Power policy

The Czech Republic’s NECP prioritizes biomass alongside wind and solar to decarbonize electricity production. The country does not 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. However, with the amendment to the law governing the subsidy of renewable sources of energy in 2022, the government will be able to resume auctions aimed at granting support to renewable energy power plants.

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 and 2013 effectively put a moratorium on further deployment, with renewables additions averaging 30 megawatts a year since then (with 28 megawatts in 2021).

The country had a green tariff program that has been closed to all renewable energy technologies except small hydro since January 2014. The Czech Republic is aiming for renewables to account for 22% of final energy consumption by 2030, which is less than the European Commission’s recommendation of at least 23%.

The country is 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 and they can opt for tariffs that charge different rates at different hours, suggesting there is little impetus for households to install small-scale solar photovoltaic (PV) systems or for 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, state-owned utility CEZ still accounts for more than two-thirds of generation. CEZ is also the biggest renewables asset owner in the country. Retail customers can choose their supplier but there are essentially just five major retailers operating 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 because of strong government and public support, a wish to boost energy independence given the country’s reliance on Russian gas, and a need to replace lost capacity through the phase-out of the aging coal fleet, which currently makes up 44% of the installed capacity in the country. Potential challenges will be deciding how to finance new reactors and mitigating anti-nuclear pressure from some of the country’s EU neighbors.

Doing business and barriers

Onshore wind potential is limited by land availability and public acceptance issues. But the main challenges for doing business in the Czech Republic are an inefficient bureaucracy, complicated 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 Republic, with Erste Group Bank and Commerzbank topping the list.

EV market

Car manufacturing is a significant sector in the Czech economy, so 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 steadily, rising from 5,329 electric and hybrid vehicles in 2020 to 6,408 in 2021.

Due to a fuel crisis, excise taxes were temporarily reduced for diesel and unleaded petrol from June 1 to September 30, 2022.

EV policy

The Czech Republic’s NECP includes 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 with about 9,969 EVs in 2021. An incentive scheme for companies to purchase EVs is suspended but the Ministry of the Environment will devote 600 million koruna (€23.74 million) from the National Recovery Plan by the end of 2023.

Regarding EV chargers, the NECP states that 19,000-35,000 units will need to be deployed to meet the country’s clean transport targets.. 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 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. Heat pump sales have increased slowly over the years, with 23,000 in 2019, 24,344 in 2020 and 25,074 in 2021. Nonetheless, the share of heat pumps in the heating sector is still less than 3%.

Buildings policy

The country is aiming for renewables to account for 31% of final energy consumption for heating and cooling in 2030. To help achieve this goal, the government has implemented a boiler scrappage scheme 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 supports 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.