The upcoming update to Poland’s Energy Policy until 2040 includes a security adjustment that puts the role of gas, which has hitherto come mainly from Russia, in question, writes Wojciech Jakóbik, editor in-chief of BiznesAlert.pl.
The goal of the new energy strategy is to respond to the emerging geopolitical threats, including Russia’s attack on Ukraine, as well as economic problems, such as the energy and economic crises. Energy sovereignty is the ultimate goal here. This term was coined in the US and popularized in Poland by Piotr Naimski, the Government Plenipotentiary Strategic Energy Infrastructure. It is defined as a country’s ability to cope without external energy and fuel supplies if necessary. “Poland’s updated energy policy must also take into account energy sovereignty, a particular element of which is rapid independence of the national economy from imported fossil fuels (coal, oil and natural gas) and derivatives (LPG, diesel, petrol, petroleum) from Russia and other countries subject to economic sanctions. This is about diversification of supply, investments in production capacity, line infrastructure and storage, and alternative fuels,” reads the government’s press release on this issue.
Safety, affordable price, environment
The definition of energy security included in the relevant Energy law has three priorities: security of supply, acceptable price and environmental protection. The first factor takes precedence over the others. Poland intends to use various domestic technologies to maintain high energy independence and system stability. To this end, it will also continue to diversify its hydrocarbon sources, including accelerating the investment in a floating regasification unit (FSRU), which BiznesAlert.pl has written about previously. The press release also includes a routine provision that is to end the dispute between the supporters of large-scale nuclear power projects with the proponents of small modular reactors (SMRs). Both types of investments are to be implemented simultaneously. Importantly Poland intends to reduce energy consumption by increasing energy efficiency. Warsaw is also planning to lower fuel demand through the development of renewable gases: hydrogen and biomethane, as well as promoting clean transport and encouraging drivers to change their behavior. Poland is not giving up on renewable energy sources and wants to step up their development in all sectors. It has promised that about half of the energy in the country will come from RES in 2040, including from biomass, hydropower, geothermal energy and biogas. There is no direct reference to onshore wind energy, which is awaiting the liberalization of the Distance Act. In fact the future of this law remains unknown, because the government’s latest guidelines do not refer to any other examples of legislation either.
Poles are to use energy produced from gas as a tool for regulating their power grid. This idea was proposed by Piotr Naimski, which he also repeated on the pages of BiznesAlert.pl. This represents a challenge for the new gas units in Ostrołęka, Grudziądz and Gdańsk. These, in turn, are implemented by PKN Orlen under the leadership of Daniel Obajtek, who is in conflict with minister Naimski. However, the minister admits that power produced from gas may stabilize the power generated in offshore wind farms, together with the atom, which is also to be built in Pomerania. This probably means that most of the planned gas units, especially those that have already taken part in the capacity market and contracted deliveries, will be completed. It is no coincidence that on 24 March, CCGT Ostrołęka, the company responsible for the 750 MW gas unit in Ostrołęka, which is part of the Orlen group, announced the next stage of the project – allowing the general contractor to start work. Gdańsk Energa, now owned by Orlen, is led by Iwona Waksmundzka-Olejniczak anointed by some as the successor to PGNiG’s president Paweł Majewski, who resigned on 25 March but will continue to work until mid-April. The revision of the energy strategy may also be relevant for the heating sector, which in the days preceding Russia’s attack on Ukraine was being switched from coal to gas, as it emits less GHGs. It is not clear whether Poles will stick to coal for longer, or whether they will switch to heat pumps.
“Gas units will still be important for regulating the energy system, but due to the changing geopolitical situation and the lack of predictability in the gas market in the medium term, the level of use of existing coal units may increase. Also, as a result of these changes, investment plans in new gas storage capacities should be subject to verification in terms of production economics,” the government document says. This is a reference to the record gas prices, which make it difficult to create a financial model for new gas projects. This was the case with the aforementioned Ostrołęka. “For the heating sector, the particularly important factor is that the rate with which the coal-fired units will be replaced with those running on gas will depend on the availability of the fuel. At the same time, the search for other energy sources will continue, as they constitute an alternative to natural gas in the heating sector. This should also contribute to the construction of efficient heating systems,” the document authors conclude without providing details on any solutions. The answer will probably be found in a new document. “Programs supporting house insulation, i.e. “Clean air” will be aimed at enabling the use of low-temperature heat sources while maintaining the thermal comfort of consumers,” suggests another paragraph in the document.
However, if Poland does not want to depend too much on gas, it must continue to use what it has at hand, which is coal. The resuscitation of old coal blocks foreseen by BiznesAlert.pl was included in the assumptions for the update of the PEP2040 as well. “The use of domestic hard coal deposits may be periodically increased in the event of a threat to the energy security of the state. The rate of reduction of coal production and use may decrease slightly in relation to the existing scenarios, due to the possible need for longer than expected operation of individual existing coal units, taking into account potential disruptions to the import of energy raw materials,” the document says. “In order to establish the continuity of supply, measures will be taken to ensure that coal-fired units are ready to operate in accordance with their technical lifespan, which is longer than the economic rationale, which is sensitive to the price of CO2 emissions,” the government explains.
Poland also intends to renegotiate the provisions of the energy and climate policy to guarantee the possibility of sticking to coal longer, which is supposed to work more flexibly and cooperate with RES, in accordance with the 200+ plan prepared by the National Centre for Research and Development. This is a signal in the direction of the Fit for 55 package, which is to be negotiated until 2024, although the war may also postpone this deadline. “To this end, the possibility of modernizing the existing production units will be verified. This will make it possible to use them with better work parameters and lower impact on the environment, which will also affect the profitability of their usage. These investments will contribute to ensuring better conditions for the integration of renewables into the power system, due to the provision of adequate power reserve,” the assumptions continue. The document also mentions clean coal technologies, which could be a nod to the Polish coal lobby.
Energy strategy no longer powered with natural gas
In summary, the assumptions of the energy strategy update suggest that Poland’s energy transformation will no longer run on natural gas. It is not clear whether this process will be accelerated, because the promise of reaching 50 percent in renewables by 2040 and speeding up the growth of these sources is accompanied by the more grounded assertions about security, which is understandable, considering the Russian attack on Ukraine. However, Polskie Sieci Elektroenergetyczne (PSE, Polish grid operator) was ready to accommodate up to 50 percent of RES in 2030, a decade earlier. Some see this as proof that it is safe to increase the share of these sources to benefit the consumers who can count on cheaper energy. It is also a way to reduce the carbon footprint of the economy in order to increase its competitiveness.
However, Poland will limit the use of gas in the energy and heating sectors to the necessary minimum, so as not to exceed the gas consumption of the Gaz-System forecast of 30-35 billion cubic meters annually in 2030, so that the system of becoming independent from Russia makes it possible to import this fuel from outside of that country. Poland intends to terminate the Yamal contract at the end of 2022 and not to sign another. Regardless of the discussions about an EU embargo on Russian deliveries of this fuel, Poland will abandon it in the New Year at the latest.