SLOVAK GOVERNMENT TURNING OUT THE LIGHTS ON SOLAR POWER

UNCLAS SECTION 01 OF 02 BRATISLAVA 000509 SIPDIS STATE FOR EUR/CE M. LIBBY AND J. MOORE E.O. 12958: N/A TAGS: ENRG EINV ECON PGOV LO SUBJECT: SLOVAK GOVERNMENT TURNING OUT THE LIGHTS ON SOLAR POWER BRATISLAVA 00000509 001.3 OF 002 ¶1. (SBU) SUMMARY: The enthusiastic solar energy "gold rush" in Slovakia has hit a series of speed bumps in recent weeks and now faces an uncertain future, as the Slovak government's weak commitment to renewable energy has been further undermined by outright opposition from several important players in the domestic energy sector. Expected legislative changes will concentrate authority over the solar power industry within its single most determined foe, likely bringing development to a standstill and creating a new opportunity for corruption in a government that already has more than its share. END SUMMARY. ¶2. (SBU) In retrospect, it was probably a bad omen that Bratislava was smothered in a thick fog the day the Slovak Renewable Energy Association held its big solar energy conference last week. An overflow crowd of several hundred solar power entrepreneurs gathered to take part in what one participant called a "gold rush" triggered by recent favorable legislation. Their enthusiasm quickly soured, however, when Jozef Mudry of the Ministry of Economy let slip that the government will soon allow greatly increased oversight of the industry by the state-owned power transmission company, SEPS. ¶3. (SBU) As a chill descended upon the room, Mudry sought to redirect the crowd's palpable anger by asserting that the Fico administration is little more than an innocent bystander--that blame for the industry's troubles instead rests with SEPS, which he said is pushing for this greater authority because "it doesn't like wind or solar power." The crowd, sensing a "you're-either-with-us-or-against-us" situation, was unmoved. The discussion panel was abruptly ended a few moments later, after an audience member launched a string of personal attacks at Mudry, garnering a round of spontaneous and enthusiastic applause. ¶4. (SBU) The proposal to tighten regulation of solar power is only the latest effort to rollback the Renewable Energy law that was approved earlier this year. The law had thrilled advocates of alternative energy, who were excited that it established generous feed-in tariffs for a period of 15 years and mandated grid operators to accept electricity from small-scale producers. It also came as something of a surprise, as the Slovak government--which remains well within its commitments under the Kyoto Protocol, and whose energy policy has historically been preoccupied with nuclear power--had previously shown little interest in encouraging the development of alternative energy. As it turns out, the law seems to have gone somewhat further than the Fico administration was willing to defend from opponents from opponents of renewable energy. SEPS, citing a study that it refused to release to the public, was quickly able to convince the Ministry of Economy to set a seemingly arbitrary limit of 120 MW for solar power, or little more than one percent of the country's total electricity production capacity of about 8000 MW. ¶5. (SBU) In addition to its lobbying of the government, SEPS had instituted a de facto ban on large solar power plants by rejecting all applications submitted to it. This hadn't posed an insurmountable problem for solar power developers, who were able to sidestep SEPS authority simply by keeping the size of their plants under 1 MW. The proposed amendment, however, will reduce the size of solar power plants requiring SEPS approval from 1 MW to 100 KW--which, in practical terms, means that SEPS will have complete control over the fate of nearly all solar power projects in the country. ¶6. (SBU) MyEnergy partner Peter Badik, along with other entrepreneurs we spoke to at the conference, was understandably dismayed about the prospect of SEPS enjoying increased authority over the industry. Badik described the SEPS approval process as a black hole and predicted that developers will be asked for "unofficial payments" in order to receive the necessary permits. Karel Hirman, Director of the Energy Policy Department at SIEA, a sort of government think tank within the Ministry of Economy, told us at a separate meeting that SEPS had recently adjusted its approval process in several ways that are "absolutely wrong" and intended to reduce transparency. Although Hirman is no fan of solar power, he criticized SEPS for trying to make policy rather than simply implement it and suggested--like Badik--that the transmission company is seeking to create an opportunity for private profit. ¶7. (SBU) Several participants at the conference appealed to Ladislav Guncaga, an official at the power utilities regulator, to help ensure that permits are awarded fairly. Guncaga replied that the process is "100% the responsibility of SEPS" and that BRATISLAVA 00000509 002.3 OF 002 the regulator has no ability to intervene. Neither SEPS nor any of the three large distribution companies in Slovakia accepted invitations to appear, leading the normally mild-mannered Miro Zeman, director of the NGO organizing the conference, to call them a bunch of cowards. COMMENT ¶8. (SBU) Although SEPS' antipathy toward alternative energy is clearly due in part to a desire to avoid costly upgrades to the power grid, Badik commented to us that its opposition seems entirely out of proportion to its interests. Besides simple rent-seeking, a possible explanation is that JAVYS--the well-connected state-owned company seeking to break back into the electricity market by building two new nuclear reactors at Bohunice--is strongly opposed to development of the alternative energy sector, which it sees as a competitive threat. The proposal to tighten regulation of the solar industry has been pushed by MP Peter Pelegrini, a member of Prime Minister Fico's Smer party. It is yet unclear to us, however, how these and other, less public, opposing interests are arrayed. We will report septel on the prospects facing other forms of alternative energy as we seek to better understand the forces and figures who currently dominate the Slovak energy industry. EDDINS