Poland’s rocky transition away from fossil fuels

In an article for EURACTIV, Kira Taylor opined that Poland still relied heavily on coal for producing energy. Fossil fuels accounted for 70.8% of the country’s electricity production in 2021 despite concerted efforts towards decarbonization.

Even though this figure represents a massive improvement from 2010, when coal accounted for 86.6% of electricity production in the country, it is nowhere near the number needed to meet the EU’s 2050 climate neutrality goals. What is perhaps more troubling is the fact that 2022’s energy crisis is threatening to derail the country’s energy transition.

“In the conditions of economic recession and growing energy poverty, there is a risk that the energy transition may be slower or even stops altogether,” warned a report by Ernst & Young (EY) Poland.

The report was commissioned by the Polish Electricity Association (PKEE) and stated that Poland was “gradually and consistently” increasing its share of low-carbon and zero-emission energy. However, revamping the energy sector coupled with initiatives to help the transition in the coal mining sector were expected to rake up bills to the tune of approximately €135 billion by 2030.

The fear was that “excessive reduction in the margins of enterprises from the energy sector to implement protective measures” might “slow down the pace of transformation due to the reduction of investment funds”.

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Poland has outlined its ambitious goals in a law detailing the Energy Policy of the country until 2040 along with the national energy and climate plan sent to the European Commission. However, the EY report pointed out that these goals would likely need “significant amendment”.

Indeed, the EU wishes to implement even more ambitious climate action for 2030 after the outbreak of war in Ukraine. On the ground, however, drastic measures have become the need of the hour to mitigate energy prices.

Poland’s is heavily dependent on fossil fuels,

Poland’s energy sector is heavily dependent on fossil fuels, especially hard coal and lignite. Even though the number of people working in the sector has decreased steadily, there were still around 84,000 coal workers in the country in 2019. Furthermore, Poland is likely to continue coal mining till 2049.

Before Russia invaded Ukraine, fossil gas seemed to be a promising alternative to coal. However, rising gas prices and the scarcity of supplies has cast shadows of doubt on this alternative.

According to Aleksandra Gawlikowska-Fyk from the Polish think tank Forum Energii, gas has “never been thought of as a perfect solution” for Poland as the country has always been wary of Russia’s supplies. The current global scenario is likely to further delegitimize gas as a potential solution. What makes matters worse is that coal-fired units are likely to be called upon to compensate for this loss.

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Significant investments in gas-fired units are still underway in Poland. However, the country is being cautious about where the gas comes from. Potential sources include the recently opened Baltic Pipe, which links Poland to Norway, and floating terminals for liquefied natural gas imported from the US.

The short-term reliance on coal also comes with its unique set of challenges. Global coal prices, already on the upswing in 2021, increased threefold after Ukraine was invaded by Russia. Furthermore, Poland banned Russian coal imports on April 14, 2022 – much before the EU ban came into effect.

Prior to the ban, Russian supplies accounted for 20% of Poland’s coal and were often used by both households and small power plants. Soaring coal prices coupled with limited supply have now shaken the belief of coal being the backbone of Polish energy security.

“It’s a huge political topic at the moment and there’s a fear that there will be not enough coal for power plants, which is something that people cannot understand,” explained Gawlikowska-Fyk.

The utilization of coal is also causing financial problems for energy companies which wish to transition. This can be attributed to the fact that they still have to purchase expensive pollution permits as per the EU emissions trading scheme for their fossil fuel energy production.

The situation is further exacerbated by the fact that financial institutions increasingly do not wish to support companies which have fossil fuels in their portfolio. “In many countries, including Poland, banks and financial institutions are refusing cooperation with companies that have any coal assets,” highlighted Wioletta Ciska, secretary of the management board of PKEE. She went on to add that “[w]hen such enterprises have a problem with getting proper funding – such as investment loans – it is an additional factor that directly compromises their investment potential”.

The Polish government is trying to work its way around this problem by trying to delink coal-based power generation assets from companies with shares held by the State Treasury.

The energy transition will ultimately depend on increasing renewable energy supplies. Poland is already on this path and has rolled out more renewables. The country is aiming to reach 21-23% of renewable energy in terms of gross final energy consumption by 2030.

According to the EY report, power generation needs to increase to meet escalating demand from heat pumps, hydrogen generation, and electric vehicles. Some renewables have already shown promising results. For instance, the installed capacity of “prosumer PV” increased almost threefold between December 2020 and July 2022. Consequently, Poland now has around 10 gigawatts of solar power.

Similarly, Poland can also tap into offshore wind on its long coastline along the Baltic Sea. The country already envisages 5.9 gigawatts of capacity on this front by 2030 in its 2040 energy strategy.

Poland is also looking at exploring nuclear energy. However, the first nuclear plant in the country is not expected to come online until the mid 2030s.