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01 February 2014

Slovakia Supports Biomass

The authors discuss the current position of biomass in power generation in Slovakia, the governmental support scheme, and the outlook for the future.

Position of biomass in power generation in Slovakia

Biomass plays an increasing role in power generation in Slovakia, mainly due to the existence of governmental support scheme. Slovakia has implemented the support scheme for production of electricity from renewable energy sources (RES) in compliance with EU legislation. Although this support scheme claims to be available for all types of RES, in fact it applies a restrictive approach, meaning energy sources with a high fluctuation of electricity generation (solar and wind) receive very little support. Other RES, such as biomass, are supported more. According to information published by the regulator, in 2012 approximately 11% of electricity produced from RES and eligible for the feed-in tariff was produced from biomass.

But biomass currently receives significant governmental support only in case of cogeneration (ie, generation of electricity alongside with the thermal power) performed in facilities with total installed capacity of up to 10 MW. Only such use of biomass is eligible for the feed-in tariff, being the main support measure in Slovakia.

Available support scheme

The generators of electricity from biomass are financially supported in the following ways.

  • The feed-in tariff, which is a guaranteed off-take price fixed by the regulator for each generator of electricity from biomass for each year. The feed-in tariff scheme applies for 15 years.The regulator calculates the feed-in tariff from a basis that depends on the year in which the biomass facility was put into operation, reconstructed, or upgraded. This calculation basis remains constant for the particular electricity generator for the whole period of support. Further factors that may influence the calculation of the feed-in tariff are the technical parameters of the facility and the type of biomass it processes (intended grown, cereal straw, or waste biomass). The feed-in tariff comprises a subsidy, which the regulator calculates as the difference between the feed-in tariff and the so-called “electricity price on loss” determined by the regulator for each year.For instance, in 2012 the biggest player on the Slovak biomass market – having a biomass facility with installed capacity of 8 MW – generated 64,000 MWh of electricity from biomass. The regulator claimed that in this case, from the total amount of feed-in tariff received by the facility, about EUR 4,400,000 was in fact the government subsidy.
  • The electricity generated from biomass is generally exempted from the excise tax otherwise levied on electricity.
  • Construction of facilities for biomass may be supported through financing from the EU funds.

In terms of policy, the generators of electricity from biomass can be supported as follows:

  • Priority connection of their facility to the regional distribution grid, priority access into the distribution and transmission grid, priority transmission, distribution and supply of electricity.
  • Obligatory off-take of electricity from biomass by the distribution system operators (for the feed-in tariff) together with transfer of liability for imbalances to the distribution system operators – both guaranteed for 15 years.
  • So-called green certificate scheme; the certificates may be transferred for consideration to another undertaking, also abroad.

But biomass support in Slovakia has its limits. For example, from January 2014, generators of electricity from biomass will have to pay a new special levy (so-called G‑tariff or G‑component) to the distribution system operators for reserved capacity. Further, in the legislative pipeline there is a proposal for amendment of law in relation to RES, stipulating that from 1 January 2014 the feed-in tariff should be available only for facilities with a total installed capacity of up to 5 MW (instead of current 10 MW).

Outlook for the biomass sector

The biomass generation market is growing mostly due to the favourable support regime in Slovakia and because the regulator creates obstacles for construction of solar and wind facilities. Strong players on the Slovak electricity market are currently increasing the usage of biomass for electricity generation. But, as pointed out above, the support schemes might be reduced from January 2014, which could lead to less interest in biomass generation.

In general, Slovakia has good opportunities for production of biomass due to the large amount of available forest and agricultural land. Nevertheless, because of the increasing usage of biomass, the supply of certain types (eg, wood biomass) may become more difficult while the biomass price in Slovakia steadily grows.

In any case, the outlook for biomass in Slovakia is promising and attractive for potential investors. Simply said, in Slovakia biomass is on the rise, while solar and wind stagnate. Assuming no dramatic shift in government support policy, this status will continue for years to come.

Biomass is on the rise in Slovakia, while solar and wind stagnate.

authors: Stanislav Kovár, Michal Lučivjanský