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Coal Energy 10 December, 2018 10:00 am   

Murder or a suicide of Polish coal?

The climate summit in Katowice was to be an opportunity to show the greener face of Poland, previously associated mainly with coal. Meanwhile, the government warns against demonizing coal. At the same time, there are suggestions that mining is threatened with a murder without pointing suspects – writes Piotr Stępiński, editor of BiznesAlert.pl.

From Monday, the capital of Upper Silesia is also the center of a global discussion on how to implement the provisions of the Paris Agreement, or how to keep the problem of global warming under control. While delegations from around the world point out that climate change is proceeding at a dizzying pace, Poland emphasizes that it will not abandon coal because it is our “strategic raw material”, resources of which allow us to extract it over the next 200 years. Yesterday in the Sejm, Minister of the Environment, Henryk Kowalczyk, stated that “we can not deprive people of heat in the winter and that is why we have to import coal”. So how do you explain the ever-growing import of coal to Poland? If it is so good, why do we bring wood to the forest?

Polish mining has a problem with the efficiency and implementation of mining plans, which means that as a country we are forced to import coal from abroad, mainly from Russia. In 2000, Poland extracted 103,4 million tons of coal. In 2017, it was only 65,5 million tons, or 6,9 percent less than in 2016. There are many indications that also this year we will see a drop in output.

According to Eurostat data, from January to the end of September Poland imported almost 14 million tons of coal, of which nearly 9,8 million tons from Russia, for which, according to the Customs Service, we paid nearly 2,5 billion PLN (687 million dollars). The volume of imports was higher than for the whole 2017 (13,4 million tonnes). Thus, the previous record from 2011 was also beaten, when 9,31 million tonnes of Russian raw material went to our country. For comparison, 8,2 million tons of imported coal went into Poland in three quarters. In the corresponding period of the previous year – 8,2 million. In total, during the three quarters of this year, more coal than on the entire 2017 (13,4 million tons) went to the Vistula. Everything indicates that this trend will continue.

The growing import of coal testifies to the condition of the mining sector, whose problems can not be swept under the proverbial carpet. Meanwhile, last Tuesday in Brzeszcze, Deputy Prime Minister Beata Szydło emphasized that mining is not only “an academic discussion at the climate summit, but it is the reality of our economy, our future”.

There is no Poland without coal?

However, it is worth looking at numbers and employment statistics. According to the Institute of Structural Research in 1990, 388,000 employees were employed in the hard coal sector. After 17 years, this number fell to 82,717 people, of which 63,721 people work underground. Access to easily accessible deposits ends in Poland. In Poland, the average depth of the mine is approx. 700 m. For comparison, in China or India they are much smaller and amount to approximately 460 and 150 m respectively. Reaching deeper and deeper into the raw material has a bearing on the amount of raw material extracted. Coal needs to be extracted from ever deeper seams, which translates into mining costs and thus the competitiveness of Polish coal. Experts, however, are divided in this matter.

In a conversation with BiznesAlert.pl prof. dr hab. Eng. Władysław Mielczarski from the Lodz University of Technology argues that there is no other future for the Polish economy than coal. – We face a choice: either coal, or liquidate the economy and people leave Poland. There’s no other way. Even if we assume that the share of coal will fall to 50 percent, we will still produce energy from it. In many aspects, Poland and the German economy are very similar to each other. They are not based on services, only on industrial production, and more energy is needed for that. Germany produces more energy from lignite than Poland consumes. Poland is in fifth place in Europe and 20 in the world in CO2 emissions. Without coal, there will be no Polish economy and European economies, as well as many countries in the world. In 200 years, there is no other perspective than coal as the main fuel – says the scientist.

Is 200 years really a real prospect? From the data of the Polish Geological Institute it appears that with the current state of geological resources, extraction and demand at the current level, hard coal would be enough to calculate mathematically for over 860 years. However, the sufficiency of hard coal reserves in Poland is much lower and amounts to 40-50 years depending on the amount of losses in operation, and with the use of undeveloped resources – for about 100 years.

Currently 80 percent of energy produced in our country comes from coal. Four coal investments are being made in the following power plants: Turów, Jaworzno, Opole and Ostrołęka. As announced by the Ministry of Energy, these will be the last new coal projects in Poland. At the same time, there are plans to build new hard coal mines, eg a new mine being built by LW Bogdanka in the Lublin region. At the same time, as the company’s management points out, one should not count on the implementation of such projects by private investors, as none of them has a concession to extract the raw material. The cost-effectiveness of such projects remains as well.

Coal will be an increasing burden

– The extraction of each mineral from the deposit must be economically justified. We have relatively large reserves of hard coal, but its extraction is likely to be economically unjustified in most cases. This is mainly due to the fact that coal seams are located deeper and deeper and from the scale of mining and geological threats and the potential effects of mining damage. Saying that we will mine coal at all costs to guarantee energy security is not consistent with the modern vision of energy and any economic rationality – said Dr. Eng Eng. Janusz Steinhoff, deputy prime minister and minister of economy in Jerzy Buzek’s government. Admittedly, according to the draft energy strategy presented at the end of November, in the perspective of 2040, our country wants to reduce its dependence on coal, but until then 60 percent. generated energy will come from this raw material. Let me just remind you that the European Union wants its economy to be environment neutral until 2050, which in practice means full decarbonisation. Already, coal is a significant burden for the Polish energy industry, and many indicate that it will be growing. By basing the production park mainly on coal installations, our energy companies are exposed to very high prices of CO2 emission rights, which in just one year increased from EUR 7 per ton to over EUR 20, exceeding even EUR 25 per ton.

One should also not forget about the rising prices of coal itself and the costs associated with its extraction, which are growing due to the necessity of reaching for the resource reserve located deeper and deeper. All this has a direct impact on energy prices, which have recently increased so much that the leading energy companies have submitted applications to the president of the Energy Regulatory Office for approval of 30 per cent higher tariffs for households. Prices also increase for the energy-intensive industry and for small and medium-sized enterprises. This means that in a direct and indirect way, in prices of products, Poles will feel increases in raw material prices. The energy resort offers compensation for increases in energy prices, which will cost the state nearly PLN 4 billion. It is roughly half the value of the pool of free CO2 allowances collected by Poland.

Coal will be an increasing burden for the energy sector, which already sees the need to diversify its generating parks to reduce the costs associated with the operation of coal-fired units. This is supported not only by global trends or EU ambitions related to climate protection, but also by the economy. Low- and zero-emission generating sources are competitive in terms of price. To this end, companies are starting to put more emphasis on renewable energy sources, on the one hand, to reduce the emissivity of their business, and on the other to save money. Recently, the Polish Energy Group (PGE) has announced that in the perspective of 2030, it wants to be hold 25 percent of energy produced by RES in our country, including offshore wind farms. According to the estimates of the company itself, only the offshore will save about PLN 350 million for the Polish economy.

Who wants to “murder” Polish coal?

Nevertheless, coal will remain the main source of production in Poland, which is clearly underlined by our delegation at COP24. At a time when participants of the summit pointed to the need to reduce emissions and reduce the role of fossil fuels, President Andrzej Duda stated that he would not allow “murder of mining”. At the same time, he added that this is what the COP24 is all about, “to speak truth in a way that is free of political correctness, often dictated by foreign, not our, Polish interests.” Last week, during the celebration of St Barbara, the minister of energy said to the miners: “Miners, we need more coal! Let’s think about where to build a new mine in Silesia. ”

According to Janusz Piechociński, former deputy prime minister and minister of economy, such statements constitute a spectacle for the needs of election campaigns in 2019 and 2020. – Even the Polish miner is surprised that mining will be murdered – he said. According to interlocutor BiznesAlert.pl, instead of the mentioned comparisons, “the financial world should be praised, because through its involvement it gives a signal to business and warn it that those who do not keep up with trends will be less and less economically effective”.

Janusz Steinhoff claims that nobody wants to “murder” any mine, but economic activity must be rooted in the realities of economics. – President’s words that he will not allow the “murder of Polish mining” are a misunderstanding and an example of a quite effective rhetorical figure with a populist color – he said.

The problems of the Polish mining industry should lead to a deep reflection on its future and actions that enabled effective implementation of the sector reform program. Meanwhile, the firm rhetoric in the defense of coal at the time when Poland presides over the COP24 deliberations may hinder the activities of our climate diplomacy. As ecologists say, coal is incompatible with climate policy. – In the context of energy and climate policy, there is no room for coal in the energy mix. The concept of clean coal is an oxymoron. We have to leave coal in such a trajectory that we would have a low-carbon economy by 2050. This does not mean switching off coal-fired power plants overnight. It is important to plan this departure so as not to cheat people that coal is the future – believes Tobiasz Adamczewski, an expert at WWF Polska.

Prime Minister Morawiecki announced that Poland would be leaving coal but by 2040 it would be 60 per cent of our energy. Although it is by nearly 20 percent less than now, coal will continue to weigh on energy companies’ portfolios and their clients. It is worth recalling that according to the Supreme Audit Office only in the years 2007-2015 PLN 58,4 billion was allocated to support the mining industry. At the same time, the budget received about PLN 64,5 billion. The discussion about the future of coal should not be a hostage to the election cycle. We are always before the election. However, the political calculation quite often obscures the actual state of the sector. The climate ambitions of the European Union are on the one hand a challenge, but also an opportunity for transformation not only of the economy but also of post-mining areas. The Vice-President of the European Commission for the Energy Union, participating in COP24, Maroš Šefčovič announced that Brussels will support changes, including in Poland. If we do not take appropriate action, it may ultimately prove that we will be responsible for the murder of mining.



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