Generation gap

energy sector Poland
Poland has been tagged as the ‘dirty boy’ of Europe with 36 of the 50 most polluted cities. Meanwhile, a generation gap in the energy market looms as the coal fleet ages and alternative sources come online. Can the country erase this smear and plug the gap at the same time?

Joanna Maćkowiak-Pandera, PhD, gives it around ten years. That’s how long the President of Forum Energii estimates Poland will have before its coal-heavy energy market will begin to feel the heat. An energy generation gap is growing as lignite (brown-coal) production declines, coal-fired power plants are decommissioned and alternative energy sources try to catch up. Signs are already beginning to show. “Because of the ageing coal fleet,’ she said, “Poland actually faces problems during summer with demand growing for air conditioning.”

Robert Tomaszewski, Senior Energy Analyst at Polityka Insight, joined Maćkowiak-Pandera and Richard Stephens, Founder and Editor-in-Chief of Poland Today, on a PT Live energy special to navigate the local energy market and survey potential measures to avert the ticking time bomb hanging over energy production. Coal, nuclear, gas, solar or wind, where will the country find the extra capacity?  

Tomaszewski opened the proceedings by jesting that Poland is the ‘dirty boy’ of Europe. But only half-jesting. “We have the biggest dependence on coal in all the European states,” he said. “And the process of transformation of our energy sector has until now been very slow.” 

In fact, the think tank Forum Energii reports that 78.1% of the country’s electricity was generated from coal in 2018, which is slightly down from the previous year’s figure of 78.4%. Although gas grew by 1.6% from a 5.6% share in 2017 to 7.2% in 2018, the country’s reliance on one single energy source presents not just a domestic but a geopolitical dilemma. Maćkowiak-Pandera said that 80% of lignite imports – the main input for coal-fired electric plants – already arrive from an increasingly hostile Russia and as national reserves diminish, this dependency will only grow.

Nuclear has been floated as an option as far back as the 1980s with the failed Zarnowiec Nuclear Power Plant. Energy Minister Krzysztof Tchórzewski fanned the flames again in the debate by announcing in May that the government plans to construct a six-reactor nuclear power plant in a yet to be disclosed location in Pomerania. But the President of Forum Energii said that it was a matter of too little too late. Indeed, the project is not expected to be completed until 2033. “Nuclear does not have a chance to appear in the Polish power system in the next 15 years. We are still considering financing and how to do it. So maybe gas is an option, but gas also has some limits.” 

In line with the EU’s energy security strategy, the government has made a big push towards Liquified Natural Gas (LNG). This year, the European Regional Development Fund (ERDF) injected €128m into an extension of the Świnoujście LNG terminal on the Baltic Coast by the Polish-German border. This investment would make the terminal the largest in Northern and Central Eastern Europe. But there are still logistical and geopolitical issues with the importation of LNG from the Arabian Peninsula or the USA, where energy security would always be exposed to the volatility of international energy markets and gas-producing regimes. 

Tomaszewski suggested that the lag in the transition to alternative sources has not come from the market or energy providers. “The government still hasn’t decided on the project for national energy policy until 2040,” he said. “Companies are trying to run away from coal because staying with it for a longer period would be a suicide option for them. We have ageing fleets which we will have to turn off in the next decade.” 

This brought up the question as to why the government continues to dig its heels on the issue. Last year, President Andrzej Duda declared to the world at COP24 Katowice that his nation still had 200 years’ worth of coal. And just last week, it took a District Court in Poznań to place an injunction on the construction of a new €1.2bn coal-fired power plant outside the city of Ostrołęka in the Masovian Voivodeship.

At this juncture in the national debate, the finger is invariably pointed south to the coal mines of Silesia where a loud minority has held sway for centuries. Having decreased by 40% over the past decade, Tomaszewski said that the population of miners is around 80,000 strong in Upper Silesia and with Legnica in Lower Silesia factored in, the number may reach around 100,000. “But still, they are very strong,” he said. “They have very strong mining unions, which are very well organised. They can organise protests. They are loud in the media. And a lot of companies in Silesia also depend on the coal sector.” This all makes for a large and stubborn political force. “But this decrease in the number of miners has allowed the government to create energy policy in a more effective way, meaning that they could, for example, give some opportunity for the utilities to make this process of transition faster.”

One inconvenient truth, however, has begun to stir change. “36 of the 50 most polluted cities in Europe are located in Poland. And it’s just changing the perspective of this society,” said Maćkowiak-Pandera. A grassroots campaign has gained momentum. The smog-plagued cities in the south are standing up. Home to the famous Żywiec Brewery, the quaint city of Żywiec at the foot of the Silesian Beskids is a case in point. “Very recently, we signed an agreement with Żywiec city, which is, in our view, a very progressive city council,” she revealed. “They want to do something because of air pollution. They see it as a limit to development. It’s a very attractive city surrounded by beautiful mountains.” It also is the third most polluted city in the country, a fact that has turned away residents and investment. Forum Energii is in the process of helping the city to modernise its thermal infrastructure both in public buildings and private households, including the potential development of an independent district heating system.    

Tomaszewski added that private households have led the movement towards photovoltaic energy. “At the end of last year, we had 55,000 households producing their own electricity. That’s 100% more in comparison with the year before. And this process is getting faster … It will definitely help our energy system during the summer peaks.” He suggested that this trend provides proof that Poles have become more aware and vocal about environmental issues. In a 2018 Polish Public Opinion poll by CBOS, 72% of respondents reported that they supported the abandonment of harmful sources of energy. He believes that it could play a role in the upcoming parliamentary elections in the autumn.

The panel ended with the billion-dollar question: should foreign investors be looking closely at the Polish energy market for yields? It was an “Absolutely yes” from Tomaszewski, who mentioned that the market will be shaken up in 2025 when a European directive comes into effect that limits any member state from supporting coal power plants from the capacity market. Maćkowiak-Pandera concurred by listing all the growth areas in the market, starting with offshore wind farms. With rising energy prices and improvements in storage capacity, renewables have become a more viable option. “Energy-intensive companies are seeing that the prices are going up,” she said. “They want to have some kind of insurance against the higher prices, which means that we’ll come to a point where renewables are not the expensive option anymore. So renewables can compete with coal.” 

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Written by: William Burke