Czech Energy Industry

The energy industry is one of the most important sectors in the Czech Republic. Traditionally, we are very strong in the area of engineering and the manufacture of power-generating facilities, which the industry can build and operate efficiently, including nuclear power sources.

The Czech Republic is self-sufficient in electricity production, based predominantly on domestic brown coal deposits and nuclear power sources. On the other hand, natural gas and oil are imported from politically unstable countries, which may endanger safe and reliable supplies in future. The adequate capacity of national and international transmission facilities creates prerequisites for international trade in electricity. The energy sector is a stable branch in the Czech Republic, which attracts foreign investors and creates good prerequisites for the further development of Czech industry. The Czech power industry is still dominated by coal resources. Traditionally, with the largest proportion of energy being generated by brown coal-powered power stations, the second largest electric power source in terms of output in the Czech Republic is the Temelín and the Dukovany nuclear power stations. Despite the protective measures and restrictions taken by the government, the Dukovany and the Temelín power stations in 2020 narrowly surpassed the 30 billion kilowatt hour mark in electricity supply, confirming the key position of emission-free energy sources in the Czech Republic. In 2020 the Temelín power station generated 15.75 terawatt hours – historically its third highest output

PHOTOVOLTAIC BOOM

Solar energy is one of the pillars on which the European Union wants to build a greener society, and that is why the popularity of photovoltaic power plants is growing. No wonder that in the long run electricity prices have been growing, while the prices of the solar systems have been declining. What

DYNAMIC RESEARCH PROJECTS IN POWER ENGINEERING The Czech power engineering industry does not entail the mere operation of power stations, coal mining and photovoltaics. In addition to all of these, the Czech Republic has a number of important programmes and research projects it can be proud of. Řež Research Centre: the construction of the SUSEN infrastructure project is completed and research is continuing. The extensive research base for nuclear technologies in Řež near Prague and in Plzeň is already in operation. The SUSEN workplace in Plzeň focuses on the research of nuclear fusion, materials, diagnostics and testing for the purposes of the power industry. An important part of the SUSEN project in Plzeň are the nondestructive defectoscopy laboratories. The material research laboratories verify the firmness, resistance, and service life of metals and welds. Broader contexts of “pure” energy generation are being sought by the Advanced Photovoltaics Centre being built in Prague, in addition to seeking ways of raising the efficiency of solar panels. At the birth of this ambitious centre were graduates from the Nuclear Engineering, Civil Engineering, and Electrical Engineering faculties of the Czech Technical University in Prague. The Centre brings together all aspects of Photovoltaics, from theoretical Physics, which will help to improve the efficiency of solar cells, to technological problems, the testing and diagnostics of solar panels and their integration into the structures of buildings.

trends are to be expected in energy prices in 2021? Probably those tending upwards, as shown by figures published by ČEZ Sales, one of the main providers of photovoltaic panel installations in the Czech Republic. In the first five months of 2020 the firm installed 238 solar systems on Czech roofs, a 54 per cent increase in comparison with the same period in the previous year. The upward trend has not been stopped even by the Coronavirus pandemic. In the Czech Republic, photovoltaic power stations are installed on the roofings of large carparks outside shopping centres or employee carports. The largest carport for 322 cars with a 820 kilowatt photovoltaic power station is currently being built outside the Dukovany nuclear power plant. The equipment worth CZK 60 million is using double-sided panels, another photovoltaic technical novelty, producing power not only from direct sunshine, but also from the light reflected from the cars parked there. Such a solar park is expected to generate about 20-25 per cent more electricity than conventional panels. The largest roof power station was installed by Škoda Auto in Mladá Boleslav in 2020. Photovoltaic stations on company and carport roofs in Mladá Boleslav are expected to generate more than 450 megawatt hours of green electricity, which the car factory will use for its own immediate consumption. The excess electricity will be stored in batteries. In 2020, a total of 1373 commercial photovoltaic facilities were installed on the roofs of companies and factories with a total output of 28.8 MWp, according to the Solar Association statistics. Nearly four times more small stations were installed on the roofs of family houses, although their aggregate capacity was only 22.6 megawatt hours.

BATTERIES ARE BECOMING INCREASINGLY POPULAR

Batteries are becoming increasingly popular, both with households and industry. In 2018, for example, the number of hybrid solar power stations with batteries installed in family houses increased by leaps and bounds. Several projects of larger batteries will also be realised in industry. For the time being, however, the Czech Republic is not prepared for the installation of large battery systems, and the two large batteries existing in the country do not as yet have the required legislative backing. On the other hand, accumulation is a challenge for Czech development firms, some of which have already taken the initiative. For example, the battery from OIG Power succeeded in the innovative project competition in Spain, and another Czech firm, Energon, has successfully tested its big stationary battery in the German market. The development of accumulation is also an opportunity for the manufacture of battery systems, and the Czech Republic is already preparing to start the production of batteries for energy storage facilities and electric car charging stations.

ENERGY ENGINEERING

Czech energy engineering is currently showing a slowdown, caused primarily by low electricity prices, which in turn led to a halt in new power plant construction. The herald of a brighter morrow is seen in the rapid development of know-how and extensive production capacity, traditions and a good name worldwide. Especially strong instances of this can be found in the East European countries, the former Soviet Union, and in the Middle East, where Czech companies were successful suppliers in the past. A solution is to offer new products and to establish a footing in new markets. One of the big firms holding a prominent position in this field is the Vítkovice Machinery Group, comprising 30 firms concerned with the preparation of large investment projects. Another important player is Doosan Škoda Power, s.r.o., a member of Doosan Heavy Industries, based in Plzeň, with a century-long tradition in turbine manufacture. The company also manufactures turbo generators, heat exchangers and engine rooms, using its own development and product testing. Also well known is Modřany Power, a.s., an important manufacturer of piping systems for the energy industry, which are exported to some 40 countries worldwide. It also supplies parts for the gas industry, petrochemistry, and construction.

ENERGY STABILITY IN THE CZECH REPUBLIC AND ATTRACTIVENESS FOR FOREIGN INVESTORS

From the foreign investors’ point of view, the Czech Republic is very attractive as regards the energy sector, both concerning legislation and future development. More investment can be expected to go into production facilities, cross-border installations and protection against electricity spilling across the border, especially from Germany, investment in the

ENETEX-TEP s.r.o. – on the market for 21 years

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We are specialists in the branch of automation and technology and power drives. Since 2000, our supplies have focused on a wide range of technological processes suitable for various industries – energy manufacturing, building, metallurgical, water supply, environmental, automotive and many others. We have been supplying our solutions into 25 countries all over the world.

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We will draft a comprehensive solution to manufacturing automation processes (custom-tailored or optimisation of the existing solution). Our solutions are based on the HAZOP analysis; We perform power measurement and regulation design services as an integral part of our comprehensive supplies of automation projects as well as a separate service. We supply comprehensive, custom-tailored field instrumentation; We do not only draft and design industrial automation – we also provide turnkey solutions. Thanks to this fact we obtain great feedback for upcoming projects; We specialize in PLC supplies and programming for the Siemens, Allen Bradley and Schneider Electric brands, and partly also the Mitsubishi brand; We create SCADA applications in WINCC, Promotic and other SCADA systems; We supply industrial electric drives with the power output of up to 2MW, in accordance with specific requirements presented by individual customers. We specialize in the brands of TOSHIBA, SCHNEIDER ELECTRIC and SIEMENS, both in the stage of design as well as in connection commissioning and servicing; Following completion of each of our projects we stay in touch with our customers, and we participate in further development and improvement of the level of used technologies, thus ensuring that they comply with the highly demanding requirements applicable to minimisation of costs and maximisation of utility value.

infrastructure in the area of distribution and the completion of the backbone gas pipeline running from north to south. The parameters of the updated State Energy Concept and the draft to regulate the pipeline system create good conditions for ensuring a reasonable payback period for the capital invested.

OBJECTIVES AND AIMS OF CZECH ENERGY INDUSTRY

The future structure of the energy mix and the strategy of the Czech Republic are outlined by the State Energy Concept, approved in 2015. The document envisages a relatively massive reduction in the use of solid fossil fuels, from the current 40 per cent to 1117 per cent, which mainly concerns black and brown coal. Reduction is also envisaged in the use of liquid fossil fuels to 14-17 per cent from the present 20 per cent, while the importance of nuclear power and renewable energy sources is to increase. Concerning natural gas, pressure is expected to grow on ensuring the reduction of its use, but in reality it is very likely that its importance will grow, especially with regard to the flexibility of this fuel. The Czech Republic will continue to stand on the same pillars on which it has been standing to date: nuclear energy and domestic coal, with the use of domestic renewable sources. Nuclear energy is to be supplemented with coal and gas. Therefore an important role will be played by accumulation of heat in hot water tanks and electricity in accumulators to ensure a short-term balance. The development of technology for hydrogen and methane production from electricity for the seasonal storage of summer surpluses gained from renewable sources for winter use will also be important. The role of coal will be weakening with the gradual exhaustion of its domestic deposits, while the role of renewable energy sources, nuclear sources and gas will be strengthening. As regards vehicle drive development, greater space exists for the use of methane and hydrogen obtained from renewable sources, rather than for electromobility. The Czech energy industry is becoming increasingly tied to the development of the European power industry, with all its pros and cons. It will be very important to prevent the transfer of the risks and costs arising from the source irresponsibility in electricity production in other EU states to the Czech power industry. Distributors will have to change into platform providers and link together local plant operators with battery storage facilities, electric car charging stations, smart city applications and other entities. Grid operators will thus be playing the central role in the framework of the transformation of the Czech power industry. The year 2021 will be a demanding one for all the energy market actors. In the Czech Republic, key act amendments are expected to be passed by Parliament, and the European Commission, too, will come forward with the revision of important directives. A major event will be the approval of the form and the follow-up invitation of tenders for the construction of new blocks in the Dukovany nuclear power

plant. The launch of the Modernisation Fund will also have a great impact on the situation in the energy industry. Its fate will determine the fixing of the final horizon for the closing down of coal mining in the Czech Republic. Also important, in this connection, will be the debate on the transformation of the heating industry and the supply of heat to households. Also, the Czech Republic will have to define steps regarding the growing demand for net mobility, further development of renewable energy sources and related measures in the electricity transmission and distribution networks.

KEY ACTORS IN THE ELECTRICITY AND GAS MARKETS IN THE CZECH REPUBLIC The most significant player in the Czech market is the ČEZ Group, currently figuring among the ten most important players in the European market. ČEZ is a vertically integrated company, operating in the area of coal mining, conventional and renewable energy sources’ production, trading, electricity and gas sales, electricity distribution, energy services, and telecommunications. The ČEZ Group has the capacity to react flexibly to changes in the energy sector which, according to EBITDA, ranks it alongside the best energy companies in Europe. Net profit of ČEZ Group in the first half of 2020 was CZK 14.7 billion, which is CZK 1.3 billion more than in the previous year. The Group´s operating profit before interest, taxes, depreciation and amortisation (EBITDA) rose by 11 %, to CZK 38.7 billion. The higher profit is due especially to the growth of the realisation prices of electricity produced in the Czech Republic thanks to its multi-annual advance sale in the wholesale market in Germany and additional profits from commodity trading. The COVID-19 pandemic has a relatively limited impact on ČEZ Group (less than CZK 3 billion). Its operating revenue amounted to CZK 106.3 billion, which is 6 % more year on year. Electricity production from traditional sources declined by 8 % year on year, mainly as a result of the growth of emission permit prices and the decline in electricity prices caused by the COVID-19 pandemic, the layoffs of the production sources and the gradual phasing out of obsolete coal power plants. Over the past five years, the ČEZ Group reduced the production of electricity in those power plants by 24 %. The production of electricity from new energy sources increased by 5 %, mainly thanks to the better weather conditions in Germany and Romania. The second most important actor in the Czech market is Innogy Energie (formally the RWE Group), which is concerned with gas transmission, distribution and sales, and energy services. Other important players in the Czech market include the E.ON Group, selling and distributing electricity and gas and providing energy services. The Group’s portfolio also comprises smaller manufacturing facilities. Another company with a similar structure is Pražská energetika, operating on the territory of the capital city of Prague, which also invests in renewable energy sources outside its own distribution area. The Veolia Energie Group in the CR, too, is one of the largest producers and suppliers of heating, cooling, electricity and other energy commodities. At the same time, it is a European leader in providing energy services for cities, villages and their inhabitants, healthcare facilities, schools, industrial enterprises, public institutions and clients in the tertiary sector. Bohemia Energy controls about 3 % of the electricity and natural gas markets and is still growing, thanks to the acquisition of its weaker rivals. There are also a number of alternative electricity and gas suppliers and energy service providers in the Czech Republic. Energy services are another step towards broadening the activities of vertically integrated companies and a segment with great potential for future development.