Despite high energy prices, problems with fuel supplies and knowing how difficult the investment process is (e.g. complexity, investment duration), renewable sources are treated by decision-makers as an unwanted addition to the energy system. The so-called distance law, which hampers the development of wind turbines (the cheapest form of energy production), was supposed to be amended months ago. Despite declarations from policymakers, it is still politically blocked. In this analysis, we focus on an often overlooked, but important thread of the energy discussion - the impact of renewable energy sources on the dependence on fuel imports.

Context

Reducing our consumption of fossil fuels and our dependence on monopolistic suppliers is crucial to improving our energy security. The first step is to reduce energy consumption thanks to better efficiency. In the overall energy balance, however, a falling demand for conventional fuels will mean an increasing demand for electricity. The fastest and cheapest way to maintain supply is to develop renewables - overcoming network barriers and integrating variable sources with conventional ones.

The substitution of fossil fuels is possible mainly through rapid electrification - in sectors where we already have relatively cheap and proven technologies. In a short time, much can be achieved in heating buildings, transport and industry. The development of heat pumps, electric cars and green hydrogen - is in the strategic interest of Poland. However, it will be difficult because the power system is on the verge of imbalance and suffers from underdeveloped grids.

Electrification potential and electricity demand increase

Below, we analyze three selected actions that will help recover from the energy crisis (lower prices and reduce the supply crisis):

• thermomodernisation of buildings and installation of heat pumps (reduction of coal and gas consumption),
• electrification of transport (reduction of oil consumption), 
• use of green hydrogen for industrial purposes (reduction of gas consumption).

Below, are possible but ambitious pathways for these technologies to be developed 2030, based on  Forum Energii calculations and a joint analysis with Aurora Energy Research.

Electric cars - 1.8 million units in 2030.

We assume that in 2030 about 1.8 million electric cars could be used on Polish roads, replacing fuel based vehicles. Increasing EV development will result from comparable costs of owning a combustion and electric car, better availability of charging infrastructure and car models. This will result in an increase in demand for electricity in 2030 by about 5 TWh.

Heat pumps - 2 million units in 2030.

In recent years there has been an increased interest in heat pumps. According to Port PC estimates, sales of heat pumps will approach 200,000 in 2022 and will be 130% higher than in 2021.[2] In our analysis, Is the Kremlin turning off the gas tap? Time to exclude gas and coal from households, we showed a pathway for electrification of heating, which by 2030 should result in the installation of more than two million devices. This will cause an increase of electricity demand in 2030 by about 15 TWh.

Green hydrogen in industry - 6.7 GW in electrolizers in 2030.

Green hydrogen has good development potential in industry, where an alternative to natural gas is needed. At the same time, financial and organisational capabilities in this sector are high. According to the European Council conclusions of June 2022[3], by the end of the decade, 35% of grey hydrogen (from natural gas and coal) in industry should be replaced by emission-free hydrogen. Poland produces about 1.3 million tons of grey hydrogen per year[4]. Replacing one third of this volume will require installation of about 6.7 GW of electrolysers.

The development of green hydrogen will entail a significant demand for electricity (by about 18 TWh).

Energy balance - reduction of fuel imports

The economy's demand for fuels may decrease, provided that energy needs are covered by the power sector. The development of electromobility, heat pumps and green hydrogen will translate into a total increase in electricity demand of 38 TWh in 2030. Figure 1 shows the estimated electricity demand in 2022 and 2030, after taking into account the electrification of heating and transport and meeting the demand for green hydrogen. We estimate that electricity production needs could reach 216 TWh. In estimating demand growth, we have assumed a moderate level of ambition in terms of energy savings. We are aware that new mechanisms are needed to encourage energy efficiency.

Share of renewables in 2030

Given the near term perspective of 8 years, it will be important to accelerate the development of proven and scalable technologies. In this period, realistic financing opportunities and the length of investment processes of various power sources should be taken into account.

The most realistic scenario is that renewable sources will cover the increased demand, together with improved flexibility of the energy system and the possibility to shift (shave off) peak demand. This means that without significant acceleration of renewables development, modernization efforts of transport, heating and industry will not be feasible.

The energy mix model developed by Aurora Energy Research assumes that about 25 GW of solar and 25 GW of onshore wind and about 6 GW of offshore wind should be operational by 2030. Conventional power will provide about 26 GW of power.

The chart below shows a comparison of Poland’s energy mix in 2022 and 2030. The assumptions for modelling the mix take into account the increase in energy demand in line with the electrification and green hydrogen developments shown earlier.

With this mix, in 2030, renewables cover 116 TWh - more than half of the electricity demand. Onshore wind power plays a key role because it is the cheapest source of energy. The development of onshore and offshore wind sources together with photovoltaics will produce enough energy to help cover the base and additional demand from electrification and green hydrogen development. The chart below shows the electricity production mix in Poland by technology in 2022 and 2030. 

Due to the structure of the Polish energy mix, RES development will also reduce the demand for coal-based energy. Replacing one GWh from coal by one GWh from renewable energy means savings of 444 tons of hard coal[5]. If renewables replaced hard coal production, in accordance with the abovementioned 2030 energy mix, savings on hard coal in the power sector could amount to 23.4 million tonnes.

Total reduction in fossil fuel consumption in 2030

The development of new technologies in heating transport and industry, accompanied by renewables development in 2030, will bring a cumulative reduction in demand of:

Hard coal - 27.7 million tonnes less (40% less compared to 2021)[6] ;

The total consumption of hard coal in Poland in 2021 was approx. 70 million tons, including households, which consumed 9 million tons[7]. Hard coal mining in Poland is in a steady decline. Between 2019 and 2021 alone, there was an 11% reduction in production (from 62 million tonnes to 53 million tonnes)[8]. Last year, net coal imports to Poland amounted to about 6 million tonnes[9]. In 2022 there will most likely be a shortage of coal for heating buildings.

The implementation of the presented scenario would reduce demand for hard coal in the power sector by 23.4 million tonnes and in heating buildings by approximately 4.3 million tonnes. Given the declining output of hard coal mining in Poland, a reduction in demand for this fossil fuel is desirable as it would help prevent an increase in coal imports.

Diesel oil - 1.7 billion litres less (8% less compared to 2021)[10];

Oil is the fuel we are most dependent on, as domestic extraction is negligible. In the last twenty years we have spent over 800 billion PLN (44 billion PLN in 2021) on oil imports[11]. Out of all imported fossil fuels, oil costs us the most. In order to reduce this dependency, a number of actions will be necessary, including, above all, the development of mass transport and behavioural changes (e.g. working from home, car-sharing, cycling or using public transport). The development of individual electromobility will also be key. Reducing demand for oil will help reduce the price of the fuel and contribute to the country's energy security.

Natural gas - 3.1 billion m3 less (16% of 2021 consumption)[12];

Gas consumption in Poland amounted to almost 19 bcm in 2021. Due to high price volatility, it fluctuated strongly in 2022. According to Gaz System’s National Ten-Year Plan of Development of the Transmission System, the increase in gas consumption could reach 35 billion m3 in 2035[13]. In the current conditions, however, we already know that betting on gas may be a risky move. Failure to rationalize the use of gas in various sectors may increase risk for the Polish economy. It could lead to an increase in energy prices and dependence on imports, even if they come from directions which at this time seem safe. The competition for the blue fuel will be strong.

The development of green hydrogen and heat pumps, as presented in the beginning of this analysis, would lead to a reduction of gas consumption in industry by 1.4 billion m3 and in heating by 1.7 billion m3. Saved gas could be used in new power units used to balance the grid.

If the development pathways of new technologies presented in this analysis were realized, the demand reduction for fossil fuels would reach 26% by 2030 (cf. chart below). These figures do not take into account the potential increase in demand for gas in the power or district heating sectors due to a potential change in the fuel mix.

Main conclusions

In order to maintain its energy security, Poland must accelerate investment in renewables. We need to take matters into our own hands and encourage investors to act. Renewable energy sources are the fastest to develop, they are easy to finance, and it is easy to accelerate their development - especially by simplifying administrative permitting issuing. Renewable sources of energy not only reduce emissions, but also reduce the price pressure on fossil fuels. They may be intermittent, but they are predictable, certainly plannable. What's more, energy production uses wind and solar, which is in unlimited supply and not subject to price speculation. In the short term (until 2030) there are two options for Poland:

• A radical reduction in demand for electricity. This is an action that is always worth taking, but with the prospects for electrification of heating, transport and the development of green hydrogen, we still expect an increase in demand.
• Accelerate the development of renewables, in particular unlocking onshore wind and scaling up offshore energy development.  

Due to a drift in decision-making, the time and the number of options available to meet the energy shortage in the coming years have run out. Continuing to maintain unprofitable coal-fired power plants would require not only illegal state aid, but also increasing coal imports. At the same time, nuclear plants will not be built anytime soon. Developing new generation capacity in renewables should be a priority.

Authors: Tobiasz Adamczewski, Dr. Joanna Maćkowiak-Pandera
Cooperation: Piotr Kleinschmidt, Marcin Dusiło
Date of publication: 29 November 2022