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The future of Czech energy: aligning good governance with good business

20.02.2017


Jan Sádlo, Public Affairs Consultant and energy expert at Grayling Czech Republic looks at challenges to the Czech energy sector.

At the end of 2017, the Czech Republic is going to have a new government that will need to set up key energy policies for the future, meet the 2030 EU climate and energy targets, and take a crucial political decision on the further development of nuclear energy. This will require compromise among top elected officials, big businesses and final consumers. Is everybody ready?

The Czech energy sector has undergone a major shift in the last decade, having had to significantly increase its efficiency and prepare for the large-scale deployment of renewables. These costs (of mostly regulated businesses) have been passed on to final consumers, inevitably increasing retail energy prices. At the same time, wholesale energy prices have decreased to extremely low levels due to the greater deployment of subsidised renewables and the related surplus of generating capacities across Europe. As a consequence, utilities’ revenues have shrunk dramatically, prompting some companies to consider splitting their assets into conventional and non-conventional (“new energy”) parts. And then Andrej Babiš happened. 

Despite showing no passion for energy policy, Andrej Babiš, the ANO movement’s leader and current Minister for Finance, single-handedly became the most influential political player in the Czech energy sector. He unleashed a struggle for political control of the majority state-owned ČEZ group, demanded more money from ČEZ for the national budget, and announced that no price guarantees should be made for new nuclear sources, resulting in the proposal by ČEZ group chairman Daniel Beneš to split up the company.

The next Czech government, however, needs to reach a political consensus and spell out how it intends to ensure that the country will become less dependent on energy imports, how it will stimulate investment in the energy efficiency, and how to offer end consumers sufficient participation in the energy market.

There will be many business opportunities along the way. In a traditionally industrial country such as the Czech Republic, smart grids will be the next big thing from both a manufacturing and a software point of view. Small rooftop solar installations, combined with additional investments in buildings’ efficiency and storage capacity will significantly empower households and businesses alike. Ultimately, keeping the Czech heavy machinery industry on its feet could prove a key asset in future energy projects worldwide.

The next general election will re-shape the Czech political landscape once again, but one thing is quite clear. In 20 years, the Czech Republic will need around 2,000 MW in installed power capacity in order to replace its ageing lignite-fired power plants and the decommissioned nuclear blocks in Dukovany. Now is the time to agree on specific actions that will significantly impact households’ and industry’s energy bills.


Jan Sádlo

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