VZCZCXRO2910
PP RUEHDBU RUEHDH RUEHFL RUEHHM RUEHKW RUEHLA RUEHNP RUEHPB RUEHROV
RUEHSR RUEHTM RUEHTRO
DE RUEHSL #0526/01 3561415
ZNY CCCCC ZZH
P R 221415Z DEC 09
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC PRIORITY 0313
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHAAA/NSC WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
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 
------- 
 
¶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