Expert on why Czechia’s electricity prices soared highest in EU, despite being net exporter
Data released by Eurostat on Monday show that Czechia saw the sharpest year-on-year rise in electricity prices out of all EU member states in the first half of 2022 (+62%). The average cost of electricity for Czechs was the sixth highest in the EU and higher than in any other Visegrad Four state (Czechia, Hungary, Poland, Slovakia). I asked ENA analyst and executive director of the Association of Independent Energy Suppliers Jiří Gavor why this was the case.
“Czech prices were completely based off of the free market in contrast to many other EU countries where state aid was adopted. For example, Poland adopted the policy of decreasing VAT and many other EU countries are practicing the state regulation of household energy prices. Meanwhile, Germany announced it would cut its renewables surcharge already in the first half of 2022. And there were plenty more similar cases.
“The Czech government was quite reluctant to adopt state aid. The first state aid package for all consumers of energy was adopted starting from October 1 of this year, so after the first half of 2022. It therefore cannot be reflected in Eurostat statistics.”
Perhaps this also connects to your point that the Czech energy market was very much free market based: Czechia houses one of the largest energy conglomerates in Europe - ČEZ Group– which is majority owned by the government and the country also ranks among net electricity exporters in Europe. So there probably was some room for manoeuvring there, right?
“Yes, many inhabitants of Czechia wonder about this. Namely, how it’s possible that we pay such high electricity prices in a situation when we are exporters of energy.
“Many opposition politicians proposed some sort of closure of the free market. Of course, if we were to close the energy market in electricity, it would substantially decrease electricity prices in Czechia. That said, fortunately, the Czech government has up to now refused such proposals. I think that this is good because, while we are exporters of electricity, we are also significant importers when it comes to gas and oil products.
“Furthermore, Czechia, and its industry as a whole, is an export oriented country. Any such proposal would therefore be quite dangerous for the Czech economy. For instance, we now depend on gas imports from Germany. If some of these contracts were to be broken, contracts for oil or gas, it would have catastrophic consequences for our industry and economy.
“So we have to see all parts of the business and not just focus on one segment – electricity – where we are indeed big exporters.”
You already mentioned that the Czech government did enact some measures in the second half of the year, so how has the situation evolved since then? How do you see the situation on the Czech energy market going into this winter and next year?
“Yes, the Czech government first waived the obligatory payment for renewable resources as well as approving a measure to support final consumers with a subsidy of CZK 4,000 (around EUR 163) per household. What is even more important is that, starting from the beginning of next year, we will have a price ceiling for residential prices as well as for small consumers. While this will help many consumers in Czechia, one problem remains. Namely, how to help big industry, especially big energy consumers. And that is not a problem that is being faced just in Czechia.
“As far as the Eurostat statistic for households and small businesses for the first half of 2023 is concerned, I expected that it will be distorted, since probably no EU country will operate in market prices. Eurostat statistics will therefore reflect the various level of state aid.
“Czechia’s position on the Eurostat graph may therefore improve, but I am afraid that the levels of state aid in neighbouring countries, especially those belonging to the Visegrad Four, will be even higher. That is why I expect that Czech consumer electricity prices will remain among some of the highest in the EU even next year.”