Energy storage regulation in the Czech Republic

There are currently only three operational pumped hydro storage projects in the Czech Republic: Stechovice with a capacity of 45 MW, Dalesice with a capacity of 480 MW and the newest Dlouhe Strane with a capacity of 650 MW, which was commissioned in 1996. All of them are owned by CEZ Group, which is the largest energy group in the Czech Republic and controlled by the Czech government.

In 2013, CEZ Group was considering constructing a new pumped hydro storage project; however, the project was postponed due to the low profitability of the investment. There are no other larger-scale electricity storage projects currently being developed in the Czech Republic.

However, the Czech government provides subsidies to household projects consisting of photovoltaic panels with electricity storage systems. Batteries and thermal energy storage are the two most commonly used methods of electricity storage for households in the CzechRepublic.

The importance of electricity storage (in connection with smart grids and other electricity management elements) is often discussed on various levels in the Czech Republic. Despite the ongoing discussions, there is no significant development in the area of energy storage.

In 2015, the Czech Government adopted the National Action Plan for Smart Grids (“NAPSG”) prepared by the Ministry of Industry and Trade under principles set out in the update of the State Energy Concept, which was also introduced in 2015. The NAPSG is meant to prepare the Czech energy system for new trends and allow citizens and businesses to reliably and safely make use of the increasing opportunities offered by the technological development in the energy sector. It is apparent from the NAPSG that energy storage is not a top priority for the Czech Republic in the short term, i.e. until 2020.

The NAPSG provides a set of questions that need to be addressed prior to the introduction of any larger-scale energy storage projects. According to the NAPSG, it is necessary to define the rules for the development of the energy storage units and to introduce relevant legislation, especially with respect to licensing, grid connection and tariffs.

The NAPSG regards electricity storage as the most expensive solution (from both capex and opex perspective) for the development of smart grid in the energy sector.

Pursuant to the NAPSG, prior to any future decision-taking regarding electricity storage by the end of 2016 a study will be prepared regarding the optimum future location of electricity storage projects within the energy system and their necessary capacity and application, in addition to the roles of the individual market participants.

No development of larger-scale electricity storage installations is expected within the Czech energy system until 2020, save for domestic installations. For the 2020-2024 period, we anticipate the development of facilities due to the requirements arising from the penetration of intermittent electricity generation, particularly solar PV plants and wind farms, as well as in respect of electrified transport. The gradual rise of electricity storage facilities is expected in the 2025-2029 period as a reaction to the anticipated considerable reduction in the price of electricity storage technologies.

In 2015, Tesla introduced new lithium-ion batteries for households in the Czech market and other household batteries projects are under research and development.

In addition, the CEZ Group (acting through its Inven capital fund) invests in small to medium-sized innovative cleantech companies. Their existing investments include holdings in a German producer of household batteries and a German company developing and industrialising the most progressive energy technologies.

As indicated above, there is no specific legal framework for electricity storage, except for the existing pumped hydro storage projects. The study undertaken pursuant to NAPSG will be prepared by the end of 2016. However, no significant development of energy storage projects (save for domestic projects) is expected until the end of 2020.

The current pumped hydroelectric energy storage plants are considered to be electricity producers and must hold the respective licence in accordance with the Czech Energy Act. Pumped hydro storage projects are not eligible for any state subsidies.

The Czech government subsidises the installation of photovoltaic panels located on domestic properties producing energy for their own consumption and the purchase of co-located energy storage solutions. These subsidies are provided under the “New Green Savings Programme” administered by the State Environmental Fund.

As of 2016, small photovoltaic facilities with a capacity not exceeding 10 kW do not need to obtain an electricity production licence, which makes their installation and operation more accessible to the public.

The Czech Government also supports research and development in the field of energy storage through its subsidy programs maintained by CzechInvest.

Larger-scale energy storage is currently not regulated by any specific regulation, nor is any such legislation contemplated. Until the relevant legal framework is implemented, any investor interested in developing an energy storage project in the Czech Republic should take into consideration that a close coordination with competent authorities on the energy market will be necessary.

The future applications of energy storage include standalone energy storage projects, co-located energy storage projects with either generation or consumers or energy storage facilities to even out the voltage differences within the low-voltage network operated by distributor system operators. Each of the above areas would benefit from the introduction of relevant legislation, especially with respect to licensing, grid connection and tariffs.New energy storage projects face the following challenges in the Czech Republic:

• New market segment – a completely new business segment of electricity storage is expected to be created in the Czech electricity market. This new sector must necessarily have the rules of operation in place (based on market principles as specified in the NAPSG) and rights and duties of its new players must be specified.
• Licence – in the event that electricity storage is operated by the market participant for its own requirements, no licence will be required. If it is a part of business activities, a licence must be obtained. There have been discussions whether electricity storage licence will be covered by the electricity production licence or whether a new licence type will be introduced. In addition, it is expected that the issuance of state authorisations for electricity storage will regulate the sector, allowing the Ministry of Industry and Trade to control the development of any new electricity storage facilities.
• Access and metering – Furthermore, the technical terms and conditions under which various electricity storage technologies will be connected to the energy system need to be outlined, while taking their impact on the electricity system into consideration. To ensure the measuring of electricity “passing through” the electricity storage, an appropriate meter will need to be installed at the connection point of the electricity storage facility to the electricity network.
• Tariff – the tariff system is in need of adjusting, because it could be abused by the wide range of investors in the new electricity storage projects, which might result in the destabilisation of the regulated payments system. However, any reform should take into account the pumped hydroelectric energy storage projects that are already being operated. The use of electricity storage may be based on market prices only, free of any regulatory interference, save for the use of electricity storage in order to stabilise the low-voltage network.

The development of a legal framework for energy storage is primarily in the power of the Ministry of Industry and Trade, which also prepared the State Energy Concept and the NAPSG. As stated above, no specific subsidy for energy storage is currently expected.

The principal regulatory body in the energy sector is the Energy Regulatory Office that issues energy licences, approves technical terms and conditions for access to the distribution network and specifies tariffs on an annual basis.

The future role of OTE, the Czech electricity and gas market operator, which provides comprehensive services to electricity and gas market players, needs to be re-considered in light of introduction of energy storage facilities.

Distribution system operators may be involved in energy storage projects, primarily in cases where energy storage could even out voltage differences within the low-voltage network operated by them.

CEPS is the sole transmission system operator that procures various ancillary services whereby such ancillary services provide key revenue streams for energy storage.

It is expected that other utilities and independent developers will be at the forefront of the deployment of large-scale electricity storage in the Czech Republic.