Selected coalition politicians got their hands on the first forecasts of what will happen in the Czech Republic if threats about the early closure of coal-fired power plants come true. And they already have the first possible answer together, which – in the event of an agreement – they will soon want to add to the law.
In simple terms, the amendment would allow the state to prohibit preemptive closures for essential resources. And for the owners of the power plants to receive compensation from state money for the forced loss-making operation.
The changes have only just begun to be debated at the government level, so none of the participants in the meeting wants to publicly comment on their progress. However, according to SZ Byznys information from the three participating actors, a general principle and a legislative solution have already been devised. The Office of the Government, the Ministry of Industry and Trade and the state enterprise ČEPS were involved in its preparations, which also prepared the relevant development scenarios.
A political agreement should be reached within two weeks. If there is agreement on compensation, the next step will be to amend the energy law, within the framework of an already existing package of amendments, known by the acronym Lex OZE 3. This package passed in its basic version last Friday in the Chamber of Deputies, in the first of three readings. Deputies now have two months to draft amendments, and one of them should also deal with coal.
According to information from SZ Byznys, the scenario based on the crisis mechanism, which is already contained in Sections 12 and 13 of the Energy Act, has wider support. According to them, the Energy Regulatory Office (ERÚ) can already today, in order to maintain supplies, order energy companies to remain in operation and compensate them for this. The obligation arises “in case of urgent need and in the public interest”, but the law now only remembers it for the production of heat and the distribution of electricity and gas. A novelty would be the expansion of electricity production.
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The state enterprise ČEPS, responsible for the functioning of the distribution network, would decide which resource is indispensable. ČEPS would report the selected sources to the Energy Regulatory Office, which would order them to operate. “The state would dictate what should remain in operation. And the company will then send an invoice for it,” summed up the principle of the newly proposed arrangement, one of the participants in the ongoing political debates.
The authors of this solution see an advantage in the fact that the law will be formulated in general, and thanks to this, ČEPS and ERO will have freedom in when and where to intervene. The risk, on the other hand, is that ČEPS and ERÚ will succumb to the pressure of power companies, who will want to force compensation even where it is not necessary, within the framework of looser controls.
Coal-fired power plants in the Czech Republic will probably not end
Mandatory operation should only work at individual selected power plants and for a limited time. In addition, if the domestic authorities are able to defend the thesis to the European Commission that there is a threat of power outages without intervention, this should also resolve the main obstacle to any subsidy of coal, namely the fact that it is a high-emission fuel, the use of which is no longer desirable to support.
Saving coal is being dealt with because of the risk, which could theoretically occur in just a few years. And this is a consequence of previously approved pan-European regulations, the purpose of which is to gradually push large emitters of greenhouse gases out of the market. Because of this, the costs of burning coal are gradually increasing, but on the other hand, alternative sources are not emerging quickly enough in the Czech Republic or strong enough lines for the possible import of electricity from abroad.
Electricity producers – including the majority state-owned company ČEZ – are therefore warning against a scenario where there will not be enough electricity, but at the same time it will not pay to produce it. Although this defies economic laws at first glance, such a situation can occur in the energy sector. An emergency only threatens for a short time in the hardest winter months, and because of such short intervals, it is not worthwhile for manufacturers to keep power plants and mines in operation all year round.
Compensating energy firms whose owners are among the wealthiest people in the country will not be popular. Especially in a situation where the problem with high electricity prices persists in the Czech Republic and when producers still had record profits last year as a result of wartime market fluctuations, which were not always taxed with an extraordinary windfall tax.
Within the five-color coalition, there is still no clear agreement on how to deal with the problem. Proponents of the proposed solution are betting that subsidizing energy companies will not be popular, but the public will be even more frightened by the sight of self-sufficiency and the risk of blackouts, even if only theoretical.
For these reasons, even the parliamentary opposition approves some form of support for coal. “The possibility that we will risk a lack of electricity is unacceptable. It will be a big problem for the next government and we must not accept that risk,” says former Minister of Industry Karel Havlíček for ANO.
