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In focus: Poland’s energy market

Poland’s energy mix looks a bit unclear. On one hand, the country has experienced strong growth in renewable energy. But, as the International Energy Agency (IEA) noted, coal still dominates the power sector being the largest source of greenhouse gas emissions.

However, the Ministry of Climate is trying to change people’s preconception of Poland as a coal state.

“The fact that Poland does profound changes in the energy sector often goes unnoticed by our partners,” reveals the Ministry of Climate spokesman, Aleksander Brzozka.

Given the pace of reducing coal use, it is almost identical in the European Union and Poland. Since 1990, coal use has fallen by 20.1 percentage points in the EU. In Poland, the rate was 18.8 percentage points. Therefore, we are different mainly in terms of starting points of our energy sectors.

To him, coal is still one of the bases of energy security, but the changes taking place in this industry are enormous and, given the scale of the challenge, unprecedented.

Also, energy companies agree that some changes must be made. Major Polish oil refiner and petrol retailer PKN ORLEN has concluded the acquisition of ENERGA Group, which comes with the Ostrołęka power plant, supposedly one of the last coal-fired thermal power stations in Poland. Early in May, the company confirmed its decision to move further with the investment only under the condition of switching the plant to gas-based technologies.

Poland’s future energy mix

The share of coal and lignite in electricity generation still amounts to almost 80 per cent, with the draft Energy Policy of Poland to 2040, aiming to reduce it to 60 per cent by 2030.

“Creating a low-carbon energy sector in Poland will require long-term and capital-intensive activities as well as huge, multidimensional changes in the entire economy,” Mr Brzozka tells CEENERGYNEWS. “The development of offshore wind energy and photovoltaics will be key to achieve a significant share of renewable energy. The development of low-carbon transport, including e-mobility and the increase in the use of renewable energy in heating, will also be very important.”

Also for Janusz Gajowiecki, CEO of the Polish Wind Energy Association (PWEA), the future energy mix in Poland will be more diversified.

“Poland will rely less on fossil fuels and more on alternative sources of energy, for example, wind (both onshore and offshore) and solar,” he tells CEENERGYNEWS. “Those technologies are among the most competitive. Onshore wind has already become the cheapest source of energy. You could see it during the last two auctions for renewables in Poland. New onshore wind projects in Polish auctions for 2018 and 2019 sold electricity under the level of the market wholesale price.”

Polish Wind Energy Association’s model.

According to PWEA’s model, the share of coal in the energy mix (both hard coal and lignite) will drop from 78 per cent in 2018 to approximately 45 per cent in 2030 and a little over 25 per cent in 2040. On the other hand, the share of wind will rise from 7.6 per cent in 2018 to 27.7 per cent in 2030 and 44 per cent in 2040. By 2025 first energy from offshore wind farms located in the Polish zone of the Baltic Sea would be produced.

“As a country, we certainly have to make efforts to gradually reduce our dependence on coal and develop new technologies, while prioritising renewable energy sources”, agrees Michał Michalski, President of the Management Board and CEO of Polenergia, the largest Polish, independent and vertically integrated energy group.

In this regard, Polenergia wishes to retain its position as the leader who is transforming the Polish energy sector. In the short-term, it continues its operations in areas known very well and in which it has vast expertise, including the development of the renewables portfolio and the gas sector.

“On the other hand, we are thinking in the long-term, just like in 2010 when we initiated the development of offshore wind farms in Poland,” Mr Michalski tells CEENERGYNEWS. “They are now the key asset of Polenergia and a major growth factor in the coming years. This is also why we decided to build a position in the hydrogen market. We believe that hydrogen is the fuel of the future and any activities initiated now will translate into growth opportunities for Polenegia, with a potential similar to the one offshore wind farms have today.”

The hydrogen strategy

Great importance in the energy transition is also attributed to the possibility of using hydrogen in a wide range.

“Much will depend on the pace and scope of the development of hydrogen-related technologies,” Mr Brzozka admits.

Green hydrogen, produced by electrolysis and powered by renewable energy sources, is perceived by recent reports and studies as a cornerstone of any strategy leading to a GHG neutral EU by 2050. The challenge is to combine decarbonisation with competitiveness and to overcome cost barriers deriving from the high cost of investments and need for scale economies.

Countries in Central and Eastern Europe are showing the first signs of opening towards hydrogen technologies. Poland recently announced that a dedicated hydrogen strategy is under preparation to exploit the potential synergies between green hydrogen and the offshore wind farms that are to be built in the Baltic Sea within the next five years.

Also, energy companies are starting to implement hydrogen initiatives. Early in May, Poland’s dominant gas firm PGNiG announced the launch of a comprehensive hydrogen program consisting of several projects, from the production of green hydrogen through its storage and distribution, as well as its utilisation in the transport sector. It was followed by PKN ORLEN which is set to build a hydrogen hub in Włocławek by the end of 2021, ultimately producing up to 600 kilograms of purified hydrogen per hour.

“Europe as a whole is now interested in hydrogen, discussions are being held concerning the support for this raw material, vast amounts are said to be allocated to this purpose,” Mr Michalski says.

We believe that hydrogen will mark a similar revolution for the energy sector to the one caused by renewable energy sources.

“This revolution, coupled with the crisis caused by COVID-19, means a tremendous opportunity for Poland,” he adds. “One should and even must combine the funds supplied by the EU with the potential existing in the hydrogen sector and also take advantage of the moment when the global players are revising their approach to the global supply chain.”

Uncertainty from the COVID-19

Energy transformation is also perceived in Poland in terms of development opportunities favourable to modernising the national economy, increasing its efficiency and innovation.

“This will create opportunities to stimulate domestic industry and use national competitive advantages,” Mr Brzozka says. “This is particularly important in the era of stimulating the economy, strained after the COVID-19 pandemic. Economic trends covered by the coronavirus epidemic may create low-carbon technologies production opportunities in Europe, providing also an opportunity for Poland. The diversification of the energy mix towards less emission and the development of the industry will affect the attractiveness of choosing Poland as a location for foreign investments.”

According to him, the effects of the coronavirus pandemic and the subsequent economic crisis may cause difficulties for local actors to invest due to the risk of losing financial liquidity.

“Considering investments in transition technologies such as natural gas, the main obstacle may be the lack of predictability of EU regulations and the policy of financial institutions refusing to finance such investments,” he adds.


According to the Agencja Rynku Energii (ARE), the agency established to conduct statistical surveys in the field of energy management, in 2019 onshore wind amounted for 62 per cent of Poland’s RES capacity, followed by photovoltaic installations (15.9 per cent), hydropower (9.9 per cent), biomass (9.4 per cent) and biogas (2.4 per cent).

“To boost investments in the RES sector, Poland has introduced several support systems tailored to the needs of selected customer groups,” Mr Brzozka explains. “In the past, it was mainly a system of certificates of origin. The cumulative value of support under the so-called green certificates for manufacturers amounted to about 30 billion zlotys [6,7 billion euros] in the years 2006-2015. As a result of the legal policy pursued during this period, RES installed capacity in Poland increased from 1,158 megawatts (MW) at the end of 2005 to 7,829 MW at the end of 2015.”

Currently, Poland has also other solutions. Prosumers’ are supported within the successfully operating net-metering format. The feed-in tariff (FiT) and feed-in premium (FiP) formulas are designed for some smaller RES producers. Finally, the auction system is intended mainly for professional producers.

Poland is also among the signatories of a letter requesting more support for renewables from EU fund. Earlier in May, the signatories (Lithuania, Estonia, Latvia, Poland, Greece, Spain, Austria and Luxembourg) emphasised that the expansion of renewable energies would create new opportunities in terms of growth, investments, job creation and innovation in Europe. But many other segments in Poland would benefit from such funds.

Together with developing capacities from the cheapest renewable sources we need to invest on grids, especially low and medium voltage networks to integrate more renewables, Mr Gajowiecki says.

“Huge investments should be done on transmission grids to send power from the coast of Baltic Sea inland,” he continues. “Polish TSO has already made projects and reserved CAPEX devoted to such investments. What is a more flexible system is needed in Poland. In practice, that means not only building distributed energy sources of renewables but also adjustment of existing fossil fuels power plants.”

Onshore and offshore wind capacity

Poland is by far the leading country in the region in terms of installed onshore wind capacity. However, Mr Gajowiecki notices that this pace has been stopped since 2016 due to the Distance Act.

Photo: PSEW’s official Facebook page.

“The Act introduced the so-called 10H rule banning wind turbine locations at a distance smaller than 10 times tip height from residential buildings and nature zones,” he says. “This rule excluded almost the whole territory of Poland and in fact stopped the development of new projects. At the moment – according to slightly liberalised regulations – the most advanced onshore wind projects (with building permits) are allowed to gain support in auctions for renewables. However, still, the 10H rule exists and no new project can be developed. So the main challenge for today is to abolish this 10H rule.”

When it comes to offshore wind projects under development, very recently, Enea announced its interest in offshore wind farms in the Baltic Sea with a possible total capacity of up to 3.3 gigawatts (GW). Yet, the main challenge is to introduce the Offshore Wind Act with support scheme for offshore projects.

“Enea’s projects aren’t among the most advanced,” explains Mr Gajowiecki. “On the other hand, the spatial development plan for maritime areas of the Baltic Sea shows locations for projects of total capacity around 10 GW. That is why the implementation of announced projects depends on both administrative and political decisions.”

Also, Polenergia is pursuing the development of three wind farm projects on the Baltic Sea with a total capacity of 3 GW.

“Our Group is the first entity to have obtained two binding environmental permits for the construction of the Baltic II Offshore Wind Farm and the Baltic III Offshore Wind Farm, including the grid connection agreement and a valid environmental permit for the construction of the transmission infrastructure,” Mr Michalski explains.

The third project, Baltic I Offshore Wind Farm received the location permit and obtained conditions for connection from the transmission system operator. The next stage in the Baltic II and the Baltic III projects will consist of obtaining the building permit and the selection of the key technology solutions.

“We and our partner, Equinor, are planning to reach readiness for the construction of 1,440 MW on the Baltic Sea by 2023,” he continues. “Electric current from our offshore plants may start flowing as early as 2025.”

Commenting on Enea’s plans, Mr Michalski says that it is good news that other projects are being developed and have a chance of achieving significant benefits brought about by the know-how of other foreign players with substantial experience in offshore wind power generation.

“Poland needs not just one or two such projects but many more,” he underlines. “We have a huge potential and one needs to tap into it skillfully. There is a lot of space on this market for numerous projects.”

Numerous projects mean more investments and, according to the Ministry of Climate, the energy transformation will facilitate the transition to a greener industry which is becoming more attractive and increase its input in the GDP.

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