Czech Republic Takes Aim at Solar - TheStreet

PRAGUE, Czech Republic (

TheStreet

) -- The European backlash against the current support levels for the solar industry -- being led by Germany's plans to reduce feed-in tariffs -- has added another country: the Czech Republic.

On Monday, the Czech Republic's electricity-grid operator,

CEPS AS

, said at a press conference in Prague that the pace of solar investment risks overloading the Czech electricity network and driving up costs for consumers.

Bloomberg

first reported the CEPS comments in the U.S. financial press on Monday.

A hard cap being put in place by the Czech Republic is the latest fear among solar investors, on top of the German feed-in tariff (FIT) cuts, as well as the FIT cuts from Italy expected in 2011. France has already cut its feed-in tariffs by 24%.

The Czech Republic has had among the most favorable feed-in tariff regimes for solar companies, and it has been singled out by solar companies, including

Suntech Power

, as a market where the solar industry will be able to diversify its geographic mix as markets like Germany pull back from current solar support levels.

Regardless, amidst the continued backlash against solar from Europe, solar stocks were having one of their best days in 2010 on Tuesday. Not a positive data point in sight -- since last week's

JA Solar

(JASO)

bullish guidance -- and more threatening political winds in Europe, but solar stocks ignored it and climbed higher, with Suntech up close to 7% on Tuesday in the early afternoon.

Many of the Chinese solar stocks, including

Yingli Green Energy

(YHE)

, JA Solar,

Trina Solar

(TSL)

,

Solarfun Power

(SOLF)

and

Canadian Solar

(CSIQ) - Get Report

were up between 4% and 6% on Tuesday in the early afternoon.

U.S. bellwether solar stock

First Solar

(FSLR) - Get Report

was also up more than 5%.

Speaking at the press conference on Monday, CEPS CEO Petr Zeman was quoted by

Bloomberg

as saying that output from solar panels may overwhelm the Czech grid by 2011 and that plants may need to be temporarily disconnected to prevent blackouts.

Zeman's comments echo an argument now being made in Germany by those in favor of cutting the solar feed-in tariffs. German critics of the current solar frenzy have argued that during peak grid use in Germany, the current level of solar growth will result in a scenario under which conventional energy plants will have to be shut down to handle the growing solar capacity.

Total solar capacity may reach 3,000 megawatts (MW) in 2015, six times the 2009 level and about half the Czech republic's off-peak consumption at summer weekends, the CEPS CEO said. "When the share of renewables exceeds 1,000 megawatts, the stability of the grid will be threatened and we'll have to switch some sources off," Zeman said.

The utility executive went further, warning solar investors that their profits may be at risk. CEPS may have to start phasing out plants to prevent a grid overload in the summer of 2011. CEPS is asking regional power distributors to stop issuing permits to new solar projects.

A hard cap on new solar would be the worst-case scenario in the Czech Republic, as it would echo the drastic shift in Spanish solar policy in 2008. What's more, the 63-cent feed-in tariff currently offered in the Czech Republic is threatened by a bill now working its way through the Czech parliament.

Indeed, talk of a hard cap on solar projects in the Czech Republic, as well as the bill seeking to reduce the current feed-in tariff, are part of a response to what many consider the outsize return potential for solar investments under the current lucrative FIT scheme.

Thus, as has been the case across Europe recently, government action on solar is being predicated by a short-term building frenzy that was, in effect, spurred by FIT schemes.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>Germany May Delay Solar Cut by Two Months

>>Italy To Slash Solar Incentives

>>France Cuts Solar Tariffs 24%

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