Where do we go from here? Czech energy policy in a desperate need of clear guidance

The European energy sector has gone through some turbulent times in the past ten years. Supply crises, emission cutting, changing energy markets, volatile prices, etc. Each and every one of these factors influencing the situation, bear the same information – the sector is changing and so does the way we perceive it. It is obvious that pertinent policies need to address the changes more than ever. As a country in the very center of the European continent, the Czech Republic is literally at the crossroad of contemporary trends in the sector. Be it  Germany´s massive introduction of renewables into the energy-mix coupled with nuclear phase-out (‘Energiewende’), changes in electricity and gas trading or EU´s pressure on cutting emissions and efficiency, the Czech Republic has to deal with all of them. In order to navigate through these turbulent times, the country undoubtedly needs guidance based on policies that provide clear clues. However, it seems that the Czech political representation is not able to formulate this type of policy and thus leaves the Czech energy sector in uncertainty.

After decades of centrally planned economic strategies and policies, the Czech energy sector spent first one and a half decade reforming itself. In 2004, the Czech Ministry of Industry and Trade, as the institution responsible for energy policy making and implementation, published the State Energy Policy - a policy document that, unlike its predecessors from 1990s, was setting guidelines for future development of the sector. (Ministry of Industry and Trade 2010) The idea behind this document was to present a clear vision of development that would provide stakeholders with a decent amount of certainty for their investment plans and policies. The document set three main priorities - namely security, independence and sustainability. The whole document revolved around the need to build a firm home basis of energy sources and securing the country against supply curtailments. The idea of being an independent ‘energy island’ was strongly resonating throughout the entire document. Although regular updates were planned, it was not until 2015 that a new version was issued after a lengthy and troubled process. (Ministry of Industry and Trade 2015) In spite of some rhetorical changes and rather formal reformulation of main priorities (namely security, competitiveness and sustainability), not much has changed in terms of the perception of the Czech energy sector. The document keeps on suggesting that the country should remain as self-sufficient as possible, stockpiling energy sources and relying on domestically produced energy while pro-longing current supplies by increased efficiency of use.

It is important to understand that past years brought a series of formative events that changed the landscape substantially. Especially the ever-growing influence of the EU´s Internal Energy Market cannot be ignored. To put it simply, the era of centrally-planned, state-guided energy sectors where it was all about meeting the base-load and peak-load demands and where rigid supplier-consumer relations dominated the arena is gone and the Central-European states have to face the reality. It seems that the Czech ministry is still not able or willing to fully grasp the reality that has substantially changed since the early 2000s when the first conceptual energy policy document was formulated.  What is even worse, however, is that the ministry is not willing or able to come up with a clear and bold policy responding to current challenges.

Probably the finest example of this inability is the issue of limitations on lignite mining in the region of northern Bohemia. In 1991, the then government decided to impose territorial ecological limits to mining, obliging mining companies to halt excavation in certain areas. (Government of the Czech Republic 1991) At that time, the de-facto territorial ban on mining was perceived as a sane decision in the most pollution-stricken region of the country. However, as the time went by and reserves in the non-restricted area were thinning, mining companies started to push the state to lift the ban. The vivid discussion dates back to 1998 when the Czech Mining Authority mentioned the need to make the final decision on the remaining sources of lignite located beyond the territorial ecological limits. (ČTK 2016) The discussion then became very heated, as the decision was not just about environmental issues, but was also threatening the town of Horní Jiřetín and its remote part Černice with complete demolition. If limits were lifted, the open-pit mine would approach also close to city of Litvínov. This instigated a strong response, creating local opposition to the issue, leading to local referendums in 2006 and becoming important cleavage in local politics since then. The issue is even more salient, as the region of northern Bohemia is among the poorest in the Czech Republic, struggling with a structural unemployment and failing industrial sector unable to cope with economic transition. Therefore, any government in past two decades was not willing to make a final decision on limits and fate of Horní Jiřetín. Even the State Energy Policy (i.e. the document that deals with energy policy guidelines to the future) was not able to provide a clear answer to the question, which can be perceived as a failure of the officials behind the document.

When the decision was finally made in 2015, it was again far from being clear, bold or with a clear long-term policy in mind. (Ministry of Industry and Trade 2017, 49) As the Figure 1 shows, there are two open-pit mines, in which untapped coal reserves are located beyond territorial limits. The debate was mostly centered on the mine ČSA, where the majority of resources are located (prospectively up to almost 0,5 billion short tonnes of lignite). The 2015 government decision lifted limits on Bílina mine, where there are basically no threats to human settlements. However, the final fate of ČSA mine is yet to be decided. The governmental decision confirmed that limits on ČSA mine will remain in place, yet, coal reserves beyond limits were not written off, keeping them de-jure as active. The status of limits can therefore be contested any time again. In addition, no plan on transformation of the local economy after expected shutdown of ČSA mine in early 2020’s was laid out.

The second example of the absence of clear guidance and sober policy is the way how energy efficiency measures and renewables have been treated. The energy efficiency is moving to the center of attention, with EU “Clean Energy Package” stating, that “efficiency first” should be a key principle of future energy and climate policy. (The European Commission 2016) Goals of decreasing energy consumption by 20% set forth in Agenda 2020 have been increased to 27% by 2030. More ambitious goals of 30% or even 40% have been heatedly discussed since then. The common European approach to energy efficiency is embodied in so-called “Energy efficiency directive” (2012/27/EU) and “Energy performance of buildings directive” (2010/31/EU). These key acts focus on the role of buildings, as buildings provide the largest potential to increase efficiency and decrease energy consumption. (“Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on Energy Efficiency, Amending Directives 2009/125/EC and 2010/30/EU and Repealing Directives 2004/8/EC and 2006/32/EC Text with EEA Relevance” 2012) The Czech Republic decided to achieve its obligations under energy efficiency directives through so-called “alternative measures”. That means energy efficiency is governed by state institutions and bodies, which determine the shape and the way how obligations are achieved. However, the lack of determination and acceptance of the “efficiency first” as guiding principle means that the future achievement of the (self-imposed) Czech efficiency target is at least questionable.

It is worth noting that some measures are highly successful. Green investment scheme “Green savings” is using money from trade with unused emission allowances for retrofitting individual and condominium houses, making housing stock less energy intensive. These houses contribute to lower emissions, potentially bringing more money into the scheme. (State Environmental Fund 2013) Yet, other schemes are more troublesome. Large bulk of proposed measures is reliant on availability of European financing coming from EU structural funds. These funds, provided through operational programmes, were belated by at least two years, though. (Ministry of Industry and Trade 2016) This is especially true for the flagship Enterprises and Innovations Operational Programme. Thus, there were no savings achieved throughout 2014 and 2015, with little new savings achieved in 2016. The programme is currently predicted to yield only nine petajoules of savings out of 20 it was supposed to. (Sochor 2017) In addition to that, most measures are based on one-off grants, which increase efficiency in a single instance, but are not sustainable, as they create little incentive for future efficiency investments.

The case of renewable sources is underlining the overall argument of this article. The support of renewable sources started in late 1990’s, even though it was comprehensively codified only in 2005. At the end of the decade, the Czech Republic decided to provide a generous support to solar businesses through feed-in tariffs. This created a so-called “solar boom”, raising the number of photovoltaic installations sharply in short time span. This is apparent in Table 1.

2004 2005 2006 2007 2008 2009 2010 2011 2012
Installed capacity (MW) 0.13 0.13 0.74 3.4 54 464.4 1959.1 1971 2086

Table 1 - PV installations in the Czech Republic (Vlček and Černoch 2013)

After it was noticed that there are too many installations appearing, the support scheme was shut down. Despite that, the sharp increase in number of installations created a lot of pressure on the Czech electricity grid, as well as high costs imposed on management of new intermittent sources. In 2010, a “solar levy” – a de facto tax on income from production of electricity – was introduced to both mitigate the solar boom and to recover part of rich support from producers. In 2012, this temporary measure became legally institutionalised. Currently, new solar installations are not supported anymore and much more measured approach to supporting renewables in general was chosen. Generally, small installations on buildings are supported only.

To sum it up, the abovementioned examples clearly show the lack of conceptual planning in the Czech energy sector. Unfortunately, as these examples demonstrated, this lack of clear vision not only undermines the future development of the sector as such, but it also leaves a lot of uncertainty that various stakeholders have to deal with. What is worse, in broader perspective, this uncertainty might seriously hinder the ability of the Czech energy sector to cooperate with its neighbours and take part in related sectoral policies of the EU.

Mgr. Martin Jirušek, Ph.D.

International Institute of Political Science of Masaryk University, the Czech Republic

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