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19 March 2020

Green light for green electricity l Slovakia

Up until the end of 2018, renewable energy sources (RES) generators in Slovakia were mainly subsidised in the form of a guaranteed feed-in tariff granted for 15 years, the amount of which depended on the date when the RES facility was put into operation.

The highest level of guaranteed feed-in tariff was granted for facilities put into operation in 2009 – 2010, after which the level of the tariff has gradually decreased significantly. In addition, the construction and connection of new RES facilities to the grid was obstructed by various obligations mainly towards distribution system operators. Thus, in recent years the development of RES facilities has been practically frozen.

This status has finally changed and new RES facilities now have a green light.

New auction

The Ministry of Economy of Slovakia recently opened the first ever auction in Slovakia for RES. The auction is part of a major reform of support of RES in line with the EU legislation, which should introduce the cheapest prices for green energy by applying market principles. In total, 30 MW of green energy will be procured under this pilot auction.

The main characteristics of the auction are as follows:

  • The only criterion in the single round auction is the (lowest) price for electricity;
  • The maximum price for solar and wind facilities is EUR 84.98 per MWh and EUR 106.80 per MWh for other RES;
  • Eligible facilities are solar plants with installed capacity of 100 kW to 2 MW and other RES facilities of 500 kW to 10 MW;
  • The auction is set up to be technology neutral, applies only to new facilities and does not cover cogeneration;
  • Support will be provided for 15 years;
  • The deadline for application is 30 April 2020.

Potential problems

Although the conditions of the auction are generally clear, there are still some problematic points.

For instance, the projects selected in the auction must be put into operation within tight deadlines. In the case of solar energy, within 21 months after the publication of the auction results, for wind energy within 39 months, and for other RES technologies within 51 months. For each day of delay the producer will pay a contractual penalty of EUR 1,500 for each MW of the facility.

A successful bid in the auction also does not guarantee that the bidder will be connected to the grid. Although the bidder must identify the territory of the regional distribution system operator to which it wishes to be connected, the Ministry does not guarantee the availability of capacity to connect new RES facilities. Therefore, bidders and potential auction winners will have to meet all the technical and business conditions of the distributors in order to be connected.

Another problematic point involves photovoltaic RES. They will be accepted in the auction only if they are located on the roof or cladding of a building or on land that is not registered as agricultural land as of the date of publication of the auction conditions. The second requirement in particular can be problematic in the case of projects that are not already in a developed stage.

Future outlook

While this may be historically the first auction, the Ministry is already interested in continuing such auctions in the future. There are indications that another auction, potentially for larger total installed capacity, will be launched this year. The Ministry signalled that the terms of future auctions should be similar to the current ones, although recent governmental elections might change these plans.