CEZ Group

CEZ has been shifting its business model to provide energy-related services and develop electric vehicle charging infrastructure. In 2014, CEZ ESCO was established to integrate and expand CEZ’s energy services business, by providing energy management, electrical equipment and installing rooftop solar. CEZ expects significant growth in this business thanks to the EU energy efficiency directive and growing consumer demand. By 2025, the company is aiming to have at least 25% of the energy services market share in the Czech Republic and Slovakia and be a top-three energy services provider in Germany, Northern Italy and Poland. In 2019, CEZ ESCO was responsible for approximately 6% of CEZ’s operating revenue. CEZ has also built 185 electric vehicle charging points and begun developing 252 more, with the goal of providing charging coverage across the Czech Republic.

CEZ’s emissions reduction targets are inadequate and make it difficult for stakeholders to track the company’s progress. The company set an unambitious target in 2005 to reduce its emissions intensity – that is, the amount of emissions produced for every unit of electricity – by 15% by 2020, which it has achieved. Before the Paris Agreement in 2015, CEZ also set a target to generate carbon neutral electricity by 2050. However, the lack of intermediary targets means management is not incentivised to achieve this in the short term. Additionally, CEZ’s well-below 2-degree pathway requires it to be generating carbon neutral electricity by 2046, not 2050.

CEZ announced a new strategy in 2019 that has four strategic priorities, including ‘new energy sector development in Czechia’ and ‘energy services development in Europe’. The company can strengthen the credibility of its strategy by conducting scenario analysis to identify its climate risks and opportunities, as well as stress-testing the resilience of its assets to climate-related risks. CEZ should also identify how it will finance its low-carbon transition.

CEZ has set out clear plans to reduce its coal capacity, targeting a phase-out of 50% of coal capacity by 2025, compared to 2016. This reduction in coal capacity means the company performs well on the locked-in emissions indicator, which measures all of the emissions from the company’s installed and planned electric power plants up to 2033. In 2025, coal capacity will stand at 27.6% of CEZ’s total, compared to 44% in 2019. However, this decline in coal will slow, with coal capacity at 25.5% in 2030 and 19.6% in 2035. CEZ will keep open its highly polluting lignite (brown coal) power plants the longest, as they burn coal produced at CEZ’s mines and therefore are more profitable. This slow decline in coal capacity after 2025 risks CEZ’s ability to align with its well-below 2-degree pathway in the long term. Additionally, a high proportion of CEZ’s capital investment is still going to fossil fuels: ~US$452 million was invested in fossil fuels and nuclear in 2019, compared to ~US$28 million in renewables.

CEZ has committed to generating carbon neutral electricity by 2050 and to reducing its coal capacity by 50% from 2016 to 2025. The company is targeting an increase in non-hydro renewable capacity from 1.7 GW in 2019 to 3.8 GW in 2025. It is aiming to become one of the top energy services companies in its markets by 2025.

CEZ will reduce its emissions intensity by closing or selling coal power plants. It has a development pipeline of 565 MW of wind projects. It is focusing on delivering renewables and energy services in the Czech Republic and growing its energy services business in Germany, Northern Italy and Poland.

In line with its new strategy, CEZ has set up a new team focused on developing its renewables and energy services business in the Czech Republic. It is planning a new nuclear power plant and preparing to close coal assets. The company is also divesting its assets in Bulgaria, Romania and Turkey.

The company reduced its emissions from 444 gCO2e/kWh in 2013 to 388 gCO2e/kWh 2018, though this rate was not compatible with its decarbonisation pathway. There was a small increase in renewable capacity from 0.74 GW in 2014 to 0.87 GW in 2018.

CEZ’s plans to close its coal power plants while increasing renewables are consistent. However, short-term emissions reduction targets that can incentivise change are lacking. Coal closure after 2025 may be too slow for the company to be aligned with its well-below 2-degree pathway.