The Czech Republic will offer USD 3.5 billion for heat and electricity cogeneration projects

The Czech Republic has received approval from the European Commission to provide 3.2 billion euros ($3.5 billion) in state aid for high-efficiency heat and power cogeneration projects.

Operators of new or modernized combined heat and power (CHP) plants that deliver primary energy savings of at least 10 percent compared to separate heat and power production, as defined in the European Union Energy Efficiency Directive, are eligible.

Cogeneration installations powered by fossil fuels are not included. “Natural gas projects will have to either close assisted installations or enable a transition to renewable and low-carbon gases by 2050 to avoid dependence on natural gas,” the Commission said in a statement.

The aid will take the form of a guaranteed bonus for each megawatt hour of electricity produced, paid for 15 years. The amount of the bonus is determined by auction, with the exception of small installations (up to 1 megawatt of electricity), where the amount of the bonus is determined annually by the Czech Energy Regulatory Office.

The Czech government expects the package to deliver 9.3 million metric tons of carbon dioxide (CO2) savings per year.

The aid was reviewed by the Commission for compliance with fair competition rules in the EU.

“This EUR 3.2 billion Czech program will promote energy efficiency and help the Czech Republic achieve its CO2 emission reduction targets,” commented Margrethe Vestager, Executive Vice President responsible for Competition Policy at the Commission. “Providing support through tenders will limit aid to a minimum and keep electricity prices for consumers low, while ensuring that possible distortions of competition are limited.”

Last year, the Energy Efficiency Directive (EU) 2023/1791 entered into force, requiring EU countries to reduce energy consumption by 11.7 percent by 2030 compared to 2020 projections.

The directive aims to achieve final energy consumption of a maximum of 763 million metric tons of oil equivalent (MMtoe) by 2030, compared to the EU’s 2020 forecast of 868.8 MMtoe. Final energy consumption as defined in the directive means “all energy supplied to industry, transport, including energy consumption in international aviation, households, public and private services, agriculture, forestry, fisheries and other final-use sectors, excluding energy consumption in international bunkers marine, ambient energy and supplies to the transformation sector and to the energy sector and losses arising in transmission and distribution.

The directive sets a target for primary energy consumption of no more than 992.5 MMtoe by 2030, compared to the EU’s 2020 forecast of 1,176.1 MMtoe. Primary energy consumption as defined in the directive means “gross available energy, excluding international offshore bunkers, non-energy final consumption and ambient energy”.

Energy savings obligations, measured on the basis of average final energy consumption in 2016-2018, were set at 1.3%. for 2024–25, 1.5 percent for 2026–27 and 1.9 percent for the years 2028–30.

The directive requires Member States to migrate their heating and cooling systems to 100% renewable energy, waste heat or a combination thereof by 2050. In the shorter term, by 2028, heating and cooling systems should use “at least 50% renewable energy, 50% waste heat, 50% renewable energy and waste heat, 80% heat from high-efficiency cogeneration or at least a combination of such thermal energies fed into a network in which the share of renewable energy is at least 5% and the total share of renewable energy, waste heat or high-efficiency cogeneration is at least 50 percent.”

According to the directive, heating and cooling systems built or thoroughly renovated with a service life until 2030 should not use fossil fuels, except gas.

The governments of the 27-member bloc have two years to adopt most of the solutions contained in the directive into local legislation.

The directive is part of Fit for 55, a set of EU rules aimed at achieving regional reductions in greenhouse gas emissions of at least 55 percent by 2030 compared to 1990.

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