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Changes in the energy sector in Poland in the face of global energy market turbulence

The soaring gas prices, following the Russian invasion of Ukraine, have questioned the rationale for choosing natural gas as a transit fuel. The turbulence in the energy markets has forced the Polish government to act dynamically on developing nuclear power plants and focus more attention on innovative RES solutions. More than a year after the outbreak of the war in Ukraine, the directions of the energy sector continue to be hotly debated.

A conference on the current and future situation of the energy markets in Poland and other EU countries will take place on 13-14 April 2023 in Warsaw. For more information, visit the event page of the 37th EuroPOWER & 7th RES POWER Energy Conference organised by MMC Polska.

The impact of the war in Ukraine on the shape of energy transformation processes in Poland

After banning Russian coal imports last year, Poland faced severe coal shortages, resulting in imports from farther away and increasing seaborne imports by over 1,500 per cent to almost 6.7 million tonnes in 2022. Therefore, the declining trend in coal use seen by Polish utilities last year may be about to be reversed. However, according to some experts, the war in Ukraine may provide the impetus for a more dynamic energy transition. Renewable energy sources and nuclear power are expected to play a much more significant role in the future, without a doubt. The problem, however, is Poland’s energy security in the meantime until nuclear energy takes over the role of sources stabilising the national energy system.

What transition fuel to choose instead of natural gas in Poland?

Experts predict that the current tight situation in the global gas market will remain the same in the coming years. Consequently, Poland and other EU countries can expect a further surge in natural gas prices. With the falling cost of renewable electricity and heat pumps, it is becoming more attractive to skip the planned intermediate step of converting coal-fired CHP plants to gas and go directly to renewable retrofits.

Right now, Poland and other EU countries can intensify the implementation of energy efficiency measures, accelerating the development of renewable energy sources and clean heating based, among others, on heat pumps. In the long term, the countries should focus on replacing natural gas with renewable gases, hybrid systems, biomethane and hydrogen.

“The energy crisis caused by Russia’s aggression against Ukraine meant that Poland had to revise its existing plans in terms of the road map for the ongoing energy transformation,” said Ireneusz Zyska, Secretary of State, Ministry of Climate, Government Plenipotentiary for RES, guest of honour of the conference. “Gas was supposed to be a link to a new model of the energy system based on RES and nuclear energy. The war in Ukraine will limit the role of gas to the necessary minimum. The demand for gas in the economy will continue to grow, but we want this increased demand to be met by domestic biomethane production. The priority is to ensure a stable energy supply, with the largest possible share of renewable energy, at a competitive price for industry and households. Poland will develop RES and nuclear energy while using existing capacities in the conventional energy sector, especially modernized flexible Block 200+ units, and pumped-storage power plants.”

“In the face of the energy crisis caused by Russia, it is crucial to strengthen energy security through energy production based on its own generation sources,” continued Mr Zyska. “Such sources are Renewable Energy Sources, working on the basis of various technologies. For over 7 years, the government has been consistently developing the renewable energy sector. From the end of 2015 to December 2022, the installed capacity of renewable energy sources increased from 7.1 gigawatts (GW) to 22.67 GW. This represents a more than 3-fold increase. Thanks to the connection conditions issued so far and projects implemented on the basis of contracts concluded in RES auctions and under other support schemes, we anticipate that in 2025 the installed capacity of RES will be around 28 GW. By the end of the decade, zero-emission energy sources will account for more than 50 per cent of gross electricity consumption, while their installed capacity could exceed 50 GW. This creates a very good prospect for the development of RES even after 2030. However, a necessary condition for a positive scenario is the modernisation and expansion of the electricity transmission and distribution system.”

“We are witnessing a crisis that defines some issues connected with the functioning of the power energy and gas market, as well as energy security, energy transformation, and international policies of many countries of the EU,” added Rafał Gawin, President of Energy Regulatory Office. “The problems we can observe in the gas market in the EU are caused by the dependence on gas supplies from Russia. They raise questions about the sectors’ future depending on the continuity of gas supplies and the end, as well as the significance of the fuel in the transformation process. They also make us expand our area of interest in the regions that only now were considered in the analyses. Until now, Europe has based on traditional gas supplies and transferred them via pipelines and the LNG gas, due to its price, did not seem to be a tempting alternative. Instead, the Russians made gas a political tool, and then the War in Ukraine broke up. As a result, the concept of “diversification” became more accurate regarding energy security.”

“[…] The shift from gas fuel and the fast development of renewable energy sources will require enormous investments in power engineering transfer and distribution systems,” he continued. “In the case of the Polish market, the Charter for the Efficient Transformation of Poland’s Power Distribution Networks was signed in November 2022 from the initiative of the President of the Energy Regulatory Office and constituted a reply to the challenges. The sectoral agreement is a part of the modernisation, digitalisation and adjustment of the power distribution networks to the new energy market architecture based in an ever greater degree on the dispersed sources, with a significant share of renewable energy sources. Limiting the significance of conventional energy sources requires the development of energy storage technologies, which in turn takes time and effort. Therefore, gas will still constitute an essential element of the energy mix to provide undisturbed power energy supplies. In this context, the LNG market becomes more significant.”

Thus, according to Mr Gawin, “the market will come out of the current crises more experienced and wiser, which we will transform into a success in a longer perspective.”

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