Electromobility and the development of energy storage devices is currently a major topic not only within the EU but also within individual member states.

Although there is no unified concept for supporting the sector, it is clear that all member states seek to support both the development and production of such products and their purchase from final customers. Some countries support the sector more, some less, but in general there is a growing trend to support the sector throughout the EU.

As part of our office’s activities, we deal with the topic of electromobility and energy storage regularly and we monitor both legal and economic developments in this area.

In this newsletter, we would like to provide a basic overview of the current legal and economic situation on this topic.

• The absence of key legislation in the Czech Republic

Winter package. National legislation responds to the development of EU legislation on this topic. Significant in this respect is the so-called “Winter Package”, published in November 2016 by the European Commission, which brought significant changes in the functioning of the electricity market. It responds to the massive development of technologies such as decentralized production, especially from renewable energy sources, energy storage and electromobility.

At the same time, the winter package brings an energy concept for the EU until 2030.

Energy Act.    The basic legal regulation for the electricity industry in the Czech Republic is Act No. 458/2000 Coll. (Energy Act), which, however, does not yet work with the concept of accumulation or any other term related to the storage of electricity.

This was to be changed by the last amendment to the Energy Act (recently adopted), which already contained such regulation. However, this regulation was dropped from the final wording based on the lobby of traditional energy companies (ČEZ, EPH and others).

Currently, the Czech Republic lacks the necessary legal regulation of this sector, although with regard to its actual development, there is a constant need to adopt this regulation.

National Action Plan for Clean Mobility. The only decisive document for this area remains the National Action Plan for Clean Mobility (NAP CM), which is a conceptual document from November 2015 that is regularly updated and contains the assumption of transport development until 2050. At the same time, it deals with charging stations as well as other alternative fuels. However, it has not been yet translated into regulatory documents (laws).

National Action Plan for Smart Grids. A similar document for the electricity industry is the National Action Plan for Smart Grids – a conceptual document that responds to the expected development of electricity production from intermittent sources and the increase in the number of small sources connected to the distribution network. As a result of these changes, reliable operation of the electricity system cannot be achieved without the introduction of smart grids. The need for a clear regulatory framework of such support persists as well.

• Promoting investment in the development and production of electric car batteries in the EU

Currently, there is great motivation to reduce dependence on Asia in regard to battery production, as about 80 percent of current battery production capacity is located in Asia. Of this, 69 percent in China alone. The United States has 15 percent and the European Union only 4 percent.

This situation is unsustainable in the long run, which is why large support programs are currently being prepared for investments in the production of batteries and energy storage devices.

The European Union plans to launch state aid for research of electric batteries. It will then offer co-financing in the amount of billions of euros to companies that want to build large plants for their production. The aim is to protect the EU economy in the electric car market and reduce dependence on supplies from Asia.

The battery support project, launched by the EU a year ago, now offers five types of funding. Individual EU countries will be able to fund 100 percent of the research if it includes cross-border projects. The EU fund Horizon 2020 has set aside 200 million euros (5.2 billion CZK) for battery projects and 800 million euros for the construction of demonstration facilities, where companies will present their capabilities and production plans.

Regions wishing to support the sector can apply for funding from regional funds in the total amount of 22 billion euros. The European Fund for Strategic Investments (EFSI) is ready to participate in the construction of so-called gigafactory plants, such as the one the American company Tesla has.

Support for construction in the Czech Republic may stem from the fact that, as in one of the few EU countries, there are deposits of cobalt, lithium, graphite and nickel (these deposits are also in France, Finland, Portugal and Spain).

• Support for investments in the development and production of batteries for electric cars in the Czech Republic

Currently, therefore, the biggest topic for support is the so-called gigafactory project, where all individual Member States aspire to have gigafactory built in their territory. This is already happening in the Czech Republic as well. Even construction of several gigafactories is being currently considered.

Directly from the Ministry of Industry and Trade (MIT) website, it can be ensured that the MIT and ČEZ concluded a Memorandum on the preparation of a project for a factory for battery cells for electric vehicles, the so-called gigafactory.

The document sets the basic conditions for the establishment of the factory and is a prerequisite for an agreement with other potential representatives of investors in this company, where, in addition to ČEZ, there would also be, for example, representatives of the automotive industry and battery manufacturers. The investment in the project with an annual production capacity of 40 GWh will reach an amount of at least CZK 52 billion, and 2,300 jobs should be created (https://www.mpo.cz/cz/rozcestnik/pro-media/tiskove-zpravy/dalsi-krok-k-vystavbe-gigafactory–mpo-a-cez-uzavrely-memorandum–262584/).

Volkswagen and the Korean LG are interested in building a gigafactory. The negotiation between the government and both foreign companies on construction of a gigafactory has been undergoing for several months now.

At the same time, there is also the possibility that there could be even two gigafactories in the Czech Republic, and the MIT itself admits this possibility as realistic (see https://www.e15.cz/byznys/prumysl-a-energetika/ve-hre-je-i -druha-ceska-gigafactory-tovarnu-na-baterky-nechce-stavet-jen-volkswagen-1381921).

Support for these projects should take the form of investment incentives, according to Act No. 72/2000 Coll., on investment incentives.

Investment incentives can take the following forms:

• discount on income taxes (tax authorities – tax return),
• transfer of land, including related infrastructure at a discounted price (municipalities, regions),
• material support for job creation (labour offices),
• material support for retraining or training of employees (labour offices),
• tangible support for the acquisition of tangible and intangible fixed assets, for a strategic investment project (Ministry of Industry and Trade),
• exemption from real estate tax in favoured industrial zones to a specified extent (tax authorities – tax return).

• Support for investments in the development and production of batteries for electric cars in the Czech Republic in the future

Based on our communication with the MIT, we know that support in this sector is now manifested primarily in the form of investment incentives. However, a launch of other tools to support development and production in this sector is planned soon.

According to information from the MIT, calls will be issued to support the development and production of batteries for electric vehicles (EVs) and energy storage devices (ESS) in two programs, namely:

• OP Technology and Applications for Competitiveness (OP TAK – responsibility of the Ministry of Industry and Trade)
• National Recovery Plan

Already in November of this year, the Ministry of Industry and Trade expects to issue calls for support for the development and production of ESS and EV batteries in the National Recovery Plan program.

Within the OP TAK, this should happen in the course of 2022.

It will certainly be interesting to see what opportunities these planned calls will offer. We shall monitor the news and keep you updated on any interesting development in the field.