A recently published report of the Institute for Energy Economics and Financial Analysis (IEEFA) shows that captured waste heat from local industry in Southern Poland can effectively compete with fossil fuel plants to supply affordable heating for local homes through district heating networks, providing cleaner air and attractive financial returns for investors.
The case study considered alternative strategies for two coal-fired combined heat and power (CHP) plants owned by the Czech utility ČEZ, in the Polish cities of Katowice and Kraków, in the coal-mining regions of Silesia and Małopolskie. Modelling scenarios find that waste heat recovery (WHR) from steel offers highly attractive financial returns, particularly in scenarios with carbon pricing where it could efficiently operate as baseload, substituting for coal CHP where possible, and providing a hedge against higher carbon prices.
IEEFA finds that sweating coal CHP is a high-risk approach, because of its exposure to carbon prices and subsidies, and is a short-term strategy, noting that today is as good as it gets for coal CHP.
However, existing energy policies make it economically rational for operators to continue to sweat ageing coal CHP assets for the next five years, which would result in more than ten million tonnes of CO2 emissions from these two plants alone, as well as significant local air pollution.
Although a shift from coal CHP to WHR plants would offer better long-term value to consumers, as well as significant air quality and climate benefits, currently there are no dedicated policies at to support and incentivise such a switch.
Therefore, the report suggests that national and local Polish leaders should be bolder in addressing the major energy transition taking place, and securing domestic energy supply, especially considering the opportunities of securing financing from investment banks like the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), that could help reduce the cost of capital and kick-start the transition to this cleaner, low-carbon heating alternative.
The report highlights that fossil-free heating is also competitive and profitable, hence the choice now is between two profitable options, where fossil-free heating has additional, longer-term benefits for the environment, climate and lower investment risk.
The findings of the report could reveal alternative opportunities for the owner, CEZ who has said it wants to sell its coal CHP assets in Poland. The analysis suggests that there is a better option: to invest in WHR that would allow ČEZ to reduce coal consumption, carbon emissions and regulatory risk while boosting margins.
Diversification into less-polluting options is a crucial issue for Poland, given its high dependence on coal and its widespread district heating networks, which could help the adoption of large-scale renewable alternatives including WHR.
