E-Mobility on rapid-charge
A nationwide drive has laid the foundations for e-mobility to force open a new segment in the Polish economy, but it’s a finely balanced game with the pieces yet to fall into place. Will the local industry reach critical mass?
There are many topics that divide Poland, such as climate change, energy policy and Robert Lewandowski’s strike rate for the national side versus club form. But the movement of e-mobility is not one. There is a surprising amount of bipartisan support for the growing industry. Prime Minister Mateusz Morawiecki said back in 2017 as the Minister of Development: “E-mobility is the first industrial revolution in which Poland could participate as a leader and not as a technology buyer.” A year later he announced a €3bn commitment to the industry over the next ten years. On the other side of politics, Rafał Trzaskowski, forthright mayor of Warsaw, said on the day his city had placed one of the largest orders of e-buses in Europe: “In Warsaw, we care about clean air and the fight against global warming, and the order of 130 electric articulated buses puts us at the avant-garde of Europe.”
There are already small signs that this enthusiasm in the political sphere has spilled over into the community through the up-take of passenger vehicles. According to the European Automobile Manufacturers’ Association, the registration of new Electric Vehicles (EVs) in Poland grew by 22.9% from 1077 units in 2017 to 1324 last year. The gains have been slightly bigger in the category of Hybrid Electrical Vehicles (HEVs) where the product group saw 32.6% growth over the same period. Local policymakers and experts are cautiously optimistic. On one hand, they see great potential for e-mobility to open a whole new branch in the economy. But given the inherently disruptive nature of the technology, this new economic horizon will only be reached through a holistic strategy, synchronising governmental institutions with energy companies, the automotive industry and the ICT sector.
The government’s vision for e-mobility has been articulated through three policy papers within the overarching national ‘Strategy for Responsible Development’ launched in February 2017. The key document is the ‘Electromobility Development Plan – Energy for the Future’ (Plan rozwoju Elektromobilności w Polsce „Energia do przyszłości”), which is broken down into three main areas and phases designed to promote the development, production and adoption of the technology in the economy and society. The first stage has already passed where the legislative groundwork was laid, including the Act on Electromobility and Alternative Fuels (Ustawa o elektromobilności i paliwach alternatywnych) in 2018 and the implementation of a 2014 EU directive on alternative fuels infrastructure to encourage EV sales through financial incentives and tax exemptions. This period was also to coincide with the development of the first polish-built EV prototypes, an awareness campaign and a national charging network. With less than 1000 public charging stations, the country is a long way behind its counterparts in Western Europe. The European Alternative Fuels Observatory (2019) ranks the Netherlands as number one in the EU with 41,117 public charging points followed by Germany (29,010), France (25,675), the UK (23,868) and Sweden (7,914), although Poland’s 929 charging points beats each country Visegrád Group (Hungary: 663, the Czech Republic: 562 and Slovakia: 545). The aim is to increase that figure in Poland to 6400 by 2020, with 1000 in Warsaw alone.
The second and current stage will run until 2020. Here the aforementioned prototypes are set to enter a trial assembly-line stage, while the first charging stations are built and subsidies are offered on the purchase of new EVs (€8.6k for private individuals and €36k for local administrations) and e-buses (€240k for each bus). By 2025, the third phase is meant to bring in the mass-production of locally-manufactured EVs, increasing market demand through reduced unit costs and prices. The Ministry of Energy calculates that there should be one million EVs on Polish roads by 2025.
The plan is just one part of a nationwide strategy to decarbonise the economy and fight pollution. Currently, the country has the unenviable distinction of hosting 36 of the 50 most polluted cities in Europe. The mass reduction of combustion-engines on the roads should help to relieve Polish cities of this curse. On the other hand, the introduction of this amount of EVs is expected to reshape the energy market. For example, the ministry projects that the country will need to generate as much as 4.3 terawatt hours of extra electricity per year, which equates to approximately 365,000 homes. Based on the average ten-year lifetime of a vehicle, this would amount to 20bn zł in added revenue for energy providers. But the linchpin to the whole plan is that this extra energy is generated from renewables and at a competitive rate. Otherwise, the true benefits of e-mobility may not evidence without the green energy sector enjoying a clear price advantage over coal or indeed crude oil. To this end, the government is actively promoting the use of smart meters and charging at the bottom of the daily electricity price curve at night. If all goes to plan, oil consumption should be reduced, providing the country with extra energy independence.
E-mobility is an intricate jigsaw puzzle with a lot of the pieces yet to fall in place, according to Krzysztof Bolesta, Vice President of the Electric Vehicles Promotion Foundation (Fundacja Promocji Pojazdów Elektrycznych – FPPE). Bolesta believes that the most telling factor will be whether the industry can turn what is still a relatively niche product into one produced at economies of scale. “When this finally happens, we will all have to figure out how to make e-mobility work at scale,” he said. “And I mean: making sure the grid is ready to handle all EVs; making sure car manufacturers are capable of meeting demand for EVs; making use of EVs as energy storage units and integrating them with … green generation sources; figuring out how to replace fuel duties in national budgets; cooperating with local administration on how to best assist car owners with new infrastructure; and last but not least, making sure the central government keeps regulation fit for purpose.”
While the intent and spirit has been lauded, the implementation has already come under some criticism. A recent draft regulation on subsidies was found wanting by experts. Firstly, according to the current proposal, businesses were not included in the proposed subsidy programme, which was considered a large oversight given the size of the sector’s extensive car fleets. The top-selling EVs on the market are ineligible for the subsidy as the price limit is set at a low 125,000 zł gross, effectively meaning that only low-end compact models attract the benefit. This has caused some to question whether the main goal of replacing combustion-engine vehicles will be achieved, since these vehicles accommodate fewer passengers and offer low range in kilometres. But Bolesta was quick to emphasise that this is the very reason why draft legislation is published for consultation. “We are still waiting on these regulations. The most important thing is that nowhere in the world have EV markets developed without subsidies, so if we are serious about e-mobility, a support system is needed here as well.”
Krzysztof Bolesta, an economist and international e-mobility expert, as well as the Vice President of the Electric Vehicles Promotion Foundation, will be a keynote speaker at the Urban E-Mobility Forum on 14 – 15 November Pomeranian Science and Technology Park in Gdynia, co-organised by the foundation and Poland Today.
In the Electric Vehicles Promotion Foundation’s 2018 report ‘Charging Poland’, the authors recognised the electric bus sector as the cornerstone of the local e-mobility industry and an area rich with investment potential. The e-bus industry is already well-established in the country, both in manufacturing output and its presence in the public eye. It is hoped that its success in sales, R&D and public awareness will trickle through to the rest of the industry and, in turn, the wider economy. The national e-mobility plan also makes special mention of the e-bus market as a catalyst sector. The plan is to increase the share of e-buses in cities and towns from 5% in 2020 to 30% by 2027. As of January 2019, there were 178 e-buses in operation throughout the country with a further 274 on order.
The capital city of Warsaw is paving the way. The city’s bus authority (Miejskie Zakłady Autobusowe: MZA) announced in July that it plans to field 400 zero or low-emissions buses by 2021 and remove diesel buses from the signature Royal Route that runs through Warsaw’s premier downtown shopping, historical and tourist hotspots. This year’s record purchase of 130 electric Urbino 12 buses from Polish-manufacturer Solaris comes after the city received 61 hybrid buses from MAN Truck & Bus in June last year.
Solaris Bus & Coach SA, based near Poznań, has been rapidly expanding its electric and hydrogen bus lines, winning contracts not just domestically but abroad. In July the company signed a framework agreement to supply the city of Milan with 250 Urbino 12 electric buses, a new record in Europe. The first delivery of 40 units is scheduled for as early as June 2020. The company has done well in Italy this year, having secured Urbino 12 electric contracts with Bergamo, Bolzano and Venice.
Back in Poland, there has been an investment frenzy in the lithium-ion battery sector, the all-important component for any electric motor. The ‘Strategy for Responsible Development’ was launched by the then Ministry of Economic Development in February 2017 and within a year the world’s leading battery producers began to line up to announce plant openings and expansions around the country. The Chinese were first to move. Capchem announced in March 2018 the construction of a ¥360m (appx. 200m zł) factory in Wrocław and in May Guotai-Huarong declared a $45m investment in a factory in Godzikowice, Lower Silesia. The Europeans followed suit. In the south of Poland, Belgium’s Umicore announced a huge 1.38bn zł investment in a plant in Nysa and in the north, Sweden’s Northvolt revealed plans to build a factory in Gdańsk to produce 10,000 battery modules per year. Not to be outdone, the South Korean giants of LG Chem and SK Innovation made waves this year with their own respective expansion plans. SK’s proposed 1bn zł plant in the Katowice Special Economic Zone is expected to create over 300 new jobs, while LG Chem received €36m investment aid from the EU to expand local production with the addition of a €325m production facility.
A Lithium Valley is being carved out in Silesia with five of the six aforementioned plants to operate in the region. Given current growth trends and the capacity yet to come online, Poland is likely to replace Germany as the EU’s export leader in lithium-ion batteries. The publication Obserwatorze Finansowy (Financial Observer) reported in April that Poland’s exports of lithium-ion batteries (€161m) had already overtaken Germany’s share (€120m) of the EU’s total export market in Q1 2019.
What are the next big trends to watch out for? For a dark horse sector, Bolesta sees the greatest potential in utility vehicles. “It’s a niche too small for big players and one that no-one has really explored yet.” But all eyes should be on Poland’s 84.3bn zł automotive parts and accessories sector and how it responds to the EV revolution. One key fact stands in its way: the EV comprises only 18 moving parts compared to 2000 in a standard combustion-engine vehicle. Overall, this, of course, means fewer repairs and hence less future revenue for the industry. This development should impact all producers of automotive parts around the world, but given that the parts and accessories sector accounts for 80% of jobs and 58% of production in the automotive industry, the disruptive effects may be felt even more acutely in Poland. Watch this space.