CEZ boosts electricity production from biomass, up 52 percent in 2007
CEZ, Central and Eastern Europe's largest power producer, boosted its production of electricity from burning biomass to 249 gigawatt hours (GWh) in 2007, up from 163 GWh a year ago (an increase of 52 per cent). Biomass has become the Czech group's second most important renewable source after hydro-powered plants, and the fastest growing segment. Wind (0.1GWh in 2006) and solar (0.07GWh in 2006) have stagnated over the past years and make up a minimal fraction of CEZ's portfolio, which also includes nuclear power. In the Czech Republic biomass is seen as the renewable with the largest potential to meet the EU's renewables target.
In the first three quarters of 2007, CEZ produced 65.1 terawatt hours (TWh) of electricity of which 1.2 TWh came from renewable sources, the bulk from hydropower and bioenergy.
The Czech company is investing heavily in biomass because it is the most competitive renewable with which the EU's renewables targets can be met. The energy group however warned that the EU's recent draft on renewable energy and greenhouse gas reductions could increase power generation costs by an estimated 50 percent by 2013.
It is uncertain how much of that cost CEZ will be able to pass on to consumers, but analysts predict the higher outgoings could stunt investments in new capacity, putting further upward pressure on electricity prices.
The European Commission last month announced a climate action and renewable energy package aimed at cutting carbon dioxide emissions by 20 percent from 1990 levels by 2020. It also set an EU-wide target for renewables to rise to 20 percent of the energy mix by that time, with an individual figure of 13 percent for the Czech Republic.
The Czech government announced it hopes to meet the criteria by stimulating the development of additional hydroelectric and biomass power plants. When it comes to renewable energy production, the Czech Republic currently sits in the middle of the pack of EU member states, with 9.4% of final energy consumption coming from green sources.
The commission further unveiled its proposals for the 2013-2020 phase of the EU Emissions Trading Scheme, under which the power sector will have to pay fully for carbon credits. Analysts said this will have the largest impact on CEZ going ahead. If CO2 credits go to full auctioning, then that CO2 cost will find its way into the power price immediately, said Bram Buring, analyst at Wood & Co.
CEZ, which has a market share of around 70 percent in the Czech Republic, has been allocated 34.3 million credits per year for the current trading period ending in 2012. Many analysts are still working out the likely financial impact of the EU proposals on the Czech power producer. But Josef Nemy, an analyst with Komercni Banka, forecasted generation costs could rise as much as 33.5 bln crowns, or around 500 crowns per megawatt hour of electricity produced, if CEZ has to pay for all its allowances. CEZ currently produces one MWh at a cost of around 1,000 crowns on average.
The increase in electricity prices is expected to be smaller than the increase in costs per MWh because the additional cost will be spread between consumers and producers. The overall impact on utilities, including CEZ, would thus be negative. Generation costs for CEZ could come under further strain as the group builds up capacity for renewable sources. The company, which has set aside 30 bln crowns for investment into renewables, admitted the EU proposals will mean "a significant and very costly increase in production of electricity from renewable sources."
Petr Novak, an analyst in Atlantik FT, said CEZ will likely need to invest more in biomass to meet the targets. But biomass is currently limited by a weak supply chain The total market for biomass producers is not working because it's difficult to process the whole supply chain, but biomass has the most potential among renewables in the Czech Republic, says Novak.
The European Commission estimates the Czech Republic's mid term (2010-2020) bioenergy potential to be around 6.5TWh for electricity from solid biomass, and slightly more than 2 TWh for electricity from biogas. Onshore wind power has a large potential as well (graph, click to enlarge):
energy :: sustainability :: biomass :: bioenergy :: biofuels :: co-firing :: coal :: renewables :: Czech Republic ::
Investment into new costly technology for carbon capture and storage (CCS) is also seen adding to CEZ's cost base. Eva Novakova, CEZ's spokeswoman, says the company has previously estimated that the cost of producing electricity from plants equipped with this technology could rise between 35-81 percent. CEZ does not currently operate any units with carbon capture, but it is working on development projects for the technology and has said it is considering future construction of CO2 separation units.
The combination of more expensive carbon credits, higher renewables output and costlier anti-emissions technology could slow new investments into more capacity in the Czech Republic and the CEE region as a whole, analysts added.
A lack of new capacity and strong demand have been two of the main reasons behind the brisk growth in Czech power prices in recent years.
Graph: Mid term potential for renewables in the Czech Republic. Credit: European Commission, SEC(2004) 547, The share of renewable energy in the EU - Country Profiles
Overview of Renewable Energy Sources in the Enlarged European Union {COM(2004)366 final}.
References:
Forbes: CEZ raises annual production from biomass in 2007 by 52 pct - February 4, 2008.
AFX: CEZ generation costs seen soaring under post-2013 EU emissions reforms - January 30, 2008.
CEZ: Utilization of renewable sources by CEZ Group is constantly growing [*.pdf] - November 2006.
European Commission: Czech Republic Renewables Country Page, at Energy.eu.
European Commission: The share of renewable energy in the EU - Country Profiles: Overview of Renewable Energy Sources in the Enlarged European Union [*.pdf] - SEC(2004) 547 Commission Staff Working Document {COM(2004)366 final}, Brussels, May 26, 2004
In the first three quarters of 2007, CEZ produced 65.1 terawatt hours (TWh) of electricity of which 1.2 TWh came from renewable sources, the bulk from hydropower and bioenergy.
The Czech company is investing heavily in biomass because it is the most competitive renewable with which the EU's renewables targets can be met. The energy group however warned that the EU's recent draft on renewable energy and greenhouse gas reductions could increase power generation costs by an estimated 50 percent by 2013.
It is uncertain how much of that cost CEZ will be able to pass on to consumers, but analysts predict the higher outgoings could stunt investments in new capacity, putting further upward pressure on electricity prices.
The European Commission last month announced a climate action and renewable energy package aimed at cutting carbon dioxide emissions by 20 percent from 1990 levels by 2020. It also set an EU-wide target for renewables to rise to 20 percent of the energy mix by that time, with an individual figure of 13 percent for the Czech Republic.
The Czech government announced it hopes to meet the criteria by stimulating the development of additional hydroelectric and biomass power plants. When it comes to renewable energy production, the Czech Republic currently sits in the middle of the pack of EU member states, with 9.4% of final energy consumption coming from green sources.
The commission further unveiled its proposals for the 2013-2020 phase of the EU Emissions Trading Scheme, under which the power sector will have to pay fully for carbon credits. Analysts said this will have the largest impact on CEZ going ahead. If CO2 credits go to full auctioning, then that CO2 cost will find its way into the power price immediately, said Bram Buring, analyst at Wood & Co.
CEZ, which has a market share of around 70 percent in the Czech Republic, has been allocated 34.3 million credits per year for the current trading period ending in 2012. Many analysts are still working out the likely financial impact of the EU proposals on the Czech power producer. But Josef Nemy, an analyst with Komercni Banka, forecasted generation costs could rise as much as 33.5 bln crowns, or around 500 crowns per megawatt hour of electricity produced, if CEZ has to pay for all its allowances. CEZ currently produces one MWh at a cost of around 1,000 crowns on average.
The increase in electricity prices is expected to be smaller than the increase in costs per MWh because the additional cost will be spread between consumers and producers. The overall impact on utilities, including CEZ, would thus be negative. Generation costs for CEZ could come under further strain as the group builds up capacity for renewable sources. The company, which has set aside 30 bln crowns for investment into renewables, admitted the EU proposals will mean "a significant and very costly increase in production of electricity from renewable sources."
Petr Novak, an analyst in Atlantik FT, said CEZ will likely need to invest more in biomass to meet the targets. But biomass is currently limited by a weak supply chain The total market for biomass producers is not working because it's difficult to process the whole supply chain, but biomass has the most potential among renewables in the Czech Republic, says Novak.
The European Commission estimates the Czech Republic's mid term (2010-2020) bioenergy potential to be around 6.5TWh for electricity from solid biomass, and slightly more than 2 TWh for electricity from biogas. Onshore wind power has a large potential as well (graph, click to enlarge):
energy :: sustainability :: biomass :: bioenergy :: biofuels :: co-firing :: coal :: renewables :: Czech Republic ::
Investment into new costly technology for carbon capture and storage (CCS) is also seen adding to CEZ's cost base. Eva Novakova, CEZ's spokeswoman, says the company has previously estimated that the cost of producing electricity from plants equipped with this technology could rise between 35-81 percent. CEZ does not currently operate any units with carbon capture, but it is working on development projects for the technology and has said it is considering future construction of CO2 separation units.
The combination of more expensive carbon credits, higher renewables output and costlier anti-emissions technology could slow new investments into more capacity in the Czech Republic and the CEE region as a whole, analysts added.
A lack of new capacity and strong demand have been two of the main reasons behind the brisk growth in Czech power prices in recent years.
Graph: Mid term potential for renewables in the Czech Republic. Credit: European Commission, SEC(2004) 547, The share of renewable energy in the EU - Country Profiles
Overview of Renewable Energy Sources in the Enlarged European Union {COM(2004)366 final}.
References:
Forbes: CEZ raises annual production from biomass in 2007 by 52 pct - February 4, 2008.
AFX: CEZ generation costs seen soaring under post-2013 EU emissions reforms - January 30, 2008.
CEZ: Utilization of renewable sources by CEZ Group is constantly growing [*.pdf] - November 2006.
European Commission: Czech Republic Renewables Country Page, at Energy.eu.
European Commission: The share of renewable energy in the EU - Country Profiles: Overview of Renewable Energy Sources in the Enlarged European Union [*.pdf] - SEC(2004) 547 Commission Staff Working Document {COM(2004)366 final}, Brussels, May 26, 2004
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