Key conclusions of the XIV. International Energy Forum “Development of the energy sector in context of regulatory and technological changes“
Prague, March 19, 2018 – Priorities of the new Government of the Czech Republic in the energy sector, status update on the "Winter Package" of the EU and possible impact on national markets, responses to the priorities of national regulators in addressing changes in the energy market, current challenges and strategic agenda of operators of energy infrastructure and changing needs and roles of customers in the energy market, these were the main topics of XIV. International Energy Forum. It took place on 15 March 2018 at the Hotel Grand Majestic Plaza in Prague with the participation of representatives of major European and national organizations in the energy and telecommunications sectors.
"In the light of Arthur D. Little's experience from strategic projects for energy organizations in Central and Southeastern Europe, we recognize the need to hold a conference to discuss key issues for the further development of such an important sector as the energy sector is," said Dean Brabec, Managing Partner CEE Arthur D. Little. "I am delighted to have been able to convey the views and discussions of important figures of the European business environment and that the Energy Regulatory Office, Czech Chamber of Commerce and the Ministry of Industry and Trade took over the auspices," adds Brabec.
The introductory speech was held by Vladimír Dlouhý, President of Czech Chamber of Commerce, who focused on the issue of the competitiveness of the Czech industry. "If we want some facilities to survive by 2035 and start building new ones, there is no need to constantly support the export of electricity and the energy-only market. To secure the financing of new (nuclear) resources, it will be necessary to offer investors guarantees such as a contract for difference, just as the UK has done," Dlouhý said. In conclusion, the President of Czech Chamber of Commerce said that the construction of the nuclear unit being considered can help to increase the competitiveness of the Czech industry despite its high costs. "The support for nuclear energy is a political issue and a task of the Government. If we prepare the industry for it by means of an early decision, we can do it," Dlouhý added.
According to Tomáš Malatinský, advisor to the Minister of the Ministry of Industry and Trade, the government plans to complete the development of nuclear sources in combination with top gas sources, because the Czech Republic's priority is security and energy availability. The government will seek financial tools to support the completion of the nuclear and other sources. The new nuclear source has to be be put into operation no later than 2040. In the area of further support for renewable energy, an auction system will be prepared, the parameters of which will be set by means of decrees rather than a change of law, because this will be faster and more efficient.
The absence of self-sufficiency of the Czech Republic in the supply of oil, oil products and gas was discussed by Pavel Švagr, Chairman of the Administration of State Material Reserves. He stressed that discussions on an agency or hybrid model of access to state material reserves should be opened, and that not only in the gas sector.
Jiří Plešek, Chairman of the Commission for Energy of the CAS, presented research projects in the field of nuclear energy and energy storage, which can enable a "revolutionary energy change". "We need to make more use of science, evolutionary approach will not help us," evaluated Plešek. As an example, he mentioned the involvement of the Czech Academy of Sciences in the Sunrise research project with a budget of EUR 1 billion that examines the possibilities of photosynthesis for a direct production of fuels and fertilizers.
Secretary General of the Association of European Energy Exchanges EUROPEX, Christian Baer, noted that the Czech Republic's energy policy plans overlook the EU's goals and policy in creating a single electricity market. "The solution cannot be the development of phase shifters on the border with Germany, but a clear position of the Czech Republic on future cooperation with neighboring states," Baer said, appealing to pursue market principles in the design and implementation of European legislation.
David Kučera, Secretary General, Power Exchange Central Europe, a.s. assessed the current electricity prices on the stock exchange and presented estimates of their further development, foreseeing the target price range at 24-45 EUR per MWh. "Another drop in prices will be caused by solar power plants. It is just hard to agree on time when it happens. Various estimates refer to the years 2028, 2030 or 2050." Therefore, Kučera would recommend waiting with the decision to build a nuclear power unit in the Czech Republic before it can be proved whether the nuclear power is the right way for the Czech Republic and whether it will not jeopardize its competitiveness.
Martin Novák, Vice-Chairman of ČEZ, a.s., presented the strategic goals of ČEZ Group, which will have to transform itself similarly as other major energy companies in Europe. He also mentioned the necessity of updating the state energy concept and noted in this context that ČEZ must fulfill its societal role as well as meet its financial obligations. ČEZ's priorities are renewable energy and the expansion of services to end-customers, but traditional energy is still an indispensable part of the energy industry and therefore ČEZ Group's business.
Tomáš Varcop, CEO, innogy Energie s.r.o. introduced a company strategy that focuses on providing customer service and is based on innovations and own technology. "Our strategy anticipates a controlled decline in existing core business and its replacement with innovative and complex services," Varcop commented on the current developments.
Speeches of representatives of key energy companies were concluded by Jiří Feist, Member of the Board of Directors of EP Energy a.s., responsible for strategy. EPH Group has undergone a transformation with a different strategy than other market players. "We focus on classic production as well as on regulated business. We are not private equity but a well-established energy company with EBITDA of more than EUR 1.7 billion," Feist said. Most EPH profits come from regulated assets because the energy market is not working. Feist illustrated this with the fact that the wholesale price of electricity has dropped significantly, but the price for the end customer has increased significantly. This state, according to Feist, will last for another 10 years.
Representatives of the ERO and distribution system operators have agreed on the need to set a new regulatory framework that will be stable and will enable the fulfillment of the strategic visions presented. Distribution companies will be more digital and closer to customers than ever before. The challenge will also be a shift away from vertical integration and a definition of new unbundling rules, as it will be necessary to ensure that the customer has the maximum benefit of what the operator of the regulated distribution infrastructure can offer through process digitization, Smart Grid development or through complex service of consumption sites.
The final panel dedicated to new market segments has confirmed the dynamic development of energy services and active customer consumption management. "The ESCO segment grew by more than 33% in the past year and will continue to grow at the same pace in the coming years," said Member of the Board of Directors of ČEZ ESCO a.s. Martin Řezáč. His opinion was confirmed by Mark Crauwels, a representative of REstore, one of Europe's largest aggregators of demand. "Providing support services to network operators across the EU through online consumption management of large customers and households is already showing excellent and measurable results," said Crauwels.
In the end, Dean Brabec summed up the conclusions of the conference, which confirmed the diversion from the vertical integration of the industry illustrated by the announced restructuring of the E.ON and innogy Groups, the suppression of the need of unbundling the (exclusively) energy networks, and also confirmed the trend of increased competitiveness of green electricity. At the same time, the security and reliability of supplies have won the priorities of Czech energy policy over the co-creation of the single electricity market, what can worsen the availability of energy in the future.
Sponsor of the event: Hrdlička Group, s.r.o.