PL
EN
Poland’s power sector is witnessing a major shift. In line with the global and European trends, the last decade has seen a steady phase-out of conventional coal-based generation, replaced by new – mostly renewable – technologies. As a result, in 2018 Poland produced ~14% of electricity from renewables (according to Sandbag), which puts us in the same league with the USA, Australia or the Netherlands, and ahead of the Czech Republic and Hungary (Fig. 1.), yet still quite behind the UK (34%), Germany (35%), Spain (38%) or Italy (39%) – writes Remigiusz Nowakowski, president of DISE (Dolnośląski Instytut Studiów Energetycznych – Lower Silesian Institute for Energy Studies).
This article has been published in the Polish Energy Brief quarterly.
Fig. 1. Share of renewables in electricity generation for selected countries. Source: own work based on Sandbag’s ‘The European Power Sector in 2018’ analysis
For large-scale utilities, the crux of the energy transition is a move from centralised generation towards distributed energy resources (DER) and from supplying consumers with electricity only to provision of bundled and innovative products and services. At the same time, more and more electricity consumers are becoming what is called ‘prosumers’ (producing consumers), with behind-the-meter facilities – usually rooftop photovoltaics (PV) coupled with storage – capable of injecting excess power into the large-scale grid. Of growing importance is also the development of auxiliary technologies – smart metering and mobile applications – allowing consumers to become increasingly conscious about electricity consumption and able to manage it more efficiently.
A key enabler of the transition is the ever-improving profitability of renewable energy technologies. Beside becoming more and more competitive against traditional sources (and yet despite lesser subsidies), further improvements and innovations in RES (and accompanying storage) are more than likely to ultimately remove of the major obstacle to renewables’ proliferation, i.e intermittency.
China boldly picks up the no-coal gauntlet…
Electricity has been and seemingly will be the cornerstone of economic and social growth in the foreseeable future. Given this, changes in the power sector will have a major impact on the GDP, energy security and, most broadly speaking, social welfare.
A noteworthy example comes from China where in January 2017 the National Energy Administration announced a halt to over 100 coal plants in 13 provinces (~120 GW total capacity), with half of the projects being under actual construction. It was also in 2017 when Beijing – infamous for its catastrophic air quality – retired its last coal plant and declared itself the first Chinese city powered by clean energy only.
…thrown down by Europe and the USA
Retreat from coal is already a common trend in developed countries and a major reason why global CO2 emissions have successfully stalled for the last three years.
In the US, the share of coal-based electricity dropped from 53% in 1997 to 32% in 2016. As of February 2017, plans were announced to retire the largest coal plant in western USA, a 2.3 GW Navajo Generating Station in Arizona.
Another example comes from the UK, although in this case change was a bit slower to progress. Initiated in the 1950s with a gradual slide in mining volumes, it gained much momentum thirty years later (1980s) only to see closures of the very the last mines in 2015. Any interim demand was being covered by imports from Russia or Colombia, and combustion of coal for electricity generation was becoming increasingly unprofitable. This falling profitability was the aftermath of the carbon tax and the system of price guarantees, which granted renewable and nuclear power a favourable cost position and – due to the so-called ‘merit-order effect’ – resulted in a gradual displacement of coal sources. It was also in 2015 when the government doubled the carbon levy that natural gas became cheaper than coal for electricity generation (due to ~50% lower emissions from combustion of the former). In contrast to the lengthy farewell to coal, the UK’s recent progress in large-scale offshore wind farms (with single turbines of ~8 MW) has won this country a position at the very forefront of the energy transition.
Over the past two years, the price of electricity from such farms dropped by as much as 50% and remains cheaper than energy from natural gas or nuclear sources. What is more, in 2016 – for the first time in UK’s history – annual electricity generation from wind (11%) exceeded that from coal (9%). According to the British Minister for Energy, investment in wind facilities will reach GBP 17.5 bn over the next four years.
The demise of high-emitting sources in Great Britain reflects a prevailing European trend where the last decade has seen the share of coal-based generation in many countries – including Poland – drop substantially (Fig. 2). On the flipside are the two leading renewable technologies, wind and solar, whose EU-wide output between 2009 and 2018 rose from ~134 TWh to ~382 TWh (wind) and from ~14 TWh to ~127 TWh (solar), leaving biomass trailing with ‘only’ 75% change in output (from ~113 TWh to ~198 TWh).
Fig. 2. Share of coal (lignite and hard coal) generation in selected countries. Source: own work based on Sandbag’s ‘The European Power Sector in 2018’ analysis
Poland’s hands not tied: wind power to help reduce emissions
The impact of global trends on the domestic power sector gives rise to a number of questions, the key ones seeking answer as to how Poland’s energy transformation should be conducted and what technologies to choose from the available array.
Given that ~77% of Poland’s electricity generation is still coal-based, it seems reasonable to assume that a significant change to the energy mix followed by a noticeable drop of emissions (all happening in a relatively near future) is only achievable with large-scale renewables. ‘Large-scale’ in this context means technologies able to provide capacity equivalent to 1,000 MW thermal units, which in Poland’s case actually narrows the choice to onshore or offshore wind. As of end 2018, the country’s installed wind capacity was ~5.8 GW, with additional ~1.0 GW contracted as a result of a November 2018 auction, and another 2.5 GW to be auctioned in 2019 (according to announcements by the Ministry for Energy). Estimates for onshore wind potential in Poland mention ~10.0 GW over the next 15 years.
An important issue is the impact of wind generation on lowering electricity prices. As facilities with close-to-zero variable costs (no fuel costs), wind farms are the first ones to be dispatched in the merit order (i.e. before coal or gas sources, and before electricity imports). This allows to drive wholesale electricity prices down, and the impact becomes greater the more wind energy is introduced. Estimates by Enteneo show that for 2019 forward electricity prices contracted in December 2018 at PLN 277/MWh, additional 2.0 GW of wind (all other conditions unchanged) would have resulted in a PLN 12/MWh price decrease. At 4.5 GW more wind, the wholesale price would have been expected to fall by PLN 27/MWh, to PLN 250/MWh. According to calculations by the Polish Wind Energy Association (PWEA), the total cost of electricity between 2020 and 2040 could be lower by PLN 25 bn than in the draft Polish Energy Policy 2040 (PEP 2040) scenario. This is equivalent to half-yearly consumption of electricity in the whole of Poland’s economy. For per-unit consumption, this means savings of PLN 10/MWh in the whole period and even PLN 30/MWh in the 2030s.
Wind energy can also become an effective tool for decreasing emissions in the Polish economy. Estimates commissioned by the PWEA show potential for reduction of CO2 emissions from current 125m tonnes per year to ~94m tonnes in 2030. In the 2040 perspective, emissions would drop to 91m tonnes. This magnitude of emissions reduction would enable achievement of the goals set by the so-called Winter Package, a document which will be setting directions for the European Union energy market in the next decade. The scenario presented by PWEA assumes emissions intensity to fall from over 800 kg CO2 per MWh of net generated electricity at present to 475 kg CO2/MWh in 2030 and 380 kg CO2/MWh in 2040. Execution of the PWEA scenario will allow for faster fulfilment of emission reduction obligations as compared to the draft PEP 2040 scenario, where the 2030 emissions intensity sits at 640 kg CO2/MWh and total emissions between 2020 and 2040 are higher by 16%, i.e. 336m tonnes.
The uptake of wind energy has been a constant trend for many years. This is best illustrated by increasing capacity and generation on the one hand and advances in technology (larger and more efficient turbines) on the other. Traditionally developed mostly onshore, a noticeable progress has recently been taking place in offshore installations. Forecasts of wind turbines manufacturing costs indicate that wind energy is becoming an attractive alternative to conventional sources, which is becoming all the more significant in the context of progressive decapitalisation of the existing generation fleet and the need to gradually replace oldest units with new sources.
A noteworthy role in the development of renewables in Poland (especially onshore wind and large-scale PV) is also being played by industrial electricity consumers, which is demonstrated by numerous plans to erect RES in the whereabouts of industrial facilities. Finally, considerable momentum for proliferation of renewables is also coming from prosumers, including a growing number of businesses becoming more and more independent of the grid-supplied electricity.
Despite the allegedly substantial drawback of renewables – a stochastic pattern of output – wind generation demonstrates big potential for growth driven by a short investment cycle, falling generation costs and ability to provide certain ancillary services. Undisputed intermittency seems to be a manageable issue, and power systems of many countries have demonstrated resilience to accommodate sudden fluctuations of wind output. For this to be the case, a power system needs to be based on diverse types of generating units, and standalone operation of wind generation would be rather unfeasible from the energy security point of view.
Due to the currently connected wind capacity in Poland and the size of individual farms, an interesting issue to explore is the scope of additional (ancillary) services which can be provided by wind facilities to grid participants. Experts have demonstrated that operation of wind units fits within numerous ancillary (regulation) services defined in the Transmission Network Operation Guidelines (TNOG), and further development of devices may allow for provision of new services beneficial for system security and cost reduction.
Renewable energy sources – wind and PV – require network operators to balance and back up the intermittency of output. Ancillary services used for this purpose are usually purchased in line with the TNOG from other generators which offer regulation capabilities. Among generators fit for this purpose are large coal-fired units, natural gas and CCGT units, pumped hydro facilities or dual-boiler-single-shaft units.
A successful energy shift: Poland’s coal and wind marry-up
The structure of the energy mix in Poland is bound to change, experiencing gradual retirement of coal units in favour of other, less emitting generation sources. The shift will be more evolutionary than revolutionary, the latter being rather impossible due to technical and economic reasons.
Inasmuch as Poland will be following global trends and leaning towards renewable energy sources, it should nevertheless use its conventional resources in the most efficient manner. Given recent thermal capacity developments, the most likely future is the co-operation of large-scale renewables with large-scale coal-fired units. To help accommodate RES intermittency, the thermal facilities will need to act as mid-merit sources (as opposed to traditionally baseload operation), with more ramping flexibility and more frequent starts and stops. Even though it’s likely that certain part of regulation will be provided by renewables, the conventional sources can still be considered foundation of the power system’s security and flexibility. For this reason, it is crucial that any refurbishment or further development of those units increase technical capability to work with variable (often minimum) load and with more frequent stops.
The present stability of the Polish power system is based on coal sources and this fact is unlikely to change in the short term. As a result of political decisions in recent years, new supercritical coal units are being erected (Opole, Kozienice, Jaworzno, Turów), involving enormous funds, mostly derived from Polish taxpayers. From the economic rationality perspective, it seems justified to expect these new sources to operate for a few decades, so finding the most efficient way for them to support Poland’s energy transformation by co-operating with wind sources is of utmost importance.
An analysis of energy transition processes in other European countries shows that the progress looks similar to Poland, with conventional sources (in many cases gas or nuclear) providing stability to power systems in light of the ever-increasing RES generation. Given that natural gas – treated as ‘transition fuel’ – is still relatively high emitting (and a costly energy carrier in Poland’s case), and the construction of Poland’s first nuclear plant has been in limbo for many years, basing our country’s transformation on existing coal sources to support large-scale RES, and using cross-border flows for system balancing, appears to be an option definitely worth considering.
The presence of renewables can contribute to a more efficient use of coal sources, within boundaries marked by the evolution of the power system. It seems almost certain that the power sector of the future will strive for limiting emissions and dispersing generation sources. Under properly designed regulatory conditions, units using conventional fuels (such as coal) will be an essential component of the technological change directed by megatrends.
The above article was prepared on the basis of the “Co-operation of conventional coal sources and large-scale RES” report by the Polish Wind Energy Association and (PWEA) and the Lower Silesian Institute for Energy Studies (DISE). The report was officially presented on 10th May 2019 during the European Economic Congress in Katowice. The full version of the report is available here.
