Recently released market study: Czech Republic Power Report Q1 2014

The future of the country's power sector is largely dependent on nuclear and renewables, although gas has a key role to play over the medium term, as it will help reduce reliance on coal in electricity generation. However, both sectors have experienced setbacks. Further delays are expected over the expansion of the Temelin nuclear facility, creating downside risk to our forecasts for nuclear in the Czech Republic. There is also an increasing level of uncertainty within the country's renewables regulatory framework, with a number of state subsidies for developers of renewable energy projects being cut. We therefore expect sluggish growth across the majority of segments within the renewables industry in 2014.

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Investment plans suggest that generation will comfortably meet demand, with steady growth in domestic demand providing net power exports to neighbouring countries. Longer term, the country aspires to significantly increase its nuclear power generation.

Key trends and developments in the Czech electricity market:

* Allowing for transmission and distribution losses (forecast at 5.9% in 2013, and expected to decrease to 5.8% by 2022, owing to new investment in the grid), power supply will continue to outweigh demand, allowing for continued net exports to neighbouring states. Czech power generation is forecast to reach 84.0 terrawatt hours (TWh) for 2013 and increase more or less steadily until 2019. However, we expect generation to waver over the latter part of the forecast period, declining to 76.2TWh by end-2022.
* An announcement made by the deputy industry minister that the country will continue to pursue nuclear power as a crucial resource for long-term energy security, highlights the controversies that surround the country's nuclear programme. The construction of the Temelin expansion has been in a state of flux for nearly a decade, as questions over economic feasibility continue to weigh heavily on project development. We believe there is significant scope for the project to encounter further delays, creating downside risk to our forecasts for nuclear, and believe that the Temelin expansion will continue to be a contentious issue within the country.
* News that the Czech Senate has passed a law that will put an end to the majority of state subsidies for renewable energy in the country comes as no surprise to BMI. The move is something that we had been anticipating since alterations to the subsidy scheme were first proposed nearly a year ago, and our growth forecasts for the market reflect the subdued market conditions.

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