Workshop E Rehabilitation Organising Transformation in the Czech Republic Mrs' Hana Luptovska, Deput

1
Workshop E RehabilitationOrganising
Transformation in the Czech RepublicMrs. Hana
Luptovska, Deputy Director ADH CR, Marketing
International Contacts Manager

• Historical background and development (1 4)
• Transformation process (1 - 16)
• - privatisation
• legislation
• market environment
• price regulation
• supporting schemas (electricity heating, NG
  heating, CHP, RES)
• changes in companies organisation
• Present situation (1)

2
Historical background and development 1 1930
40 launched centralised DH systems Era of steam
systems construction with urban DH plants
burning solid fossil fuels

• Reasons
• energy demand for developing industrial
  production in urban areas energy demand for
  residential buildings (flats of the employees)
• power industry development, need of new and
  bigger energy plants for operation of local or
  regional grids
• a need to solve problems with transport and
  storage of fuel (mostly coal on that time) and to
  limit impacts of coal burning by the use of high
  chimneys for a better spread of exhaust gases,
  residuals (slagde and ashes)
• construction of modern and progressive DH
  systems (steam supply) with CHP plants

3
Historical background and development 2 1950
60 Era of the highest development of large DH
systems

•        Reasons 
• extensive development of heavy industry evoking a
  continual increasing of energy consumption,
  overall increase of energy intensity and labour
  concentration in industrial agglomerations
• integration regional grids into a unified
  interconnected system national transition grid
  - and the resulting need of new large base-load
  power plants, which were at the same time
  significant heat sources for DH systems
• centralized planning and reallocation of
  financial sources preferring large projects on
  account of smaller spread projects and
  initiatives
• launching of very large DH systems especially in
  industrial and highly urbanised agglomerations.
  The main sources were newly built power plants or
  HOBs situated out of the city centres with hot
  water heat feeders and networks

4
Historical background and development 3 1970
80 Era of satellite housing estate development
with DH

• Reasons
• use of high-minded fuels (fuel oils and later
  natural gas) with a balanced planning consumption
  
• overall shortness of investment sources
• Impacts
• development of relatively cheap but energy highly
  demanded systems for housing estates with HOBs
  (local boiler houses) burning high-minded fuels
  or
• larger DH systems were constructed but with HOBs
  due to a lack of finances
• Characteristics
• HOBs with an overall technical stagnancy, absence
  of measuring and regulation, retaining technology
  of heat substations, construction of duct-laid
  networks.

5
Historical background and development 4 after
1990 Era of ecological and rational improvement
of the existing DH systems

• Characteristics
• gradual liberalisation of fuel and energy prices,
  competitive environment, entrance of
  international investors
• introduction of new ecological and energy acts,
  national and EU legislation and standards
  harmonisation
• availability of most modern DH technologies

Results Stagnation of new DH
systems development, but a high intensification
of the whole process from the production up to
final consumption on the present operated
systems. Typical new elements of the plants are
fluid-bed boilers, desulfurisation technology,
CHP units in the distribution it means
prefabricated pre-insulated pipelines, high
efficient heat exchangers and compact house
stations at the consumer side there is installed
measuring, regulation and thermostatics walves.
6
Transformation process 1 - privatisation

• state policy changes - the socialist regime with
  the centralized planning rejected, a new target -
  market based economy
• state ownership of largest DH companies
  privatized
• - 1st voucher privatisation wave (over 7 million
  stakeholders gt investment funds gt banks,
  financial institutions gt private (foreign)
  capital
• - 2nd wave (1/3 population, 1/3 municipalities,
  1/3government higher share of free transfer to
  the municipality ownership gt direct sale to the
  buyer (private /foreign/ capital)
• DH companies privatised as business subjects
  (sold 3x?!)
• in many cases heat generation and heat
  distribution were privatised separately
• smaller communal heat supply companies owned by
  municipalities gt rent for operation by private
  companies
• gt sold to private ownership
• District heating in public services (army,
  police, schools, state hospitals etc.) remain
  under state ownership

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Transformation process 2 - legislation

• Transitional period of the state economy towards
  market economy
• new legislation introduced - better energy
  management and more strict environment protection
  
• 1990 - unbundling (power, gas - distribution
  from transport, heat distribution from power
  generation
• 1992 first Energy Policy document
  (privatisation, restructuralisation)
• 1st wave of voucher privatisation (power and
  heat production comp.)
• 1993 (January) - Split of Czecho/slovakia gt
  split of energy sector
• 1994 - Energy Act (222/1994 Col. on the
  business cond. and execution of State admin. in
  the energy branches and on the State Energy
  Inspection Board
• - stopped government regulation of solid fuel
  prices
• - 2nd wave of privatisation (incl. power and
  gas distribution, oil and coal comp.)

8
Transformation process 3 - legislation

• 1998 (July) - removal of subsidies to prices of
  heat from district heating
• 1999 - Clean Air Act (strict requirements on
  pollutants emissions)
• 2000 - Energy Policy (energy market,
  preparation of the conditions for full membership
  in the EU)
• 2001- Energy Act and Energy Management Act
  (territory energy conceptions)
• - Energy Regulatory Office (gas, power heat
  regulator)
• (July) - removal of subsidies to prices of gas
  and electricity
• (December) finalisation of Energy Chapter
  before the EU membership
• 2002 - 1st step to power market opening (30)
• - new feed-in tariffs for CHP and renewables

9
Transformation process 4 - legislation

• 2002 - electricity exchange start of operation
  (Electricity Market Operator)
• (May) start of the work on updating Energy Policy
  and Energy Act - policy for full membership in
  the EU, gradual harmonisation and involvement of
  the EU legislation in amendments of the acts
• 2004 State Energy Policy (priority on lower
  dependance on import of energy)
• /2007 - new Czech government program new State
  Energy Policy required (priority on an
  environmental friendly approach based on higher
  RES utilisation and ambitious requests for energy
  savings, prevention of coal excavation limits and
  no plans for construction of new nuclear
  sources) reduction of energy consumption of
  about 40 per GDP unit until 2020 gtgt serious
  doubts about the costs, RES and especially
  biomass potential, availability of power capacity
  already in 2015/
• 2005 - Act on support for the use of renewable
  sources of energy (Act No. 180/2005 Coll.), NAP I
• 2007 open electricity and gas markets
• Further period - obligations of IPPC, NAP II,
  Ecology tax reform

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Transformation process 5 - legislation
Legislative support of CHP - Notice of Ministry
of Industry No. 539/2002

• This Notice specifys the general conditions and
  procedure by determination and purchasing of
  cogeneration electricity. The main issues are
• Purchasing and accounting of price benefits are
  provided by the responsible regional operator
• The timing for valuation and accounting of CHP
  electricity is once a month
• The Notice specifys different CHP technologies
  similar to Annex I of Direction 2004/8/EC
• The calculation of CHP electricity amounts are
  based on the useful heat delivery multiplied by
  power to heat ratio
• Notice No. 539 is principally similar to the
  conditions given by Directive 2004/8/EC, but
• Does not contain the annual overall efficiency
  limits (75 or 80 )
• Does not contain the procedure of energy savings
  calculation
• Ministry of Industry is working on its amendment
  to correspond with the valid Czech Energy Act and
  to fulfil all conditions and procedures given by
  Directive 2004/8/EC.

11
Transformation process 6 legislation
Development of legislative support of CHP
(purchase obligations for a stated price
gtgtpriority of CHP connection ERO CHP ele. bonus
for decentralisation minimal CHP electricity
financial benefits)

12
Transformation process 7 market environment

• 1990 - state economy restructuralisation gt
  decrease of the industrial production gt
  significant reduction of heat demand especially
  for technology purposes
• state support for electricity heating
• 2000 state promoted strategy ecological
  natural gas supply gtcross subsidies in low
  consumption tariffs higher NG tariffs for the DH
  as eligible cust.

13
Transformation process 8 regulation

• During the gradual opening of the energy
  markets and price deliberalisation (rejections of
  subsidies 1998) the DH price regulation as a
  mean of customers protection was established
  ERO, 2001).
• ERO set up at 1st January 2001 under Act No.
  458/2000 on the Conditions for Business and State
  Administration in the Energy Industries
• A Chairman, appointed by the Government for a
  term of five years (and dismissed by the
  Government) manages the Office.
• Divided into Licensing, Regulation and Strategy
  Department
• The EROs main mission Protect consumers,
  emphasize the quality and reliability of energy
  supplies to consumers, support competition,
  promote the effectiveness of energy utilities'
  business, price stability.
• For thermal energy (heat) a new regulation
  period started from 1.1.2005, lasting until 2008

14
Transformation process 9 DH price regulation

• Main rules provided in ERO price decision on
  heat prices for one year
• ADH CR negotiated more stabile (for a longer
  period) conditions, mitigation of the principles
  (there is a market regulation and ERO
  administrative regulation (when the
  calculation/costs are approved even very high
  prices are approved)
• The regulation split above and below price
  level with regard to the calculation (materially
  regulated prices DH energy for individual price
  localities, variable economically justifiable
  costs, fixed economically justifiable costs,
  adequate profit, value added tax)

Prices above the level
Limited annual increase of fixed costs and profit
for a maximal price locality
Prices below the level Materially
regulated prices without limitation of the annual
increase of the fixed costs and profit
15
Transformation process 10 DH price regulation

• reasonable results of negotiations gt mitigations
  of the principles
• investments to the DH technology are not limited
  
• annual increase of depreciations dealt with
  production and distribution not limited
• for an increase of the total fixed costs and
  profit available to use 90 of stabile savings
  of variable costs
• change of total fixed costs and profit available
  with extention of new consumer points

• individual heating price

16
Transformation process 11 DH price regulation
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Transformation process 12 DH price regulation

• Convergence of the set out regulated prices and
  the actual prices

18
Transformation process 13 Heat prices
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Transformation process 14 Heat prices
ADH CR With regard to the energy savings and
efficient energy management annual payment should
be pursued!
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Transformation process 15 changes in CHP/DH
companies

• the largest DH companies under the new ownership
  gtgt huge investments to the technology parts
  renovation to meet the ecology limits and also to
  enhance the efficiency
• from the local to energy business
• installed efficient CHP technology offered
  needed services for the power system of the CR
• Example CHP/DH plants Brno by-pass installed
  to provide system services for the transmission
  grid

21
Transformation process 16 changes in CHP/DH
companies

• gradual reunion of heat generation and
  distribution companies
• new organisation structures of the DH companies
• reduction of operation costs
• reduction of maintenance costs lt outsourcing
  /core business (/-)
• streamling (reduction of the number of
  employees)
• development of the activities (cooling, facility
  management)

22
Present situation 1- successfully passed changes

• District heating provides services in third of
  the households in CR
• (urban areas 56.8 and in rural areas 9.7 )
• CHP produces 39 of heat, in the DH delivery the
  CHP heat shares 70.9
• fuels for district heating - 63 coal and 37
  natural gas
• newly build DH plants based on natural gas
• district heating prices regulated by the ERO, VAT
  of 5
• several HOBs biomass in smaller communities
• some CHP/DH plants with biomass boilers,
  co-firing of biomass with fossil fuels
• rarely used geothermal energy, heat from
  incineration plants, land field gas

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• Further information
• Euroheat Power District Heating 2007/ Country
  by Country Survey, Czech Republic
• www.tscr.cz
• tscr_at_tscr.cz
• District Heating Days 2008 (April 22 24)
• Thank you for your attention