The energy issue is one of the most important, i.e. most frequently discussed topics in every country in the world. And so it is in the Czech Republic. The energy industry in the Czech Republic covers both production and distribution of all forms of energy, including mining and the use of energy sources such as coal, oil, natural gas, uranium, etc. The discussion among politicians, businessmen and other decision-makers related to the energy sector covers especially topics such as sustainability, energy mix, self-sufficiency, regulation, efficiency or renewables. The Czech Republic is one of the largest electricity exporters in the European Union, so the energy sector – especially the market of electricity – plays a vital role in the Czech economy as well as in the energy security of the Central Europe.
Due to several factors (e.g. the EU regulation, a specific shape of the national regulation, the Czech energy mix, an effort to maximize the use of indigenous resources, comprising coal, uranium and renewable energy, the expansion of renewable energy supported from the public finance, the position of the Energy Regulatory Office of the Czech Republic or the Czech political and economic institutional environment), the Czech energy market is undoubtedly an interesting topic to analyze. So both, description and analysis of the recent situation on the electricity sector in the Czech Republic and its opportunities and threats, are the main focus of this article.
In the Czech Republic, the energy market is – as well as in other countries – subject to immense regulation. There is a regulated access to the transmission system, to the distribution systems, to the potential construction of power plants and also to the construction and running of utilities necessary for transferring electricity. The regulation is provided via several main channels – the government and the parliament (legislation), the Energy Regulatory Office of the Czech Republic1 (production control) and, last but not least, the Czech Transmission System Operator2 (transfer network). As the government and the parliament (Chamber of Deputies and the Senate) participate in a standard legislative process, which does not differ when compared to other countries, let us briefly discuss the Energy Regulatory Office (ERO) and the Czech Transmission System Operator (ČEPS).
The ERO was established on January 1, 2001 (Act No. 458/2000, passed on November 28, 2000) as an administrative authority responsible for regulation of the energy sector in the Czech Republic3. Among the ERO’s main competences, we may find mainly price control, supporting the use of renewable and secondary energy sources, support for heat and power generation, consumers’ protection, granting licensing permissions and market administration, support for a fair competition in the energy industries,co-operation with the Office for the Protection of Competition and supervision of the energy market.4
The ČEPS, with its license under the Energy Act granted by the ERO, is responsible for the electricity transmission operating through the ownership unbundling (TPA – Third Party Access). The ČEPS was established in 1998, when the General Meeting of ČEZ5 separated the Transmission system division from the ČEZ activities and formed this brand new institution. The ČEPS has an exclusive license for a long-distance transmission of electricity at high voltage. It implements a supervisory control of the transmission system on the Czech territory in real time and is also responsible for the stability of the power and frequency, voltage control and reactive power. The ČEPS is allowed to trade the energy on its own account to ensure stability parameters and required power reserves. Hand in hand with the extension of an unpredictable energy production from renewables (especially solar systems and wind power plants), the ČEPS processes and tests a plan of defense against the spread of the system failures transmission and a recovery plan for the electrification system after system disorder.
In the Czech Republic, the generation of electricity is provided by several sources:
Thermal power stations: Thermal power stations are the largest energy producers in the Czech Republic. They are located in regions with large deposits of coal (especially lignite, i.e. brown coal) and the proximity to rivers. The largest ones are situated near the cities of Sokolov, Most, Ostrava, Mělník, Chvaletice or Opatovice.
Nuclear power plants: Nuclear power plants are the second largest producer of electricity. Two power plants (Dukovany and Temelín) are the subjects of a heated discussion about completion or extension, which should increase the installed capacity in the Czech Republic.
Hydroelectric power stations (including pumped-storage hydroelectric power stations): Traditionally, hydroelectric power stations are a stable part of the Czech energy sector, because the Czech countryside is very rich in water sources. The largest hydroelectric power stations are located by the cascade of dams on the Vltava river (Lipno, Kamýk, Slapy, Orlík, Vrané).
Combined cycle and gas-fired power stations: In the past ten years, this source of electricity production had doubled its share in the Czech energy mix. A combined cycle in the production process improves efficiency of energy sources processing. That is why several large projects of this kind of power stations are completed or forthcoming (esp. Počerady and Mochov).
Photovoltaic power plants: A boom of photovoltaic power plants is related to the government intervention to the energy production (subsidized prices), i.e. to the effort to diversify energy production towards the renewable energy. Among almost 30 thousands power plants, the largest ones are situated in the Northern Bohemia (Ralsko), the Central Bohemia (Vepřek) and the Southern Bohemia (Ševětín).
Wind power plants: The energy produced from wind power plants covers a negligible share of the Czech energy consumption. The most of wind power plants are located in mountain ranges in the northern part of our area, such as Jeseníky, Krušné hory or Orlické hory.
Considering the share of production, thermal power stations and nuclear power plants significantly dominate. In 2013, the gross electricity production reached the total of 87,065 GWh, whereas 51.4 % of that was produced by thermal power stations and 35.3 % by nuclear power plants. The remaining sources covered just about 13 % of the energy production. For further details about the Czech energy mix and its development in time, see the Figure 1.
Fig 1 – Gross electricity generation in the Czech Republic (2001 – 2013)
As observable in the Table 1, the share covered by the thermal power stations is decreasing (especially during the last six years). Nevertheless, it still exceeds a half of the annual gross electricity production. A stable (or slightly increasing) energy production by the nuclear power plants presents an important stability anchor of the Czech energy self-sufficiency. The table also captures the boom of photovoltaic power plants, which expanded under the governmental support especially between 2009 and 2010 (it increases app. 7x) and moreover the next year (when it increases app. 3.4x). Combined cycle power stations, gas-fired power stations and hydro power plants do not constitute a key energy source, but they could be marked as efficient sources of diversification, especially with a regional importance.
Production, consumption, energy balance
The Czech Republic regularly reports that the annual electro-energy production is higher than the annual electro-energy consumption. The Table 2 provides a significant data about net electricity production (gross electricity production adjusted for house load for electricity production), gross consumption and net consumption between years 2000 and 2013. The presented in the fourth row “net balance” shows annual cross-border exchanges of electrical energy (flow), which can be calculated as total electricity imports (+) adjusted for total electricity exports (-) in a given period. When resulting positive, the country is a net electricity importer; a negative value denotes that electricity exports of the country are exceeding its imports. The data indicates the Czech Republic exported 195,403 GWh of electricity between 2000 and 2013.
It is noticeable that the Czech electricity grid is not free of energy losses. These losses oscillated between 4,000 and 5,000 GWh per year (compare with the Table 1). The most efficient performance was recorded last year. Moreover, one could consider as interesting the increasing trend of electricity consumption at pumped-storage hydroelectric power stations.
Let’s have a brief look at the electricity consumption by sectors. The Czech Republic is an export-oriented economy with an important share of manufacturing (especially automotive), construction and engineering. This fact significantly influences the sector consumption. In the past ten years, the industry sector consumed about a third of the annual electricity consumption (2013: 34.3 % of the total consumption). Households used up about 20 % of annual consumption (2013: 20.1 %). The third largest consumer of electricity is the sector of energy generation itself, which needs slightly less than a fifth of the total electricity consumption (2013: 18.2 %). The overview of all sectors and their electricity consumption is pictured in the Figure 2.
Source: Energy Regulatory Office.
A grid provides a transfer function at the Czech electro-energy sector, so the information about it simply must be featured in this article. A so-called installed capacity belongs among the most important characteristics of each energy sector. In the Czech Republic, the recent installed capacity reaches 21,079 MW. The largest part of it is provided by thermal power stations (more than 51 %) and nuclear energy (20.4 %). A state intervention into the market with renewable energy supports surfaces in the share of photovoltaics. It has already exceeded 10 %. The wind energy covers the smallest share (270 MW, i.e. 1.3 % in total).
The development of the installed capacity of individual energy sources in time is shown in the Figure 3. Thermal power generation is a quite stable component in time, so is the hydro source. Nuclear energy hasn’t changed since 2003 and 2004, when Temelin Nuclear Power Plant has been completely joined to the grid. Together with Dukovany Nuclear Power Plant, those are the only two nuclear power plants in the Czech Republic. Looking at increasing trends, combined cycle and gas-fired power stations could be also mentioned, but the number one is undoubtedly the photovoltaics. There was no photovoltaic installed capacity before 2008. However, after 2009 and further, the photovoltaic energy boom has caused enormous increases of the installed capacity – as of January 1st, 2014, there were 28 thousands6 of photovoltaic power plants. The largest one, FVE Ralsko RA 1, operates with the installed capacity of 38.3 MW.
Source: Energy Regulatory Office.
For the energy security in the Czech Republic, a regional distribution of the electricity generation really matters. Differences generate special requirements on the Czech electricity grid as surpluses or deficits of the available energy are necessary to transfer among regions of the Czech Republic. From this point of view, there are major differences among individual regions, what is in consequence one of the reasons of the abovementioned big network losses. The largest installed capacity is located in the Ústecký region (4,621 MW, especially because of thermal power stations burning coal7), then in the Středočeský region (2,956 MW, mainly thermal power stations + hydro power stations) and in the Jihočeský region (2,896 MW, the result of the Temelín Nuclear Power Plant). On the other hand, the lowest installed capacity may be found in the Liberecký region (186 MW), Praha (198 MW) and in the Zlínský region (280 MW).
As visible in the Figure 4, the Jihočeský region and the Vysočina region constitute a major part of the installed capacity of nuclear energy. Temelín Nuclear Power Plant (the Jihočeský region) has the capacity of 2,110 MW (2 x 1,055 MW), Dukovany (the Vysočina region) generates the capacity of 2,040 MW (4 x 510 MW).
Source: Energy Regulatory Office.
When travelling around the Czech countryside, it is almost impossible not to notice the typical photovoltaic panels covering fields, farmlands and meadows. The actual capacity of photovoltaic power plants exceeds the projected six years ago reality. Several times. Undoubtedly, that’s the result of the state regulation.
The renewable energy support program was originally based on a legislation proposed in 2003 by the government of the PM Vladimír Špidla. The state support to the electricity produced from renewable energy sources in the Czech Republic was proclaimed by a special Act no. 180/2005 Coll. (and the promotion of renewable energy sources), a guarantee of the financial support to wind energy, solar energy, geothermal energy, water energy, soil, biomass, landfill gas and biogas. The provisions have announced significant subsidies especially in 2009 and 2010, what prompted the construction of thousands of power plants and caused the threat of higher prices for electricity customers in the state by tens of percent.
Between 2008 and 2010, the sharp decline in the prices of photovoltaic panels (return on investments with included support dropped from legislatively calculated 15 years to 6 or 7 years) caused the dramatic increase in the construction of photovoltaic power plants, i.e. dramatic pressure on public finance expenditures.
The critical situation has led to the effort to limit the support under the emergency legislation process. In September 2010, an amendment to the Act8 has been passed. It approved the limitation of the state support for newly constructed solar power plants, while the plants built by the end of 2010 still had the guarantee of extremely discounted purchase price of electricity for other 20 years with the regular annual increase by 2 %.
So, the aim of rent-seekers (owners of photovoltaic power plants) was to finish the construction and connect it to the network by the end of 2010. In the second half of 2010, applications and requests for connection to the grid flooded the regulatory offices. This generated a high capacity for corruption and clientelism in those days. Courts in the Czech Republic are still dealing with serious cases of corruption of officials, deception and frauds, as well as litigations related to high-priority connections of new companies with anonymous property structure to the electro-energy network, which are often rumored to be covertly co-owned by politicians, officials and other decision-makers.
Source: Energy Regulatory Office.
The Figure 5 provides the information about a share of renewable energy sources on the annual gross consumption in the Czech Republic (right axis) and the electricity generation in TWh (left axis).
In total, the share of renewable energy sources increased up to 13.17 % in the end of 2013. Especially the boom of photovoltaic along with biogas and landfill gas stations could be marked as the main driven factor. Concerning the renewable electricity generation, it produced over 9.243 TWh in 2013. The essential part of that is covered by hydro energy (almost 30 % on RES production), biogas and landfill gas (over 24 %), photovoltaics (over 22 %) and biomass (app. 18 %).
The Czech electricity sector has many particularities. Some of them could be definitely labeled as opportunities and threats.
The Czech Republic produces a higher volume of electricity than it is consumed in the country. Installed capacity and ability to produce stable volume of electricity provides good conditions for electricity export, which can cover power cuts related to a high installed capacity of renewable energy sources in neighboring countries. The “Go Green” way in energy politics, which has been already accepted in several states in the Western Europe, will need a stabilizing factor, an anchor. And that is a good opportunity for the Czech electro-energy producers.
The boom of renewable energy sources, which creates problems in energy sectors across Europe as it delivers an unforeseeable amount of the produced electricity, has been scaled down in the Czech Republic. Although the Czech taxpayers (as consumers) still feel the significant impact of the renewables on their wallets, the recent shape of legislative framework doesn’t really create a desirable conditions for any notable enlargement of the renewable energy sector.
On the other hand, the Czech Republic is not energy self-sufficient in terms of resources used for electro-energy production. The extensive resource depletion before 1989 reaps its harvest now, especially when talking about coal mining. The net import of resources used for electricity and heat production left the country dependent on suppliers, so any problem on the international market (including international political) could cause a cost-shock in the economy and threaten the energy consumption.
As mentioned above, the boom of the renewables was suppressed in the Czech Republic. Nevertheless, that doesn’t mean it is over for good. In the matrix composed of very strong rent-seekers, very weak and corruptive politicians and a very bad institutional background, one cannot be sure that the regulation of the renewable energy sources will not go bad and that as a result, the market won’t be distorted again.
The problem, which is settled in many other states, is also related to the obsolescence of traditional sources of electricity. And, it is like a vicious circle leading to the catastrophic end. Planning and construction of new power plants, no matter whether the thermal or the nuclear ones, takes years and years of preparation and billions of euros, on the costs side. The current situation in the Czech Republic (and in the European Union as well) together with decreasing prices of the electricity does not provide good conditions for these long-term investments. The renewable energy sector is not strong enough to cover all the consumption of electricity 24/7/365. The energy sector needs traditional sources, but those are neither in the plans nor under construction. The business unisono says the recent situation is unsustainable and there is no way to cover the future power cuts without a traditional sources, i.e. without a state guarantee of the purchase price of energy needed for lowering the risk related to projecting a new power plant.
In the following years, the Czech government should definitely focus on the energy policy improvements. The energy efficiency should be enhanced, ideally by the means of the low-carbon technologies implementation. The presence of renewable energy in the European grid needs significant improvements of the energy infrastructure as well.
The article was originally published in the second issue of “4liberty.eu Review” entitled “Energy: The Challenges Europe Must Face”. The magazine was published by Fundacja Industrial in cooperation with Friedrich Naumann Stiftung and with the support by Visegrad Fund.
Read the full issue online.
ČSÚ (Český statistický úřad – the Czech Statistical Office. Link: www.czso.cz)
ČEPS (Česká energetická přenosová soustava – The Czech Transmission System Operator. Link: www.ceps.cz)
ČEZ (ČEZ, a.s. Link: www.cez.cz)
ERÚ (Energetický regulační úřad – Energy Regulatory Office. Link: www.eru.cz)
EUROSTAT (Official European Statistics. Link: http://epp.eurostat.ec.europa.eu)
1 Known as český energetický úřad (ERÚ).
2 Known as ČEPS – Česká energetická přenosová soustava, a.s.
3 The ERO is managed by the Chairperson appointed for a term of six years by the President of the Czech Republic upon the government proposal.
4 Source: ERO.
5 ČEZ, a.s., is the largest Czech energy company, partly owned by the state. The Czech Republic, represented by the Ministry of Finance, holds 69.78 % shares of the company.
6 1. 1. 2014: 27,956 power plants. Source: ERO.
7 The key power stations are owned by the ČEZ Group – Tušimice, Ledvice, Počerady and Prunéřov.
8 This Act has been replaced later on by the Act no 165/2012 Coll. (on supported energy sources).