Can power companies meet the Paris climate challenges?

If the Paris climate change summit delivers on ambitions goals and targets, then the main burden will fall on energy companies to deliver on them. But is the Czech Republic’s biggest power company, ČEZ, placed to square up to that challenge?

Photo: Horst 74, CC BY 3.0

Around three quarters of all greenhouse gas emissions in the Czech Republic are created by the broad energy sector. That’s energy use across the board from energy production, to energy use by manufacturers, and transport.

Basic energy production accounts for around half of those emissions with the transport and manufacturing sectors weighing in at around 15 percent each. So, the energy sector will bear the brunt of whatever climate change commitments are eventually earmarked for the Czech Republic as part of the bigger undertakings from the European Union.

State-controlled power company ČEZ is far and away the dominant electricity producer in the country, generating around 70 percent of power from a mix of renewable, coal-fired, and nuclear power plants. But just under half of its power output comes from plants burning lignite or brown coal and most of the rest comes from its two nuclear power plants at Dukovany and Temelín. Wind, solar, hydro and gas fired power plants account for less than `10 percent of its production.

Petr Hlinomaz, photo: Czech Television

ČEZ has largely backed the European Union’s long term energy goals framed with a view to the Paris Summit. In particular it is looking for a much stronger emissions trading system which will give clear and substantial rewards to companies which deliver cuts in output of climate change gases.

So how easy will it be for ČEZ to live with the low carbon economy of the next decades and longer term future. That’s a question put to Petr Hlinomaz an analyst with the Prague-based brokerage BH Securities, who follows ČEZ developments and strategy.

“I think that there will be no problem because first of all the Paris Summit will bring some very important, but general, conclusions and Europe, form this point of view, that is the protection of the climate, is in advance. So ČEZ and other energy companies have to respond to the new circumstances. So from this point of view, I think there will be no problem. And ČEZ has a very low emission production portfolio which is an advantage.”

That’s a low carbon footprint compared, say, with the still heavy coal burning power companies in Poland but not so clean compared with the energy revolution which Germany has embarked on.

Big energy companies, with their profits already undermined by low electricity prices, are generally cautious about any new undertakings that might be hoisted upon them. ČEZ and other big European energy players have stressed that they will need help to cover the costs of research and development on low carbon technologies.

Photo: Filip Jandourek

At the same time they are worried whether the possible evolution of a new energy market not based on a handful of very big players delivering power across countries and continents but on hundreds of small power companies just delivering to local villages and towns might not leave them high and dry. Petr Hlinomaz again:

“I think that these big companies feel that conditions and circumstances are changing and so they are trying to make acquisitions of photovoltaic companies and producers of energy solutions etcetera and to create some dependence of their customers.”