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Polish Briefing 1 March, 2023 7:30 am   
COMMENTS: Joanna Słowińska

Polish Briefing: Gov wants derogation of the capacity market I Tatneft spins story about oil to Poland I Orlen reveals plan for SMRs and faces revenue cap

Minister-Anna-Moskwa-na-nieformalnym-wspolnym-posiedzeniu-ministrow-UE-ds.-energii-i-transportu.-Zrodlo-MKiS-1-1536×1027 Energy ministers meeting. Picture by Ministry of Climate and Environment

What goes on in Poland on the 1st of March.

Poland calls for derogation of the capacity market at the meeting of ministers for energy energy in Stockholm

Energy market issues, gas reserves and transport, are the main topics during the informal meeting of EU states ministers for energy and transport. The meeting, which took place on 27-28 February 2023 in Stockholm, was attended by Minister of Climate and Environment Anna Moskwa and Deputy Minister Adam Guibourgé-Czetwertyński. During the summit, representatives of the Polish government stressed that the capacity market should be extended to allow coal units to run beyond 2025.

According to the head of the Climate and Environment Ministry, currently the capacity market is based on short-term markets, which generates the risk of external shocks and does not provide sufficient incentives for new investments necessary for the energy transition. “Poland is of the opinion that the capacity markets requirements should be relaxed, so that member states can design and adapt them to changing needs and circumstances, and above all be able to respond effectively to threats to the security of electricity supply. Poland supports a far-reaching reform of the energy market, so that changes can really affect the reduction of electricity prices for citizens,” said minister Anna Moskwa.

One of Poland’s most important demands, widely discussed during the TTE Council, was the proposal to introduce flexible rules for the design of capacity mechanisms and to extend the derogation from the application of the emission standard at the level of 550 g CO2/kWh after 2025. Such a solution would ensure the security of energy supply until adequate, stable, low-carbon generation sources, such as nuclear power, are put into operation. “We need derogations for the capacity market, which will allow stable operation of existing coal units also after 2025. Thanks to this, we will be able to reduce gas consumption, and thus reduce energy prices,” minister Moskwa summed up.

Did Poland fail to pay Russia for oil? Fake news alert

Russian oil pipeline operator Transneft said on February 27 that it stopped sending oil to Poland through the Druzhba refinery, because it had not received capacity reservations or payments. The media speculated the fees were not paid by Poland’s Orlen. The company has taken this opportunity to explain it had no ties to Transneft.

Russia’s Tatneft Europe has a contract with PKN Orlen for deliveries of up to 200 million barrels per day until  the end of 2024, which accounts for 10 percent of deliveries to Poland. This was Orlen’s final contract with the Russians.

Orlen said on February 26 that the Russians stopped supplying oil through the Druzhba Pipeline to Poland, although on the same day supplies of the Russian crude to the Czech Republic continued and deliveries from Kazakhstan through Russia to Germany started.

“Transneft does not currently transport oil to Poland. Our company was supposed to pump it to Polish refineries in the last ten days of February, but the capacity reservation and payment were not transferred,” said the president of Transneft Igor Demin in a comment for TASS. Some Polish media used this statement to speculate that Orlen did not pay Transneft.

However, it is Tatneft Europe AG, registered in Switzerland as a trading house, that reserves the capacity of the Druzhba Oil Pipeline on the Russian section under the supervision of Transneft. Orlen orders a certain amount of oil from Tatneft every month and does not maintain relations with the operator of oil pipelines in Russia. “PKN Orlen did not and does not have direct business and trade relations with the Russian oil pipeline operator Transneft,” the company’s press office said.

The official reason for stopping Tatneft’s oil supplies to Poland is not known. Daniel Obajtek, president of PKN Orlen, said he suspects that it may be related to the visit of US President Joe Biden to Poland on February 20-22, during which the Americans and Poles reiterated their support for Ukraine resisting the invasion of Russia.

Windfall tax or not, Orlen will pay

Prime Minister Mateusz Morawiecki has announced that Poland will not take advantage of the possibility of introducing a windfall tax. Instead, the government will introduce the so-called revenue cap, under which energy companies will use their earnings to reduce customer bills.

“You can tax companies with a tax on extraordinary profits (windfall tax – ed.) and then use the money from the budget to lower gas, electricity and fuel prices. We decided on a similar mechanism, but implemented in a different way, i.e. the revenue cap,” said Prime Minister Mateusz Morawiecki during a press conference.

“This is included in special regulations, which say that companies use their revenue to spend it on reducing gas, heat and electricity prices. This means Orlen and other energy companies will spend billions of zlotys on reducing bills,” he added.

Orlen to reveal plans on SMRs in Poland in April

PKN Orlen announced it would reveal a plan for Poland’s small nuclear reactors in April.

“Until 2030, we will be investing in individual SMRs, but after 2030 we expect a rapid growth, as this technology will be commercialized and more mature,” said Rober Śleszyński, Director for Capital Investments at Orlen. “We assume that the investments will be bankrolled not just with our balance sheet, but also thanks to partnerships, structure financing and project finance. We want to create an offer, in which different funds will want to engage in,” he added.

“At the end of April, we will present the location and progress of our partners in this important project,” revealed Orlen CEO Daniel Obajtek.

PKN Orlen cooperates with GE Hitach and Synthos Green Energy on the implementation of the BWRX-300 technology in Poland. By the end of the decade, the technology will be commercialized in Canada and then in Europe. Orlen says the first such reactor will be built in Poland in 2028.