Energy liberalization and efficiency in the Czech Republic
Along with many other industrialized countries around the world the Czech Republic has begun the process of restructuring its energy sector. Liberalization and efficiency are two themes which are driving the production, distribution, and use of energy. In this week's economics report we look at how successful the Czech Republic has been in liberalizing the energy sector and we will investigate how liberalization is effecting the increasing importance of energy efficiency in the Czech Republic.
A conference entitled Energy Efficiency Business Week took place in Prague recently which discussed the issues of energy efficiency and the liberalization of the energy sector. I caught up with Peter Fraser from the International Energy Agency or IEA. IEA is an organization which is connect to the OECD or Organization for Economic Cooperation and Development. The IEA purpose is to co-ordinate energy policies and to co-operate in the development of rational energy programmes, the agency has done a number of studies on the Czech Energy sector. I asked Mr. Fraser first, why countries are moving to liberalise their energy markets:
The main reason why they are liberalising their energy markets is that they feel that the old monopoly based systems were inefficient, that they were over investing and therefor making energy too expensive. Its believed that now with new generating technology and with better organisation the power system could be run much more efficiently, we think competition is really needed to get those efficiency into the system.
Have their been any problems or any problems expected in the liberalisation?
California stands out as the great problem that has emerged over the first dozen years or so of liberalisation. Although that was of course was a special circumstance, everyone has been looking very carefully at. It has underscored a couple of important points and first of all, is that just liberalising or just opening the market is no the only step to take, you must take many steps and also be a little cautious because it is possible to make a bad mess. And secondly, it is important that you ensure that real competition can emerge because one of the things that is coming out of California is that apparently some of the generators were manipulating the market to drive up prices. It is very important to have a good regulatory system to detect such problems before they occur or as they occur as so they could be prevented.
The Czech Republic is expected to join the EU in 2004. What will this mean for the Czech energy sector?
It will be a major step towards creating an integrated electricity market and giving the Czech market access to that larger market. Electricity is still in the EU at the early stages of trying to make the single market, already 15 markets exists and I guess it will be 24 or 25 very soon. But the fact that the Czech Republic has certain advantages and some rather cheap power generation should mean that they should be able to export more electricity to elsewhere in the EU. By being a part of the union the import barriers will be removed and they will be able to sell more power.
The Czech Republic has completed the first step in liberalising its energy market. The Energy Efficiency Centre is a non-governmental organisation who's mission is to protect the environment and to support economic development efficiency improvement. Juraj Krivosik, a consultant with the Energy Efficiency Centre talks about how the liberalisation of the Czech energy market is progressing:
So far the experience is that those who can already buy their electricity have experienced better services from the suppliers of electricity. Acording to the information that was published these supplier have offered 5 to 9 percent electricity discounts which is one of the advantages of course but also improving the services of the suppliers is another advantages which was the goal of the organisers of the liberalisation. So far basically their is satisfaction with the process of organising the liberalisation. Of course their is questions of regarding the promotion of co-generation and renewable energy sources and how to organise this whole process so it benefits the end consumers.
Is there any model followed by the Czech Republic in the liberalisation of the energy market?
Basicly the rule is the European Union legislation. For example, now in the EU there is a directive under consideration that even from the year 2004 all of the consumers, both of electricity and natural gas, should have the right to choose their suppliers so that there should be a 100 percent open competition. And the plan for the Czech Republic is to join the EU by 2004, this would mean that we would have to change the legislation, make more progress, and open the market to a 100 percent.
Another development in the Czech energy sector has been the increased importance of energy efficiency. Mr. Krivosik explains how liberalising the Czech Energy sector can actually hurt the drive to become energy efficient. I asked him how the Czech Republic was doing in meeting its commitments to energy efficiency in an increasingly liberalised energy market.
It is a very good question because where the energy industry is organised by the state and in a monopolistic system one of the advantages of that system was that the state could have an emphasis on energy efficiency and organise it in a way that politicians see as useful. Once you open the market, this tool is not available anymore and you have to find out how to promote energy efficiency in the open market, so it is a very good question. In our condition, in this situation, their is hope that energy efficiency could be promoted and there are several ways. For example, the Czech energy agency which is a state organised institution or the state fund for the environment which is also a state organisation have funds from the state budget or form the penalties for polluting the environment that they reinvest into energy efficiency and renewable energy projects. But it is also relatively small projects in comparison to the overall budget of the economy lets say. Then there is some feed-in tariffs for renewable energies which are available to the producers of renewable energy sources and of course the state also funds some promotional programs for energy efficiency. So there is some motivation but in the end it will always be the prices which will motivate people on how much energy they will save or not. And one of the consequences of energy liberalisation may actually be that prices will go down so at least in the short-term it may be a negative consequence from this point of view that energy efficiency will have a lower priority.
I also spoke with Jaroslav Marousek who is the director of the Energy Efficiency Centre, about its efforts to support the effective use of energy efficiency in the Czech Republic.
We have a large range of activities in the Czech Republic. Our activities start from energy policy and activities in this field, we have designed for instance a climate change policy for the Czech Republic in 1997, one of the first issues. We also work on energy concepts for cities, we do energy audits, and the concrete implementation of energy efficient technologies in industries for instance.
How would rate energy conservation and energy conservation in the Czech Republic in comparison in say the EU member states?
When we compare energy efficiency as a primary energy source divided by GDP Czech Republic is in a bad situation, but the main guilty party is the low economic efficiency of our economy and maybe less responsibility is on energy efficient technologies. But, energy efficient technologies and dealing with energy is not only technologies. Dealing with energy in the Czech Republic is still on a lower lever in comparison with other Western countries and that's what we strive to turn upwards.
Increasingly, Czech companies have been making headway in the international market place by producing energy efficient products. One of these companies is Solartec.
We are from the Czech Republic and the name of our company is Solartec. Our main product are solar cells, photovoltaic solar cells. Our PESC {passivated emitter solar cells} cells have very high efficiency, up to 16 percent under standard light conditions. They are for special applications in space and for architectural applications, for example colour PESC cells.
How popular are these cells in the Czech Republic?
Concerning popularity it is at the start. Some people install these modules to their cottages. But concerning high size installations it can be said rare, but the situation is improving step-by-step.
Would you say energy efficiency is gaining in popularity in the Czech Republic?
I think so, it is improving.
