World Energy Council (WEC), of which Poland is a founding member, was created in 1924 to promote the sustainable supply and use of energy around the globe.
The Polish Committee of WEC initially functioned under the Ministry of Industry but starting with 1997 it became a self-governing organization. Today WEC Poland hosts independent members (industry experts, academia, journalists) as well as institutional members, including the Ministry of Energy and companies that play a key role in the country’s energy security, such as PSE, ENEA, PGE or Orlen.
What major trends you are noticing in the global energy industry at present and how are they reflected in the Polish market?
The biggest challenge faced by energy sectors around the world at this point is adapting to climate changes. In Poland, more than 70% of electricity is produced from coal and the majority of our production capacities have been built in the 1960s and 1970s. The new rules of the European market make it impossible to support these capacities in our system over the long term.
Ostroleka C power plant will be the last coal fueled power plant in Poland, and to fulfill the growing domestic demand we will need alternative sources of generation. A major milestone that we are approaching for example is in 2025, as after this year many of the older blocks can no longer be supported by the capacity market mechanism and it will be difficult for them to survive under normal market rules. This represents an opportunity for renewable energy sources as well as nuclear power, which is under discussion presently.
The energy transition poses an even bigger challenge for Poland compared to other countries in the region, given its huge reliance on coal. Is there already a vision in place to support this transition?
The vision was set in the draft Energy Policy of Poland until 2040, which is basically very similar to the program of Law and Justice party (PiS). In light of recent election results, which secured their majority in parliament once again, it is likely that the policy will maintain the same goals.
One strategic direction pursued is the development of nuclear power plants. The final decision is yet to be made, but according to government declarations we can expect to have six nuclear units by 2036. We do have a nuclear program in place already, since 2009, but the progress has been rather slow. So far we have a company responsible for building the power plants, and some geological research in the two areas where the new units would be located: one is close to the Baltic Sea (nuclear power production requires high amounts of water to cool the reactors) and the other in the central part of the country, near Belchatow power plant. The government has also started discussions to source the necessary technology, with companies from the United States, South Korea and Japan.
In 2018 renewable energy accounted for only 7% of the country’s energy mix. What role do you expect renewable energy sources (RES) to play going forward?
No doubt the share of RES needs to be improved. A large part of it will likely come from offshore wind, as the government has declared its support for this sector. We have available a vast economic zone in the Baltic Sea where wind conditions are excellent.
Onshore wind will play its part as well but for the time being investments in this segment have slowed down, mainly because of unpredictable legislation. There are also a few rules in place that make it difficult to develop new capacities, for instance the 10H rule. Briefly, this states that the distance to the nearest building must be at least ten times the height of the turbine installed, which means only a few regions in Poland remain suitable locations in these conditions.
I expect solar panels will also become more relevant, especially during summer time. One reason for this is the fact that in summer season we have difficulties ensuring the necessary water to cool off the power plants, especially coal fueled ones, which require very high volumes. Increasing the share of generation from solar panels during this period will help us to solve this problem.
Looking at the region more broadly, Poland has several interconnection projects planned. Which ones do you expect will have the biggest impact on the local market?
Historically we have used our domestic natural gas resources, which are enough to fulfill the demand for households, but for industrial use have been relying on gas imported from Russia. This contract will come to an end in 2022 so we are looking at opportunities to diversify our supply sources.
One way is by using the gas terminal in Swinoujscie which gives us the option to buy gas from the US (we have a long term contract with them already) and LNG from other countries in the world. We are considering building a new terminal, most likely in Gdansk, but the real change will be the Baltic Pipe project which will allow us to transport gas from the North Sea. The pipeline will come across the Danish economic zone and our government has already secured all the necessary agreements.
The amount of gas that we can transfer via this pipe and through the two terminals, together with our domestic resources will be enough to resign from the contract with Russia - we might continue importing from them, but only on the basis of short term agreements that allow us to react on price changes.
Given the circumstances, what objectives is WEC pursuing with priority in Poland in the coming year?
We are preparing for the Baltic Sea Roundtable, a two days event taking place in the autumn of 2020. The conference is a means to support dialogue with our guests from the Baltic Countries about common challenges, for instance in the gas sector which appears to be our biggest challenge in the short term.
More broadly, we acknowledge that Poland needs to embark on a transformation process and we expect this will bring many new opportunities, particularly in the renewables sector. For investors eyeing the local market, our message is that there is plenty of room for growth here and the investment climate is very favorable.
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