Czech Republic Renewable Energy Market Outlook to 2022
Over the years, fossil fuel has played a crucial role in the primary energy mix in the Czech Republic, and it still accounts for the bulk of the total energy supply and domestic energy production. Coal is the major source of electricity generation in the country, followed by nuclear. In 2015, around 68% of energy needs in the country was produced locally, representing approximately 27.8 Mtoe. Primary energy production in the Czech Republic is largely made up of coal (accounting for 59.5%), nuclear (25.2%), and biofuels and waste energy (12.5%). Coal is the only conventional source of energy that is produced in large amounts in the country and therefore, the energy security in the Czech Republic is directly related to its use. During 2005-2015, the nation witnessed a drop in the share of domestic energy production in the total primary energy supply (TPES), from 76% in 2005 to 68% in 2015, owing to the decline in coal consumption, offset by growth in biofuels and wastes, and nuclear power.
Following a surge in 2003 when the 2, 000 MW Temelín Nuclear Power Station was commissioned, nuclear energy in the Czech Republic had witnessed a moderate increase from 6.5 Mtoe in 2005 to 7 Mtoe in 2015. The share of nuclear power in TPES is expected to reach 25%-33% by 2040, driven by the National Action Plan for the Development of Nuclear Energy (NAP NE) approved in June 2015, which ensures the future development of nuclear energy.
Solar photovoltaic (PV), wind power, hydropower, pumped storage, and biomass are the principal renewable energy sources (RES) used for power generation in the country. In 2015, RES accounted for 9.4% of TPES, out of which, biofuel accounted for 8.6%, solar accounted for 0.5%, hydropower accounted for 0.2%, and wind accounted for 0.1%. Over the past ten years, renewable energy production has increased by 95.7% on account of favorable support mechanisms. The renewable sector is supported through either a guaranteed feed-in tariff or a green bonus paid on top of the market price, and the plant operators are free to choose between either options. In addition, operators of hydropower plants may receive subsidies under the Operational Programme “Entrepreneurship and Innovation for Competitiveness,” while operators of renewable energy plants are entitled to priority connection to the grid. Moreover, the use and the expansion of the grid are subject to general legislation on energy.
The Czech Republic aims to achieve 40% reduction in CO₂ emissions by 2030, and a further reduction in emissions in compliance with EU strategies aimed at decarbonizing the economy by 2050 (in accordance with the financial capacity of the country). This has, in turn, favored the growth of non-conventional energy sources in the country to a large extent. The government projections indicate that the share of renewable is expected to reach 17%-22% of TPES by 2040, with biofuel accounting for the significant share (80%), followed by solar (8.7%), geothermal (6.1%), and hydropower (3%).
Solar energy has grown considerably from negligible levels in 2009 to around 0.5% in 2015, primarily due to generous subsidies. In December 2016, the Czech Republic reached a cumulative installed PV capacity of about 2.08 GW. During 2010-2014, the growth of renewable energy sources was supported by a number of different mechanisms, including feed-in tariff (FIT) system (guaranteed price), feed-in premiums (an amount paid on top of the market price for electricity or green bonuses), investment subsidies, and fiscal measures. Two-thirds of the subsidies for RES were going to solar power, which produced only 5% of renewable energy. In 2014, access to the FIT system was ended for new capacity (except hydropower), and there is no longer a FIT support mechanism for wind power, solar PV, biomass, etc. This has created uncertainty in the market. These unexpected changes in the support schemes have altered the remuneration structure of existing installations. As such, these measures have created uncertainty and have undermined investor confidence, besides arguably increasing the cost of capital for future investments. However, auctioning certain amount of capacity of renewable energy production (for example, solar PV) to the lowest request for subsidies or quota obligations is expected to overcome this challenge."