Article:

Energy and competitiveness

19 January 2023

Kamil Vaniš, Manager |

Czech industry is experiencing an unprecedented situation with electricity prices. As a result of the enormous increase in the price of electricity, governments within the EU have adopted measures setting a maximum price for electricity for companies. In the process of creating the measures, concerns were raised about the future competitiveness of Czech industry in the international supply chain.

For this reason, we have compiled a comparison of future electricity prices - the so-called futures and indications of price caps approved by local governments within the CEE region. The countries included in the overview below are often compared in the context of tenders by international supply chains.

Based on the January data, the Czech Republic ranked in the middle of the other countries included in the comparison. According to the January data, the 2023 futures prices recorded a significant decrease at the turn of the year in all the countries compared - comparing the November 2023 futures prices vs. the January 2023 futures prices vs. the March 2023 futures prices. This decrease also created a new situation where the approved electricity price caps are above the current futures prices.

The price caps, which were mainly based on the December price situation, currently appear to be inappropriate in most of the countries compared, except for Germany. In Hungary, the price cap does not apply to large enterprises and SMEs, but only to micro-enterprises with up to 10 employees and with net annual sales of up to EUR 2 million. In the current market set-up, the most competitive electricity prices in the region are in Germany and Poland. Another destination to consider when allocating new contracts from the perspective of international customer chains may be Spain, which has introduced a mechanism to cap the price of gas used for electricity generation (at EUR 50/MWh; about 25% of electricity comes from natural gas), thereby regulating production costs and reducing the wholesale price of electricity. While historically it has been one of the countries with higher electricity prices within the EU, in the current comparison it has the lowest prices of the countries observed.

From a global perspective, despite government measures in selected countries, there is a negative impact on industrial competitiveness vis-à-vis the US, where monthly "futures" prices for March 2023 are at EUR 42 per MWh.

However, the price comparison is based on the current market situation, so in a highly turbulent economic environment, capping electricity prices may still be a timely hedge against the risk of price increases.

To price cap in the Czech Republic for 2023, companies must register with their electricity/gas supplier and submit the relevant declaration. In order to ensure that the price cap is already in force from 1 January 2023, the declaration had to be submitted by 15 January 2023. Customers who are thermal energy producers and customers using natural gas for electricity production must submit a monthly Statement of Thermal Energy Producer or Statement of Customer Using Natural Gas for Electricity Production in addition to the relevant customer declaration. The capping for 2023 can be combined with subsidy support, but up to a maximum total limit of EUR 4 million (approx. CZK 100 million).

*(HU-Hungary, SR-Slovakia, RO-Romania, ČR-Czech Republic, DE-Germany, BG-Bulgaria, PL-Poland, SP-Spain)