Czech ministries and businesses broadly back proposal to support gas-fired power plants

Ministries and businesses broadly support a proposal by Industry Minister Lukáš Vlček (STAN) to support gas-fired power plants. Vlček submitted the relevant amendment to the Energy Act as an MP late last year, together with three other coalition MPs. The government will discuss it on Wednesday. According to the explanatory memorandum, the amendment is intended to ensure the capacity needed to generate electricity as coal is phased out. The bill is also intended to speed up the conversion of coal-fired power plants to gas. Information on the government website shows that the Green Circle (Zelený kruh), an association of environmental organisations, has raised objections.

According to the bill’s sponsors, gas-fired power plants are to play a key role, primarily as backup capacity capable of stabilising variable output from renewable sources. „The proposed amendment to the Energy Act responds to a situation in the energy market that requires measures to ensure the Czech Republic’s energy security. These measures should include ensuring stable and reliable energy supplies for consumers and businesses,“ the MPs, led by the minister, write in their justification for the proposal.

Among other things, they propose that the Energy Regulatory Office be able, in cases of urgent need and in the public interest, to require an electricity generation licence holder to generate electricity beyond the scope of its licence.

They explain that, given the high share of coal-fired sources in electricity generation, there is a risk that the uncontrolled shutdown of coal-fired sources could threaten the reliability of electricity supplies and reduce energy security. „Uncertainty over electricity prices and emissions allowance prices could lead power plant operators to decide to shut down their facilities relatively quickly for economic reasons,“ they warn.

The Ministry of Finance (MF) raised concerns during the consultation process about the newly imposed obligation, but took a positive overall stance. The ministry pointed to the explanatory memorandum’s assertion that the amendment would have no negative social impacts or impact on the state budget, and would have a positive impact on the business environment. The Finance Ministry said this raised doubts.

„Costs could arise in particular from the possibility of requiring electricity generators to produce beyond the scope of their licences, which would entitle them to compensation for verifiable losses and a reasonable profit,“ the MF warned.

It also warned that imposing an obligation beyond the scope of a licence could increase the overall price of electricity, particularly under unfavourable market conditions.

The bill’s sponsors say the proposed measure serves as a safeguard against a situation they consider highly unlikely. According to ČEPS, the transmission system operator, it affects only a limited number of electricity generating facilities whose operation is essential to the system. The Ministry of Industry itself expressed support for the amendment. It was also backed by the Czech Chamber of Commerce and the Confederation of Industry of the Czech Republic.

By contrast, the Green Circle, an association of conservation groups, has raised major objections. It says the proposed amendment is likely, among other things, to conflict with European law, which prohibits support that distorts competition. It also argues that the mechanisms needed to maintain district heating and ensure adequate generating capacity are already in place, since the current wording of the law allows a heat supplier to be ordered to continue operating and entitles it to continue generating and selling electricity.