Czech companies cannot resist Hungary's solar power frenzy

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The combination of a slow-down in state subsidies at home and an increased demand for solar power in Hungary is leading many Czech companies to set up to invest in Hungary’s photovoltaic market. The companies have serious plans for Hungary. One of them is in talks to buy a licence to build a new 30-megawatt plant there. Some Czech investors, however, are more cautious and are also wary of risks on the Hungarian market.
Czech companies cannot resist Hungary's solar power frenzy

The Czechs cannot resist Hungary’s solar energy revolution

Thanks to a favourable regulatory environment, Czechia’s solar energy boom started more than ten years ago, and as a result of that Hungary is still lagging behind despite its ongoing growth in respect of photovoltaic developments. As the technology available at that time demanded rather hefty financial assistance, the government slapped the related grants almost directly onto customers, and while PV capacities soared, electricity tariffs rose with them. Besides the costly technology, the ascending trend was also disrupted by the fact that the country’s system of supporting photovoltaic construction was criticised for leading to many cases of subsidy fraud. Policymakers also got spooked that the Czech power grid will not be able to keep up with the spread of solar panels that were difficult to regulate.

As a result of the above, less than 10 megawatts worth of new solar farms were built in the Czech Republic in the past five years, whereas Hungary’s photovoltaic power stations grew by more than 400 megawatts in 2018. Altogether, the Czech Republic’s solar farms and smaller solar parks have combined nominal capacity of over 2,000 MW that is greatly over Hungary’s 700-800 MW of PV capacity. The latter amount, however, is expected to increase substantially in the near future. Hungary’s photovoltaic association estimates that licenses allowing the construction of up to 2,000 megawatts worth of photovoltaic energy sources have already been issued. According to Hungary’s National Energy and Climate Plan, this could reach 3,000 MW by 2022-2023 and further to 6,645 MW by 2030. This implies great potential in the Hungarian market which offers attractive opportunities for Czech companies, as investment costs are relatively low compared to the profit guaranteed by the mandatory off-take system in place.

According to one of the investors news site iHNed spoke to, the current purchasing price for one kilowatt of produced solar energy in Hungary is around CZK 2.50, while the cost of constructing a source worth one kilowatt lies at CZK 15.

New investments on the horizon

In parallel with the greater importance given to the emission reduction targets, the perception and outlook of solar energy in the Czech Republic have improved again recently, but for local companies the home turf is not as attractive as other markets, such as Hungary The aforementioned relatively low cost of construction compared to profits makes Hungary an attractive investment for some Czech businesses active in solar.

One example, iHNed reports, is Nova Green Energy, which invested EUR 5 million into a recently finished 15 megawatt solar park in the Southern Hungarian city of Barcs. Nova is the subsidiary of the investment group Redside, which is currently negotiating the purchase of a license to build a new 30 megawatt plant in Hungary, the Czech public radio reported.

There is also Photon Energy, the largest Czech investor, which is planning to increase its energy production share in Hungary to 75 megawatts by 2022.

However, some of their business competitors are viewing Hungary with caution. The director of the investment company Verdi Capital told iHNed that it is wary of political risk and fears potential interventions by the Hungarian government into tariff rates. Verdi Capital is instead looking at solar markets in Spain or Italy and has already invested into wind energy in Finland.

Czech market may be reactivated

Over the last few years, subsidy fraud cases have made Czech officials hesitant to issue calls enabling companies to get subsidies for photovoltaic power plant construction, despite the fact that EU money is available, according to the news site iDNES. Whereas Czechia has been one of the countries - besides Hungary, Poland and Estonia - that were trying to prevent the European Union from further tightening CO2 emission targets, the last time Prague was willing to stand behind the plan backed by 24 EU member states. One of the conditions for supporting the zero emission goal set for 2050 was that the Czech Republic should be financially compensated in some way for the unfavourable social impacts of phasing out coal. Yet, stepped up climate protection efforts could create new opportunities in solar power in the country.

One of these great opportunities is provided by the fact that 300,000 Czech households still use coal as a heating source, and these should switch to renewables. The programme director of the Modern Energy Union Martin Sedlák told Aktuálnì.cz that the government’s decarbonisation plan needs could be done through a government pledge to place solar panels on at least 290,000 homes by 2030.

The renewed push to move away from fossil fuels could bring back support for solar. Just recently, the government approved the creation of a commission tasked with cutting down coal production. Its target is to reduce the share of coal as an energy source to 10 or 15% by 2040.

Earlier this week, he told Aktuálnì.cz that the government’s decarbonisation plan needs to include Czech households, 300,000 of which still use coal as a heating source. This, he said, could be done through a government pledge to place solar panels on at least 290,000 homes by 2030.

Czech Minister of Industry and Trade Karel Havlíèek told Czech Television this week that the success of this plan is very much dependent on activating other energy sources.

The largest domestic professional grouping of photovoltaics companies, the Czech Solar Association, is already attempting to persuade the ministry to make European subsidies more easily accessible.

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