Power policy

The Czech Republic’s NECP prioritizes biomass alongside wind and solar to decarbonize electricity production. The country does not currently offer any support mechanisms for new renewables projects. The possibility of auctions has been under discussion for several years, and the Czech Republic is one of the last EU member states that has yet to initiate such a program. A short-lived renewables boom ended in 2011 when the government imposed a retroactive tax on solar projects to limit returns and lengthen the payback period. Further laws in 2012-13 effectively put a moratorium on further deployment, with renewables additions averaging 30 megawatts a year since then. The country had a green tariff program that has been closed to all renewables technologies except small hydro since January 2014.

Nevertheless, the Czech Republic achieved its 2020 target for renewables to comprise 13% of final energy consumption seven years ahead of schedule, which affirms that the original goal was not very ambitious. For 2030, the country is aiming for renewables to account for 22% of final energy consumption, which is below the European Commission’s recommendation of at least 23%.

Concerns about energy independence have dominated discussions about phasing out coal, as the fossil fuel is a source of dispatchable generation capacity in the Czech Republic. The country is also highly dependent on imported crude oil and gas, with almost all of its imported gas coming from Russia. The EU emissions trading system (EU ETS) increases fossil fuel prices in the Czech Republic and an excise tax applies to oil products, natural gas, and coal consumption.

Power prices and costs

Retail prices for all types of customers are relatively lower than surrounding EU countries, suggesting there is little impetus for households to install small-scale solar PV or corporates to undertake power purchase agreements (PPAs). No PPAs beyond the feed-in tariff have been signed. Even though corporate PPAs are not restricted by law, no specific framework has been adopted.

Power market

While the Czech Republic’s electricity sector was liberalized in 2006, it remains fairly concentrated, with state-owned utility CEZ accounting for more than two thirds of generation. CEZ is the biggest renewables asset owner in the country. Both CEZ and transmission system operator (TSO) CEPS are likely to remain government-owned for the foreseeable future.

CEZ owns and operates two nuclear power plants, which account for around a third of electricity generation. This share is due to expand over the coming decades due to strong government and public support, a wish to boost energy independence amid reliance on Russian gas, and a need to replace lost capacity through the phase-out of the aging coal fleet. Potential challenges will be deciding how to finance new reactors and mitigating anti-nuclear pressure from some of the country’s EU neighbors. Still, the Czech Republic’s generation mix is likely to remain diversified as the national strategy does not allow any one technology to provide more than 65% of generation.

Doing business and barriers

Onshore wind potential is limited by land availability and public acceptance issues. But the most problematic factors for doing business in the Czech Republic are inefficient bureaucracy, tax regulations and, to a lesser extent, corruption, according to the World Economic Forum. The Czech government has pledged to cut red tape and application processing times for renewables.

Meanwhile, European commercial banks have been responsible for most loans to renewables projects in the Czech Reupblic, with Erste Group Bank and Commerzbank topping the list.

EV market

Car manufacturing is significant to the Czech economy, accounting for nearly 10% of GDP. The country is looking to capitalize on the shift to electric vehicles (EVs). Its first lithium-ion battery factory was opened in September 2020, and state-owned CEZ signed a memorandum of understanding with the government in July 2021 to develop a Gigafactory with an annual production capacity of 40 gigawatt-hours. Looking at the domestic EV market, sales have been growing rapidly from a low base, surging by 159% between 2019 and 2020 to 5,439 electric and hybrid vehicles.

EV policy

The Czech Republic’s NECP states a target for renewables to account for 14% of final energy consumption in the transport sector by 2030. Under the country’s core EV policy program, the National Action Plan for Clean Mobility, it is aiming for between 220,000 and 500,000 EVs to be on the road by the end of the decade, compared to about 6,000 vehicles in 2020. The upper limit of that goal equates to around 7% of the national vehicle fleet and would require 35,000 charging points to be installed by 2030. Schemes for public chargers were suspended after 2020 but will likely return from 2022. Meanwhile, an initiative to support private chargers is planned. In order to improve EV adoption, an excise tax for fuel and exemption on road tax for EVs are in place.

Buildings market

The operation of buildings accounts for around 44% of the Czech Republic’s total emissions, and the government estimates that emissions from the buildings sector could be lowered by 40% by 2050. The National Energy Efficiency Action Plan covers buildings, transport, and industry. For major modifications or construction of new residential, commercial, or public buildings, they must meet minimum energy efficiency requirements.

Buildings policy

The country is aiming for renewables to comprise 31% of final energy consumption for heating and cooling in 2030. To help achieve this goal, the government has implemented a boiler scrappage schemes for old, inefficient coal boilers, which will be phased out from 2022. There is support available to install biomass boilers, heat pumps or gas condensing boilers under the New Green Savings grant program, which covers up to 50% of costs. This initiative also assists the construction of new high energy performance buildings and the installation of solar thermal systems. The program is funded with the revenues from the sale of EU emissions allowances, and had a budget of 27 billion Czech Koruna ($1.2 billion) from 2015 to early 2021.