Czechia exposed to fossil electricity price shocks

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26 Oct 2021

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Sarah Brown
Strategic Advisor
Ember

The price of Czech electricity has soared

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Protecting against future fossil fuel price hikes

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A new analysis by energy think tank Ember reveals that Czech electricity prices have soared more than 140% since August 2020, driven by increased costs of fossil gas and hard coal imports. The analysts warn that Czechia risks continued exposure throughout this decade if it remains one of the EU countries most dependent on volatile fossil fuels.

The price of Czech electricity has soared

Czech electricity prices have jumped more than 140% since August 2020

Since January 2021, Czech fossil gas prices have soared by 150% and hard coal prices have increased by 156%.

Although Czechia generates most of its electricity from lignite and nuclear, it still has exposure to fossil gas and hard coal price volatility due to their presence in its electricity mix and also because of EU interconnectivity. The analysis shows that while fossil prices have risen exponentially, carbon prices have been relatively flat in comparison.

Protecting against future fossil fuel price hikes

Czechia will need to accelerate towards clean electricity

The way to avoid the volatility of fossil fuels is to accelerate the transition to clean electricity, in particular wind and solar, so that the power price is set by fossil fuels for fewer hours. Wind and solar are not exposed to variable fuel prices and the cost of generating electricity from these sources has collapsed in recent years.

However, according to Czechia’s National Energy and Climate Plan (NECP) it does not intend to move away from fossil fuels any time soon. According to the document published in 2019, fossil fuels would contribute 47% of electricity production in 2030, the third-highest level in the EU. The ongoing coal exit process should result in an earlier end to coal than envisaged by this plan. However, if growth in clean power continues to stagnate, the country risks replacing one fossil fuel with another, missing the opportunity to enhance energy independence with homegrown renewables.

Ember’s modelling showed that the most cost-effective way for Czechia to reduce fossil fuels, and exit coal entirely by 2030, is to increase the deployment of domestic renewable electricity in combination with energy efficiency measures.

At present, Czechia plans to have the lowest renewables growth rate in the EU, with renewables only accounting for 17% of production by 2030. Ember’s analysis shows that with average levels of growth in renewables, Czechia could successfully phase out coal by 2030.

The soaring cost of imported fossil gas and hard coal is driving up electricity prices in Czechia and across Europe. A more rapid and committed transition to clean electricity is the only way to escape the volatility of fossil fuels. With costs of renewables continuing to fall, there’s never been a better time to speed up the transition from coal to clean.