribution system operator for the next calendar year is 30 November of the respective calendar year. The selected method of support will then be effective from 1 January of the following calendar year.

7) Can you combine green premiums (bonuses) and feed in tariffs?

Feed in tariffs and green premiums CANNOT be combined. This follows from Section 4(3) of Act No. 180/2005. Producers can opt for one of the two methods of support for renewable electricity once a year.

8) To whom can electricity be sold in the event of going for green premiums (bonuses)?

In the green premium regime, the producer can sell electricity to its customers, who can be either final customers or electricity traders. The market price at which the producer sells electricity to its customers is set by agreement between the producer and the customer, i.e., the Energy Regulatory Office does not set this price.

9) For how long are feed in tariffs and green premiums (bonuses) for renewable electricity guaranteed?

Under public notice no. 150/2007, feed in tariffs and green premiums are applied throughout the service life of electricity generating plants; the expected durations of the service life of each of the renewable source categories are listed in Appendix 3 to public notice no. 475/2007 as amended. Over the service life of an electricity generating plant included in the respective category by the type of the renewable source used and the date of commissioning, feed in tariffs are annually increased with regard to the producers price index, by at least 2% but no more than 4%, with the exception of generating plants that fire biomass and biogas. In the case of biogas stations and operations that fire biomass, operating expenditure plays an important role rather than capital expenditure. For greater clarity, the time of guaranteed feed in tariffs for the various types of renewable electricity capacities newly commissioned after 1 January 2008 are listed in the following table:

The guarantee for green premiums is one year. The reason is that their level depends on the price of energy, and generally declines precisely because of rising energy prices. However, the calculation of green premiums includes as certain motivational element and a higher discount in comparison with the calculation of feed in tariffs, particularly because of the higher risk associated with the marketing of this electricity.

10) What will be the development of feed in tariffs going forward?

In the case of the existing generating plants, ERO public notice no. 150/2007 is important; in its Section 2(11) it says that in respect of the existing plants, the feed in tariffs shall be annually increased to reflect the producers price index, by at least 2% but no more than 4%, with the exception of biomass and biogas plants. In the case of new installations the Energy Regulatory Office will take into account the development over time of particularly the unit capital costs (CZK/kW), and the other parameters that have a material impact on the resulting feed in tariff (such as biomass price in the case of biomass plants). However, for new installations feed in tariffs may only drop by 5% (see question 11).

11) Can feed in tariffs for renewable electricity drop?

Feed in tariffs for electricity generated from renewable sources may not drop by more than 5% annually for new plants under Section 6(4) of Act No. 180/2005. When feed in tariffs drop, the level of revenues per unit of electricity from renewable sources must be maintained for 15 years in each category of renewable sources. A drop in feed in tariffs for new plants is possible, for example, due to the current level of the unit capital costs of a particular type of renewable source and other parameters that influence the resulting support. In the already declared categories, a drop in feed in tariffs is only possible for plants where operating (fuel) costs play an important role. These renewable categories include, primarily, electricity generation from biomass, the price of which can have a significant impact on the guaranteed level of revenues during the service life of these installations.

12) What is the difference between a 15-year payback period required by Act No. 180/2005 and the guarantee for the duration of support?

In its Section 6, this law provides for the prices of electricity from renewable sources and green premiums. Under Section 6(1) the Energy Regulatory Office shall at all times set feed in tariffs and green premiums so as to help achieve a 15-year payback period while maintaining the return per unit of electricity generated. This approach ensures that the feed in tariffs set under Section 6(1)(b) point 1, will support investment recovery over the 15-year payback period.

On the other hand, the time for which renewable electricity producers can enjoy guaranteed support is not limited by the law. Under Section 3(1) of the law, support applies to electricity generated in installations that use renewable sources. It can be inferred from this provision that support for electricity generation is provided throughout their economic life. This principle is further reflected in Section 2(11) of public notice no. 150/2007, which stipulates that feed in tariffs and green premiums shall be applied throughout the service life of electricity generating plants.

On the basis of the above it can be noted that two periods of time, provided for by the law, are involved, and that these two periods have two different meanings for producers. One of the periods is important for setting the level of support in relation to return on investment, while the other is important in the sense that the support is provided throughout the economic life of the electricity generating plant.

The law on support for the use of renewable resources also requires the Energy Regulatory Office to issue an implementing legal regulation for the execution of Section 6(1)(b) point 1 of the law, setting out the technical and economic parameters as a precondition for achieving the 15-year payback period. This legal regulation is public notice no. 475/2005 implementing certain provisions of the law on support for the use of renewable resources, as amended. Appendix 3 to this instrument lists indicative technical and economic parameters for the various types of renewable sources. One of the parameters is also the service life of the generating plant, because it is one of the key inputs to the financial calculations and reflects the actual situation in the area of renewable sources.

13) Am I entitled to support for electricity generation from renewable resources in the case of failing to meet the parameters required in Appendix 3 to ERO public notice no. 475/2005?

Appendix 3 to ERO public notice no. 475/2005 as amended, lists indicative technical and economic parameters for the various types of renewable sources. If the parameters of a completed plant differ from the indicated values, this does not mean that the plant is not eligible for support of renewable electricity generation. Indicative values in Appendix 3 only declare the details on the basis of which feed in tariffs and green premiums given by price decision no. 8/2008 are set. It is up to each particular investor to decide whether it will be worth for him to build a new plant given the current levels of support for renewable electricity generation.

14) Is a renewable electricity producer connected to a local distribution system entitled to select the form of support?

Yes, renewable electricity producers have the right to select the method of support also when they are connected to a local distribution system. If a producer opts for feed in tariffs, it will sell all of its electricity to the operator of the regional distribution system serving the respective area. If it opts for green premiums, the situation is easier: the producer sells electricity to any electricity trader or final customer, and collects the green premium from the regional distribution system operator. This issue is treated in more detail in "Buyout of Electricity from Renewable Resources in Local Distribution Systems". (available only in czech language)

15) What reports must a producer of renewable electricity fill for the Energy Regulatory Office?

Renewable electricity producers shall furnish the Energy Regulatory Office with the following reports, which can be found in appendices to ERO public notice no. 404/2005 on the essentials and structure of regulatory reports, including model forms, and the rules for compiling regulatory reports.

a) Regulatory report for electricity generation licence holders (statistical reports)

- Producers from small hydroelectric power stations with a capacity of less than 0.5 MWe shall fill Report VD 2-12;
- Producers from other renewable sources with a capacity of less than 0.5 MWe shall fill Report VA 1-12;
- Every producer from renewable sources with a capacity greater than 0.5 MWe shall fill Report ERÚ 1-12.

b) Report 11-N (statement of costs - electricity production in generating plants that use renewable sources)

This report contains the key information about the costs and sales of a particular operation. So far, the Energy Regulatory Office has not required producers to furnish this report. However, with regard to the latest developments in renewables it is now necessary to know, for purposes of objectively setting the feed in tariffs and green premiums for the next period, the current parameters of the various types of renewable sources. The report is differentiated separately for generating plants using biomass and biogas (11-Nb) and for all other generating plants using renewable sources (11-N).

Producers can also fill the report that is appended to the licence application. This report contains the key information about and parameters of the generating plant such as installed capacity, capital and operating expenditure, etc.

16) What is meant by the date of the commissioning of a generating plant?

For newly built electricity generating plants/units, commissioning means the day on which the producer started, in accordance with the decision on the award of a licence and its authorisation to carry on the licensed business, to produce electricity and supply it to the electricity grid while applying support in the form of feed in tariffs, or started to produce electricity while applying support in the form of green premiums. Provided that a licence has been awarded the date of commissioning is also understood to mean trial operation of the generating plant/unit.

17) What is the approach to a generating plant the installed capacity of which has been increased by the addition of a new unit?

If within one generating plant one or more new electricity generating units are added, or one or more units meet the requirements for a different feed in tariff (refurbishment of units in small hydroelectric power stations), within such generating plant the producer can apply a different amount of support for each of the units under point 1.12 of ERO price decision no. 8/2008. The requirements that a producer must meet to be able to apply different amounts of support include, in particular, separate metering installed on individual outlets from the units. The metering must meet the requirements of Ministry of Industry and Trade public notice no. 218/2000 as amended. The meter is owned by the electricity producer and the producer is responsible for the data to be correct. Another requirement in the case of installing a new unit(s) is an amendment to the licence. The licence must specify each of the units. The different amount of support can be applied from the day of the amendment to the electricity generating licence. In the case of claiming feed in tariffs, the electricity metered on fiscal meters shall be allocated upon billing in proportion to electricity production from each of the units. In the case of claiming support in the form of green premiums, the support shall apply to each unit separately (in accordance with the metered values). If separate metering is not installed the electricity producer can only apply the lowest support, where there is a choice of multiple methods of support, for the whole electricity generating plant.

18) Can support be claimed for the so-called other house load?

The term ‘other house load' is defined in ERO public notice No. 475/2005 implementing certain provisions of the law on support for the use of renewable resources, as amended; it concerns electricity consumed by the producer, or another natural or juristic person, without using the regional distribution system or the transmission system. Only green premiums under Section 4(16) of Act No. 180/2005 can be applied to ‘other house load'. However, a producer who wants to claim green premiums for its ‘other house load' must sell all of its electricity in the green premium regime, and the two ways of support cannot be combined (see question 7).

19) Can support be claimed for the so-called process house load?

‘Process house load' is defined in ERO public notice no. 475/2005, as amended. ‘Process house load' is understood to be electricity consumption for electricity generation when producing electricity, or electricity and heat, in the main generating installation and also in auxiliary operations that are directly related to the production, including the production, transformation or treatment of fuel, losses in distribution, house load, and losses in step-up transformers for supply to the distribution or transmission system if fiscal metering is installed on their primary side. For example, at biogas stations this load also includes the consumption of the reactor, conveyer belts, etc. Green premiums cannot be claimed for this consumption. For clarity, please see the figure outlining biogas stations; it can be downloaded here.

20) Is it possible to claim green premiums (bonuses) for ‘other house load' in the case of applying feed in tariffs in respect of a regional distribution system operator?

Act No. 180/2005 suggests that the forms of support for renewable electricity generation cannot be combined. If a producer goes for feed in tariffs, it will collect feed in tariffs for the electricity it supplies to the regional distribution system or transmission system from the regional distribution system operator. The producer cannot claim support for ‘other house load'.

21) What regulated charges are paid by a renewable electricity producer who at the same time uses the produced electricity for ‘other house load'?

If electricity from, for example, a photovoltaic plant does not flow through the distribution network the charge for electricity distribution is not paid. However, regulated charges have to be paid, both the charge to cover the extra costs incurred in support for electricity from renewable sources, combined heat and power generation and secondary resources, and the charge for the electricity market operator's activity under ERO price decision no. 9/2008. If the producer has an installed capacity of up to 100 kW it does not pay the fixed charge for system services. A model example of a photovoltaic plant that uses its electricity for house load is shown here.

22) Is a renewable electricity producer connected to a local distribution system entitled to claim green premiums (bonuses) for ‘other house load'?

Yes, in this case the producer can claim green premiums from the regional distributor. However, it is to be noted that Act No. 180/2005 suggests that feed in tariffs and green premiums cannot be combined. This implies that the above situation only applies provided that the producer will not sell surplus electricity for feed in tariffs, for example, supply it to the distribution network. This would mean a combination of the two methods of support, which is not permitted (see question 8).

23) What price can I apply to a hydroelectric power station commissioned on or after 1 January 2008?

Hydroelectric power stations commissioned on or after 1 January 2008 on new sites are entitled to support under point 1.4 of ERO price decision no. 8/2008, i.e., a feed in tariff of CZK 2,700/MWh. A new site is understood to be a site where no electricity generating plant has been connected to the transmission or distribution system since 1 January 1995. At the same time, these power stations must satisfy point 1.4.4 of price decision no. 8/2008, i.e., none of the various generating process equipment units may be older than five years. If a natural or juristic person builds a power station after 1 January 2008 on a site on which a hydroelectric power station existed in the past, or any of the generating process equipment units are older than five years, this person will be entitled to support for renewable electricity in the category of Small Hydroelectric Power Stations Commissioned before 1 January 2005 at CZK 1,790/MWh. A joint position issued by the State Energy Inspectorate and the Energy Regulatory Office on small hydroelectric power stations addresses this issue; you can find the position here.

24) Under what conditions can an existing small hydroelectric power station claim feed in tariffs or green premiums (bonuses) applicable to refurbished small hydroelectric power stations?

Electricity producers from small hydroelectric power stations who meet the requirements of point 1.4.3 of ERO price decision no. 8/2008 can claim feed in tariffs or green premiums for refurbished small hydroelectric power stations. As regards the existing small hydroelectric power stations, producers will carry out the refurbishment to the required extent and request a higher support from the regional distribution system operator. More detailed specifications of the various refurbishment actions that producers have to carry out to be granted a higher level of support are contained in the joint position issued by the State Energy Inspectorate and the Energy Regulatory Office on small hydroelectric power stations.

25) How do things work in the event a power station does not have control equipment?

If with because of its type the original process equipment did not have any controls and the erection of control equipment would require extensive structural modifications to a small hydroelectric power station, no control equipment needs to be erected on such water works. Subject to all the other conditions required for the refurbishment, the operator of the small hydroelectric power station will be granted a higher level of support.

26) Is a wind power plant commissioned on or after 1 January 2006 and incorporating renovated process equipment entitled to feed in tariffs?

A precondition for granting feed in tariffs to wind power plants commissioned on or after 1 January 2006 is to satisfy point 1.7.1 of price decision no. 8/2008; generating process equipment units may not be older than two years. If generating process equipment units older than two years have not been refurbished feed in tariffs cannot be granted to this category.

27) Where are biomass and biogas categories set out?

Biomass categories are set out in Ministry of the Environment public notice no. 482/2005 on determining the types, methods of use and parameters of biomass in support for electricity generation from biomass, as amended.

28) How do you report electricity from biomass and fossil fuel co-firing?

The quantity of electricity produced by the co-firing of biomass and a non-renewable fuel is reported in accordance with ERO public notice no. 502/2005 on methods for reporting electricity quantities in respect of biomass and non-renewable fuel co-firing.

29) Is it true that the service life has been extended for photovoltaic, and therefore the time for which feed in tariffs are paid has been extended too?

In 2007 two legal regulations were issued, which concern support for electricity generation from renewable sources. One is public notice no. 150/2007 on regulatory methods in the energy industries and procedures for price control. In its Section 2(11) this instrument lays down that feed in tariffs and green premiums are applied throughout the service life of electricity generating plants. It also lays down that throughout the service life of an electricity generating plant included in the respective category by the type of the renewable source it uses and the date of commissioning, the feed in tariffs shall be annually increased with regard to the producers price index by at least 2%, but no more than 4%, with the exception of generating plants that fire biomass and biogas.
The other regulation is public notice no. 364/2007, which amends no. 475/2005 implementing certain provisions of the law on support for the use of renewable resources. In its Appendix 3, this instrument sets out the technical and economic parameters of the various categories of renewable sources, including the expected service life of the plants. These parameters serve as input into the calculation of feed in tariffs and green premiums. For photovoltaic, the expected service life has been set at 20 years. This provision applies to plants commissioned after the entry into force of this regulation, i.e., on or after 1 January 2008.
The above suggests that under current legislation, feed in tariffs and green premiums for photovoltaic commissioned on or after 1 January 2008 can be applied for 20 years, provided that the development of the level of already set feed in tariffs is provided for in public notice no. 150/2007. To photovoltaic installations commissioned before 1 January 2008, the conditions under which they were commissioned shall apply, which means a 15-year service life and, in turn, 15-year eligibility for support.

30) What is the approach to single-phase connection of a generating plant (for example, photovoltaic) and what is the applicant's unit share of the connection in this case?

In its Appendix 6, public notice no. 51/2006 on the conditions of connection to the electricity grid does not specify the amount of the unit share of the applicant for connection in the case of single-phase connection of the generating plant. In the case of generating plants, only three-phase connection is specified. Thus, although legislation does not provide for the connection of single-phase plants in any way, the Energy Regulatory Office recommends that in these cases an approach analogous to the connection of a "supply point" be taken. For the connection of a "supply point", the above Appendix 6 lays down the applicant's unit share at CZK 200/A in the case of single-phase connection.

31) What is the basis for calculating support for combined heat and power generation (CHP) and secondary resources?

Support for combined heat and power generation and secondary resources is provided for in Section 32 of Act No. 458/2000, the Energy Act, as amended. Under this law, the Energy Regulatory Office sets contributions to electricity prices, which are paid to producers by the operators of the distribution systems directly connected to the transmission system, to which the producers are connected, or by the transmission system operator if the producer is directly connected to the transmission system. The contributions for combined heat and power generation are categorised by the installed capacity of generating plants. In the case of secondary resources, the contribution is set for secondary resources without any categorisation and, separately, for drained gas (gas from open mines). The amount of the contributions can be found in ERO price decision no. 8/2008.

In this case, the price of electrical energy is determined on a free-market basis; in a way, this is an analogy to green premiums for renewable resources.

Combinations of support methods for combined heat and power generation in the case of firing renewable sources, secondary resources or drained gas are shown here.