Energy Sector Issues Will Keep Us Up At Night
Grid stability is a must, given the anticipated boom of renewable energy generation in Germany. This will certainly give rise to discussions over the EU’s uniform energy policies and powers each EU country will want to retain in such an extremely important and strategic industry.
However, the current situation on energy markets does not favour the development of new large regulated power plants. Under certain circumstances, subsidized prices for renewable energy push the price for power on power exchanges to negative values. As a result, the question of how to deal with renewable energy and national subsidy plans obviously must be answered. The new Supported Energy Sources Act includes a complete set of rules and policies for calculating renewable energy prices. The Czech Energy Regulator, for example, is required not to support a certain type of supported generation facility if the goals imposed by the Czech National Action Plan are met. It is therefore possible that certain renewable energy sources will not be granted support as of 1 January 2014.
The duty imposed on power generators to purchase all emission allowances commencing in 2013 just completes the image. Fortunately, thanks to the derogation package (a time-limited free allowance allocation system) this will not have such a devastating impact on the Czech economy.
The free allocation issue is closely associated with the Czech energy concept, which primarily counts on burning brown coal and nuclear power. Although a fairly unique approach in “post-Fukushima” Europe, it is not totally ill-founded given the Czech Republic’s geography and natural resources. The anticipated fight over who will finish the Temelín power plant cannot be omitted in that respect. It will certainly be very interesting to watch how the tender develops given the disqualification of Areva. Nevertheless, thanks to the dropping price of electricity on European markets, such a long-term investment can hardly be expected to go unguaranteed by the government. However, a big question mark still remains.
Players in the Czech gas industry will surely be watching with anticipation the sale of Net4Gas, a strategic gas transmission system operator. Moreover, there is the issue of shale gas. Despite last year’s great wave of protests, shale gas companies will hardly give up their efforts to explore and potentially extract Czech shale gas reserves. Nevertheless, their position will be more difficult due to the poor exploration results in Poland, especially since Polish shall gas reserves originally looked very promising.
Power trading companies’ efforts to win end consumers will continue and can be expected to escalate this year. Households, many of which have learned their lesson, are becoming more knowledgeable and selective in choosing their power supplier. Given the competition, energy and services portfolios are often expanded and consolidated. Logically, small suppliers who are slowly becoming rising stars are therefore likely to be acquired by bigger energy players. The prosperity of some small suppliers is even prompting thoughts of providing telecommunications services, which is quite rare in the energy sector.
Last but not least, the traditionally centralized Czech heat generation industry will continue dealing with how to survive the emission-limit pressure on their facilities, which will soon reach the end of their operational lifecycle, and with the existing laws which fail to support investment in the heat industry, which would make sense in the Czech Republic. Let us wait and see whether the changes intended to prevent the central heating generation facilities from crumbling will see the light of day this year.