Boston, MA -- (SBWIRE) -- 02/07/2013 -- BMI View: 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 helps reduce reliance on coal in electricity generation. Solar power use has soared thanks to an over-generous subsidy scheme, which has now been revised in order to deliver more modest but sustainable growth.

Investment plans suggest that generation will remain more than adequate, comfortably meeting forecasts for steady growth in domestic demand and providing the basis for continued net power exports to neighbouring countries. Longer term, the country aspires to significantly boosting its nuclear power generation.

Key trends and developments in the Czech electricity market:

- The government has introduced a retroactive 26-28% tax that must be paid to the state by all owners of 30 kilowatt (kW) solar energy plants brought into operation in 2009 and 2010. The legitimacy of the law was questioned by a group of members of the Senate. However, in May 2012, the Czech Constitutional Court ruled in favour of the Government, arguing that it was fully within the Government's rights to act in what was regarded as the public interest in an attempt to limit public costs and to react to the changing circumstances in the solar sector.
- Allowing for system losses (estimated at around 4.74% in 2012, and expected to decrease to 4.62% by 2021, owing to new investment in the grid), power supply should continue to outweigh demand, allowing for continued net exports to neighbouring states. Czech power generation is estimated to have reached 81.55 terrawatt hours (TWh) in 2012, with an average 0.30% annual increase to 82.54TWh by 2021.
- In spite of opposition from neighbouring countries, namely Austria and Germany, the Czech nuclear energy push is the cornerstone of a government drive to secure its energy future, with the completion of the new units seen as key to lower dependence on imported gas and oil, ensure reliable coverage of the growing electricity consumption in the Czech Republic, and build sufficient reserves.
- On October 5th 2012, CEZ announced that Areva has failed to qualify to stay in the tender for its multi-billion project to expand the nuclear power plant in the southern Czech town of Temelin. According to CEZ, the bid failed to meet statutory requirements for building the two new units and did not fulfil some other crucial criteria defined in the tender. Areva has appealed against the decision.
- The government is considering adopting a new bill that will introduce further hikes to power prices for Czech households and firms in 2013. In addition, a new legislation, currently under discussion in the Cabinet will stop all renewable energy support from 2014. As such we see a downside risk to our forecast.

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