Czech Republic (2012)

Degree of reliance on imported energy: 

<p>
The Czech Republic has significant reserves of coal (6300 million tons), but imports most of its crude oil and natural gas, with three-quarters of the total provided by Russia and Norwegian producers supplying the balance. There is a single importer and wholesale supplier of gas (RWE Transgas), which at the same time has majority control over six of the eight large distribution and supplier companies.<br />
<br />
In 2007, the import/export balance by energy source was as follows (all units ktoe):<br />
Oil: 7223.5 / 16.9<br />
Natural Gas: 6828.6 / 327.4<br />
Solid Fuels: 2446.1 / 5221.9<br />
Electricity: 873.4 / 2255.9</p>

Main sources of Energy: 

<p>
Total installed electricity capacity (2010): 17412 MW<br />
- Coal: 60%<br />
- Nuclear: 32%<br />
- Natural gas: 3.5%<br />
- Other RES: 1.5%<br />
<br />
<br />
Share of Total Primary Energy Supply* (2009, IEA): 42Mtoe</p>
<ul>
<li>
Oil: 21.1%</li>
<li>
Natural Gas: 15.6%</li>
<li>
Nuclear: 16.5%</li>
<li>
Hydro: 0.5%</li>
<li>
Biofuels and Waste: 5.5%</li>
<li>
Geothermal/ solar/ wind: 0.1%</li>
<li>
Coal/ peat: 40.7%</li>
</ul>
<p>
<br />
*Share of TPES excludes electricity trade<br />
<br />
<br />
Natural gas is mainly used as complementary fuel in multi-fired units and for peaking purposes. Combined heat and power (CHP) constitutes one third of electricity generation and over 40% of overall heat production, making the country the third largest in CHP use after Denmark and Finland.<br />
<br />
The Czech Republic is the third largest net electricity exporter in the European Union, after France and Germany.<br />
<br />
Coal remains the main energy source for electricity production, followed by nuclear, and hydro.</p>
<p>
According to the Czech Republic&rsquo;s State Energy Policy, which was launched in March 2004, coal will remain the country&rsquo;s primary energy source in the coming decades, despite the increased use of natural gas and nuclear energy. The government expects coal to account for 55.5% of electricity production in 2005, and 36.8% in 2030, while the share of nuclear power will increase to 33.3% in 2005 and 38.6% in 2030. The Czech government also aims to increase the contribution of renewable energy sources to electricity generation to 16.9% in 2030.</p>
<p>
In the Czech Republic the share of renewable in gross electricity consumption was 5.6% as of 2006 (4,225 GWh, which is 4.2% of domestic production).<br />
Czech renewable electricity generation is dominated by hydropower plants, which produced 3,257 GWh of electricity in 2006 (77.1% of total renewable electricity production).</p>

Country: 

Czech Republic

Extent of the network: 

<p>
National electrification rate (2000):&nbsp; 99%</p>
<p>
With regards to electricity exports/imports, and in some cases transit, the volume of traded electricity is limited by the capacities of the lines on cross-border interconnections. The size of free cross-border capacities is determined by the physical electricity flow and the commercial load at the respective border interconnection. The method of free capacity allocation is based on ETSO&rsquo;s (European Transmission System Operators) methodology, using the principle of explicit auctions.</p>

Capacity concerns: 

<p>
Given its geographical location and interest in regional integration, the Czech Republic plays a significant role in electricity transfer, which imposes a burden on its grid and requires substantial investments in transmission networks and interconnection capacity. A better performing and smarter grid (transmission and distribution) is also a precondition for the greater penetration of renewable energies (in the light of the 2020 target) and further energy efficiency improvements.</p>

Potential for Renewable Energy: 

<p>
<u>Hydropower</u><br />
The hydro sector covers the largest share of renewable energy.&nbsp; For large hydro plants there are no more suitable areas, therefore there is no room for growth in this sector.&nbsp; However, there is still room for small hydropower plants to be built in some mountainous regions of the Czech Republic.<br />
<br />
<u>Wind power</u><br />
Total estimated potential of wind power plants (WD) resulting from natural conditions is 2,750 MW and the respective annual production about 6,000 GWh.<br />
<br />
<u>Biomass energy</u><br />
Out of all the renewable generation sources biomass has the largest potential.&nbsp; The country&rsquo;s total agricultural land that is not used for producing food is estimated to be more than 1.3 million hectares of which about 800,000 hectares were not used at all as of 2006.<br />
<br />
<u>Solar energy</u><br />
The installed solar capacity in the country currently stands at 105 MWt.<br />
<br />
<u>Geothermal energy</u><br />
As of 2004, the installed geothermal capacity was 4.5 MW. The total exploitable geothermal potential of the country stands at 2,500 &ndash; 3,000 MW</p>

Potential for Energy Efficiency: 

<p>
The Czech Republic is the fourth most energy intensive country in the EU mainly due to the high intensity of its industry (such as metallurgy, steel and coal).<br />
<br />
Although gains have been made in reducing energy intensity in the industry sector, the potential for energy efficiency improvements in the buildings and transport sectors is substantial. Energy use and carbon dioxide emissions in these sectors are growing. Energy efficiency&nbsp; is considered&nbsp; the low hanging fruit&nbsp; in efforts&nbsp; to&nbsp; reduce&nbsp; energy&nbsp; consumption&nbsp; and&nbsp; address climate&nbsp; change,&nbsp; while&nbsp; also&nbsp; providing benefits&nbsp; for energy security.</p>

Ownership: 

<p>
<u>Electricity: </u><br />
The electricity market in the Czech Republic is composed of the following participants defined in the Energy Act: electricity producers (EPs), the transmission system operator (TSO), distribution system operators (DSO), the EMO, electricity traders (ETs) and customers (ECs).<br />
<br />
The electricity market was opened in several progressive steps, which took place from<br />
2002 until 2006. Since 1 January 2006, when the last group of customers &ndash; households &ndash; became authorised customers and obtained the right to choose an electricity supplier, the market has become fully liberalised. Only activities of a monopoly-like nature remain regulated, such as transmission and distribution of electricity and activities related to ensuring the electrical grid stability both from a technical and commercial point of view (for example, prices of services provided by the EMO are regulated by the ERO).<br />
<br />
For gas, all customers with the exception of households became eligible on the same date, while choice of supplier has been extended to households as of 1 January 2007.<br />
<br />
The electricity industry is dominated by three vertically integrated companies (CEZ, E.ON and PRE) that hold both a licence for electricity distribution and for supply. These three suppliers&rsquo; electricity market share is more than 95% of final customers&rsquo; total consumption; in the case of small customers, their share is more than 99%.<br />
<br />
The generation sector is similarly concentrated, consisting of a single generator (CEZ) (<a href="http://www.cez.cz/en/home.html">http://www.cez.cz/en/home.html</a>) that accounts for 73% of national production capacity, and a number of much smaller generators none of which have a share more than 3% of the total.<br />
<a href="http://www.eon.cz/en/index.shtml">http://www.eon.cz/en/index.shtml</a><br />
<a href="http://www.pre.cz/en.html">http://www.pre.cz/en.html</a><br />
<br />
<u>Oil</u><br />
Unipetrol (<a href="http://www.unipetrol.cz/en/index.html">http://www.unipetrol.cz/en/index....) is a group of companies operating in the chemical industries sector. The former state company was privatized in June 2004.&nbsp; In 2005, the share of the National Property Fund was transferred into the hands of the Polish company PKN ORLEN (<a href="http://www.orlen.pl">www.orlen.pl</a>).<br />
<br />
<u>Coal</u><br />
All former State owned coal production companies, after having been transformed into joint stock companies, are now hold at more than 50 % by the National Property Fund. It is planned to privatize them.</p>

Structure / extent of competition: 

<p>
<u>Electricity</u><br />
CEZ s.a. produces about 70% of the country&#39;s electricity in 29 power plants.<br />
<br />
Meanwhile, CEPS a.s. (<a href="http://www.ceps.cz">Czech Transmission System Operator</a>) is the only TSO operating the transmission grid in the Czech Republic (consisting of 400kV, 220kV and selected 110kV wires).&nbsp; Since 1999 it has been responsible for development, management, operation and maintenance of the transport network. It was statutorily unbundled from CEZ.<br />
<br />
The ownership structure of the eight distribution utilities was recently restructured, CEZ controls five regional distribution companies, the other three utilities are mainly owned by E.ON and RWE/EnBW (German energy companies).&nbsp; The state-owned market operator OTE organizes a day-ahead and balancing market.</p>

Existence of an energy framework and programmes to promote sustainable energy: 

<p>
Energy policy in the Czech Republic closely follows EU Energy Policy. Apart from the Energy Act, Energy Management Act and the Alternative Energy Act, Czech electricity policy is expressed in the State Energy Concept (SEC), which constitutes a strategic document with a 30-year outlook. It determines the scope of energy management in accordance with the necessities of economic and social development and environmental protection.<br />
<br />
The SEC was prepared by the Ministry for Industry and Trade (MIT) pursuant to the Energy Management Act and approved by the Czech government in 2004, and the fulfilment of the scope, priorities and tools set therein is reviewed by the MIT periodically not later than every five years, when the MIT informs the government of its conclusions. Where necessary, the MIT submits proposals to the government to amend the SEC. Currently, the new amended SEC wording as of June 2011 has been prepared by the MIT.<br />
<br />
The main priorities mentioned in the amended SEC include reliability, security, and an environmentally friendly approach with respect to energy supplies, fair competition and sustainable development.<br />
Pursuant to the SEC, regional energy plans are developed by Czech regions, the City of Prague and the &lsquo;statutory cities&rsquo; of the Czech Republic.<br />
<br />
The Czech Republic&rsquo;s National Renewable Energy Action Plan (hereinafter the &ldquo;Action Plan&rdquo;)<br />
was prepared on the basis of a requirement of Article 4 of the Renewable Energy Directive<br />
2009/28/EC. The Action Plan was prepared by the MIT and the Czech government approved it by resolution No. 603/2010, dated 25 August, 2010.<br />
<br />
The plan de facto constitutes a road map for the country to achieve its target of 13.5% renewables share in total energy production by 2020 (according to the country&rsquo;s 2020 commitment within the EU).<br />
<br />
The Action Plan is referred to by a new government draft law on supported energy sources, replacing Act No. 180/2005 Coll., on support for the use of renewable sources, among others.<br />
<br />
This draft law links the right to receive support for sources coming online in future to not exceeding energy production limits (in the case of biomass) and installed output limits (in the case of other sources) for a given year.<br />
<br />
If this draft law is approved by Parliament, the Action Plan will no longer be merely a strategic document, but will become a document whose contents directly raise or lower the right to receive statutory support.</p>

Current energy debates or legislation: 

<p>
At present, the political and media debate in the Czech Republic is very unfavourable to RES. State bodies, using the estimates of the half-state-owned energy company &#268;EZ warn of a danger of a significant increase in electricity prices as a result of support for photovoltaic plants. Politicians are turning against all renewable energy sources. Due to the state&rsquo;s actions, therefore, exactly the opposite is happening to what Directive 2009/28/EC requires.<br />
<br />
During 2010, the Czech government and other state institutions undertook several steps that significantly complicated or may complicate further development of renewable resource use: freezing the addition of RES to the power grid, preparation of a regulation for photovoltaic panels in a non-conceptual manner with minimal effect, a confusing mixture of proposals modifying Act no 180/2005 Coll. and the introduction of a 26% taxation of income from photovoltaic power plants which went online in 2009 and 2010.<br />
<br />
Moreover, these measures were prepared without the consultation of representatives from<br />
renewable resource business owners, non-governmental organizations and the public.</p>

Major energy studies: 

<ul>
<li>
The Czech Republic 2010 Review: IEA Commends Energy Security Achievements <a href="http://www.iea.org/publications/free_new_Desc.asp?PUBS_ID=2289">http://w...
<li>
Development model for energy crop plantations in the Czech Republic for the years 2008&ndash;2030 <a href="http://www.sciencedirect.com/science/article/pii/S1364032110000651">http...
</ul>

Role of government: 

<p>
The primary legislation is adopted by the Czech parliament (the draft laws are usually prepared and submitted by the government) and the public authority bodies adopt secondary acts for implementation of the primary one; in case of the Energy Act, such authorities are the Ministry for Industry and Trade (MIT) and the&nbsp; Energy Regulation Office (ERO).<br />
<br />
<br />
The MIT is the supreme state administration body and was established by law. It issues the implementation legislation pursuant to the Energy Act, while respecting the policy of the government and internal regulations. The head of the MIT, the minister, is a member of the Czech government.&nbsp; Within the MIT, there are The <a href="http://www.mpo.cz">Ministry of Trade and Industry</a> / Section of Energy Sector is in charge of energy policy. There are five departments:</p>
<ul>
<li>
Unit of International Relations in Energy,</li>
<li>
Department of Electric Power and Heat Production,</li>
<li>
Department for Mining Industry,</li>
<li>
Gas and Liquid Fuels Department,</li>
<li>
Department for Eco-Energy.</li>
</ul>
<p>
<br />
<br />
The ERO is also a supreme state administration body, which was established pursuant to the Energy Act and Act No. 2/1969. It is independent to the extent that it issues the implementation legislation within the bounds of its powers, nevertheless it is obliged to respect the government&rsquo;s policy and internal regulations.</p>

Government agencies in sustainable energy: 

<p>
Originally, the Czech Energy Agency (CEA) was the agency responsible for energy efficiency and managing the energy efficiency and renewable energy programmes. At the beginning of 2008, the CEA was abolished by the MIT, the main reason being savings in the State budget. Activities of the CEA have been handed over to three other state organisations:</p>
<ul>
<li>
MIT (<a href="http://www.mpo.cz">www.mpo.cz</a>) &ndash;managing the EFEKT programme and responsible for the energy auditors programme.</li>
<li>
State Energy Inspection (SEI) (<a href="http://www.cr-sei.cz">www.cr-sei.cz</a>) &ndash; enforcement of provisions under the Energy Act, Energy Management Act as well as accompanying decrees. The SEI also checks if the contents of energy audits are in compliance with decree 213/2001Coll.</li>
<li>
Association of Energy Auditors (<a href="http://www.aeaonline.cz">www.aeaonline.cz</a>) &ndash; Professional body representing energy auditors and taking care of education of energy auditors.</li>
<li>
Agency Czechinvest (<a href="http://www.czechinvest.org">www.czechinvest.org</a>) &ndash;managing the ECO &ndash;ENERGY programme.</li>
</ul>
<p>
<br />
Other State organisations having an important role in EE and RE are the following</p>
<ul>
<li>
Ministry for Environment (<a href="http://www.env.cz">www.env.cz</a>) &ndash; has developed the Green Light for Savings Programme.</li>
<li>
State Fund for Environment (<a href="http://www.sfzp.cz">www.sfzp.cz</a>) &ndash; is managing the Green Light for Savings Programme</li>
</ul>
<p>
<br />
Non-governmental organization related to RE and EE in the country are:</p>
<ul>
<li>
Czech Biomass Association</li>
<li>
Czech RE Agency</li>
<li>
Czech Biogas Association</li>
</ul>

Energy planning procedures: 

<p>
There is ongoing work on the revision of the State Energy Concept in preparation for a new Energy Concept, to be adopted in 2011.&nbsp; Also, the Czech government created an Independent Expert Energy Commission, charged with assessing the country&rsquo;s long-term energy needs. The Commission delivered its final report to the government in January 2009. Since then, the MIT published a draft update of the State Energy Concept (SEC) in September 2009. Separately, the Ministry of the Environment issued a draft Climate Protection Policy (CPP) in October 2009.</p>

Energy regulator Date of creation: 

<p>
The Energy Regulatory Office (ERO) was established in 2001.<br />
<br />
Financed by the State budget, its main tasks are to grant licenses, regulate prices, and to resolve disputes related to access to transmission or distribution networks. It is responsible for price setting.<br />
<br />
The ERO&acute;s organizational structure is composed of a Regulation Section, a Licensing Department, a Strategy Department and the ERO Bureau Department.</p>

Degree of independence: 

<p>
The Director of the Regulation Section, which is also the Vice-Chairman of the Energy Regulatory Office, is being appointed for a term of five years (and dismissed) by the Government. The Energy Regulatory Office submits its Annual Report for approval to the Government and Parliament&rsquo;s House of Deputies through the Ministry of Industry and Trade.</p>

Regulatory framework for sustainable energy: 

<p>
The conditions for doing business, regulation and public administration in the energy sectors are set forth in Act No. 458/2000.&nbsp; Act No. 406/2000 on energy management (Energy Management Act) sets forth measures for increasing the effectiveness of the use of energy and obligations of natural persons and legal entities, as well as rules for preparation of the State Energy Concept, Regional Energy Concept and National Programme for Energy Saving and for Utilisation of Renewable Energy Sources. It also sets forth requirements for the ecological design of energy appliances.<br />
<br />
At present, Act No. 180/2005 Coll., with which the Czech Republic implemented Directive 2001/77/EC on support for production of electricity from RES, is in force. This is a well-written law and grants producers of electricity from RES the right to choose support in the form of fixed purchase prices or green bonuses if the producer sells its electricity on the market. The law sets fixed purchase prices and green bonuses for individual types and output categories of renewable sources in such a way as to guarantee a 15-year simple return on investment.<br />
<br />
The law also includes a provision guaranteeing that the Energy Regulatory Office will not lower the fixed purchase price for new sources by more than 5% year-on-year. This provision was amended in the spring of 2010 with an exception, stating that the rule shall not apply to sources whose return on investment decreases to less than 11 years. The amendment, which comes into effect for 2011 prices, is a reaction to the significant decrease in investment costs for construction of photovoltaic plants.<br />
<br />
In the Czech Republic feed-in tariffs for new and existing RES-E generation are adjusted annually according to the inflation by at least 2% but no more than 4%, with exception of biomass and biogas plants. The feed-in tariffs for the following year shall not be reduced by more than 5% compared to the tariff in force at the time of the calculation of the new tariff.</p>

Regulatory roles: 

<p>
The Energy Regulatory Office also issues the Electricity Market Rules, the principles of pricing the activities of the Electricity Market Operator, and the Gas Market Rules. The Energy Regulatory Office is authorised to approve the Commercial Terms and&nbsp; conditions of the Electricity Market Operator; the Rules of the Electricity Transmission System Operation (Grid Code); the Rules of the Electricity Distribution System Operation; the Rules of the Gas Transmission System Operation (Grid Code); and the Rules of the Gas Distribution System Operation.<br />
<br />
The Energy Regulatory Office decides on the award, change, or revocation of licences for business in the energy industries and for the Electricity Market Operator&rsquo;s activities; on imposing the obligation of supplies over and beyond licences; on imposing the obligation to provide, in urgent cases, energy facilities for meeting the obligation of supplies over and beyond licences; on price controls; etc.<br />
<br />
It is also within the ERO&rsquo;s competencies to adjudicate disputes, for example, disputes between licence holders and their customers or those concerning failure to reach agreement on regulated access to the transmission or distribution system.</p>

Role of government department in energy regulation: 

<p>
According to the Energy Act in the Czech Republic, the electricity market shall be based on regulated access to the transmission system and distribution systems and that electricity generating capacities may only be built subject to the State&rsquo;s authorization, on the granting of which the Ministry of Industry and Trade shall decide.<br />
<br />
The Ministry of the Environment is responsible for allocating funds for development of renewable energy sources under the State Environmental Fund.</p>

Regulatory barriers: 

<p>
The Czech government faces several challenges in fulfilling its energy policy objectives. The draft State Energy Concept (which is the preliminary document establishing a new energy policy, to be released in 2010) relies heavily on the maximum use of domestic resources thus focusing mainly on energy security but lacking a certain degree of coherence in climate related policies. The Czech government could do more to implement energy efficiency policies and measures. Further the government should clarify its role as an electricity exporter in the future.<br />
<br />
Problems related with RES are lately becoming widespread due to the significant legislation and subsequently economic support. As a result, many problems occur in the area of the source connection into the network and also in the area of the operation, when often random or badly predictable course of output requires the provision of ancillary services at higher level.<br />
<br />
Interest in the construction of renewable electricity sources is generally significant and it results mostly from economic offers. The interest changes in relevance to the support structure.</p>

References: 

IEA Energy Statistics (2011). Available at: <a href="http://www.iea.org/countries/membercountries/czechrepublic/statistics/">... [Accessed 15th September 2013]<br />
<br />
Austrian Energy Agency Country Profile - Czech Republic. Available at:&nbsp;<a href="http://www.enercee.net/countries/country-selection/czech-republic.html">... 15th September 2013]<br />
<br />
Global Impact Consulting. Renewable Energy Czech Republic. Available at: <a href="http://globalimpactconsulting.com/60/5/2/hot_sectors/renewable_energy/cz... [Accessed 15th September 2013]<br />
<br />
European Commission Staff Working Paper. Assessment of the 2011 national reform programme and convergence programme for the Czech Republic. Brussels 7.6.2011. Available at: <a href="http://ec.europa.eu/europe2020/pdf/recommendations_2011/swp_czechrepubli... 15th September 2013]<br />
<br />
Global Impact Consulting. Renewable Energy Czech Republic. Available at: <a href="http://globalimpactconsulting.com/60/5/2/hot_sectors/renewable_energy/cz... 15th September 2013]<br />
<br />
OTE. Expected Electricity and Gas Balance Report. 2011. Available at: <a href="http://www.ote-cr.cz/statistics/files-long-term-balances/expected-electr... 15th September 2013]<br />
<br />
IEA: Energy Policies of IEA Countries Czech Republic 2010. Available at: <a href="http://www.iea.org/Textbase/npsum/czechrep2010SUM.pdf">www.iea.org/Textb... 15th September 2013]<br />
<br />
Electricity Regulation 2011. Getting the deal through. Available at: <a href="http://www.ksb.cz/docs/1103-electricity-regulation-2011.pdf">http://www.... 15th September 2013]<br />
<br />
European Commission. Czech Republic Internal Market Fact Sheet. Available at: <a href="http://ec.europa.eu/energy/energy_policy/doc/factsheets/market/market_cz... 15th September 2013]<br />
<br />
J. Glachant. F. Leveque. Electricity Reform in Europe: Towards a Single Energy Market. Edward Elgar Publishing Limited. 2009.<br />
<br />
Green European Foundation. Holub, P. Analysis of the Czech NREAP Presented in Prague. Available at: <a href="http://gef.eu/event/analysis-of-the-czech-nreap-presented-in-prague/">ht... 15th September 2013]<br />
<br />
Holub, P. Czech Photovoltaic Industry Association. Analysis of the National Renewable Energy Action Plan of the Czech Republic and alternative recommendations for development of the sector. November 2010. Available at: <a href="http://www.gef.eu/fileadmin/user_upload/GEF-10-06_NREAP_EN_web_final.pdf... 15th September 2013]<br />
<br />
Ministry of Industry and Trade. <a href="http://mpo.cz/default_en.html">http://mpo.cz/default_en.html</a>&nbsp;[A... 15th September 2013]<br />
<br />
Concerted Action Energy Services Directive. ESD Implementation in the Czech Republic. January 2010. Available at: <a href="http://www.esd-ca.eu/reports/outcomes-2008-2011/national-summary-reports... 15th September 2013]<br />
<br />
Energy Regulatory Office. <a href="http://eru.cz/?bl=y">http://eru.cz/?bl=y</a>&nbsp;[Accessed 15th September 2013]<br />
<br />
International Feed in Cooperation. M. Ragwitz, A. Held, E. Stricker et al. Recent experiences with Feed-in tariff systems in the EU. November 2010. Available at: <a href="http://www.feed-in-cooperation.org/wDefault_7/content/research/index.php... 15th September 2013]