Czech government approves Crown 150 bil modernization fund to drive energy transition

The Czech Republic approved Jan. 25 a modernization fund for energy and climate change aimed at helping transform the country's domestic energy sector and wean it off its still heavy dependence on coal-powered generation.

Czech Minister of Environment Richard Brabec said in a press conference that the government has approved the framework for the fund of at least Czech Crown 150 billion (6.98 billion dollars) up to 2030, to be earned from the sale of carbon allowances.

"With the expected rise in price of carbon allowances, it's likely the fund will be significantly bigger than Crown 150 billion in size," Brabec said, adding that the Czech fund is the second biggest in Europe after Poland.

The fund is divided into nine main program areas, with the biggest chunk -- at 38.7% of the total fund allocation -- earmarked for new renewables, and 26% of allocation for the country's significant centralized heating and cogeneration sector to shift from coal to natural gas or biomass. Other fund areas target energy and emissions savings in industry, transport modernization in the private sector, public transport modernization, energy efficiency in public buildings and infrastructure, community energy projects, and modernization of the public lighting system.

Preregistration calls made at the start of November 2020 for projects in the three biggest focus areas of renewables, heating, and industry energy saving, was met with massive response, according to Brabec. More than 200 projects, with a total investment of about Crown 160 billion, have been received so far, the minister said.

Preregistration for projects continues until Feb. 1. A second call for preregistration after 2021 will be launched by the end of this year, the ministry said on its webpages.

Czech renewables associations broadly welcomed the fund's approval. The Association for Modern Energy said in a statement that it represented "the most fundamental impulse for the re-start of renewables" in the country, adding that at least Crown 80 billion would be available for solar power, wind, and small hydropower projects. A key factor is the incentive for solar farms to be sited on brownfield sites, including coalfields. The fund also aims to encourage energy saving in wind and solar generation, either through battery capacity or power-to-hydrogen conversion, the association added.

The Czech branch of the environmental law firm Frank Bold said last-minute changes to the fund would open the door to much greater opportunities for community energy projects to tap investment aid. Such projects can now make bids for cash for renewables and heating projects whereas they were initially limited to one category of fund offering of just 1.5% of total aid.

The environment ministry estimates that the modernization fund could contribute 40% of the emissions cuts the country has forecast by 2030, 30% of the energy savings target, and 30% of the new target for the share of renewables in final energy consumption. The Czech Republic has a 2030 target for renewables to meet 22% of overall energy needs, up from the 13% renewables EU target set for 2020.

Coal still represents a major source of power production in the Czech Republic, with renewables making tardy progress until recently. Czech coal-fired power production fell to 30 TWh in 2020 compared with 38 TWh in 2019, according to a report by think tank Ember on Jan. 25. Total gross Czech power production in 2019 came at 87 TWh, according to figures from the Energy Regulatory Office, published Feb. 18, 2019. Wind and solar power accounted for just 4% of overall Czech 2020 power production, the Ember report added.