Identifier
Created
Classification
Origin
09BRATISLAVA526
2009-12-22 14:15:00
CONFIDENTIAL
Embassy Bratislava
Cable title:  

THE FUTURE OF SLOVAKIA'S SOLAR POWER INDUSTRY GROWS EVEN

Tags:  ENRG EINV ECON PGOV LO 
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P R 221415Z DEC 09
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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHAAA/NSC WASHINGTON DC
RUEAIIA/CIA WASHDC
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RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
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RUEHSL/AMEMBASSY BRATISLAVA 0367
C O N F I D E N T I A L SECTION 01 OF 02 BRATISLAVA 000526 

SIPDIS

STATE FOR EUR/CE M. LIBBY AND J. MOORE

E.O. 12958: DECL: 12/20/2019
TAGS: ENRG EINV ECON PGOV LO
SUBJECT: THE FUTURE OF SLOVAKIA'S SOLAR POWER INDUSTRY GROWS EVEN
DIMMER

REF: BRATISLAVA 509

BRATISLAVA 00000526 001.2 OF 002


CLASSIFIED BY: Susan Ball, Charge d'Affaires.
REASON: 1.4 (d)
SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 02 BRATISLAVA 000526

SIPDIS

STATE FOR EUR/CE M. LIBBY AND J. MOORE

E.O. 12958: DECL: 12/20/2019
TAGS: ENRG EINV ECON PGOV LO
SUBJECT: THE FUTURE OF SLOVAKIA'S SOLAR POWER INDUSTRY GROWS EVEN
DIMMER

REF: BRATISLAVA 509

BRATISLAVA 00000526 001.2 OF 002


CLASSIFIED BY: Susan Ball, Charge d'Affaires.
REASON: 1.4 (d)
SUMMARY
--------------


1. (SBU) Fears about a lack of transparency and openness in
Slovakia's renewable energy industry were realized last week, as
the government-owned power grid operator (SEPS) approved a list
of solar power projects and announced that nothing further will
be approvedQat least two years. The application process
conducted by SEPS was poorly advertised and almost completely
non-transparent, fueling widespread suspicion that it was rigged
to benefit certain individuals. Combined with a proposal to
expand SEPS' authority over the solar power industry (reftel),
this move will likely close the industry--and its expected high
profits--to anyone outside the small group of investors who
received approval last week. Additionally, the move all but
ensures that alternative energies, such as solar and wind, will
remain an insignificant part of Slovakia's energy industry for
the foreseeable future. END SUMMARY.


RESETTING SOLAR PROJECTS
--------------


2. (SBU) After dragging its feet for the better part of a year,
SEPS announced on November 29 that it had summarily rejected all
solar power plant applications submitted to that point, and that
the application process would be restarted from scratch five
days later on a first-come-first-served basis. The announcement
was quietly placed at the bottom cornerQe SEPS website, and
Peter Badik, a partner in MyEnergy, a solar energy start-up,
told us that none of the established solar power entrepreneurs
in Slovakia knew anything about it until a local newspaper
reported the website announcement late the evening of Friday,
November 30. Even those companies fortunate enough to see the
news that night had little more than a weekend to complete a
lengthy application and secure the necessary documentary
evidence. In the end, SEPS only accepted applications for part
of one day, announcing later that all submissions arriving after

that point were being returned unopened.


3. (SBU) Miroslav Gramblicka, the Director of Development at
SEPS, explained to us that the grid operator had been inundated
with applications over the past year, and that the only
practical and fair thing to do was to return what it had
received and start over. Few agree with this assessment. Karel
Hirman, the DireQf Energy Policy at the Slovak government's
energy think tank, told us that SEPS' handling of the
application process was "absolutely wrong" and was intended to
reduce transparency. Badik, whose company was fortunate enough
to have two projects approved, called the process a "joke" and
questioned how SEPS could possibly have been able to review 57
applications within a week (it approved 36 projects totaling
120MW and rejected 21).


CAN'T TELL THE PLAYERS WITHOUT A SCORECARD
--------------


4. (SBU) Many of the projects approved by SEPS raise further
questions. Martina Kolesarova, a renewable energy NGO project
manager who has been working with prominent solar power
entrepreneurs in Slovakia to establish an industry group, told
us that 27 of the 36 approved projects involved companies she
had never heard of before. Many of these seem to be little more
than shell companies. One winner, the CTC Tennis Club, based in
Presov in Eastern Slovakia, lacks even a phone line. While it
has licenses allowing it to sell vegetarian food and provide car
rentals, the business is not licensed to build or operate a
solar power plant--or, for that matter, a tennis club.


5. (C) A reliable source close to the power industry alleged to
us that the industry has been rigged by the highest levels of
government to benefit Jozef Brhel, one of a group of wealthy
Slovak businessmen widely thought to bankroll--and benefit
from--PM Robert Fico's Smer political party. The consultant
told us that earlier this year, Fico personally told Minister of
Economy Lubomir Jahnatek to slow preparation of the Renewable
Energy law in order to allow the regulatory agency (URSO) an
opportunity to provide input. Two days later, we were told,
URSO presented its own completed version of the law, which was
offered in place of the draft law Jahnatek's ministry had been
working on for more than a year. This law--along with generous
feed-in tariffs offered for solar power--created a regulatory
regime ensuring enormous profits for anyone able to develop a

BRATISLAVA 00000526 002.2 OF 002


solar power plant, and the consultant told us that SEPS is using
its control of the permitting process to ensure that
Brhel-backed projects will dominate the industry. Two other
sources--including MyENERGY's Badik--have corroborated part of
this story, telling us it is "well-known" that SEPS is
controlled by close associates of Brhel.


QUESTIONS ABOUT GRIDS
--------------


6. (SBU) Another consequence of SEPS's recent moves is that
solar power--and alternative energy, more broadly--is unlikely
to produce a significant portion of Slovakia's electricity in
the foreseeable future. SEPS has now set a firm cap of 120MW
for large solar power plants, and the Slovak government is
poised to enact legislation that would effectively extend this
cap to all solar power projects (reftel). Gramblicka of SEPS
explained to us in great detail how peculiarities of Slovakia's
electricity industry complicate load-balancing and thereby
prevent the grid from incorporating large amounts of
non-dispatchable energy, such as solar and wind. Several in the
solar industry have challenged this assertion, although they
have not been able to provide us with a technical critique of
SEPS's argument. Either way, the cap appears unlikely to change
anytime soon--and in fact, the amount of solar power actually
installed in the next two years will likely be somewhat lower
than 120 MW, as there does not appear to be any mechanism to
replace projects that fail to materialize.


COMMENT: MORE UNPREDICTABILITY
--------------


7. (SBU) Slovakia's renewable power industry is already trailing
behind its Czech and Austrian neighbors; the huge wind farms
lining the farmland between Vienna and Bratislava stop abruptly
at the border, as do the solar arrays scattered across Moravia's
hillsides. Now that renewable energy prices are set to produce
profits, it would seem that the industry here is primed to take
off. But no: solar power at least appears to be in line for a
lackluster start, whether because of an inflexible grid, an
unimaginative regulator who would rather limit the contribution
of renewables than re-engineer the grid, an opaque process for
awarding permits to cronies, or--most likely--a combination of
the three.


8. (C) The Fico government has long since established a trend
toward ever-murkier regulation and a determination to slant the
economic playing field in its friends' direction. It may seem
incidental to point out that underlying this trend is a
fundamental hostility toward private players in "strategic"
industries. Given a real strategic political concern about
energy security, and a conviction that renewables will not
change the strategic equation noticeably, the government's
attitude has predictably gone in a "who cares?" direction.
There is, in this view, nothing much at stake except a
rent-seeking opportunity for friends. What this means for
investors is a new level of unpredictability as they compete
with favored insiders and a government that doesn't care about
real results.
BALL