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