Czech Energy Congress – first session: the energy trilemma

Energy is one of the fundamental building blocks of modern society. It determines many things, including the competitiveness of a given country or continent relative to others. At present, a rapidly evolving and changing geopolitical situation can be observed amid the EU’s energy transition.

The role of the state in the energy market is changing as a result of this transition. The energy market is distorted by external influences, such as investment and operating subsidies for various energy sources, and is thus losing its capacity to respond to market signals. This places greater demands on the competence of those in government. They must ensure that the required sources are built in the required volumes, while also taking supply chains into account in light of geopolitical developments.

Moreover, electricity prices must be affordable for end consumers. This energy trilemma was the focus of the first session of the Energy Congress organised by Business Forum.

René Neděla – Ministry of Industry and Trade

René Neděla, Director General of the Energy Section, was the first speaker at the 23rd Energy Congress. In his view, the energy transition is often hampered by frequently changing European legislation, which is becoming increasingly ambitious.

This is not necessarily a bad thing, but the investment horizon must be taken into account. In the energy sector, it is at least 7 years. In practice, investors are unable to adapt quickly to frequently updated legislative conditions; alternatively, if they have already invested and support conditions change, they may run into difficulties. Uncertainty over future changes therefore weakens the appetite to invest in new sources.

Neděla also spoke about the updated State Energy Policy (SEK) and explained its importance – in particular, that it should not say exactly what will happen and when (for example, the date of the coal phase-out), but rather identify and define the means of achieving the stated objectives.

Martin Jirušek – MUNI

Martin Jirušek from the Department of International Relations and European Studies at the Faculty of Social Studies, Masaryk University, took a deeper look at the energy trilemma – energy security, environmental impacts and affordability.

According to Jirušek, these aspects are to some extent in conflict with one another. If one is prioritised, another suffers. He stressed that the geopolitical situation affects supply chains and that these chains need to be considered. He sees the war in Ukraine, China’s ambitions and other factors as geopolitical risks.

In his view, the energy transition may mean shifting dependence, for example from dependence on supplies of Russian pipeline gas to dependence on supplies of green technologies from China.

Looking at the photovoltaic market, nine out of ten installed photovoltaic panels come from China. The EU’s ambition is to raise the share of locally manufactured installed panels to 40 %. The question, however, is whether this target is actually feasible – China has already built enormous manufacturing capacity, which is pushing panel prices down.

The share of Chinese companies in the electric vehicle and wind turbine markets is also increasing. The European Commission has recently opened investigations into Chinese suppliers, covering both electric vehicles and wind turbines. It is examining whether Chinese suppliers are making excessive use of state subsidies there. Using these subsidies, suppliers can supply the local market with technologies at prices that European suppliers find difficult to compete with.

However, if Europe chooses not to further increase this dependence, technology will be less affordable but more secure from a geopolitical perspective. The key question then is: will Europe remain industrially competitive? The issue of supply chains does not concern China alone – there are also major plans for green hydrogen. The United Arab Emirates and Qatar, for example, have export ambitions in this area.

Jirušek believes that it is not possible to have a fixed path towards a given goal; instead, a flexible and proactive approach is needed to fulfil these visions. But is this possible across the EU with its current decision-making processes?

Jörg Jasper – EnBW AG

According to Jasper, Germany faces major obstacles and uncertainties. The Czech Republic, which lags behind its neighbour in the development of renewable energy sources, will face similar challenges. Emissions targets and climate ambitions must be met, but security of supply and impacts on end customers must also be taken into account. The state will play a much larger role in the energy market, and state interventions in market operations will, according to Jasper, be considerably more frequent than they have been so far.

Some sectors, such as transport, may fail to meet their targets. Others will therefore have to make up for this and increase their ambitions. The market alone will not ensure a sufficient replacement of coal-fired sources with gas-fired ones. Germany has therefore prepared a plan for developing new capacity and will introduce capacity mechanisms from 2028, while support for new power plants is expected to be tendered as early as the end of this year. Support may take the form of both investment and operating aid. There will be 4 auctions, each for 2.5 GW of capacity. Gas-fired power plants will also have to be ready to burn hydrogen in the future, from around 2035.

Historically, the Czech Republic, like Germany and Poland, did not secure capacity mechanisms and is now making up for lost time. Crucially, however, we are lagging behind our neighbours in both planning and implementation.