Analysts: Energy price cuts in Czechia will have greater impact only next year, market to remain stable

The fall in energy prices on the market at the start of this year will be reflected in prices for consumers with a delay, and is likely to have a more significant impact next year. Analysts contacted today by the Czech News Agency (ČTK) say they do not expect further fluctuations in the energy market this year, either upwards or downwards, and believe the market will therefore remain stable. Energy prices in the first months of this year have fallen by tens of percent compared with last year. A megawatt-hour (MWh) of electricity currently costs 83.4 euros (around 2110 Kč) on the exchange, about 40 percent less year on year. The price of gas has fallen even more sharply, by approximately 50 percent, to the current 34 euros (more than 860 Kč) per MWh.

According to Jiří Tyleček, an analyst at XTB, one of the main factors behind this year's price decline was the warm winter in Europe and the US. Cheap American gas in liquefied form, or LNG, is also flowing into Europe in ever greater volumes. “EU gas stocks have not even fallen by half,” he stressed. He said weak economic performance on the continent had also contributed to lower prices. “Personally, I see the price plunge at the end of winter as only slightly less extreme than the price surge to record highs at the end of summer 2022,” Tyleček said.

According to Michal Macenauer, strategy director at consultancy EGÚ Brno, energy prices on the market have been declining on average following the shock caused by the interruption of supplies from Russia. “The problem of Russian gas has, however, practically been resolved,” he said.

Analysts say the current price decline will be reflected gradually and with a delay in prices for end consumers. Václav Skoblík, sales director at UCED, noted in this context that some suppliers had already bought energy on the market in advance, at higher prices. He therefore does not expect prices for customers to fall significantly this year. “Prices will at least not rise and will remain stable,” he said. The downward trend should become more apparent during the heating season next year, he added.

According to Skoblík, the arrival of new suppliers could affect market supply this year. They will buy electricity on short-term and spot markets at prices several hundred crowns per MWh lower. He recommended considering all the risks in this context. “We all remember the collapse of a number of larger and smaller traders that used speculative purchasing strategies,” he said.

According to Macenauer, making use of short-term market prices is currently particularly suitable for consumers with high consumption, such as industrial companies. For smaller consumers, he said, the market situation does not offer the possibility of making a large profit, regardless of the strategy they choose. Radim Dohnal, an analyst at Capitalinked.com, recommends waiting before agreeing to longer-term fixed prices, until large suppliers have sold the electricity they bought earlier.

Analysts expect market prices to remain stable for the rest of this year and do not anticipate any further significant price cuts during the year. “If there is a fluctuation, it will probably be a one-off effect with no significant impact on consumers,” said Ivana Dancáková of the Bidli energie division. She said energy prices for next year were more likely to fall. “Our estimate is around eight percent,” she said.

Czech suppliers are gradually reducing the prices in their offers to consumers this year, often by hundreds of crowns per MWh compared with offers at the end of last year. Gas from large suppliers with a fixed price currently costs an average of around 1300 Kč per MWh excluding VAT, while fixed-price electricity costs around 3500 Kč per MWh. Last year, most customers paid prices at the level of the government-set cap for much of the year: 2500 Kč per MWh of gas excluding VAT and 5000 Kč per MWh of electricity excluding VAT.