Czech heating plant in Plzeň prepares CZK 7 billion coal-to-gas project

Plzeňská teplárenská is preparing a project to switch from coal to gas and hydrogen. It is the largest investment in its history, at around seven billion crowns. The reasons are mainly economic, namely the sharp rise in spending on emissions allowances, but also environmental. Construction will take place while the plant remains fully operational, and the project will be completed by 2029, the plant’s CEO Václav Pašek told ČTK. He expects the investment to pay for itself within ten years. The largest heat supplier in western Bohemia is majority-owned by the city of Plzeň, with 35 percent owned by billionaire Daniel Křetínský’s EPH group.

„We expect a 50 percent grant, or 3.5 billion crowns. The funding will come from the Heat call under the European Modernisation Fund, which is expected to have 200 billion crowns,“ Pašek said.

The company submitted its application to the State Environmental Fund nearly a year ago, accompanied by a large number of files containing analyses. It has already been assessed and sent to the European Investment Bank in Brussels, which will make the final decision. „We held talks at the Ministry and the Environmental Fund on Wednesday, and things look promising,“ he said. The company is prepared to cover around 1.5 billion crowns from its own funds, which it has been saving since 2020, and will need two to 2.5 billion crowns from banks or shareholders.

„We have completed two of the three pillars of decarbonisation – using municipal waste and burning biomass, which together meet almost 40 percent of Plzeň’s energy needs,“ Pašek said.

The waste incinerator is fully operational and paid for, and the company completed a second biomass boiler this year. „The main pillar now is replacing coal with natural gas,“ the CEO said. The company will replace its coal boilers with gas turbines and heat recovery boilers for combined heat and power generation. They will also need to be able to burn a hydrogen blend, which has future potential.

Because of the time and cost involved, the plant has divided the project into two phases: the first combined-cycle plant will be built at the Doubravka heating plant, and the second at the Energetika facility on the site of the Škoda works in Plzeň. „We are now preparing to select an EPC contractor (which will deliver the project and construction on a „turnkey“ basis) for the first phase. The grant could be approved in the first quarter of next year. As soon as the first phase is complete, we will start work at Energetika, where costs will be higher because it will be a greenfield project,“ the CEO said. The company has already launched a separate tender for the gas turbines, which the winning supplier will then install in the system.

After decarbonisation, the heating plant’s capacity will be roughly the same as it is today. The investment should pay for itself within ten years, Pašek said. It also includes smaller backup gas boilers, which would supply heat if the combined-cycle units were unavailable.

Opposition councillors Petr Suchý and Michal Vozobule of TOP 09 questioned why decarbonisation had been estimated at four billion crowns last year and warned that the cost could feed through into heat prices. Another opposition councillor, Pavel Šindelář (ODS), proposed setting up a working group with opposition representatives to improve access to information about the project. „Based on analyses, research into market conditions and the equipment available, the technology mix at both sites is changing. And then there is inflation, materials price indices and more. We do not make these figures up; we hold monthly review meetings to refine the budgets,“ Pašek said. He added that prices could not be disclosed while the public tender for the turbines was under way. The tenders are still in progress, so the figures will be refined,“ said councillor Petr Fišer (ANO), chairman of the heating plant’s board.

The company has committed to reducing carbon dioxide emissions, but must carry out decarbonisation mainly for economic reasons. „Emissions allowance costs are rising enormously and are expected to reach 1.4 billion next year and two billion in 2025, which is absolutely crippling for us,“ Pašek added.

Plzeňská teplárenská posted a net profit of 807 million crowns last year, more than double the previous year’s figure. Revenue rose by 29 percent to 5.6 billion crowns. Electricity sales were the main driver of the significant increase in the figures. Of the profit, 270 million crowns went to dividends, of which the city received 176 million. The company supplies 54.000 households. In January this year, it raised heat prices by an average of 4.8 percent to 626.67 Kč/GJ including VAT; in January 2022, it had raised heat prices by 9.7 percent. The plant’s general meeting will decide on prices for next year on 28 November. The board proposed a 40 percent price increase, which Plzeň’s city leadership rejected, approving instead a 28.3 percent increase.