The construction of the Ostrołęka C power plant has already cost PLN 300 million. The price may go up because the invoices are still being counted. According to recent speculation the plant may be running on gas, not coal as originally planned. This begs at least two questions – where will the gas come from and what will happen to the current construction contract – writes Bartłomiej Sawicki, editor at BiznesAlert.pl.
The contract between the special purpose vehicle Elektrownia Ostrołęka (Ostrołęka power plant) and GE Power, the contractor, says that it is permissible to suspend all or some of the obligations arising from the agreement. The total duration of such a suspension(s) is 90 days. The original deal said that Ostrołęka C will be a coal-fueled power plant. It seems that this has changed and the plant will run on gas. This begs the question – if this change is indeed made will the parties cancel the current contract and sign a new one? Or will they amend the existing agreement? This is an important issue because it will impact the capacity agreement that the plant should start fulfilling in 2023. According to our information, if a decision to alter the plant’s fuel is made, the entire project may be delayed. However, it is possible the setback will be small, which means the penalties will not be high. Karolina Baca-Pogorzelska calculated that the maximum penalty for not submitting the required document may reach PLN 500 million within three years. In a more optimistic scenario, where the investment is completed quickly, this may be PLN 100 m. However, it is probable that the gas-version of the plant will require a new tender. Additionally, new environmental and location permits will have to be obtained. This is because a gas-fueled plant will have a different emissions level and will require a different intake of water than a coal plant.
Gas vs. coal
According to Energa as at 31 January 2020 the investment was completed at 5%. “As far as we know, preparatory work, ground work and foundation works have been completed,” prof. Krzysztof Badyda, PhD, Eng. from the Institute of Heat Engineering at the Faculty of Power and Aeronautical Engineering at the Warsaw University of Technology, told BiznesAlert.pl.
The already existing structures were built for a coal-fired power plant. We asked the professor whether it was possible to use them if the decision to switch to gas was made. In his opinion it won’t be easy. “If the decision is made, it will be difficult to adapt the existing elements to a gas project. However, we do not know whether the decision has been made. The investors and the contractor should discuss the future of the project. If it is decided that a gas-fueled power plant will be built, then it will be the architect’s job to make use of the existing construction. For instance, the pylons’ parts of the power unit boiler that have already been constructed will most probably not be used if the plant runs on gas. Cooling stacks are rarely used at CCGT plants, which usually utilize mechanical draft cooling towers. Also, the size of the cooling towers needs to be adjusted to the needs of the plant,” the professor explained. He added that it was necessary to construct a power plant in that part of the country because of energy security and the needs of the Polish Power System. “We need to know what the final power balance will be once the old units are decommissioned,” he said.
Where do we get the gas?
In professor’s Badyda opinion poor access to a gas transmission network will be a serious problem if a gas-fired power plant will be constructed. The Yamal gas pipeline is close to the construction site, but according to the scientist it is currently technically impossible to connect the Ostrołęka power plant to the pipe. “From the moment a contract is signed, the construction of a 1 GW gas power plant may take about 36 months. To compare, the construction of a coal-fired power plant usually takes about 55-58 months. So, even if the construction of the gas plant started today it would be extremely difficult to complete it by 2023 when the coal plant was supposed to have been done,” he assessed.
However, a few strategies are available. It is possible to connect the plant to the Yamal gas pipeline to import gas from the East, from Russia, or from the West via the physical reverse flow in the town of Mallnow. This could only be done if certain conditions are met. Jacek Sasin, Deputy Prime Minister and Minister of State Assets, has already commented on this alternative by stating that “we are not introducing diversification of gas suppliers and sources to revert back to buying gas from Russia”. “We need to remember that at the end of last year PGNiG informed Russia that we will not be extending the Yamal contract, which will run out in 2022,” the minister said.
How much gas will the Ostrołęka plant need? The gas units that PGE will build at the 700 MW Dolna Odra power plant will consume from 1 to 1.5 billion cm of gas a year. So we can estimate that the Ostołęka plant, which will have a capacity of 1 GW, will need about 1 billion cm of gas a year. Why is it so important for Ostrołęka to have that capacity? In 2018 the old/coal version of the plant contracted 852.6 MW of capacity obligation for 15 years on the capacity market.
The second strategy is to use the physical reverse flow in the Yamal gas pipeline. In 2014 Poland’s Gaz-System and Germany’s Gascade Gastransport opened a renovated gas metering station in Mallnow on the Polish-German border, which was equipped with a physical reverse flow that enables Poland to import gas from Germany’s market via the Yamal pipe. This means Poland can buy about 5.5 billion cm a year from Germany, but it doesn’t necessarily mean that the gas will flow to Ostrołęka. In order for this to happen another investment needs to be.
Finally, the third strategy says that the Ostrołęka power plant could be connected to the Poland-Lithuania gas pipeline (GIPL). It is worth taking a closer look at this project. Gaz-System is planning to open the pre-investment and design stages this year. The GIPL will connect the transmission and transit systems. One of the goals is to use the transit infrastructure for transmission purposes. Specifically this pertains to the construction of a gas unit in Zambrów, close to Ostrołęka. The unit would be a two-way regulatory and measurement station that would make it possible to connect the GIPL with Yamal to ensure that consumers in Eastern Poland would have access to a new source of gas.
The station in Zambrów could become Ostrołęka’s gas source. The pre-investment and design work will take about two years to complete. The construction of the plant will take 36 months. This means the new project would be ready two years after the date (2023) from the original coal contract, i.e. in 2025.
All of the questions about the future of the Ostrołęka C power plant will have to be answered, but perhaps this future no longer includes coal.