Czech capacity auctions will be pushed back to next year. According to the Ministry of Industry and Trade, the first price bids could be submitted in the first quarter of 2027. For investors in new power plants, this means further uncertainty when deciding whether to pursue projects worth billions of crowns. And time is becoming an increasingly important factor for the Czech energy sector.
In August, ČEPS announced auctions for delivery periods starting in 2030, 2031 and 2032. A change to the schedule is now being prepared which, if the current lead times are maintained, would push these periods back by a year. The first capacity payments could therefore arrive no earlier than 2031, with the main auction planned for 2033.
Delaying the auctions could postpone investment
Preparing a new power plant takes several years, from obtaining permits and connecting to the grid to ordering equipment and securing financing. Czech projects are not competing for technology only with one another. Manufacturers of turbines, cogeneration units and other key equipment operate in a global market, and their production capacity is limited. We are therefore competing for the same supplies with investors from Germany, the United States and other countries.
If the Czech auctions are delayed, foreign investors may be able to order the turbines and other equipment they need sooner. For Czech projects, this would mean not only longer waits for deliveries, but also the risk of missing the deadlines set by the capacity mechanism.
The capacity mechanism is intended to help finance new generation assets. It offers investors longer-term revenue in return for being ready to supply capacity when the grid needs it. The auction result can therefore be crucial in deciding whether to go ahead with a project. The longer the auction date remains uncertain, the harder it is to plan the next steps.
The rules are changing in the right direction
The proposed changes also include some positive measures. The preliminary assessment of projects is to be simplified, and some investment cost data could newly be substantiated by a sworn declaration. ČEPS is expected to cover the costs of testing the availability of generation assets.
I consider the proposed removal of conditions that could automatically terminate capacity contracts if related legal or pricing regulations are adopted late to be particularly important. If such a contract is to serve as the basis for financing an investment worth billions, it must provide an appropriate level of legal certainty and predictability.
I therefore welcome the improved rules. However, their preparation must not take longer than necessary. Announcing an auction alone will not build a power plant.
Germany: support and competition
In addition, the European Commission approved a capacity mechanism for Germany this September, with projected costs of up to 35.2 billion euros. Germany aims to ensure sufficient generation capacity from 2031, when Czechia could also face the risk of shortages. New German generation assets could help the Czech grid in the future, provided they are actually available when needed and the transmission grid allows imports. ČEPS must assess how any contribution from abroad would affect the amount of capacity auctioned in the Czech auctions. At the initial stage, however, we cannot automatically assume a significant reduction in Czech demand for capacity.
The Czech energy sector is preparing for the gradual phase-out of coal-fired power plants. New generation capacity must therefore be built well in advance. The capacity mechanism can provide significant support for the necessary investments, but its rules must be clear and its timetable credible.
A one-year delay to the auctions does not necessarily mean construction will be delayed by a year. However, it could postpone investment decisions, which in turn affect equipment orders, financing and construction itself.
