Poland’s energy policy until 2040 considers offshore wind as a key technology to make Poland a low-emission economy. According to the Offshore Wind Act, the country has committed to install 5.9 gigawatts (GW) by 2030 and up to 11 GW by 2040.
For PGE Capital Group, offshore wind has become one of the priorities. Earlier in February, the Company signed an agreement with Danish Group Ørsted to form a 50/50 joint venture for the development, construction and operation of Baltica 3 and 2, the largest offshore wind project in the Polish part of the Baltic Sea, which will have a total installed capacity of up to 2.5 gigawatts GW.
CEENERGYNEWS spoke with Wojciech Dąbrowski, CEO of PGE Capital Group about how the company intends to carry out the investments in offshore wind farms, as well as Poland’s strategy to reach carbon neutrality, the role of the Recovery Fund and the main challenges for further development of offshore wind.
Before closing the transaction with Ørsted, earlier in April, the Polish Energy Regulatory Office awarded a Contract for Difference (CfD) to Baltica 3 and Baltica 2, which also included PGE’s concrete steps to become a leader in this industry.
“According to our new strategy assumption, PGE will be the future leader of the Polish offshore wind market,” Mr Dąbrowski begins. “By 2040 we will install offshore turbines with a total installed capacity of at least 3.5 GW in our Baltica project.”
He goes on to explain that the most advanced offshore project of the PGE Group, Baltica 2 and Baltica 3, will be put into operation before 2030. The second most advanced project, Baltica 1, with a capacity of approx. 0.9 GW, will be put into operation after 2030. Both projects will provide electricity to approximately 5.4 million households and lead to avoid the emission of 11 million tonnes of CO2 annually.
“Our vision does not stop on these projects, however,” he says. “We plan further investments in the offshore wind before 2040.”
The EU Recovery Fund could contribute to the development of renewable projects in Poland and, as Mr Dąbrowski reminds us, companies that plan to invest in offshore wind energy, apart from their own funds, may apply for financial support under a dedicated national support scheme, as well as for available EU funding.
“In addition, similarly to PGE, they can aim at finding a business partner to cover part of the capital expenditure,” he continues.
Investments in offshore wind farms in the Baltic Sea are becoming more and more financially viable over time – over the years the costs of turbine components and services related to their prefabrication and construction have decreased. These are still capital-intensive investments, but various financial institutions at the national and European level are extremely interested in this type of investment.
In the case of financing from the EU, Mr Dąbrowski underlines many potential possibilities to support offshore wind farms and renewables in general. For him, instruments that should be taken into account are the Modernisation Fund, the CEF, the Just Transition Fund and the Innovation Fund.
“PGE is working on financing opportunities from all these funds,” he points out. “It will help us to reduce investment risk as well as to balance risk and costs.”
As we know, under the EU Recovery Fund, at least 37 per cent of funding should be allocated to climate-related undertakings. Mr Dąbrowski mentions the Polish Plan sent to the European Commission, according to which 3.25 billion euro was allocated to offshore wind energy in form of loans.
“Additionally, the subsidy of 437 million euro can be allocated to the construction of an offshore installation port that will constitute a service and maintenance base for offshore wind farms in the Baltic Sea,” he adds.
However, challenges remain, especially considering that wind energy is a new sector in Poland’s economy.
“The new energetics branch requires not only financial resources but also a legal framework, gaining experience in developing offshore wind projects by Polish companies, as well as building an extensive supply chain,” Mr Dąbrowski says.
The Polish government has already responded to challenges related to such important factors as a legal and financial framework. This framework has been set by the Act on promoting electricity generation in offshore wind farms adopted at the beginning of this year, the so-called offshore wind bill. It is the most important legal act regulating the support program for investments in offshore wind farms in detail. The basis of the program is the government’s coverage of the negative balance of generated electricity. The maximum period of support will be 25 years, counted from the introduction of electricity produced in the offshore wind farm into the grid.
“The adoption of the offshore wind bill allowed not only to introduce a financial support system that will secure key Polish offshore wind farm projects but also created a number of legal and administrative facilities that will allow for more efficient investments in the Baltic Sea,” he continues.
Mr Dąbrowski points out that the development of the offshore wind industry is also crucial for the whole energy sector within European Union, which has set ambitious climate goals.
“Offshore wind energy is key to achieving the European Union’s climate neutrality target by 2050,” he says. “For this reason, in the framework of the draft revision of the Directive on the promotion of the use of energy from renewable sources (REDII) that is currently being prepared, but also in the framework of the new draft regulation on Trans-European Networks for Energy (TEN-E), the Commission will propose streamlining the process of obtaining the necessary permits for these plants.
The future development of the offshore wind sector might depend primarily on regional cooperation and the spatial planning of maritime areas. At the same time, all action must take into account public participation and the voice of other stakeholders.”
Indeed, offshore wind farms are one of the pillars of PGE’s 2030 strategy aimed for the Group to become climate-neutral in 2050.
“This will be achieved through investments in low and zero-carbon energy sources and network infrastructure,” explains Mr Dąbrowski. “Our focus is to build new business areas based on the development of low- and zero-emission energy generation sources, including offshore wind power as well as solar PVs.”
By 2030 the PGE Group intends to build 2.5 GW of new capacity in offshore wind farms, 3 GW in photovoltaics and expand its onshore wind farm portfolio by at least 1 GW. Large-scale projects will be accompanied by a complementary energy storage programme of at least 0.8 GW, which will support the safe and flexible operation of the power system. Noticing the interest of customers, the PGE Group will prepare for them an opportunity to participate in the energy transition.
With regards to the energy transition, the case of PGE’s Turów lignite mine has made the headlines, with the Czech Republic submitting a request for the immediate closure of the mine to the Court of Justice of the EU. According to PGE, the Czech government’s demands are a dangerous precedent carrying a serious risk of a predatory energy transition in contrast to just transition promoted by the European Commission and this international legal battle threatens the future of the European Green Deal.
“The Turów mine is one of the smallest in a region dominated by much larger mines and power plants operating in the Czech Republic and Germany – the Polish mine is surrounded by open-pit mines working in neighbouring countries, located just a few dozen kilometres from Turów and even as close as a few hundred meters from the Polish border,” highlights the CEO of PGE. “Thus it is difficult to understand why only one Polish mine is at the centre of international accusations – although it is one of the smallest operations in the entire region dominated by Czech and German open-pit mines.”
He notes that the Turów mine fully complies with environmental standards and that the concession extending the mine’s operation was issued in compliance with Polish and European law, after several years of cross-border consultations with the Czech Republic and Germany.
As pointed out many times on several occasions, the closure of coal and lignite mines cannot come at a cost for the people employed in such sectors. Therefore a transformation of these mines is the preferred solution.
“The transformation of post-mining regions is one of the assumptions of our new strategy,” Mr Dąbrowski says. “To this end, we will invest in low and zero-emission energy sources. The move away from conventional energy has already begun, but we must nevertheless remember that there is no effective energy transformation without a sensibly planned transformation of the regions. A just transformation is a process that must be spread over time and gives a chance to create new jobs. Regions such as Bełchatów or Turów are coal monocultures, which means that their development has been largely based on conventional energy.”
According to him, over the next decade, PGE Group will implement investments in renewable energy sources there. In the Bełchatów region, as part of the Transformation Concept for the Bełchatów Region, the PGE Group Investment Committee issued positive recommendations for the implementation of the first projects, including 3 onshore wind farm projects with a capacity of nearly 100 megawatts (MW), photovoltaic farms with a capacity of approximately 600 MW and waste to energy installation with a capacity of 180,000 tons of waste per year.
“We also plan to build energy storage facilities with a capacity of up to 300 MW,” he adds. “Until 2030 alone, we will allocate nearly 5 billion zloty [approximately 1.1 billion euro] to these investments. On the other hand, the projects that we will implement in the Turów region include wind farms, photovoltaic farms, energy storage and a new heat and power plant to ensure the long-term heating needs of Bogatynia. All projects amount to over 2 billion zloty [approximately 440.4 million euro].”
“The transition to green energy generation goes along with a transformation in the area of human capital, which means for us creating opportunities for our employees to retrain and gain new qualifications,” the CEO of PGE concludes. “To this end, in September 2021, in Bełchatów, we will launch the Competence Development Center, thanks to which people working today in the mine and power plant will be able to complete the necessary qualifications in the fields related to the development of low and zero-emission energy and other professions for which there will be local demand. We will also create a similar place in Turów.”