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That’s how the new ČEZ price list for electricity from January 1, 2023 came home to me. So far, I’ve only read various reports about how it will be, but I still believed that it couldn’t be true. Unfortunately, it is. Basic rate 8.989 CZK/kWh without VAT.

I consider this to be completely outrageous. ČEZ has been proven to produce electricity at costs below CZK 1/kWh. So, his profit is 900%. And since those profits are disproportionate, they will be taxed as an extraordinary tax, and this will be used to finance completely obscure government activities. And in order for households to refrain from commenting, part of it will be temporarily returned to them in the form of a price cap. So, ČEZ will no longer have a profit of 900%, but only a miserable 400%. Well, don’t buy it 😊

They did not invent such economic outrageousness even under the communists, and that is something to say. And since the communists also stole wherever they could, and robbed us all, they built the Temelín and Dukovany nuclear power plants at least from what they took. So at least there was something to see behind them.

The democrats who can’t think of a name for the communists are making a pretty good living from this investment today.

And another Dukovany or Temelín? Let’s not be under any illusions, there won’t be any. And reason? Under socialism, the scheme of simple reproduction was based on the assumption that all surplus value would be used for final consumption. Therefore, all cash above the level of direct costs, i.e. both profit and depreciation, was taken from the companies. And such large investments were made from this package of money.

And since profit is a very variable financial category, dependent on the art of tax optimization, the current system of “seeming capitalism” can never accumulate enough resources to build another Temelín or Dukovany, unless it does it like the communists. Or he will have to take out a loan for it. But today the indebtedness is already so high that it is very unlikely that any government, in 4 years of ruling, would achieve something like this.

But what is even worse, with artificial interventions in energy prices, emission allowances, energy stock market, artificial price limitation, the green deal, terrorism on gas pipelines, etc., this commodity has become such a mess that we cannot see what we will pay tomorrow, let alone in 15 or 30 years. If nothing else, the market environment and business stability has been completely devastated.

Fig.  1 – Green deal in practice, view from Ještěd .. Czech wind power plants drive up Polish emissions

But I didn’t really want to write about that. I’m just interested in how it will be with the heat treatment shops. So, I made a rough estimate of the effects on heat treatment.

This first diagram shows the development of electricity prices for the heat treaters, with the fication of energy at 5 CZK/kWh without VAT. If we take the price for 2020 as a basis, then in 3 years the price has increased by 112%. But that’s only thanks to the artificial price fixation.

Fig. 2  – Increase in electricity prices from 2020, with a cap of 5 CZK/kWh

But if the real price without capping were applied, then it is even more drastic, the cost of electricity will rise by a total of 149%

Fig.  3  – Increase in electricity prices from 2020, without capping, 8.99 CZK/kWh

And how would that translate into heat treatment costs? The cost of heat treatment will rise by 25% just because of the capped electricity prices.

Fig.  4  – Increase in heat treatment costs due to the increase in the price of electricity, with capping

And without price cap? By a full 50%. Does that seem a little? Yes, but only and exclusively the impact of electricity prices is taken into account here, net of other influences, as a domino effect of the impact of rising energy prices on subcontracting, inflation, etc.

Fig.  5  – Increase in the cost of heat treatment due to the increase in the price of electricity, without capping

But what about revenues, or prices? I assume that today energy costs make up roughly 12% of the total cost of heat treatment operations. At the maximum price of uncapped energy of CZK 8.99/kWh, this share will increase to 30%, with the simultaneous increase in the total costs of the heat treatment plant to 118%.

Fig. 6  – An increase in the share of electricity costs in total costs due to an increase in electricity prices

That doesn’t sound all that bad. But if we wanted to get back to a 12% share of the total costs at new electricity prices, we would have to raise the heat treatment prices by 2.5x. And that is frightening. Is the market even able to absorb such an increase?

Fig.  7  – Theoretical need to compensate for heat treatment price increases to maintain a 12% share of total costs

PS: ….    the time is probably approaching when the prices for hardening will have to be capped  ….. 😊

November 20, 2022

Jiří Stanislav