Czech Republic Natural Gas Security Policy

Natural gas is the fourth-largest energy source in the Czech Republic. Industry is the largest user, followed by residential and electricity and heat generation. With hardly any domestic gas production, the Czech Republic relies on imports for its domestic consumption, mostly from Russia. 

As a landlocked country, the Czech Republic does not have any LNG terminals and natural gas is imported via pipeline interconnection points between the Czech Republic and neighbouring countries, namely Germany and Slovakia. The Czech gas transmission system plays a key role in supplying gas to Central and Eastern Europe as well as to Germany and Western Europe, with the annual amount of gas transported through the country more than four times domestic consumption. Given the country’s role in the European gas supply network, the government should increase regional cooperation and assistance in case of security of supply problems, and organise cross-border emergency response exercises.

Czech gas suppliers are required to maintain gas reserves. Mobilisation of these security reserves can only be decided by the Central Crisis Management Committee after declaration of a state of emergency. As a last resort measure, a solidarity mechanism mandated by EU Regulation can also be applied to supply gas to protected customers, although bilateral agreements with neighbouring countries must be concluded to validate the mechanism.

Organisation 

The Czech Republic maintains a high degree of natural gas supply security through a combination of several measures, including a relatively high capacity of underground commercial gas storage and well-established safety standards of TSO and DSO infrastructure. The country seeks to improve security of supply through capacity extensions of a number of storage facilities and increased flexibility and interconnections of its gas network.

The natural gas emergency response policies of the Czech Republic are in line with EU regulation 2017/1938. According to the regulation, the Czech Republic every four years prepares a Risk Assessment, a Preventive Action Plan, and an Emergency Plan as parts of the emergency planning at national, regional and EU level. The EU-regulation also includes an obligation to establish and maintain a security standard of gas supply. In the case of the Czech Republic, this obligation is specified in the Energy Act and Decree No. 344/2012 Coll.

The Ministry of Industry and Trade monitors compliance with safety and reliability standards for the gas and electricity networks, and implements protective measures for emergencies. The TSO has a number of obligations, including securing the safe and reliable operation and maintenance of the transmission system, improving the transmission system and interconnection with neighbouring states, as well as solving problems during a gas emergency. In the event of an accident, the dispatching centres of the TSO, DSOs and storage facility operators are capable of cooperating to operate the network safely together.

The Czech gas National Emergency Strategy Organisation (NESO) nominally comprises 22 people from a number of organisations including the TSO, DSOs, and relevant gas stakeholders. Notably, the leading role of the NESO is performed by the central dispatching unit of the TSO, NET4GAS. The TSO carries out the practical management and coordination of any gas crisis situation and is responsible for setting the emergency measures to be implemented by the relevant entities in the system. It also has a role of collecting and processing the required information in order to perform those functions.

In accordance with EU regulation 2017/1938, the competent authorities of neighbouring countries are expected to exchange proposals for their Emergency Plans and carry out consultations at regional level in order to avoid inconsistencies between emergency measures proposed by each country and facilitate harmonisation between them. The Czech Republic has concluded such an arrangement only with Slovakia.

Fuel switching

The Czech Preventive Action Plan includes the measures needed to solve or mitigate security and supply risks identified in the national and common risk assessments. The Emergency Plan describes three crisis levels: early warning, alert and emergency. During the first two levels, the available natural gas emergency response measures are market-based, but if the situation is determined to require declaring a state of emergency, non-market measures are also applied. The TSO has a duty to manage emergency prevention and emergency activities for the country, including publishing information in the mass media, allocating gas, and notifying the MIT, the ERO, the market operator and relevant municipal authorities. It is supported by DSOs at regional level.

In the event of a state of emergency, all participants in the gas market are obliged to comply with restrictions on gas consumption or supply. For emergency response purposes, natural gas customers are divided into eight categories (A, B1, B2, C1, C2, D, E and F) based on their annual gas consumption and whether they provide essential services. Restrictions are decided based on these categories and on the level of actual gas disruption. The TSO or the appropriate DSO announces the emergency level through Czech Radio and informs all participants on the gas market including state authorities.

Gas-electricity interlinkage and coordination

While the Czech government is aiming to reduce natural gas demand, the government sees a role for natural gas in the energy transition, especially to provide security of supply for electricity generation and to cover hard-to-decarbonise sectors. The planned phase-out of coal-fired generation and the expected increase in shares of generation from variable solar PV, bioenergy and wind, could give natural gas power plants an increased role in balancing the Czech Republic’s electricity system. According to the Czech Preventive Action Plan of February 2019, only 6% of the natural gas consumed in the Czech Republic in 2018 was used to generate electricity. However, further increase is foreseen given the envisaged growth of gas-fired power generation and combined heat and power generation.

In light of this increased interlinkage between the gas and electricity sectors, more attention should be given to cross-sector emergency plans and exercises to mitigate the potential impact of a gas supply disruption on electricity production, and vice versa.

Obligation for emergency gas storages

There are no government-owned strategic natural gas reserves in the Czech Republic. Suppliers that serve protected customers are obliged to have gas emergency stocks held in the country or elsewhere in Europe, with preference for domestic storage facilities.

Czech natural gas traders supplying protected customers are required to maintain gas reserves, corresponding to 30 days of exceptionally high gas demand of those customers based on EU Regulation 2017/1938. These stocks should be available between 30th of September and 1st of April to ensure that high gas demand is met during winter. The average level of these mandatory gas reserves in the winter season 2019/2020 was 325 mcm, sufficient to cover about 11 days of gas supply in winter and equivalent to a volume of 14 days of average gas demand in 2019. Both the storage system operators and the suppliers to protected customers have to report stock levels to the market operator and the ERO on a monthly basis between September and March. In case gas is stored outside of the Czech Republic, the suppliers also have to report on the transport capacity booked in order to bring the gas into the country.

Mobilisation of gas security stocks is one of the key non-market-based emergency response measures. But before these stocks can be released, market-based measures, such as increased imports and the use of bi-directional cross-border interconnection points, should be used and exhausted. The Central Crisis Management Committee decides on the release of compulsory gas stocks. Over the last decade, there have been no supply disruptions seriously affecting the national gas system or requiring release of emergency stocks. The large storage capacity and the diversification of supply sources supported by several pipeline interconnections with neighbouring countries, as well as the obligated gas storage for protected customers, allows for a resilient level of security in the Czech gas system.