Dorota Dębińska-Pokorska
Partner and Power & Utility Group Leader
PwC Poland

29 April 2020

PwC is among the largest professional services firms in the world. In Poland, the company employs 6000 people across eight cities. Their Power & Utility Group offers business advisory,  audit and tax to firms from the power and utility sector. 

Casting a bird’s eye perspective on the energy market in Poland, where do you see most activity taking place presently?

At the moment, the hottest topic is the development of renewables, in particular the PV segment, which accounts for up to 80% of the market activity. This is closely linked to the functional auction system we have in place. Another crucial matter is the political decision to get offshore projects off the ground - by 2025 I expect we will have a sizable volume of MW generated this way. There are also investors interested in the acquisition of district heating networks, including the generation sources.

 

Poland is unique in Europe in that our households are heated by centralized sources, with the majority (around 90%) of them fired by coal. Because it is the cheapest option, it often does not make sense to transfer the assets from coal into gas.

This is counterbalanced by the necessity to move away from CO2 emissions, and find new ways to tackle challenges.

 

Speaking of offshore, appropriate legislation is now the main factor that holds back development of this technology in Poland. What is needed for this sector to flourish? 

Having the bill ready and authorized by the European Commission is the most important part, especially if Polish companies want to work on these projects with foreign partners. There has also been a heated debate on how to shape the support system for offshore in Poland. n. My view is that we should start with CfD, the safest way to ensure investors will have a fair return on the investment.

December 2019 witnessed the 4th capacity market auction, last of its kind that allowed coal-fired facilities to participate. What alternatives can Poland rely on going forward?

It is a very important question for the Polish market because our conventional plants are fired by coal (lignite and hard coal), and we don’t have a solid alternative. Since renewables cannot be the primary source for the system, we have to figure out what type of fuel will replace coal to ensure a steady flow of electricity. There has been some discussion about a nuclear plant, but we still don’t have it. Therefore, gas could become really crucial.

 

I do agree with the government that Poland has a completely different starting point for the transition, compared to other European countries. But I also believe that there is no other direction for Poland but to be part of this transition “marathon”, especially being part of the EU, and ensure it goes the fastest possible way.

 

Poland’s DESI index [Digital Economy and Society Index, measures the digitization progress in a given society] is among the lowest in the EU. Why are companies in Poland not adopting new technologies at a faster pace?

I believe that this is partly due to Poles’ nature, unfortunately. We feel very comfortable as followers, not innovators – that would be my first answer. We will probably wait to see these new technologies adopted by 100 other countries in the world first, just to be sure that they do not pose a risk to our market.

We also miss a few other fundamental elements. For instance, we do not have a central point to cover readings from meters and to exchange information between distribution system operators. Our retail market is not developed enough to ensure the fast-switching supplier process and this is also why we do not have any significant competition. The incumbents, four state-owned companies, do not have the incentive to be fighting in the market either.

What will the priorities for PwC’s Energy Department be in the coming years, as the energy transformation unfolds?

I predict that the major part of our business will be connected with renewables. For instance, we will have a massive development in photovoltaics for private households. A handmade PV installed on a balcony costs less than 600 euro and provides 25% of the total household electricity consumption. This will also affect the distribution system and the way in which traditional, vertically integrated state-owned energy companies work.

 

Whenever I talk with foreigners, they always want to see double-digits in terms of the IRR return, and I always try to explain how the market works. Today, when you have a project on sale, you have 100 bidders, which really speaks to the temperature of the market.

Even so, I trust there is still space to earn money in the energy sector here - the condition is to be smart, well prepared, and truly understand the local specifics.

 

How did the Polish energy market react to the COVID-19 outbreak?

Renewable energy roved very resilient throughout the crisis, it is becoming a no brainer for everyone that we need to keep pursuing this path. Utilities should look more at investing in this area, not just from a profitability point of view but also for securing the supply of electricity.

 

While it is too early to understand the full impact of COVID-19 we do notice some financial difficulties, primarily for utilities. Generation dropped, so did electricity consumption and generally there are fears of deep recession.

To maintain jobs while ensuring enough money for investment is a real dilemma - it will be difficult for these companies, who are mostly state owned, to balance the situation.

 

The Polish Government has announced several measures to help the economy recover. How will the energy sector benefit?

Energy companies will likely benefit from these funds just like players from other sectors. The biggest challenge is with Polish mines because we had the warm winter so consumption of coal was not as significant as expected. We have a lot of coal without end users and now the coronavirus...No doubt they will need help to sort this out. 

In what ways do you think the word will look differently after the crisis?

We digitalized globally in just two weeks after spending years talking about it, it is truly impressive how quickly everybody adapted. This remote model could be maintained for some workers going forward and we might change some behavior patterns out of fear that the virus might come back. 

Even so, I trust people will continue to come together - we all need each other and we will want share coffee and beers again once everything settles down.

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