EC clears Czech capacity mechanisms. State to support new power sources

The European Commission (EC) has approved the Czech system of so-called capacity mechanisms for the construction of new electricity generation sources. Under the system, the state is expected to guarantee investors, in the form of state aid, at least a partial return on their investments in new capacity in the coming years. The European Commission announced this today. Setting up capacity mechanisms was one of the energy policy priorities of the ANO, SPD and Motorists government.

So-called capacity mechanisms are used to ensure sufficient energy supply in the grids throughout the year, including during periods of peak demand. Under these mechanisms, for example through auctions, the state would guarantee support to investors for providing electricity capacity.

Under the Commission's decision, the state will be able to use capacity mechanisms for ten years from July. Support contracts with investors may last for a maximum of 15 years. State aid may be granted to both existing and new capacity, with the mechanisms open to all technologies for generating or storing electricity. According to the EC, the estimated state aid budget is up to EUR 6.2 billion (CZK 150 billion). However, the exact amount will depend on auction results and the current needs of the power system.

Establishing capacity mechanisms for the construction of new capacity was one of the current government's energy policy priorities. "This is an absolutely crucial step for the Czech energy sector," Industry and Trade Minister Karel Havlíček (ANO) said in the spring. Until now, the state had been waiting for the European Commission's clearance. Following it, the Ministry of Industry and Trade should launch the selection of investors. Havlíček previously said that the first tenders could begin in October.

According to earlier information from the ministry, once capacity mechanisms are introduced, the first facilities should begin construction in roughly two to three years, while the first gas-fired power plants could be operational around 2031.

In the coming years, the mechanisms are expected to work primarily for gas-fired capacity, which the state sees as a key replacement for coal-fired power plants and heating plants that are being gradually phased out. However, they will also apply to other sources.