PRAGUE, Czech Republic ( TheStreet) -- The Czech Republic is one of the biggest growth markets for solar. Projections from Emerging Energy Research indicate that the Czech market will have a growth rate over 200% this year.

The pressure being applied to solar subsidy programs in Europe is the other side of the solar growth story, and the Czech Republic has put forward a new proposal that marks an interesting twist in attempts to limit European solar growth prospects.

The Czech Republic Ministry of Industry and Trade (MIT) introduced this week a proposal stating photovoltaic plants installed in the Czech Republic that have a total output of more than 20KW would be limited to using PV modules with conversion efficiencies of more than 22%.

The solar efficiency decree would take effect in June, according to a report on The article by a Czech solar official notes that solar companies and investors with valid construction permits before May 1 will not be subject to the new decree. Nevertheless, for solar projects beginning after May 1, the decree could lead to an exit of many solar investors from the Czech market.

The attitude of the Czech solar official writing on the was on one side of the issue. He positioned the fight as another battle between green energy and the coal industry, and the article argues that thousands of Czech citizens will lose their jobs as a result of the decree and many solar investors exit the market.

The European efforts to alter solar subsidy schemes have primarily focused on reducing feed-in tariff levels, or imposing cap levels on annual installed solar capacity. Germany's move to reduce feed-in tariffs is the most notable, while Italy's deliberations on FIT cuts and a cap on solar are expected to heat up in April.

These European efforts are a roundabout way of forcing higher efficiencies from solar projects, or else face diminishing return profiles. And some solar critics have maintained that the lucrative FITs have had the unintended effect of allowing solar developers to take a lax position on research and development efforts. However, no other European efforts have gone beyond caps or FIT reductions and mandated a specific efficiency benchmark for solar projects.

In mid-March, the lower house of the Czech parliament won approval -- by one vote short of a unanimous decision -- that starting next year, regulators will be able to reduce feed-in tariffs for solar projects beyond the annual 5% drop. What's more, the lower house of the Czech parliament measure would trigger the larger FIT reductions based on the length of time it takes for a solar project's initial investment to be returned.

The latest decree isn't the first indication that the Czech Republic's political environment is getting serious about its oversight of solar growth, either. At the beginning of February, the Czech transmission grid operator stoked fears about the growth of solar, arguing that the number of solar power plants coming online in 2009 was so large that it could cripple the Czech grid, cause blackouts and force the shutdown of conventional energy plants to handle the solar load during peak periods.

Since February, all three Czech power distribution companies stopped connecting new solar plants to their grids, a Czech solar official writes on, in what the solar official described as a "fierce" anti-PV campaign in the Czech Republic.

Another aspect of the Czech proposal is aimed at limiting big solar projects and steering the market in the direction of rooftop installations. Germany has also focused on reducing the ground-based solar market in its FIT revisions.

At present, there are few solar companies that could meet the 22% efficiency requirement, and none of the crystalline silicon players like Suntech Power ( STP), Yingli Green Energy ( YGE) or Trina Solar ( TSL).

SunPower ( SPWRA) is about as good as it gets, efficiency-wise, among the public solar companies. There are semi-conductor companies like EMCORE ( EMKR - Get Report) with solar modules at 35% efficiency, but high cost makes EMCORE a non-factor in the competitive solar market.

The most efficient photovoltaic solar technologies are concentrated solar arrays that work best in desert conditions, and as anyone who has been to the Czech Republic knows, that ecosystems requirement would make concentrated solar a non-starter as a solution to the efficiency mandate.

What's more, the cost equation brings into question just what the Czech Republic intends in putting out a decree stating it only wants the most efficient solar technologies, without factoring in costs as part of what makes a "best-in-class" solar technology.

By putting in place a solar efficiency mandate that would, in effect, bar most solar companies from competing in the Czech market, solar technologies would not be competing head to head as part of striving towards a more efficient sector. Rather, a winner would be declared now, and maybe prematurely. The idea behind most national support schemes for solar has been to foster the industry as a whole and let the chips fall where they may competitively, so to speak.

"The fate of Czech photovoltaics seems to be in the hands of politicians," the Czech solar official wrote on

That's a situation with which solar investors are well-accustomed. And as solar investors have learned in the case of Germany, the worst-case scenario introduced by politicians is often just the starting point for a long road in negotiations.

In any event, the latest political firestorm in Europe over solar seemed to have little effect on solar stocks as the week ended. Solar stocks, led by Trina, were experiencing their largest rally in some time on Friday as the Dow flirted for the second straight day with the 11,000 mark. Trina received an upgrade from Credit Suisse to buy on Friday morning, and a buy reiteration from Cowen & Co.

Trina was up 9% near midday Friday, leading a large group of Chinese solar stocks up between 6% and 8% on Friday morning. First Solar ( FSLR) was leading returns among U.S. solar stocks, up close to 5% on Friday.

-- Reported by Eric Rosenbaum in New York.


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