German policy influences prices

Changes in German energy policy could cause electricity prices in the Czech Republic to rise, negatively impacting homes and industry, according to government officials.

"Germany, as the largest economy in the European Union, will affect the price levels in this country," Industry and Trade Minister Martin Kocourek told the daily Hospodářské noviny.

Recently, German Chancellor Angela Merkel confirmed the position on German energy policy that has emerged in the past few weeks, imposing a "windfall levy" on any revenues earned from extending the operating life of nuclear plants, in addition to a fuel-rod tax.

Merkel's predecessor, Gerhard Schörder planned to shut off all nuclear reactors by 2020. Merkel has said the country would need more time to replace the energy with that from renewable sources, but that the windfall, or profits, the plants gain from extending that deadline should contribute to the research and development of renewable energy. That burden on nuclear plants would be in addition to a tax on fuel rods, which are metal rods containing uranium-oxide pellets providing fuel to nuclear reactors.

The German Economics and Technology Ministry declined to comment to The Prague Post on the situation, saying it couldn't answer any questions until the plans are finalized in the upcoming days.

The 17 nuclear reactor operators in Germany, which produce around 25 percent of the country's energy, have threatened to shut down the reactors if the taxes are implemented.

Analysts said it is unlikely the operators will follow through, as they have long-term contracts to fulfill, and the German government would reach a compromise beforehand because of the crisis their shutdown would cause.

"If Germany turns off nuclear sources right away, as industry leaders have said they would, Germany would have to import electricity from neighboring countries, and the Czech Republic is a neighboring country," said Milan Vaníček, an analyst at Czech brokerage firm Atlantik FT. "I don't even assume it's technically possible to import that much energy supply."

Barring any extreme situations like that, the policy will still likely push prices up in the Czech Republic, analysts said.

Petr Hlinomaz, an analyst with Prague-based brokerage company BH Securities, said if Germany doesn't manage to replace nuclear energy sources by the time they shut off the reactors, that gap will have to be filled with imports, which could put upward pressure on prices. In addition, even if renewable resources cover demand in the country, the cost of producing energy from renewable sources is significantly higher.

"If prices in Germany go up, German companies, distribution companies and electricity traders will seek lower prices, like in the Czech Republic, which would increase Czech prices," he said.

In the immediate future, though, the extension of the nuclear reactors' operation could also have a negative effect of downward pressure on prices by creating an oversupply in the Central European market, said Marek Hatlapatka, head of research at Brno-based brokerage firm Cyrrus. 

"High electricity prices before the crisis spurred the building of new power capacities, and these plants aren't even on the market yet," Hatlapatka said. "So in fact, if the German government extends the lifetime of nuclear reactors, it can have a negative effect on prices in Central Europe."

- Klára Jiřičná contributed to this report.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com