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20th Sep 2018

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Scandal around Slovak solar energy industry

  • Robert Fico is said to have made sure his government's solar subsidies went to friendly companies (Photo: European Commission)

When the state-owned grid operator in Slovakia in November 2009 announced it would start accepting solar power plant applications, nobody knew about it.

“The announcement was quietly placed at the bottom corner of [the operator’s] website,” the US embassy in Bratislava said in a dispatch dated one month later, and remained unnoticed until a local newspaper picked up the news.

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The operator had “summarily rejected all applications submitted to that point,” according to the dispatch, and said “the application process would be restarted from scratch five days later on a first-come-first-served basis.”

“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 documentation,” it adds.

In the end, the operator is reported to have accepted applications for only “part of the day.” According to Martin Simonek, an analyst at Bloomberg New Energy Finance and a Slovak national, it closed the window after half an hour.

Good business

The government at the time - as it is today - was run by Prime Minister Robert Fico from the centre-left Smer party.

Earlier that year, he and his fellow EU leaders had agreed to binding renewable energy targets. Shortly after, his government passed a law granting generous subsidies to those producing renewable energy.

“And then they said: okay, let’s make some good business,” Martin Kretter, member of the executive committee of the Slovak Association of the Photovoltaic Industry, told EUobserver.

He accused the government of rigging the application process.

“Normal people did not know about it. Only [Fico’s] friends from politics,” he adds.

There was a lot of money to be made. The subsidy, after German example, was set up in the form of a so-called feed-in-tariff: the guaranteed purchase of generated electricity for a period of time at a premium price. That price, as was the case in Slovakia in 2010, is often several times as high as the price for electricity from non-renewable sources. The time period was 15 years.

At the same time, the price for solar panels was tumbling. China had begun to invest massively and would soon all but take over the EU market. In the time span of a couple of years, the price has fallen by some three quarters.

Logically, most money was to be made in big installations. The state-owned operator, when issuing the call, put a cap of a total of 120MW on installations bigger than 1MW.

"Those 120MW were distributed among Fico's friends," Kretter says.

Solar tennis?

The US embassy refers to “a reliable source” who “alleged 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 party.” Brhel is also a former member of parliament.

The source is reported as having said that Fico himself was pulling strings in order to create “a regulatory regime ensuring enormous profits” and to make sure those profits would go to “Brhel-backed projects.”

The US embassy says that many of the companies whose projects were approved by the operator were unknown to industry experts and “seem to be little more than shell companies.”

As an example, it names the CTC Tennis Club, which “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.”

Fico denies

Fico's office told EUobserver that the allegations are based on "false, fabricated constructions based on subjective, untrustworthy opinions," and "absolutely in conflict with the facts."

It added that the attribution of the 120MW of big installations was done "transparently."

"[The operator] published the criteria on its official Web page and also in the state-wide daily newspapers. All those who wanted to obtain a position of approval had already had a number of months to pass through the successful process of assessment in the regional distribution system, and thus were sufficiently qualified to submit a very simple application," it said.

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