Polish energy in Europe | Modernization challenges

27.1.2016

Event

In August 2015 the Polish power system experienced a capacity shortage - industrial electricity consumers were forced to curtail their electricity consumption. For the first time in 25 years, energy consumers experienced the effects of many years of inattention and lack of system regulations and strategic decisions concerning the direction of development of this sector. As reported by Polish TSO, supplies may be limited again in the years to come and serious capacity deficits may occur after 2020. Achieving a consensus regarding the Polish energy sector and preparing a long-term vision for the development of the sector are priority tasks for the Polish government in the next few months. 

 

27.1.2016

The Polish energy sector is at a crossroads: how can energy security be ensured in the context of the changing energy market? Should electricity markets be integrated? What will be the role of Polish coal be in the future economy? Do we want renewable energy sources to be developed? What should the European compromise look like when it comes to energy issues? Key speaches were delivered by: Michał Kurtyka, Deputy Minister, Ministry of Energy and Dagmara Koska, Cabinet Member of Vice-Chairman of the European Commission, Maroš Šefčovič.

The conference was held under the patronage of the Minister of Energy, the Energy Regulatory Office and the Polish Power Exchange. Webportal Wysokie Napięcie was the media patron for the conference.

The Forum for Energy Analysis and Confederation "Lewiatan", organizers of the conference on "Polish Energy in Europe. Modernization Challenges", prepared six key recommendations (attached to this article) concerning necessary actions for the energy sector. As emphasized by Joanna Maćkowiak-Pandera, Ph. D., head of the Forum for Energy Analysis: The most important tasks in the Polish energy sector cover development of a new State Energy Policy to 2050. For years Poland was on a collision course with Brussels when it comes to low emission policies, but now compromise is needed more than ever. Poland is in crisis when it comes to resource adequacy. Polish coal is losing to competition from abroad. We stand in front of a deep power market transformation: more than 50 bln euro have to be invested in the power sector. Designed properly, these investments can become an engine for the economy and society. Poland needs a long term and realistic vision for the energy market, which takes into account international megatrends and decisions taken on EU and global level. We need to diversify our energy mix considering the changing costs of technologies and the conditions of raw material extraction in Poland and global competition. Other important issues include strengthening regional cooperation with Poland’s neighbors in the EU when it comes to energy market design and electricity trade. We believe that the development of a compromise between the EU’s and Poland’s visions for the energy sector is the basic condition to unlock investment and minimize the risk of capacity curtailments in the future. Europe needs the Polish power system just as the Polish power system needs Europe. Cooperation can take advantage of these synergies.

According to the Forum and Lewiatan other key activities to be undertaken include: reform of the energy market, launching resources on the demand side and use of smart grids. Development of a new strategy towards renewable sources is very important to reasonably complement the existing energy mix. As explained by Henryka Bochniarz, Ph. D., President of the Confederation "Lewiatan": The regulations should be as clear and long term as possible to allow for the initiation of activities and investments both on the part of the state and on the part of private enterprises. Without such regulations, the state, on the one hand, deprives itself of the capital of an important stakeholder group (including the possibility of involvement of private funds in the achievement of government objectives) and, on the other hand, can cause state controlled companies to have a worse market position through mobilization of funds in less profitable investments.

Recommendations for decision makers are the result of an in-depth analysis prepared at the order of the Forum for Energy Analysis and concerning the impact of megatrends on the Polish energy system. As Joanna Maćkowiak-Pandera explains: Megatrends are major and permanent changes of social, economic, technological or political nature that affect societies, governments, and economies of particular countries. They form slowly but when accelerated, they are irreversible. Together with experts, we have identified the most important megatrends in the European energy sector that are affecting Poland. They include, among other things: the decreasing costs of renewable energy generation, reduction of the environmental impacts of power generation in fossil fuel plants on human health and global climate, the changing role of coal, and emerging, new business models in the energy sector. Numerous countries in Europe and worldwide have been transforming their energy systems under the increasing influence of megatrends. You may disagree with the direction of these megatrends, but they have to be taken into consideration when drawing up strategic papers and taking decisions relating to the energy sector with a perspective up to the year 2050. In recent years, one might have the impression that decision makers have assumed that the regulatory and technical levels of the electricity sector exist in isolation, which is as if monopolies operating fixed line wire communications attempted to stop the growth of mobile telecommunications. Change in the energy paradigm is inevitable, the question is what national strategy should be adopted so that the economy and society could benefit.

Paweł Smoleń, President of ERBUD SA for the energy sector and industry, former President of EURACOAL, the co-author of "Megatrends impacting Polish energy sector" addsFor many decades, the development of the energy sector has followed without deeper reflection on its impact on society. When attention started to be paid to climate protection, the energy sector was limited to comply with standards such as emission limits. At present, the energy sector is increasingly seen from the angle of environmental protection. Traditionalists believe this is only a temporary marriage. We think that this is a long-term phenomenon - the environment and the energy sector will remain inseparable. We witness the changing attitude of the consumers: they have become increasingly conscious customers and market participants. The structure of production itself will also change. Coal is another difficult challenge for Poland. When analyzing the lifetime and economics of existing coal mines and projects to construct new mines, we estimate that up to 2030 the share of coal and lignite from Polish mines in the Polish energy mix will drop from the present by over 85% to even below 30% of what it is today. Dealing with those issues is a challenge, but also an opportunity for Polish business, innovators, the labor market and the environment.

To sum up, Joanna Maćkowiak-Pandera points out: We are convinced that a new opening in the energy sector is needed, that European energy and climate policy includes numerous synergies with Polish national interests, and modernization of the energy sector can boost the Polish economy. The first two years after elections is a good time to adopt certain reforms and decisions regarding a long-term plan for the Polish energy sector.

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