Why Czechia could be Central Europe's next battery storage hotspot

Regulatory reform, capacity market revenues and the transition away from coal are creating a compelling first-mover opportunity for battery storage investors in Czechia.

Czechia represents a unique opportunity for the right investor.

• First movers can benefit from highly lucrative ancillary market revenues; the low level of storage deployment means that these markets have not yet saturated.  
• Neighbouring markets are further ahead on their decarbonisation trajectory, excess renewable generation from these markets and growing domestic renewable capacity will drive widening price spreads. 
• Long-term contracted revenues from the initial Capacity Market auctions benefit from de-rating factors being at their highest levels, as these decline over time as storage penetration increases. 
• Capitalising on this emerging market for storage in Czechia requires acquiring a deep understanding of policy and regulatory dynamics, a detailed view of the storage pipeline of both storage and competing flexible technologies, and fundamental market modelling capabilities to translate these factors into revenue implications.

Three takeaways for BESS investors

How LEX OZE III unlocked utility-scale battery storage

BESS deployment in Czechia, especially at the utility scale, has been hampered by licensing restrictions. There was no specific legal framework for electricity storage, apart from existing pumped hydro sites (which were considered to be electricity producers). 

The approval in 2025 of the LEX OZE III amendment to the Czech Energy Act makes several key changes that will unlock the potential of utility scale assets. These changes include: 

• Creation of a distinct legal status for storage, previously storage assets were forced to co-locate with generation and operate behind-the-meter. BESS assets can now connect directly to the grid and directly participate in wholesale, ancillary and balancing markets. 
• Removal of double charging which meant that storage assets were liable for network charges on the volumes of electricity they imported and exported to the grid. These amendments included considerations for hybrid sites to establish measurement methods to ensure the correct chargeable volumes are identified. 

For investors, these changes together with the announcement of a new Capacity Market, open up the Czech market to deployment of utility scale storage assets. The opportunity for early movers is significant, whilst ancillary service markets will quickly saturate, investors can access price spreads which closely align to the German market without facing the complex Flexible Connection Agreements (FCAs) which place operational limits on importing and exporting to the grid. 

BESS penetration of peak demand: Czech Republic, Germany, GB and Poland

Regulation, not opportunity, has held Czechia back: LEX OZE III removes the barriers that kept the country years behind comparable markets. 

Why early investors could benefit most  

Ancillary service markets (FCR and aFRR) provide significant short-term returns for the first storage projects to be developed. However, these markets are shallow, with total upwards and downwards volumes of approximately 50MW for FCR and 250MW for aFRR. With just over 1GW of capacity expected to connect by 2030, the value of these services will quickly erode.   

• FCR (Frequency Containment Reserve): is a fast-acting (activation time of under 30 seconds) automatic balancing service which is used to quickly stabilise frequency deviations.  
• aFRR (automatic Frequency Restoration Reserve): is a slower acting (activation time of under 5 minutes) automatic balancing service which takes over from FCR to restore grid frequency to 50Hz. 
• mFRR (manual Frequency Restoration Reserve): is a slow acting (activation time of under 12.5 minutes) balancing service the activation of which is triggered by ČEPS the Czech Transmission System Operator (TSO). It takes over from aFRR and typically addresses long deep imbalances on the grid. 

FCR is the smallest ancillary market of typically 50MW in volume. Prices in the first half of 2026 have averaged €19/MW/h for the symmetric response product. The need for fast-acting response makes this an ideal service for BESS. However, the limited volume requirement means this market will quickly become saturated. Prices will drop as they realign to the opportunity cost faced by storage assets of foregoing cycling revenues in energy markets.  

The overall volume requirement is determined at the Continental Europe synchronous area level and then proportioned out to system operators based on their share of net generation and consumption. For continental Europe the minimum requirement for FCR is 3,000MW.  

ČEPS participates in the cross-border cooperation for the procurement of FCR, under this scheme response is procured through a common merit order list in which all offers are pooled. Nine countries (Austria, Belgium, Czechia, Denmark, France, Germany, the Netherlands, Slovenia, and Switzerland) participate in this scheme. 

The aFRR market is larger than FCR with 250MW of upwards and downwards reserve combined being procured in the first half of 2026. Prices for upwards reserve averaged €14/MW/h and downwards reserve averaged €7/MW/h. 

For early movers, the aFRR market is a source of substantial returns, at c.€120/kW/yr for aFRR capacity (based upon annualised revenues using prices for the first half of 2026). Similarly to FCR, as storage capacity grows (with 1GW of pipeline capacity already preceding the announcement of a Capacity Market) these prices will be cannibalised down to substantially lower levels. 

Early aFRR revenues are strong, but the window is narrow

At c.€120/kW/yr, aFRR capacity revenue is the single biggest near-term prize for first movers, but with only c.250MW of market depth, it won't stay uncrowded for long. 

Volumes and prices available in the mFRR market approach those seen in aFRR. However, short duration storage assets are less well suited to this market. If called upon, activations can be both deep and sustained depleting storage and potentially leading to penalty payments and loss of reputation with the system operator. Thermal peaking assets and longer duration storage assets are better placed due to the slower activation times and length of response required.

Unlike aFRR where the volumes response procured are fairly even, mFRR upwards volumes are consistently higher than downwards. This is driven by the need to cover the prolonged outage of the largest generation loss on the system (one Temelin nuclear unit of c. 1GW), whereas the corresponding largest demand loss is around 330MW (although this varies across the year).

mFRR is growing, but it's a market for longer-duration assets

ČEPS's shift toward daily auctions is deepening this market, but the deep, sustained activations it can call for make it a better fit for thermal peakers and long-duration storage than short-duration BESS.

Tightening system margins as coal exits and intermittent generation increases act to support price spreads

Coal has historically been the mainstay of the Czech electricity system, but its contribution to both the energy and capacity mix has begun to decline. As Europe accelerates its decarbonisation efforts, EU ETS carbon prices are expected to rise, placing increasing economic pressure on coal-fired power stations due to their high emissions factors. These pressures have led Czech based Sev.en Energy to announce the closure of three coal-fired assets (2.4GW) across 2026-27.

Roughly a third of the installed generation capacity in Czechia is coal-fired, whilst only a tenth is gas-fired (with the bulk of the remainder being nuclear and interconnection). Rising EU ETS carbon prices driving coal off the system will leave a gap both in terms of capacity and flexibility.

Conversely wind and solar capacity is on the rise, having more than doubled since 2020. Czechia is still at the beginning of its decarbonisation journey and lags behind interconnected markets such as Germany and Poland. The rapid decarbonisation of neighbouring interconnected markets (in particular Germany) means that the fundamental need for flexibility will continue to grow.

Czechia's decarbonisation is only just getting started

Czechia still lags Germany and Poland on renewables, but that gap is exactly what makes the flexibility opportunity so durable: the country has a full decarbonisation cycle of price volatility still ahead of it. 

Significant investment is necessary in electricity generation to meet growing demand and fill the capacity gap left by coal. Czechia plans to phase-out coal by 2033 with the bulk of new generation coming from nuclear, wind and solar assets:

• Nuclear assets are slow to both build and deploy, Czechia is looking at a mix of large conventional plant and SMRs the earliest of which could be operational in 2035. This leaves a gap in firm generation capacity between the closure of coal and the commissioning of these new nuclear assets.
• Whilst wind and solar can notionally be deployed more quickly the so-called acceleration zones (allowing for faster permitting of wind and solar) earmarked by the previous government have been significantly reduced from 2,595 square kilometres to just 297 square kilometres by the current administration.

Increasing renewable capacity will lead to frequent and longer periods of excess renewable generation. Negative and zero prices will therefore become more common, widening the spread between high and low prices and increasing arbitrage margins for storage assets.

Imported renewable oversupply is already dragging Czech prices down

Czech minimum prices are falling even before domestic renewables have scaled, a preview of the arbitrage upside once the country's own wind and solar pipeline catches up.