Solar and biomass wait for state support

EUROPEAN Commission rules bind Slovakia to increasing the share of the energy it produces from renewable sources to 14 percent. Currently, the actual figure stands at around 6 to 7 percent. Solar energy and energy from biomass - which the Slovak economy minister has identified as the country's most promising renewable resource - could contribute to reaching this goal.

EUROPEAN Commission rules bind Slovakia to increasing the share of the energy it produces from renewable sources to 14 percent. Currently, the actual figure stands at around 6 to 7 percent. Solar energy and energy from biomass - which the Slovak economy minister has identified as the country's most promising renewable resource - could contribute to reaching this goal.

However, technologies producing heat from renewable resources are still more expensive than gas boilers, and household gas prices in Slovakia are still subsidised. Investors in "green" energy technologies have therefore emphasised that Slovakia will not be able to increase its current share of renewable energy production without long-term and strategic state support for these technologies. At the same time an environmental watchdog has added that support should not be based on direct state subsidies but rather on different solutions.

"When it comes to investment in renewable energy sources by business we do not consider direct financial support from the state budget appropriate," Karel Polanecký of environmental group Greenpeace told The Slovak Spectator. "There are other schemes for promoting the development of renewable resources which have already been tested in other European countries."

The principle of minimum purchase prices, which decrease the risk of investing in these technologies, has so far proven the best, according to Polanecký.

Using this principle, an independent energy authority each year sets a minimum price for one kilowatt-hour (kWh) of generated energy which is guaranteed for renewable energy producers. The price varies for energy produced from different renewable resources - for example, it would be lower for a small hydroelectric power producer than for a biomass plant. An energy network operator has to pay the producer at least this price, Polanecký said.

"The principle protects small producers who have a difficult starting position in the negotiations with the network operator," said Polanecký. "At the same time the legislation limits how far the purchase price can change each year. In this way it limits investment risk."

As far as encouraging households to use renewable resources, a direct subsidy of, for example, modern biomass boilers could be more suitable, said Polanecký. These can reduce the wasteful biomass useage which occurs in cheap and ineffective boilers.

"However, even in this case, we consider support from non-budgetary means such as fees for pollution and profits from auctions of emission quota, to be preferable," he said.

The Slovak cabinet has declared its support for the use of renewable energy sources - but actual support is absent, producers say.

Most recently, the cabinet approved an "Action Plan for Biomass Use for 2008 - 2013" on February 27, 2008, which describes the advantages of biomass and its potential but doesn't specify any actual proposals to support it.

According to the document, biomass has the greatest potential in the forthcoming five to ten years among renewable energy sources. Present use of biomass is insufficient given its potential and its use in 2005 stood at 2 percent of the overall energy consumption in Slovakia, reads the document.

The volume of potential energy which could be produced from biomass is comparable to the volume of energy produced by three 440-megawatt nuclear reactors, according to the document approved by the cabinet.

"The Slovak economy has not paid adequate attention to the meaning and economic potential of biomass," reads the plan.

The document declares that to increase the use of biomass in the economy the cooperation of several ministries is necessary - specifically, the Agriculture, Economy, Environment, and Finance ministries, as well as the Ministry of Transport, Post and Telecommunications and other state organisations.

It concludes that to achieve these goals Slovakia intends to use EU funds, cooperate with private capital and use so-called public-private-partnership projects, private equity projects, and the principle of energy contracting.

One actual plan to support biomass use and solar energy was a proposal by the Economy Ministry to subsidise the installation of small biomass boilers and solar panels in households. This support was included in the preliminary proposal for the 2008 state budget. However, it didn't make it to the final budget proposal as the cabinet needed to keep fiscal expenditure tight due to Slovakia's ongoing effort to keep within euro-adoption criteria.

Investors in solar and biomass energy production agree that currently there is almost no support for the use of renewables, whether for businesses or for households.

Marián Ježo of the Thermo/solar company from Žiar nad Hronom, which produces solar panels, said that there are a few programmes for supporting solar energy but that the level of state funding for solar panel installation is more or less symbolic. Industrial companies, local administrative institutions, and schools - but not, for example, agricultural companies - can use EU funds.

"Support for households is the same as in 2007, which means zero," said Ježo. "Slovakia is one of the few EU countries without accessible support for the use of renewable energy."

Using solar energy, each household could save 50 to 70 percent of the energy it currently uses to heat water, he added. It's a long-term goal which requires the installation of thousands of solar-energy sytems annually over several decades.

"We will not get closer to this goal without a transparent and administratively-simple programme of support," Ježo said.

He added that if Slovakia waits until the prices of so-called classic energy source increase, it may discover too late that it has too few installed solar panels.

In Slovakia, wood biomass from the forestry and wood-processing industries is currently the most important source of biomass, said Milan Oravec from the National Forest Centre. It is possible to use biomass for heating anything from a family house up to a medium-sized town, including industrial companies.

"Foreign experience show that at the stage of development [in the use of biomass] where Slovakia stands right now, the free functioning of the market cannot replace direct support," Oravec said. "The best solution would be a long-term and balanced policy supporting production and the use of biomass," Oravec said.

However, he added that the proposal to subsidise small household biomass boilers, which the original plan of the Economy Ministry included, is not the best solution either, as was demonstrated in Sweden where a similar project was applied.

"A steep increase in demand for boilers lasted about three years, after which producers faced big problems since the market was saturated," Oravec explained.

The Biomasa association has already completed about 20 biomass projects. Ladislav Židek, its general director said that although the technology for burning wood chips and pellets is about 50 percent more expensive than a gas boiler, the price of the fuel is lower by about 15 to 20 percent than gas.

The return on these investments - from the costs saved by not buying gas - kick in after four to six years, depending on the size of the object, said Židek, adding that afterwards the biomass boilers bring profit.

"But, in fact, it's still only the Environment Ministry which is in favour of using biomass - and this is not enough," Židek said. "Government support is unavoidable because the technology is expensive. Gas and electricity have had state support and they are widely used. As long as there is no support for the use of renewable energy sources, they will not develop sufficiently and Slovakia will not fulfil the set quotas. A future government will have to pay for this."

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