Czech and Slovak power prices will move in unison through 2030 – ICIS Power Horizon

LONDON (ICIS)–Czech and Slovak wholesale power prices will move in unison until 2030, ICIS Power Horizon long-term price forecasts show. But both countries are set to switch their net trade position in 2021 due to changes in generation capacity.

From June 2019, ICIS widened its forecasting coverage to five new markets, Slovakia, Romania, Hungary, the Czech Republic and Switzerland. Modelling shows that the Czech Republic and Slovak wholesale power prices are forecast to move in unison from 2019 to 2030, remaining below the Hungarian and Romanian prices, with whom they participate in the net transfer capacity based day-ahead market coupling, known as 4MMC.

The annual average power prices in both countries are forecast to dip in 2019 compared to outturn prices in 2018, only to resume rising until 2025. In 2025 they are forecast to peak slightly above €70/MWh and fall to around €63/MWh before rebounding.

Capacity impact on net trade

ICIS modelling suggests that in 2021 the Czech Republic will become a net importer and Slovakia switch to net power exports, mainly due to lignite/coal and nuclear capacity changes. Based on the draft national energy and climate plans (NECPs), both countries will see a limited growth in renewables.

We assume that the Czech Republic will close around 3.6GW of lignite and coal capacity from 2021, followed by around 1.5GW in 2022 and a further 1GW in 2023-2024, which will be largely replaced by imports and to a lesser degree by renewables. Based on our estimates of the latest European Environmental Agency data, around 4.5GW of the Czech coal and lignite power (co)generating capacity will not comply with the nitrogen oxides and sulphur dioxide limits set for large combustion plants for both 2021 and 2022, when the limits tighten .

Czech energy incumbent CEZ, which owns a share of those power plants, already announced that 1GW of coal fired capacity will be shut down in 2020 due to the new emission limits. Emissions limits tighten in the same period that ICIS forecasts EUA prices will be rising.

CEZ and the Czech state are currently in the process of drawing up a framework agreement over new nuclear capacity at Dukovany, but we do not model any nuclear additions in the country before 2030.

The biggest year-on-year drop in directional exports from the Czech Republic are to Slovakia – down by around 2TWh/year in 2020 and again in 2021. At the same time, directional imports from Slovakia will start increasing y-o-y from 2020. In Slovakia, unlike in the Czech Republic, nuclear capacity will replace the coal and lignite closures. Two new reactors, Mochovce 3 and 4 are expected to commission during 2020 and 2021 respectively, adding 7.4TWh of supply. By 2021, total nuclear generation is forecast to make up 71% of Slovakia’s power demand.

In 2021 Czech directional exports to Germany and Austria are set to each fall by around 2.6TWh y-o-y, and the country will become a net importer. At the same time Slovakia, as a result of the commissioning of two new nuclear reactors of 471MW each, will switch to net power exports 2021-2025.

Forecast risks

In the Czech Republic, Prime Minister Andrej Babiš is facing corruption charges, protests, and calls to resign, but a change in government would have limited impact on Czech energy policy. Most of the other parties which provide information on their energy policy are similarly pro-nuclear and endorse the building of further nuclear capacity at Temelin and Dukovany.

Both countries may however increase renewable energy ambition compared to the current assumptions because of the pressure from the European Commission, which called both countries to do so after reviewing draft NECPs of all EU member states . The Commission recommended Czech RES ambition be raised from 20.8% to 23% while the Slovak NECP was thought to be even less ambitious and prompted a recommendation of raising the RES target 6 percentage points, to 24%.

A full analysis including market impact, is available on the ICIS Power Perspective interactive web platform. If you have not yet subscribed to our analytics products, please get in contact with Justin Banrey (justin.banrey@icis.com ).

Vija Pakalkaite, Anise Ganbold, Ellie Chambers