Energy 15 March, 2019 10:00 am   
COMMENTS: Jadwiga Emilewicz

Emilewicz: Polish energy sector has two lungs (INTERVIEW)

Minister of Entrepreneurship and Technology Jadwiga Emilewicz talks about energy strategy, development of Renewable Energy Sources (RES) and fight against smog. The consultations concerning the Polish Energy Policy until 2040. What stance did your ministry take?

Jadwiga Emilewicz: We participated in the consultations and voiced our reservations. We focused on launching prosumer micro-installations for small- and medium-sized enterprises. We see great potential here. The European Commission lifting import duties on photovoltaic panels is an opportunity for fast growth of cheap photovoltaics in Poland. It seems that too little emphasis was put on this issue. Not only offshore, but also onshore should be included in the strategy. The Ministry of Energy has already announced an amendment to the 10H Act (regulating the distance of fans from buildings), which liberalises the process of building fans on land. I have already communicated to the business that it should be reflected in the strategy. So far it has not ben. PGE is the largest owner of wind farms, its renewable energy companies are interested in such assets because it is profitable. The results of the RES auction showed the market that the wind energy, with all the complex pricing structure of CO2 emission permits and green certificates, is twice as competitive as the conventional sources. Similar holds true for RES until 2020 and 2030. It might be that the currently implemented avenues will not result in the achievement of that goal. Our remarks form a supplement to the Policy, they do not change its course.

Does this supplement have to be taken into account?

We have not seen the effects of the consultations yet, but the document will have to be submitted to the Standing Committee of the Council of Ministers and the government anyway, where it will be considered again.

When will the strategy be handed to the government?

It depends on the internal procedures of the Ministry of Energy. Nevertheless, by the end of the year we are to send the European Commission the National Energy and Climate Plan, which has to comply with the energy strategy. It is not only about the requirements set by the Commission, but also about clear terms of investment in Poland for the people considering such an idea right now.

Will the strategy be available only at Christmas?

I expect it will happen earlier. We would like to create conditions fostering investment in renewable energy for enterprises, local governments and individual recipients. The power price will rather not go down, except for compensation. We need to find an alternative protecting recipients against energy price fluctuations.

Will the 200 MW from the Energy Plus programme be enough?

200 MW is a good start. It is an estimate made with the business of renewable energy. This is a value for the run-up year, but 2018 was a record year for the photovoltaic business. It is evident that the installation construction potential is growing bigger and bigger. More and more people are becoming aware that they can invest in such installations. The amendment to the RES Act endows individual recipients with the status of prosumer. We would like to keep that trend going. So far, the renewable energy generation has been developing thanks to subsidies, but after the prices of installations decreased, it is enough to provide other instruments, such as lending and leasing mechanisms. The standardised Polished house has 127 square metres. An installation costs PLN 27-35 thousand. With the warranty period of 25 years, for the best panel producers a lending product that will be repaid from surpluses of sold power can be created in banks. The prosumer invests and is granted a beneficial loan which does not affect their household budget very much.

When will Poles sell power to power distribution networks?

Already the current RES Act makes them prosumers. They can sell power to the network. Bidirectional meters are already installed, we have 36 thousand prosumers. It is quite a starting point, and the potential is 5 million one-family houses. 200 MW is a very conservative estimate for this year, it will be much more later on. However, the process of obtaining the status of prosumer takes too long. One non-statutory obligation was introduced by distribution companies: according to it, a person can become a prosumer only if they have a system agreement of transmission and power from one supplier. We will be convincing companies to resign from this obligation.

How do energy companies react to this programme?

An inter-ministry team for the Energy Plus programme is currently operating. It includes for instance the Minister of Energy and the Energy Regulatory Office. Representatives of energy companies are also invited to the meetings. Companies want to invest in renewable energy. One of offshore projects will be most probably implemented by the largest energy company, under control of the State Treasury. We are currently in dialogue. What forms a barrier, as in each system in Europe, is surely network stabilisation. Distribution companies emphasise that the necessity to balance out a system destabilised by RES poses a challenge. We are now after summer, when we have to import as much energy from abroad as possible to avoid shortages in the country. We have a lot of white gaps on the energy map of Poland. It is worth developing the prosumer model where we lack conventional energy – it will not stand contrary to the interests of larger players. The development of RES in the US was criticised by the largest US companies as well. After the first hard starting years, even these companies introduced large renewable energy projects.

This trend can be seen in the strategies of energy companies in Poland. They aim for RES, seek how to limit the encumbrance resulting from coal assets.

These entities will have to have green energy in their balance sheet. Reliefs on the power market and investments from CO2 emission permits must have an effect on RES and energy efficiency. The green way of development cannot be avoided.

What about energy poverty, which is put forward as an argument against the renewable energy revolution?

Increase in prices of coal and CO2 emission permits makes the conventional energy more and more burdensome for the poorer population as well. Let me remind you that additional funds from the Thermal Modernisation and Refurbishment Fund, launched as a result of amendment to the Thermal Modernisation and Refurbishment Support Act, and a thermal insulation relief, which became effective this year, aim to fight energy poverty. We have five million one-family houses. According to the Institute for Structural Research, the problem of energy poverty occurs in ca. 13 percent of them. Improvement in energy efficiency, thermal insulation, replacement of window woodwork and high-emission energy source will improve the living standard. In addition, by purchasing photovoltaic panels with tax deduction, we limit energy consumption, provide additional thermal insulation to our house and take care of the environment better. The two concepts are not mutually exclusive.

If we aim to achieve energy efficient, can this mean that the forecast of considerable increase in demand for energy from the energy strategy might be overestimated?

After the strategy draft was published, I read the strategy documents from 10 years ago. Today, we consume about 134 TWh a year. According to the strategy from 10 years ago we were to consume 200 TWh. Energy efficiency is getting better despite growing demand. The big industry places sources in its neighbourhood. From 2022, the largest players will have to show that they use clean energy. The largest investors, like Mercedes or Umicore, want to stick green certificates on their products. The new Mercedes factory in Jawór is to be energy-independent in 100% and take energy from renewable sources only. This is already happening. We have to create such regulatory conditions that will speed this trend up, not slow it down. In my remarks to the Cogeneration Act, approved by the Council of Ministers, I suggested for the cogeneration support system to include a relief on power for entities who are able to introduce heat into the network. The Act provides for commercial energy only and we drew attention to KGHM, foundries and paper factories. They have huge energy surpluses and they could sell them to the network. Stoimil could heat Olsztyn thanks to its larger installation if it was granted an energy relief, but it will not go in this direction without proper support. This industry will mostly be building clean energy facilities. This industry will create jobs outside the largest metropolises later on.

Should we open to energy import?

I would not like to interfere with the competences of the Government Plenipotentiary for the Strategic Energy Infrastructure. At present, 4-7 percent of energy in Poland comes from import, mostly from Germany and Scandinavia. According to Polskie Sieci Elektroenergetyczne [Polish Power Systems], the technological conditions do not allow more. Energy surpluses from the German Energiewende flow through Poland to southern Germany and Austria and we do not make use of them. It might be that an increase in energy prices is a signal for considering that aspect.

The industry says that it will bring energy from anywhere as long as it is cheaper.

It says that if this is the only option, it will bring energy from abroad and the problem of growing energy prices will disappear for it.

What will be do then with our national assets in the form of power companies?

We will have a big problem then. Therefore, we cannot neglect modernisation of our own infrastructure, we must start to invest in our own wind energy in the Baltic Sea. Environmental permits for two investments are expiring this year, so these investments must start already.

How to reconcile these investments in energy with other ones, such as compensations? Can we afford all of them?

We do not know yet what will the compensation system look like exactly. We know the the Minister of Energy must make a correction and that entrepreneurs will be included in the programme. Threat of price increases for household was fended off by reducing the excise tax and the transitory charge. We need an alternative for enterprises and local governments. There is no secondary legislation, so we do not know exactly how much will all this cost. The Minister of Energy is currently holding talks with the European Commission in this matter.

Are you currently in dialogue with your ministry in this respect?

These talks are under way.

What about standards for solid fuels? Why were we not able to introduce them faster?

We have standards for boiler quality. We have an agreement with Allegro, and I hope that we will also have one with OLX, as regards elimination of polluting fuels off secondary markets on online auctions. Standards for fuel quality required a compromise, as often happens in politics. The Supreme Audit Office has been communicating the lack of standards since 2011. For eight years, no one took it seriously and even if someone did, they withdrew right in the final sprint. Our solutions are very restrictive as they require a technological changes for the consumer to have full information about a given product. Control in points of sale requires the introduction of a special selection system letting only proper quality through. This is the first step in the direction that has already been set. The awareness of the problem is growing. The market is already getting ready for change and takes the possibility of control into consideration.

What does this political resistance includes?

There is no such resistance anymore. Nevertheless, what is evident is some distrust of environments connected with coal extraction and production. Our communication to them is clear. We do not prohibit the sale of coal in Poland. Good coal from a good boiler will not be an environmental problem anymore. We want to improve the reputation of that fuel in Poland. I guess nobody wants coal to have 50 percent of coal and 50 percent of dust. It could happen before our regulation.

How much Polish coal will there be in that coal?

We know that we witnessed a record high in coal import last year. This is a result of investment negligence – we do not have as much coal as we would like to have. It is worth reminding, however, that 40 thousand people work in the coal industry in Silesia. This is less than in the automotive sector of that region. Change is in progress and we have to cooperate with the environment connected with coal so it prepares for the change as well as possible. Nowadays everybody knows in Poland where the Polish energy is headed.

It seems that you are developing a green programme and the Minister of Energy is developing a black one and that they will clash at some point. Are the policies pursued by these ministries coordinated?

The energy strategy of the entire government includes atom, offshore and network investments. Commercial energy plans can be compromised if transmission networks are not built which are necessary to spread that energy across Poland. The Polish energy has two lungs. This is a good thing. We are talking and communicating. For sure, what poses a challenge is the adaptation of the Energy Price Act to the EU requirements. The Compensation Act and the Cogeneration Support Act are solutions developed together. We will have to reconcile the policy pursued so far with new proposals. Funds from CO2 emission trade can be a source of compensations in various sectors – we have to work out mechanisms of action together. We have to build that system together and do it as quickly as possible to remove the uncertainty on the market.

Interview by Wojciech Jakóbik