THE WARSAW INSTITUTE REVIEW

Date: 20 March 2017    Author: Piotr Naimski

Starting Points for Developing a New Energy Policy for Poland

© Marcin Bielecki (PAP)
  • Poland is to remain sovereign in the field of energy supplies. Energy production based on domestic energy resources must provide consumers with uninterrupted and competitive energy supplies. The importation of raw materials and energy can only be a supplement.
  • It is safe to assume that the demand for energy in Poland will not decrease before 2050.
  • Energy efficiency, understood as saving energy, will be an important factor contributing to energy security and the competitiveness of Polish industry.
  • Black and brown coal will remain the basic energy sources in Poland until 2050.
  • The use of coal as a raw material must be based on the latest, high-performance, clean technologies, both directly in power units and in the field of chemical coal processing.
  • We will maintain coal-based electricity generation of around 30 GW until 2050.
  • High-emission power plants, non-compliant with European standards and at the end of their lifecycle, will be replaced by new ones. This will mean a huge investment effort in the coming years.
  • We will achieve current climate policy commitments adopted by Poland in the Paris Agreement and those resulting from EU regulations. At the same time, we are determined to defend Poland’s right to choose its own path to achieve CO2 emission reduction targets.
  • The European emissions trading system should be applied in Poland by taking into account its exceptionally high (by European standards) dependence on coal as an energy source.
  • Further attempts to increase CO2 reduction commitments conflict with Poland’s economic strategy, they will be harmful to the energy sector and will reduce the competitiveness of Poland’s economy.
  • Renewable energy technologies will develop in Poland based on market principles of competition. The support models used in some EU countries cannot be duplicated in Poland, primarily due to the fact that end consumers of energy cannot bear the burden of the costs.
  • The strategic direction of research and investment will be energy storage and modern coal technologies. New, innovative solutions in this area will be supported by the government and energy companies, with participation from the state treasury.
  • Natural gas will remain an important raw material for the Polish economy. We will maintain our existing level of production and will complete the plan to diversify the types and sources of energy supply from abroad. We anticipate that in 2022 Poland will be connected by pipeline to the Norwegian continental shelf through the Danish transmission system.
  • Deliveries through the northern gas pipeline and from the Świnoujście gas terminal, as well as the anticipated linking of Poland with Lithuania, Ukraine, Slovakia and the Czech Republic through interconnectors, will enable the creation of a gas hub in Poland important for Central Europe.
  • The transmission of energy, natural gas, petroleum and fuels, as well as the availability of sufficient quantities of storage for raw materials and fuels, must remain an essential element for the security of supplies.
  • Poland’s energy security requires coordinated action in the international arena between those leading on this issue in the Ministry of Energy and other ministries, foremost in the Ministry of Foreign Affairs and the Ministry of the Environment, and strategic companies in the electricity, oil and gas sectors, with the state treasury playing a dominant role.
  • Poland must guarantee its participation in the creation of energy and gas markets at the European level to a degree safeguarding the interests of the Polish economy and the country’s energy security requirements.
  • Actions and investments undertaken on the basis of the strategy adopted for energy policy will determine the so-called “energy mix”, the share of different primary sources in meeting the country’s energy needs. Power generation technologies need to be tailored to the needs of the country, their capabilities and profitability, and not to the a priori energy mix of 2050.
  • Maintenance of strategic reserves of fuels and extraction potential, including protection of national strategic fuel deposits from construction that would prevent their future use, especially brown coal deposits.
  • Poland must methodically develop systemic heating as the primary means of supplying heat to consumers in high population density areas. In addition, in the mid and long term, the combustion of fuels in individual home installations should be abandoned, in favor of electric heating (including heat pumps), solar thermal connectors or other emission-free forms of supplying heat.

The energy sector should rely on the country’s own raw materials and technological resources and at the same time support the country’s overall economic and industrial policy. This especially means that these processes should be as cost-effective as possible to stimulate necessary investments and lead to the transformation of the government-established sector. It should be emphasized that decisions undertaken in the field of energy will both directly and indirectly influence other segments of the domestic economy. In this context, it is crucial to ask about the vision for change in the structure of the creation of added value to GDP. At present, with the multiplier effect, the energy sector generates nearly 8% of added value and creates nearly 600,000 jobs both directly and indirectly in related sectors.

 

The assumed transformation in the direction of a strong economy will require taking into account the challenges facing this sector. The most important ones include:

  • the need to implement highly capital-intensive investment plans related to the construction of new generation capacity and the modernization of existing network and manufacturing assets,
  • the decline in the profitability of the electricity sector and the deteriorating financial situation of domestic energy companies,
  • unstable investment conditions caused by EU climate policy and the expected price increases for CO2 emission allowances,
  • serious disturbances in the functioning of energy markets in Poland and other EU countries (caused in part by massive subsidies for renewable energy sources, often not covering full production costs, resulting in a lack of profitability for new investments),
  • practices observed in other countries based on protecting low energy prices for industry by shifting costs to individual consumers,
  • regulatory changes imposed by the EU not taking into account the specificities of the Polish energy sector.

 

It is worth pointing out that the investment direction indicated in the energy policy will have a significant impact on the future structure of energy production in our country. In turn, it will affect energy-related fuel production (black and brown coal mining, gas extraction, biomass production), production of equipment and machinery for the mining and power industries, and the condition of companies serving the energy sector. The conventional energy generation segment will be especially important, where the investment time is long, lasting 5-10 years and the life of the asset is nearly 40 years.

 

At the same time, when deciding on the construction of new power plants, account should be taken of their impact on the functioning of the National Electric Energy System and on the economic effectiveness of different change scenarios in the market environment, in particular on fuel costs and CO2 emissions.

 

The basic conditions for the successful transformation of the energy sector include:

  • stabilization of regulations covering the energy sector,
  • formulation and development of modern coal technologies (among others, the optimal selection of technologies for the Polish power industry using domestic and foreign solutions, including duoBLOCK technology, coal gasification, oxidation and CCU technology development),
  • coordinating mechanisms with the European Union to reduce the costs and risks of the development of modern, conventional energy and to obtain financing for new investments in conventional generators.

 

Without neglecting work on the development of a comprehensive strategy for the Polish power industry for the next 30-35 years, we must solve the immediate problems of coal mining transformation, which will ensure the supply of this raw material during this period. We need to provide financing for new investments in the power sector, including by introducing the power market and by the establishment of reasonable rules for the cooperation of energy and gas system operators with neighbors in the region, which does not undermine the sovereignty of the Polish state in this regard. Without the successful resolution of these issues, the implementation of the best long-term strategy will be impossible.

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