When will Czech coal-fired power plants close?

Various years are mentioned in discussions about the end of coal-fired power plants in Czechia. The government policy statement cites 2033, the former coal commission once recommended 2038, and coal advocates believe they will remain in operation long after that. However, a political decision will only determine the latest possible date by which a coal-fired power plant can operate. The real market situation may set a much earlier cut-off point. It is even very likely that many Czech coal-fired power plants will start disappearing from the market well before 2030. The reason will be economics.

It is simple mathematics. To generate 1 MWh of electricity, an older lignite-fired power plant needs around 1 CO2 allowance. An allowance for 2026 is almost as expensive as electricity. The plant sells that for around 106 euros and must buy the allowance for 98 euros. This leaves the plant with just a few euros to pay for coal, employees and essential maintenance. And that is not enough. The required amounts in basic operation are in the range of several tens of euros per megawatt-hour. Moreover, if we used the plant less (for example because of the expensive allowance), these costs per megawatt-hour would rise further. They are mostly fixed: employees and maintenance must always be paid for.

With expensive allowances and cheaper gas, coal-fired power plants may therefore end up at the end of the cost curve – generation from them will be too expensive and they will therefore be dispatched only rarely. Another source will have to take over their role.

In Czechia, the impact of growing renewable generation in neighbouring countries is vastly underestimated. German renewables significantly push down wholesale prices across the region, and this effect will become increasingly important. Ultimately, this double pressure – expensive allowances on one side and low electricity prices from renewables on the other – will overwhelm coal power. The energy sector is changing fundamentally, and the cards are being dealt again. Old experience is therefore losing its validity.

Czechia is significantly lagging behind in renewables, and if we want cheap electricity in the future, we must rapidly step up renewables and accelerate their deployment. Not block them, as still happens in many cases here. We are therefore likely to see increasingly often that electricity in Germany is tens of euros cheaper than in Czechia at certain times. Solar power has recently begun to be built more widely again in Czechia, but wind power plants would also need to be added to ensure security of supply. They generate mainly in the winter half of the year, when electricity consumption is higher and solar plants generate little.

The solution? A combination

Let us return briefly to conventional sources in conclusion. To ensure sufficient capacity, Czechia will need to notify the European Commission of so-called capacity mechanisms. This means approving support for power plants that will be able to cover peak instantaneous demand under all circumstances. This will primarily be the role of gas-fired power plants, including combined-cycle plants. By contrast, coal will have a small role in capacity mechanisms. Capacity mechanisms are quite stringent for coal and, under a number of arrangements, allow operation for only around 300 hours a year. That is very little when you also have to pay for a lignite mine alongside the power plant.

A great deal of work lies ahead. In this case, the crux is not money but simpler permitting processes, so that we are able to build power plants quickly. We need to simplify them substantially through legislation, otherwise high electricity prices will threaten us again in the future. The long-term solution is a combination of solar, wind, nuclear power, flexible gas-fired sources and storage.

Pavel Řežábek, Chief Economist at ČEZ