Installing Small-Scale Photovoltaic Systems for Businesses

In this dynamic environment, the Prague-based ARROWS legal team is your reliable partner. They provide comprehensive legal advice essential for the successful implementation and seamless operation of your corporate photovoltaics, minimizing risks and ensuring legal certainty on the path to energy independence.

Legislative Foundations: What you need to know about PV systems up to 100 kW

Energy Regulatory Office (ERÚ) License: The key to understanding your obligation

A fundamental change in Czech energy legislation was the 2023 amendment to the Energy Act, which increased the limit for operating photovoltaic power plants without the need for an Energy Regulatory Office (ERÚ) license from the original 10 kW to 50 kW; as of 1 August 2025, Act No. 87/2025 Coll. increased it to 100 kW, provided that the generation is intended for consumption at the generation plant's delivery point or for free sharing. This change significantly expanded opportunities for small and medium-sized entrepreneurs.

Operating a PV system without a license is possible under specific conditions:

• the installed capacity of the power plant must not exceed 100 kW and  
• its operation must primarily serve for self-consumption of electricity or for its free sharing, not for profit-making purposes. This means that electricity generated on the roof or land of, for example, an s.r.o. (limited liability company) should preferentially be used in its corporate premises or production halls.

However, a license is always required if another electricity generation plant is connected at the same consumption point or if support is drawn for the generated electricity under the Act on Supported Energy Sources (Section 3(3)(b) and (e) of the Energy Act).

Nevertheless, even for power plants up to 100 kW, there are situations where an ERÚ license is essential. These primarily include cases where the operation of the PV system is considered a business activity. Under Czech legislation, a business activity is defined as an activity carried out independently, on one's own account and responsibility, for the purpose of making a profit. Therefore, if a company regularly sells electricity for profit, it will need a license even for a power plant with a capacity not exceeding 100 kW. Furthermore, if the company already operates another licensed PV system at the same consumption point, it must include the new power plant in its existing license.

The difference between self-consumption and business activity represents a fine line with major consequences. The definition of 'self-consumption' relies not only on the company's intent (for example, to reduce operating costs), but on the actual method of operation. If a company generates any regular, albeit small, surpluses that are supplied to the grid, the boundary between self-consumption and business activity becomes blurred. This is especially true in light of the new requirements regarding production EAN and imbalance responsibility that will come into force. A company that believes it is operating a PV system for self-consumption without a license may inadvertently cross this line and enter the regime of business activity or unauthorized supply, leading to an obligation to obtain a license, tax implications, and potentially severe fines.

For generation plants over 100 kW, an ERÚ license is always mandatory, regardless of the purpose of using the generated electricity, if the power plant is connected to the distribution or transmission grid. The process of obtaining a license, if required, involves careful selection of the correct documents, filling out the relevant forms, and subsequent registration with the Market Operator (OTE) after the license is granted. For legal entities, it is also necessary to appoint a responsible representative. The Prague-based ARROWS legal team can accurately assess whether your planned or existing PV system operates within the safe zone of self-consumption, or whether it already falls under the definition of a business activity requiring a license and other obligations.

Building Permit and the New Building Act: Simplification with conditions

New Building Act (Act No. 283/2021 Coll.), which became fully effective on 1 July 2024, brings significant simplification for PV installations up to 100 kW. These power plants are often categorized as so-called minor constructions.

Structures for energy generation from renewable sources (and from 1 October 2025 also energy storage structures) up to 100 kW are minor constructions, with the exception of waterworks, wind power plants, structures in specially protected areas, and in areas designated by the Ministry of Defence / Ministry of the Interior. No building permit or occupancy permit is required for them, but only provided that specific conditions are met. Key conditions include that the installation must not interfere with the load-bearing structures of the building, must not change the purpose of use of the building, does not require an environmental impact assessment (EIA) and must meet all fire safety conditions. For cultural monuments (and properties in heritage reserves, zones, or protective zones), it is also necessary to request a decision or binding opinion of the state heritage care authority in advance (Section 14(1) and (2) of Act No. 20/1987 Coll.). It is important to note that construction supervision is required even for these minor constructions.

Even though a building permit is not always required, professional project preparation is absolutely crucial for a correct and safe installation and can save the company significant financial resources. The absence of a formal building permit for smaller PV systems shifts the responsibility for regulatory compliance directly onto the investor and the installation company. This is not a free pass, but rather an increased emphasis on compliance with technical standards, especially fire safety (Decree No. 114/2023 Coll.), proper project design, structural integrity (roof load capacity), and professional supervision. Failure to comply with these conditions can lead not only to fines but also to serious safety risks and the potential invalidation of insurance coverage. 

Fire Safety: Decree No. 114/2023 Coll.

Decree No. 114/2023 Coll. plays a key role in the field of fire safety of photovoltaic installations. This decree sets specific requirements for the safe installation of electricity generation plants using renewable energy sources with an installed capacity of up to 50 kW. Compliance with it is essential to meet the conditions for license-free operation and for exemption from a building permit.

Fire safety is not a mere formality, but a critical point for PV system operation that directly affects both compliance with legislation and insurance coverage. Statistics show that the main causes of PV fires are faulty installation, manufacturing defects in components, and project design errors. This underlines that compliance with the decree and related standards is essential to minimize risk. Although Czech standards are often only recommendations, compliance with them is absolutely necessary for insurance coverage in the event of an emergency, such as a fire.

Failure to comply with fire regulations, whether due to poor installation or design, directly increases the risk of fire. In the event that a fire occurs and the installation did not comply with these (albeit recommended) standards, insurance companies may refuse to pay out insurance claims, which would mean huge financial losses for the company. This elevates fire safety from a mere technical detail to a critical legal and financial vulnerability. 

Practical Steps to Implementation: From application to commissioning

Connection to the Distribution Grid: An essential bridge to energy independence

The first and necessary step to start operating a PV system is to submit an application for connection to the distribution grid with the relevant distribution system operator (DSO). The connection application requires detailed corporate information, such as company name, ID number (IČO), registered office, etc. Furthermore, it is necessary to state the technical parameters of the planned PV system, including the requested installed and reserved capacity, generator type, battery capacity (if part of the system), and connection method (single-phase/three-phase). A single-line wiring diagram and written consent of the property owner are also often required.

After submitting the application, the DSO will perform a technical assessment of the connection possibility. In the event of a positive assessment, the applicant will receive a draft connection agreement. After the installation is completed, it is necessary to go through the process of enabling permanent operation (UTP), based on which the final operational notification is issued and the electricity meter is subsequently replaced.

Grid capacity and technical details represent a new bottleneck in the connection process. Although the legal requirements for a license have been eased, technical requirements and grid capacity limitations have become significant practical obstacles. It is not uncommon for connection applications to be rejected, or for the power plant to be temporarily connected in a simplified mode until the capacity of the distribution grid in the given area increases. The complexity of technical requirements specific to each distributor means that a seemingly simple installation can be delayed or rejected if not carefully planned and implemented with these details in mind. This highlights the need for professional technical and legal advice to ensure a smooth and fully compliant connection. The Prague-based ARROWS legal team will help you assess the connection agreement and technical conditions to prevent unnecessary complications and ensure a seamless connection of your PV system.

Production EAN and Registration with the Market Operator (OTE): A new administrative reality

The production EAN is a specific code that allows PV system operators to conclude a separate electricity supply contract and a separate contract for the sale of surpluses. Since 1 January 2023, all PV system operators have the right to be allocated a production EAN. 

The reason for introducing the production EAN is to fulfill legislative requirements, specifically Decree No. 408/2015 Coll., on electricity market rules, which establishes the obligation to register generation sources with two EAN codes: one for consumption and the other for generation. After the license is granted (if required for the given PV system), the generator is obliged to register with the Market Operator (OTE), thereby becoming a registered market participant.

A key new obligation that will come into force on 1 July 2025 is the necessity to contract an electricity trader who will assume imbalance responsibility for the production EAN. This obligation applies to all generation sources, including micro-sources, even those commissioned before 1 January 2025.

The apparent 'freedom' to sell surpluses brings a new, critical administrative burden and risks. If a company does not secure an electricity trader to assume imbalance responsibility for its production EAN code, it finds itself in a state of unauthorized electricity supply to the distribution grid. This state is prohibited by the Energy Act, and the distributor has the right to charge significant penalties for it. The specific amount of the fine varies depending on the voltage level and the maximum measured capacity supplied to the grid without secured imbalance responsibility. In addition to financial penalties, there is also a risk of disconnecting the source from the grid, which would prevent its operation and electricity generation.

Furthermore, it is important to mention the pitfalls of the 'virtual battery' service, which is often offered for utilizing surpluses. This service is not free and is charged via a flat fee or a fee for the capacity used. Moreover, the price of electricity supplied to the grid in summer can be low, while the price for consumption in winter is significantly higher, with the supplier charging this price difference to the customer. A virtual battery only saves on the price of commodity electricity, not on distribution fees, VAT, and other taxes, and unused capacity may expire with some suppliers. Paradoxically, using a virtual battery can increase the company's dependence on the energy supplier, which contradicts the main goal of investing in a PV system – energy independence. Additionally, some suppliers refuse the virtual battery product if the company has a separate production EAN.

The introduction of the production EAN and the possibility of selling surpluses, although appearing advantageous, introduces a new, legally binding administrative layer that is easily overlooked. The obligation to secure a partner for imbalance responsibility (an electricity trader) is a critical, unavoidable step. Without it, the company engages in illegal activity with serious financial and operational consequences, even if the primary intent is self-consumption. This transforms a seemingly simple act of selling small surpluses into a complex regulatory challenge that requires careful management. The Prague-based ARROWS legal team will help you with registration with OTE, obtaining a production EAN, and negotiating an agreement with an electricity trader so that your surpluses do not become a source of fines.

Contract for Work with the PV Supplier: Secure your investment

The contract for work for the installation of a PV system is a key document that should protect the company's investment and minimize future risks. It is not a mere formality, but the first line of defense against financial and operational problems.

When concluding the contract, it is essential to pay attention to several key clauses. The contract should contain detailed and transparent information on prices and payments, clearly specifying the price for project documentation, installation, material delivery and all related administration. Warning signs should include unreasonably high advance payments (e.g., 80-100% in advance) or formulations about storing material at the client's site.

Furthermore, it is crucial that the contract includes a clear schedule with precisely defined deadlines for installation and commissioning of the PV system. The contractual arrangements should explicitly define the company's right to withdraw from the contract if the supplier fails to meet the agreed deadlines. No less important are the warranty conditions for both components and the work performed, as well as the mechanism for resolving potential defects and complaints.

The contract should also require the installation company to have insurance covering any damage caused during installation. The supplier should demonstrate its qualifications for installation and a commitment to comply with all applicable standards and decrees, including Decree No. 114/2023 Coll., on fire safety. Another important point is the contractual treatment of responsibility for assessing and potentially modifying the structural load capacity of the roof on which the PV system will be installed.

Given the administrative complexity of the entire process, it is advisable for the contract to include the supplier's commitment to provide all administrative support, such as subsidy applications, communication with the distributor, and preparation of inspection reports. Providing access to remote monitoring of the PV system's performance and related statistics is another element that increases transparency and control over operation.

A low installation price can lead to high operating costs and loss of investment. Technical and operational deficiencies, often stemming from poor-quality installation or bad design, can lead to significant hidden costs throughout the lifespan of the PV system. These costs include reduced energy generation, premature equipment failure, and potentially invalidated insurance coverage. Relying solely on the lowest bid without thorough technical and contractual review is a false economy that can undermine the profitability of the entire investment and even lead to safety risks. 

Financial Aspects and Taxes: Maximize the benefits of your investment

Subsidy Programs for Companies: The key to rapid payback

For companies planning to install a photovoltaic power plant, there are a number of subsidy programs that can significantly accelerate the return on investment. The key is to navigate the current options and strategically time the submission of applications.

The cornerstone program from EU funds for Czech entrepreneurs in the 2021–2027 period is the Operational Programme Technologies and Applications for Competitiveness (OP TAK). This program is primarily aimed at supporting small and medium-sized enterprises, but in some cases, it also supports large enterprises, e.g., in the area of energy savings. Within OP TAK, programs such as 'Energy Savings' are available, offering subsidies for energy-saving measures, including the installation of renewable energy sources, or the 'Renewable Energy Sources' program, which is intended for the generation and distribution of energy from renewable sources. 

The subsidy landscape is dynamic and requires strategic timing. Allocated funds are limited, and the rule 'first come, first served' applies, as each call has a limited amount of money that can be exhausted. It is also important to point out the potential risk of the so-called 'Stanjura trap', where PV system operators could be forced to return part of the state support if their internal rate of return (IRR) exceeds 8.4% for the year 2025. Inadvertent errors in filling out forms can lead to fines of up to CZK 50 million from the State Energy Inspection. Programs like 'Nová zelená úsporám' (New Green for Savings) are intended primarily for households. 

Subsidy programs offer significant financial leverage, but they are not an automatic guarantee. Companies must contend with limited allocations, tight deadlines (which may require accelerating other phases of the project, such as design and permitting), and potentially complex compliance requirements that could lead to the return of subsidies or massive fines if not managed perfectly. This makes strategic timing, careful preparation of applications, and ongoing compliance monitoring key to maximizing benefits and avoiding serious financial impacts. The Prague-based ARROWS legal team will help you navigate subsidy programs, prepare applications, and ensure compliance with conditions so that your company obtains maximum support without the risk of penalties.

Value Added Tax (VAT): Implications for your investment

It is crucial to understand how VAT applies to the acquisition and operation of a PV system, especially in the context of self-consumption and the sale of surpluses. The standard VAT rate of 21% applies to materials (photovoltaic panels, inverters, and batteries) and to the installation of PV systems on commercial buildings. If the supply (installation and assembly of the PV system) is provided between two VAT payers, it usually subject to the reverse charge regime. However, it is essential to assess each transaction individually to determine whether all legal conditions for using this regime are met.

VAT payers are entitled to an input VAT deduction if they use the PV system for economic activity. If the company sells the generated electricity, it is obliged to pay VAT on the income from this sale at the standard rate of 21%.

VAT is a complex area where the combination of self-consumption and the sale of surpluses creates tax traps. If a company claims a full input VAT deduction on the grounds that the PV system serves an economic activity (sale of surpluses), but a significant portion of the generated electricity is subsequently consumed for self-use, an adjustment of the original tax deduction from the acquisition of the PV system may be required. This could lead to unexpected tax liabilities. Self-consumption of electricity, i.e., electricity generated and consumed for the company's own needs, is not taxable income and is not subject to VAT.

Corporate Income Tax and Depreciation: Long-term optimization

A PV system is generally classified as a long-term tangible asset in the company's business assets. The method of depreciating the PV system has a significant impact on corporate income tax and the overall economics of the project.

Currently, the technological part of photovoltaic power plants is depreciated straight-line over 240 months (20 years) without the possibility of accelerated depreciation and without interruption. Structural modifications to the roof, the supporting structure of the photovoltaic panels, and cabling are usually classified as technical improvement of the building, representing roughly 5-10% of the total investment.

As of 1 August 2025, Act No. 87/2025 Coll. abolished Section 30b of the Income Tax Act (ZDP). Newly classified technological parts of PV systems are depreciated in standard depreciation groups; for assets whose depreciation began after 30 June 2024, the new rules can be applied retroactively from 1 July 2024. For assets where depreciation commenced before the amendment to the Act took effect, the existing Act as worded prior to the amendment applies.

Income from the sale of electricity from a PV system is taxed under Section 7 of Act No. 586/1992 Coll., on Income Taxes (ZDP) as income from independent activity. Operating costs of the PV system and depreciation are tax-deductible. Conversely, electricity generated and consumed for the company's own needs is not taxable income and is not subject to tax.

Changes in depreciation offer new opportunities for tax optimization but require active management. The upcoming changes in depreciation rules represent a valuable opportunity for companies to optimize their tax burden and increase the financial attractiveness of investments in PV systems. However, navigating these changes, understanding which rules apply, and correctly classifying PV components (technological part vs. technical improvement of the building) require specialized tax and accounting expertise. Proactive planning and consultation are essential to effectively utilize these changes. The Prague-based ARROWS legal team, in cooperation with tax experts, will help you set up an optimal depreciation strategy and ensure compliance with current and future tax regulations.

Why is cooperation with the Prague-based ARROWS legal team crucial for your PV project?

Installing a photovoltaic power plant for a company's self-consumption in the Czech Republic is an investment with huge potential for savings and energy independence. However, as detailed above, this process is intertwined with complex legal and regulatory aspects that are constantly evolving. The apparent simplification of legislation for smaller PV systems can lead to overlooking hidden obligations and risks that can have serious financial and operational impacts.

The Prague-based ARROWS legal team offers comprehensive legal support for your PV project from A to Z. Their expertise is essential for:

• Initial analysis and planning: Accurate assessment of whether your PV system falls under the license-free regime or requires a license, taking into account the nuances between self-consumption and business activity. Analysis of property titles to the real estate where the PV system will be located, and assessment of the need for easements or owner consents.
• Connection to the distribution grid: Assistance with submitting the connection application, reviewing the draft connection agreement, and understanding the specific technical requirements of individual distributors, which are often a new bottleneck in the entire process.
• Post-launch administration: Ensuring correct registration of the production EAN with the Market Operator (OTE) and negotiating an agreement with an electricity trader to assume imbalance responsibility, which is a critical obligation from 1 July 2025, failure of which leads to high fines and the risk of disconnection.
• Contractual security of the investment: Thorough review and negotiation of the contract for work with the PV supplier. Ensuring clauses regarding prices, schedule, warranties, insurance, compliance with standards, structural load capacity of the roof, and administrative support. This minimizes the risks of technical problems, financial losses, and warranty service issues.
• Financial and tax optimization: Advice on subsidy programs, assistance with preparing applications, and ensuring compliance with subsidy conditions so that your company obtains maximum support without the risk of penalties. Furthermore, optimization of tax impacts, especially in the area of VAT and depreciation, taking into account the combination of self-consumption and sale of surpluses and changes in depreciation from 1 August 2025.
• Risk minimization: Active prevention of penalties for unauthorized electricity supply, fines under the Building Act, and hidden costs arising from technical and operational problems or disadvantageous virtual battery contracts.

Investing in photovoltaics is a step forward towards a sustainable future for your company. To make this investment truly pay off and avoid unexpected complications, it is essential to have a strong legal partner by your side. The Prague-based ARROWS legal team routinely handles these matters and is ready to provide you with comprehensive support so that you can focus on your core business activities, knowing that your energy future is in safe hands.

Do not hesitate to contact us and discuss your PV project with us. We will ensure that your path to energy independence is smooth and worry-free.