Czech power giant ČEZ lined up for massive environmental windfall

Normally news about massive incentives for energy companies to invest in technology cutting down on polluting greenhouse gases would be applauded as a step in the right the direction. In the Czech Republic however those plans have stoked a massive controversy centred on the country’s very powerful electricity company, ČEZ.

After a stormy debate on Wednesday, the Czech upper house of parliament gave the green light to government plans to offer massive investment incentives to power companies which invest in clean production technology. The deal is basically this: power companies will be given carbon emissions pollution permits free that they would otherwise have to pay for if they can come up with greenhouse gas cutting projects. The offer is estimated to be worth around 68 billion crowns, or around 3.8 billion dollars.

The Czech incentive is the follow-up to a deal thrashed out by European leaders earlier this year to get countries in Eastern and Central Europe to sign on to ambitious EU greenhouse gas cutting targets. Central European governments warned their coal burning power companies could not make the switch to cleaner technology without help.

So far, so good. The problem with this programme to smooth the way from dirty to clean technology is that everyone but dominant domestic electricity producer ČEZ has complained it has been tailor-made for the Czech energy giant. In particular, rivals says that only ČEZ with its large number of projects in the pipeline will be able to roll them out to meet the tight deadlines for securing the aid.

Petr Novák is an energy analyst with the brokerage Atlantik.

“This proposal seems to be made for ČEZ, definitely. I also do not understand why this time period to invest a lot of money is so short. It seems to me to be strict. ČEZ will be able to invest a lot of money because it is in the process of renewing its coal sources right now and that is why it has record investment in the coming year. So that is why it is in a good position.”

One of ČEZ’s domestic rivals is the J&T energy group. Spokesman Martin Maňák says it is still hoping for amendments to the flawed proposal so that it can benefit as well.

“At this moment, as it was passed in the Senate it is not good for us but we hope there will be another law that will be better.”

Former Green Party leader and minister of the environment Martin Bursík has described the programme so far as basically amounting to a free gift from taxpayers to ČEZ. He said the government should have made power companies pay for their pollution permits and used the revenues for specific environmental programmes.

The latest episode has only fuelled comments in the Czech media that state-controlled ČEZ actually seems to control the state because it seems to get its way on every important issue. ČEZ boss Martin Roman is often referred to as the most powerful man in the country and the name of the Czech Republic is often transformed in Czech into ČEZká Republika to illustrate the fact.

In one recent interview, Roman said that it was normal that the state defended state-owned energy companies. The same happened in France, he pointed out. The ČEZ boss protested he did not have power but influence. For the emissions incentives at least, influence seems to be all that was needed for now.