Czech industry ministry wants to contribute only CZK 9bn to supported energy sources, leaving end customers to again pay tens of billions

The Ministry of Industry and Trade (MPO) submitted a draft government regulation on Monday, 25 September, setting the funds to be provided from the state budget for supported energy sources (POZE) in 2024. The proposal envisages funds of CZK 9.35bn. According to an estimate by the Energy Regulatory Office (ERÚ), which sets the level of support each year, total support is expected to amount to around CZK 36bn. If approved, the “POZE contribution” item should therefore return to end customers’ bills.

As part of the interministerial consultation process, the MPO did not comply with the ERÚ’s request to increase funding from the state budget. The ERÚ requested that a larger volume of funds be directed from the state budget to supported energy sources, citing rising costs of other regulated components. However, the ERÚ’s request was rejected based on a decision by the coalition parties due to the need to consolidate public finances.

The state has been covering payments associated with the POZE contribution from October 2022 until the end of this year, which has had a negative impact on the state budget.

However, when presenting the Consolidation package in May this year, Finance Minister Zbyněk Stanjura sparked controversy by stating that the contributions would not return to end customers’ bills, but that operating support for existing sources would be cut, citing an MPO analysis. According to the editors of SeznamZpravy.cz, however, this analysis does not/did not exist. According to his statements, the finance minister’s main aim was to limit support for photovoltaic power plants (PV) from the years of the solar boom. In this case, however, an MPO analysis does exist, stating that the support meets the definition of “adequate” support under current legislation, or rather that measures already adopted were sufficient (a solar levy was introduced) (more here).

Total costs for POZE in 2024 are estimated at CZK 36bn, with CZK 26.65bn falling on end consumers. In 2021, total support amounted to CZK 40.8bn, while the state contributed CZK 27bn under a government regulation at the time. The history of support provided and state subsidies can be seen here.

The maximum possible payment for supported energy sources under Act No. 165/2012 is CZK 495/MWh excluding VAT, which is generally applied at the low-voltage (LV) level. At higher voltage levels, calculation based on contracted reserved capacity is more commonly used – higher charges than in previous years can be expected there.

Earlier this month, the MPO submitted an updated climate and energy plan, whose objective is to establish a “transparent and predictable investment environment”. Given the further planned development of energy sources, cutting support after more than 10 years of operation would trigger arbitration claims against the Czech Republic, which would significantly undermine predictability from investors’ perspective, while the outcome of such disputes would be highly uncertain. A return of POZE contributions to bills is therefore more likely.