Department of International Relations and European Studies1 The Current Energy Crisis and the Czech Republic doc. PhDr. Tomáš Vlček, Ph.D. Department of International Relations and European Studies International Institute of Political Science Faculty of Social Studies tomas.vlcek@mail.muni.cz PV226 Seminar LaSArIS, 24 November 2022 Department of International Relations and European Studies2 Content ̶ Background ̶ Structural limits of Czech energy sector and policy ̶ Energy crisis? ̶ Czech reaction and readiness for winter crisis Department of International Relations and European Studies3 Background Installed Capacity and Gross Electricity Production in the Czech Electricity Grid on December 31, 2020 Type of Power Station Installed Capacity (MWe) Percentage (%) Electricity Production (GWh) Percentage (%) Thermal 10,058.3 47.1 35,197.6 43.2 Gas Combined Cycle 1,363.5 6.4 6,041.3 7.4 Gas Fired 962.2 4.5 3,790,1 4.7 Hydropower 1,093.9 5.1 2,143.9 2.6 Pumped-storage Hydropower 1,171.5 5.5 1,293.1 1.6 Nuclear 4,290.0 20.1 30,043.3 36.9 Wind 339.4 1.6 699.1 0.9 Photovoltaic 2,071.3 9.7 2,235.1 2.7 Geothermal Power 0 0 0 0 Total 21,350.3 100 81,443.4 (gross) 76,126.2 (net) 100 93.5 Source: Energetický regulační úřad Department of International Relations and European Studies4 Background Czech Tradition ̶ Backbone of Czech (elektricity) energy sector is based on coal, water and nuclear power plants Department of International Relations and European Studies5 Background ̶ nuclear power will gradually replace coal power as the main pillar of electricity generation ̶ general reduction of importance of liquid fuels and coal ̶ transition from lignite combustion to other fuels in the heating industry ̶ renewal, transformation and stabilization of heat supply systems based mainly on indigenous sources (nuclear, coal, RES, secondary sources) supplemented with natural gas ̶ two options with solution to the problem – nuclear and gas Indicative Corridors for Czech Republic's Energy Sector in 2040 Structure of Brutto Electricity Generation Structure of Energy Mix Nuclear 46 – 58 % Nuclear 25 – 33 % RES and secondary sources 18 – 25 % RES and secondary sources 17 – 22 % Natural Gas 5 – 15 % Gaseous fuels 18 – 25 % Coal 11 – 21 % Solid fuels 11 – 17 % Liquid fuels 14 – 17 % Source: Ministerstvo průmyslu a obchodu, 2014, p. 44 Department of International Relations and European Studies6 2021-2022 reality ̶ Green Deal and Green Taxonomy ̶ low emission or renewable gases from 2035 ̶ Natural gas prices ̶ low emission or renewable gases from 2035 ̶ high prices of natural gas – geopolitics ̶ Nuclear power plants ̶ new nuclear with construction permit only until 2045 ̶ construction of deep underground repository until 2050 ̶ Russian invasion to Ukraine ̶ short term negative financial effects ̶ acceleration of transition efforts SEP plans not feasible Major revisions expected Change of minds Department of International Relations and European Studies7 Reasons for structural limits ̶ Tradition ̶ century of usage of coal and hydro, later nuclear ̶ Path dependence ̶ i.e., education of cadres (e.g., more than 80 % of ministers of industry have education or experience in traditional heavy energy/industry sector) ̶ generational issues, lack of imagination ̶ Structural changes in 1990s ̶ privatization, economic reforms, EU accession, liberalization ̶ Reality of available sources ̶ coal, uranium, water, limited potential for „standard“ renewables Define footer – presentation title / department8 Energy crisis 2022? Define footer – presentation title / department9 What is happening with electricity? Department of International Relations and European Studies10 Electricity trade ̶ Direct bilateral contracts ̶ Electricity market ̶ Energy-only Market (D, M, Q, CAL) ̶ Balancing Market (H) ̶ Capacity Market ̶ Energy-only and balancing markets compensate power that has actually been produced ̶ Capacity market compensates the mere readiness, or capacity, for power production Department of International Relations and European Studies11 Merit Order Effect (MOE) Department of International Relations and European Studies12 Merit Order Effect (MOE) Define footer – presentation title / department13 Czech preparations I ̶ Natural gas in storages (11/2022 = 99,5 %) https://gass.ga/ ̶ The capacity of the Eemshaven floating terminal leased to the Czech Republic is 3 bcm (about 30 gas tankers) ̶ Savings (Ministry of Health regulation on reducing the minimum heat in public spaces, changing rooms, showers, corridors, offices, etc.) ̶ Coal mining extension to end of 2022, potentially to spring 2025 ̶ Creation of a state energy trader (large suppliers obliged to supply energy at pre-agreed prices to protected customers) – questionable and unlikely at the moment ̶ Waiver of fees for RES support (from 01-10-2022 to 31-12-2023, CZK 495/MWh without VAT) ̶ Electricity market reform (long-term solution and questionable) ̶ Increasing the capacity of the TAL pipeline for a smooth end Russian oil supplies Define footer – presentation title / department14 Czech preparations II ̶ Savings tariff (CZK 3,500 contribution for 10-12/2022 in tariff d02d, ends at the end of the year) ̶ Czech caps on electricity and gas prices from 1 January 2023 (maximum 6.05 CZK/kWh electricity, 3.025 CZK/kWh gas), caps for the commodity, not the final price of electricity (!) ̶ Council Regulation (EU) 2022/1854 of 6 October 2022 ̶ mandatory income caps at 180 EUR/MWh from water, solar, geothermal, biomass, waste, nuclear, brown coal, oil, peat ̶ levy from excess income from the sale of electricity for electricity producers (now in the Senate in the form of an amendment to the Energy Act), valid from 01-12-2022 to 31-12-2023 ̶ levy in the amount of 90% of the difference between the cap and the selling price ̶ wind, solar, geothermal, water 180 EUR/MWh ̶ biogas EUR 240 ̶ biomass EUR 210 ̶ waste 100 EUR ̶ nuclear EUR 70 ̶ brown coal EUR 230 (〈140 MWe) and EUR 170 (〈140 MWe) ̶ oil, peat EUR 180 ̶ no caps for natural gas and hard coal Define footer – presentation title / department15 Czech preparations III ̶ Windfal tax ̶ now in the Senate in the form of an amendment to the VAT act ̶ the tax will be applied on the profit that is above 120% of the average profit in the last 4 years (2018-2021); if the producers generate profit over the 4-year average even with the EU cap, they will be taxed ̶ the tax is 60 % ̶ aimed at companies with windfall income of over 2 billion CZK ̶ aimed at following sectors: oil and gas production, coke production, oil refining, production, transport and distribution of electricity, production and distribution of natural gas, oil and gas trade, oil and gas pipeline transport, bank sector Source: AMO Department of International Relations and European Studies16 ̶ Production 2020 = 0,138 bcm/y ̶ Import 2020 6,2 bcm/y, of which Russia 4,5 and Germany 1,7 ̶ Import 2019 7,5 bcm/y, of which Russia 6,2 and Germany and other European countries 1,3 Natural Gas Department of International Relations and European Studies17 Natural Gas Department of International Relations and European Studies18 Oil ̶ Production 91 kt in 2020 ̶ Import 6,2 mt in 2020 (usually ca 7,5) ̶ + import of ca. 3 mt of oil products 19 Department of International Relations and European Studies Odessa-Brody-Adamowo-Płock-Gdańsk Thank you for your attention! tomas.vlcek@mail.muni.cz