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All Poles will pay for the energy transition. One of the propositions on the table is a new tax. We will pay less if we use the subsidies for the transition to a green economy, but there is a catch – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
Disputes over energy strategy and in the coalition
The Polish government has formally adopted the Polish Energy Policy until 2040 (PEP 2040) a.k.a. the energy strategy, which describes how the energy industry will be changing to ensure security of supply in view of the ever stricter climate policy, and the economic challenges conventional sources are facing as they need to compete with new, renewable energy. At the time of publication of this piece only the general premise of the document was revealed. Reportedly it was not altered in comparison to the previous draft that replaced coal with a duo of nuclear power and renewable energy sources (RES). Critics of the adopted energy strategy from the United Poland party warn that its implementation will cost PLN 1.6 trillion, and that there is no plan to acquire funds for this goal. We reported on this in early February in BiznesAlert. On the other end, there are critics who believe the strategy is not bold enough. Those include the Energy Forum think tank, which argues the document does not match the most ambitious climate goals. Another criticism pertains to nuclear power as the foundation of energy transition. The construction of a Polish nuclear power plant (NPP) has a very tight schedule, according to which the first reactor will go live already in 2033. In theory it is possible to build one within a decade, so if the decision is made in 2021 there will be a margin of two years. However, in practice it may be different if we take into consideration the delays in European projects of this kind, for instance Finland’s Olkiluoto is already 11 years behind schedule, whereas the entire project has been in development for fifteen years. The Finns are building a French EPR reactor, which is also considered by Poland, apart from offers from the U.S., Japan and South Korea.
The government has not yet made a decision on the NPP, but it has ensured that it will soon. If that doesn’t happen, the foundation of the Polish energy strategy will disappear. Nuclear power is to ensure a rapid decline in CO2 emissions in line with the EU climate policy and a decreased dependence on imported gas. The critics from United Poland claim that if the nuclear strategy fails, it won’t be possible to import all the gas that Poland will need from outside of Russia, and that a new gas contract with Gazprom will be necessary despite the assurances of some of the decision makers in Warsaw that Poland will be able to abandon this source altogether. If Poland wants to minimize the import of gas without the atom, it will be left with renewable energy, which in the future should need less conventional support, as well as with the necessity to import electricity (mostly from Germany). This means the decision on nuclear power has to be made in 2021, but if the project fails the state energy policy will have to be reviewed. The disputes in the coalition government – United Right, some of which pertain to Poland’s energy policy, will make that decision more difficult. However, time for a discussion is running out, because the queue for EU funds devoted to the energy transition is already forming.
EU money for a transition, but only the green one
Environmental organizations under the leadership of WWF Poland submitted a letter to the Polish prime minister about financing these changes. “BoMiasto, Business Centre Club, Centrum Myśli Strategicznych, ClientEarth, Prawnicy dla Ziemi, Climate Strategies Poland, Europejski Kongres Finansowy, Instytut na Rzecz Ekorozwoju, Instytut Odpowiedzialnych Finansów, Instytut Zielonej Gospodarki, Konfederacja Lewiatan, Krajowa Izba Gospodarcza, Polska Rada Biznesu, Polska Zielona Sieć, Pracodawcy Rzeczpospolitej Polskiej, Railway Business Forum, ThinkTank, TOR and WWF Polska are calling for the National Recovery Plan that is being drafted by Poland to create the basis for a competitive Polish economy. We demand a real dialogue that will include all the relevant stakeholders,” the letter says. The authors argue that the projects submitted to the European Commission by Poland as part of the so-called National Recovery Plan, out of which at least 37 percent of subsidies is to be devoted to climate protection, will make it possible to reach for as much as EUR 57 bn (37 bn in loans and 23 in grants) from Next Generation EU, which is even PLN 50 bn a year. This may be an important source of bankrolling the Polish energy strategy, provided that it goes along with the climate policy, which is increasingly more strict.
“The COVID 19 pandemic caused a huge economic crisis in Poland, Europe and across the world. In order to help its member states to recover from the crisis, the European Commission proposed the creation of a European economic recovery package worth EUR 350 billion. The decision to establish it was made in December last year. With the right to receive almost EUR 60 billion, which include almost in equal parts loans and grants, Poland is the fourth beneficiary of the fund,” Marcin Korolec from Instytut Zielonej Gospodarki (Institute for the Green Economy) explained. “It will be possible to use the money from the European recovery package already this year, but it needs to be spent by 2024. This spending period is very short in relation to the huge sum, which creates an enormous challenge all of us need to face – from state administration responsible for programs, to local administration and business that will implement specific projects. The member states are obliged to guarantee that the projects financed from the funds devoted to the fight against the economic crisis are at the same time contributing to the digital and green transitions of European societies,” the expert goes on.
“The thing is that the deadline for submitting National Recovery Plans, documents on the basis of which the subsidies and loans will be distributed, is in April, but as of today the government has not presented a draft, or at least some basic propositions for such a document. The European recovery fund is the contemporary Marshall Plan. If we rise to the challenge and plan it well, our kids and grandchildren will definitely call it that way. We cannot waste this opportunity, let’s start a serious discussion with central and local administration, representatives of economic associations and non-governmental communities on how to best use the last financial support of this size, which may not only help us get out of this economic crisis, but also ensure permanent competitive advantage in the future in the ever changing contemporary world,” Korolec argues in a commentary for BiznesAlert.pl.
It remains to be seen whether it will be allowed to use the EU funds to subsidize an energy transition that involves nuclear power. Poland has declared that it would not use the EU money, and instead use a financial model that will be paid for by Warsaw and its future technological partner from America, France, or some other country. Discussions on expanding the RES fee, i.e. remuneration to the transmission system operator for making the system available for transporting energy from renewable sources, are still taking place. The fee is included in the tariff for the service and on the consumer’s electricity bill. It would be increased to finance the energy transition in Poland, including the nuclear project, half of which needs to be paid for with Polish money. A cheap loan taken abroad has been mulled over for years as well. The idea is that it will pay for itself once the expensive nuclear power plant, whose cost is estimated at billions of Zlotys, will provide energy that is cheap from the point of view of the costs of the functioning of the power system in line with the forecasts included in the Polish Nuclear Power Program.
Too late to talk
The discussion on this topic is long overdue. We still don’t know how the energy transition in Poland will be financed, but the EU subsidies are already on the table. How this matter will be settled will determine to what degree the transition will be financed by the taxpayers, and whether the foundation of the energy strategy will be ensured and deemed a “green” solution. It is worth stressing that today one cannot implement energy projects without state support, which is evidenced by the act that promotes offshore wind farms. However, the state needs to decide which technology it wants to support to make sure that the duties paid by Poles is invested in the best possible way. The supporters of speeding up the transition argue that renewables should receive as much support as offshore in the Baltic. The government trusts in nuclear power, while its internal critics from the United Right coalition defend the coal status quo against the European Union.
“We want to use the EU funds from the National Recovery Plan, from the Just Transition Fund, and from structural funds. Therefore, we need to all mobilize to draft the best possible plans in the regions that will introduce a just transition,” Michał Kurtyka the Minister of Climate and Environment said. Will this happen? There is no time left for a discussion.
