Coal’s share of CEZ Group’s electricity generation mix fell to 27 percent in the first half of 2023, hitting a record low, partly due to European Union emission prices, it said the Czech electricity company.
CEZ’s contributions to the nuclear and renewable energy grid increased by 2% to 17.2 terawatt hours (tWh) from January-June 2022. Driving the increase was the higher generation of hydropower plants and the Dukovany nuclear power plant, the majority state-owned company said in earnings. Press release.
“On the other hand, generation from coal and steam-gas sources with emissions fell 22 percent to 7.8 TWh due to lower deployment of these sources in the face of falling market prices for “electricity and the evolution of the price of emission rights and natural gas”, says the report.
Under the Emissions Trading System (ETS), the EU uses a mechanism called cap-and-trade that sets out emission allowances for companies to buy, which they can trade. Member states can award free allowances, but the bloc on April 18 adopted reforms to the ETS, implemented in 2005 and now in its fourth phase (2021-30), which include phasing out allowances zero cost emission or greenhouse gas emissions allowed for companies. With a target of completion by 2034, the phasing out of free subsidies begins with a 2.5 percent reduction in 2026.
The updated ETS, approved with 413 in favor, 167 against and 57 abstentions, the European Parliament reported on April 18, orders companies to reduce global warming emissions by 62 percent during this decade compared to the levels of 2005. This is a percentage point higher than the previous proposal of the European Commission.
Electricity producers have been obliged by the ETS to buy all their emission rights since 2013. But lower-income members, including the Czech Republic, can offer free allocations. However, the Czech Republic has chosen to transfer all of its free emission volumes to the EU Modernization Fund, thereby increasing its share of the funding, according to the European Commission. Emissions rights transferred to the fund, a package of aid for the EU’s climate ambitions for the poorest members, are sold to raise capital.
As a result of carbon price pressure and weaker electricity prices holding back deployment, “the share of generation from coal sources reached 27 percent, a historic low,” CEZ said .
“The CEZ Group is thus fulfilling its Clean Energy for Tomorrow strategy in terms of decarbonisation commitments with the public”.
In the strategy launched on May 20, 2021, CEZ committed to reducing the share of coal-fired electricity from 39% in 2019 to 25% in 2025 and 12.5% in 2030.
“We will reduce the intensity of emissions [of the company as a whole] from 0.36 tCO2/MWh [metric tons of carbon dioxide per megawatt hour] in 2019 to 0.26 tCO2/MWh in 2025 and to 0.16 tCO2/MWh in 2030,” CEZ said in the Clean Energy for Tomorrow statement.
CEZ reported a net profit of USD 1 billion (CZK 22.3 billion) in the first two quarters, USD 514 million (CZK 11.3 billion) compared to the first half of 2022. “The decrease was caused by the ‘newly introduced windfall tax of 60%, which amounted to more than 13 billion CZK [$591 million] subject to expenses,” the company said.
“After the approval of the record dividend of 145 CZK per share [$6.6] and taking into account the extraordinary taxation of sales and profits of energy companies, we expect CEZ Group to pay between 110 and 120 billion CZK [$5-5.5 billion] to the Czech state in dividends, profit tax and excess generation sales levy this year,” CEO Daniel Benes said in the results report.
Income from operations before deductions amounted to USD 2.8 billion (CZK 62.4 billion), up 5% year-on-year. “The year-over-year comparison is affected by extreme fluctuations in commodity prices, particularly last year following Russia’s military invasion of Ukraine and subsequent sales taxes on excess generation of 11 billion of CZK. [$500 million]”, he said. “These costs almost wiped out the year-over-year increase in sales prices for generated electricity.”
Net debt fell by $5 billion (CZK 113 billion) in the first half of 2023. CEZ had net debt of $7.1 billion (CZK 155.7 billion) at the end of 2022, according to its annual report.
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