We all know what happened in Spain in 2008.Due to extremely generous feed in tariffs for solar , installers went on a spree installing 2.5 GW of solar in 6 months compared to the world’s global capacity till date of less  than 20 GW . This led to a sharp revision and crash of the Spanish solar industry in 2009.Czech which could have learned something from the Spanish tale did nothing of that sort. Their FIT also led to lavish returns for all developers of solar power leading to 400 MW being installed in 2009.Compared to the small size of their grid that was a lot and led the grid operators to make deadly warnings that the grid would crash.The Czech politicians like the Spanish ones woke up late in 2010 and have decided  on changing the law in 2010 . Many proposals are being floated on how to change the  rate. A 25% cut in 2011 is being considered while 2010 will be a merry time for all solar developers .There have been more European mistakes regarding FIT in the past where over generous FITs have led to a market freeze or a severe bust following a boom.Greece comes readily to mind.

Solar price may drop 25 percent – Prague Post

In an attempt to get hold of what could be a runaway solar subsidy market, the Senate approved an amendment April 21 that will allow the Energy Regulatory Office (ERÚ) to lower solar energy prices well below the current annual limit of 5 percent cuts.

At the start of 2011, the state will now be able to decrease solar energy prices up to 25 percent – if President Klaus signs the amendment into law. Even with a quarter cut, the government’s subsidies for feed-in tariffs remain so high that solar energy remains an attractive investment.

“It’s almost certain the government will use the full amount [to cut tariffs] allowed by the bill. Even if the tariff is cut 25 percent from the current amount, under the current exchange rate, the tariff will still be slightly higher than Germany’s in 2009,” said Martin Šimonek, CEE solar analyst at Bloomberg New Energy Finance.

The government would even do well to cut subsidies even more, but politicians must balance keeping good faith with foreign investors with what they can afford to do, he added. Across the EU, countries that offer feed-in tariffs to private investors are dealing with a flood of speculative license applications and mounting subsidy bills that states can barely afford. In Spain, there are even rumors the beleaguered country may have to retroactively reduce rates for existing solar plants, a move that would be devastating for investor confidence.

“It would have a really negative affect on the fiscal policy of the country and set a terrible example,” Šimonek said. “I know that, when the Czech Republic was considering revising tariffs … research found the costs of legal disputes would be greater than any savings from readjusted tariffs.”

Feed-in tariffs were passed in 2005 to attract investors to the growing renewable energy sector and to help the Czech Republic meet the EU requirement that 20 percent of the nation’s power come from renewable sources before 2020. The feed-in tariffs for plants built that year locked in solar energy prices between 12,790 K? and 12,890 K? per megawatt hour until 2025, while obligating ?EPS, the Czech electricity grid manager, to purchase all solar energy produced.

While the cost of producing solar energy falls 10 percent annually, according to the ERÚ, the feed-in tariffs had previously been limited to price drops of 5 percent per year.