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14 November 2019

Poland walks slow towards Wind, but rushes to protect coal

Poland is playing a long game with the European Commission, on the one hand sticking steadfastly to its coal based electricity generation, which is 80% dominant, and on the other pushing ahead with renewables – most recently offshore wind, with a government plan about to move through its freshly elected government.

But for renewables at least, it is a slow process, and this represents the biggest thorn in the side of any EU strategy on climate change. One of the first steps the new Commissioners at the EU must work out is how to change Poland’s beliefs. It won’t be easy.

The Wind bill discussed openly this week by Polish Minister for Energy Krzysztof Tchorzewski, will make room for over 10 GW of offshore wind with the first Baltic Sea wind farms plugging into the grid during in 2025, and hitting that 10 GW mark around 2040. This is a very slow rate to install a technology so much cheaper than coal.

EU Commissioners will be trying to think of ways to pressurize the Polish government to move faster, and looking for ways to fund even more renewables. Given that Poland has around 42 GW of electricity generation, with around 80% of that produced by hard and brown coal, mostly mined in Poland, it feels it is being asked to give up energy security for EU promises. It is naturally resistant.

It has scheduled 10 GW of old coal plants to be retired, but wants to replace like for like by 2025, which means that unless there is a sudden conversion to renewables, these plants will still be running by 2050, and possibly even by 2060 and the new plants alone will make up 25% of national electricity capacity.

But already there are a few new GW plus sized coal plants, which have just gone live, so it is almost already too late, and Poland had embarked on its own nuclear program, which like everyone else’s is massively behind – but it will take critical decisions by the end of 2019, and looks like it may embrace the High Temperature Gas Reactor (HTGR). This technology uses uranium fuel, a graphite moderator, and a helium gas coolant. Given that no-one else has got one, and there were only experimental programs in Germany, Japan, China and South Africa, this technology has the potential to absorb a huge amount of Polish cash, and still move it nowhere nearer to completion. So its first love is coal, second a new nuclear program, and there is also a rising interest in gas.

It is no wonder that the EU is finding it hard to attract Poland to the renewables proposition, it seems hell bent on spending way over the odds to bring these technologies into its power mix.

The new government which came back to power this week post-election, with a smaller majority and a loss of control in the senate, but more or less unchanged, with the Law and Justice Party in control, has said openly that it will cost up to €900 billion to build up its renewable sector to reach zero emissions by 2050.

And although the EU has not contradicted this statement directly it has said that the entire EU will need to spend a smaller figure, 575 billion but spend it every year for two decades for all of the EU to make the transition – that totals €11.5 trillion, and it makes the Polish figure close to being believable – though we would argue it is probably around 50% of that figure.

No wonder Poland has taken this view. Within a few months of first talking about its offshore wind strategy, which should become law come January, two major overseas players, Orsted from Denmark and RWE from Germany, have already made moves to acquire development pipelines in Poland, with Orsted chasing 50% ownership in two wind farms Elektrownia Wiatrowa Baltica 2&3 from state-owned utility Polska Grupa Energetyczna (PGE).

The first is due to develop 1 GW by 2026, and the second a further 1.5 GW by 2030, which are among the furthest developed in Poland which amounts to 2.5 GW of that 10 GW in one fell swoop.

Late in October RWE followed suit acquiring a pipeline of 4 offshore projects in the Baltic Sea with 1.5 GW capacity around the Slupsk bank area of the Baltic Sea and construction might begin on these as early as 2023.

RWE is rapidly becoming one of the most dominant renewables businesses in the world after acquiring E.On’s renewable pipeline, so there is pretty much no chance than any Polish companies will end up owning any of the wind infrastructure in its territory.

This represents across these two deals, some 4 GW out of the 10 GW that is likely to become available by 2040. This follows the same development that happened in onshore wind in Poland, with overseas players getting all the deals, although many locals gaining jobs in the sector

Meanwhile much of the spending for all of this will fall to the EU through its Cohesion funds or the European Investment Bank.

The EU spent € 11.9 billion in Poland in 2017 while Poland contributed just € 3 billion. Recent EU projects funded in Poland include €61 million for new hospital equipment; €155 million for maritime transports, and modernizing quays; €126 million to build a new Railway, and buy more trains and €129 million for its S7 express road. These are from the last quarter of funded deals.

In total Poland has submitted 108 successful large projects since 2014, each over €50 million, more than any other country.

So we can see that the efforts of the EU to get Poland to back its zero emissions by 2050, will require massive amounts of non-Polish funding, because that’s pretty much what Poland is now used to.

One deal saw a portfolio of three wind farms, Starza (44 MW), Rybice (22 MW) and Karnice II (22 MW), on the Baltic sea connected for the first time to the national grid, so the EU has to pay for its first offshore project, just to get Poland interested in renewables.

But a single fresh law shows just how the ruling party is thinking, in that just prior to the election it passed a law which said that the central government has to power to overrule local government if it feels a coal project is important for “the raw material security of the country.”

It says this was to give certainty to the investment community, but what it says is that come 2050 Poland will still be on 50% coal, unless the EU bites the bullet and begins to threaten to take away some of this colossal funding for projects in Poland, it will simply absorb EU and EIB cash, and refuse to toe the zero emissions line. We continue to see no solution in site.