Photovoltaic power plants and future regulation

15. 11. 2022

In connection with the installation of PV (photovoltaic power plant) and its advantages, very often only its main benefit is mentioned, which is partial energy independence and the possibility of financial savings for electricity consumption over the years. These facts certainly play the most important role in deciding whether or not to install a PV plant. However, there are also two other facts that may be relevant when considering whether an investment in PV makes sense and what the eventual return on investment will be. The return on investment must also include any subsidies received, which we will only briefly mention at the end of this article.

Both facts are based on the approved Green Deal for Europe, which aims to achieve a climate-neutral society in the EU by 2050. The first is based on the so-called Fit for 55 programme, the second on the intention to amend the directive on reporting of non-financial information, or so-called ESG (Environmental, Social and Governance) reporting. In the context of ESG reporting, amendments to the current directives and new EU regulations have already been issued, which regulate the obligation of individuals to disclose information relating to their activities and their impact, specifically in relation to the environmental, social and governance criteria assessed. For the Fit for 55 programme, the final parameters of the individual measures proposed and their impacts on society have still not been agreed, but the key facts are already known.

ESG and PV
The Directive of the European Parliament and of the Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014 as regards corporate sustainability reporting (the “Directive“) extends ESG reporting obligations to all large companies and to listed medium and small companies. It also imposes an obligation on financial institutions to classify new loans in ESG terms.

Under ESG, a company’s activities will be evaluated according to their impact on society, whereby, from an environmental perspective, the company’s activities will be evaluated as to whether they contribute to or detract from the achievement of accepted environmental objectives. For the assessment of activities, the EU Commission has issued Delegated Commission Regulation (eu) 2021/2139 of 4 June 2021 supplementing Regulation (eu) 2020/852 of the European Parliament and of the Council as regards the establishment of technical screening criteria for determining under which conditions an economic activity qualifies as significantly contributing to climate change mitigation or adaptation and whether that economic activity significantly undermines any of the other environmental objectives (the “Regulation“). The Regulation sets out the individual criteria for assessing the performance of businesses that are reflected in the ESG Report. One of these criteria is the criterion of the production of energy from PV or the installation of equipment that will increase the energy efficiency of buildings. Both of these criteria include the installation of PV power plants (depending on how the electricity produced is used) and the use of the energy produced for the company’s operations. Thus, the installation of PV will improve the ESG reporting of the company, which in the future may lead to better access to external financing as well as to winning new contracts precisely because the contracting authority will have to have the greenest possible supply chain, as this will also be reflected in the ESG reporting.

Fit for 55 and FVE programme
The Fit for 55 programme has tentatively identified a number of areas where specific measures are to be taken to reduce the emissions produced by these areas. One of these areas is the GHG emissions produced by buildings. At the current stage of the negotiations of the EU institutions, a consensus has so far been found that commercial buildings would be subject to the obligation to purchase emission allowances. Commercial building owners would thus be obliged to participate in the emissions trading scheme, which currently only selected industries are obliged to purchase. The installation of PV to meet at least part of the building’s energy demand will reduce the amount of greenhouse gas emissions that the building produces and thus be reflected in the final number of emissions allowances that the owner will have to purchase.

Author: Pavel Kubíska