Coal Energy GAS Nuclear Renewables 31 July, 2019 10:00 am   
COMMENTS: Janusz Steinhoff

Steinhoff: Gas should replace the nuclear (INTERVIEW)

Poland must abandon coal because it is an increasing burden for the economy. Dr Janusz Steinhoff, former Deputy Prime Minister and Economy Minister in the government of Jerzy Buzek, emphasized in an interview with that it will not happen rapidly, and that the share of individual energy sources in the energy mix should be determined by the economic calculation. In his opinion, Poland should abandon plans to build a nuclear power plant and focus on the development of Renewable Energy Sources (RES) and gas energy. During the election convention of Law and Justice in Katowice at the beginning of July, the representatives of the ruling party argued that the energy strategy should be based on the slogan “Coal Plus”, which means that coal would remain one of the pillars of Polish energy security. What do you think about this idea?

Dr Janusz Steinhoff: Talking about Polish coal as the basis of energy security in the aspect of EU climate policy is unjustified in the long run. It is the effect of thinking about energy security and economics in the realities of the principles of the previous system. Should unrentable coal mines be financed not looking at costs? Should the coal import be blocked by administrative methods? And produce electricity from it, production cost of which including the cost of CO2 emissions will be significantly higher than electricity from RES or natural gas? Energy security should not only be associated with self-sufficiency with regard to energy resources. It is the result of an effective state policy, that is appropriate regulations, diversification of supplies and development of the broadly understood transmission infrastructure. A good example of the rational policy of our country in this respect is the current state and planned investment activities in the field of oil and gas supplies that we import. Hard coal and lignite are mined in Poland, but in the near future the level of extraction will be insufficient in relation to the needs of energy and heating. Currently, current import of hard coal to Poland country has reached the level of almost 20 million tons. And there is no sign that it will soon decrease.

What are the reasons for that?

Coal resources in the Upper Silesian mines are becoming more and more limited. Coal is extracted in deteriorating mining and geological conditions, often under urbanized areas. Obviously, it has a significant impact on high mining costs. It is difficult to maintain the competitiveness of Polish coal in relation to imported, extracted in different geological conditions, often the opencast method. And it is the economy, not the bad will of the decision-makers that decides the fate of our mines. Therefore, I am surprised by the reluctance of our administration representatives to build new mines by domestic and foreign investors. In my opinion, the government should be open to these initiatives, of course if they are embedded in the realities of Polish law and the will of the local community.

The prices of steam coal in Europe are falling quite quickly, which will inevitably lead to the shape of Polska Grupa Górnicza (Polish Mining Group – ed.). I have an impression that the good times for restructuring activities in this company have not been properly used. But, mining is an industry with regard to which populism and the demagogy of the political class often reign supreme.

Nevertheless, politicians are quite cautious about mining.

The statements of the President and the Prime Minister do not indicate serious treatment of the industry’s problems. It is worth mentioning that also the previous coalition “played” with coal. I recall the statements of the former prime minister who persuaded the trade unionists that he would not liquidate the mines. He created a situation from which it could result that not economics and geology, but political will determine the future of the mines. The trade unionists were delighted … I compared these union-government talks to the ball at the Titanic. Both sides swore reality ignoring economics and responsibility for the state. And, unfortunately, it is a political custom that the current government continues to improve only the effectiveness of the public message. It is hard to resist the impression that we are dealing with instrumental treatment of miners by the political class. Especially in the face of upcoming elections.

Should the ever-growing import of coal from Russia prompt policy-makers to discuss the condition of mining and abandon the use of coal?

This is the assumption of the current government, which, moreover, declared that Ostrołęka will be the last coal block in Poland. Besides, it is not known if this project will be implemented, because reliable analyzes show that it will be permanently unprofitable. For economic reasons, moving away from coal is a must. If we take into account the rising costs of CO2 emission allowances, they are currently a burden for energy production from solid fuels amounting to almost PLN 120 per MWh. Even 2-3 years ago, the MWh wholesale price was PLN 160, so we’re talking almost doubling the energy production costs. This means lowering the standard of living of citizens and the competitiveness of Polish industry. And this problem can not be solved by ignoring the economy through statutory regulation of energy prices. This is a serious problem. We must leave coal. Coal monoculture is a past tense. According to our obligations, we must develop RES. Unfortunately, as a result of regulatory errors, it is unlikely that the 2020 target will be met, that is a 15 percent share of renewable sources in the energy mix. Although Poland used a derogation in this area. Although some hope in this matter may be created by the latest amendment on RES. It is worth emphasizing, however, that due to the instability of renewable energy, we need to develop capacity in gas-fired power plants. The government rightly develops technical possibilities to import gas from various directions. Until now, we have paid money to Russian suppliers for the lack of an alternative. This is – as I mentioned earlier – the right direction, which was adopted in the energy policy. I think that no matter who wins the election, the continuation of this program is necessary.

It is not known what shape the energy policy will ultimately take, because the government still has not approved it.

I can only express disappointment that the government has not adopted the energy strategy for four years. In my opinion, it should cover at least until 2050, and not as proposed by the government until 2040. This should be a strategic program that I hope will be seriously treated by both the rulers and the opposition. Currently, I have the impression that we are choosing tactics for an unknown strategy. This is incomprehensible and irrational.

I think it’s time to end the discussion about the construction of a nuclear power plant. This should be determined by the strategy. The discussion on this subject has been going on for over 15 years. It ridicules our country, moreover, it does not help in the rationalization of the electric power model, which should be adapted to European directions.

What do you think the Polish energy mix should look like in 2040? Is it the case that the current government proposes that the ambition to reduce the share of coal in the energy sector should be greater?

I believe that one should not talk about ambitions or that the mining or mines will be limited, and that they will be closed by force. It must be based on economics. The energy strategy is forecasting the situation, but not planning. It is hard to imagine that we would maintain the monoculture of coal. Competition is needed on the energy market. The creation of large, state-owned entities with a dominant position on the market is absolutely not useful. The priority for the government should be low prices of electricity and fuels rather than the potential of one or another company achieved in conditions of limited competition. The economic calculation should determine the share of particular carriers in the energy mix. Thinking about energy security only in terms of domestic energy carriers, without an economic context, is therefore completely wrong.

If current forecasts of CO2 emission costs are reliable, coal will be less and less profitable – both hard and lignite. Economics dictates the development of renewable energy and gas-fired power plants. Are we going to build nuclear blocks considering the high investment costs of a nuclear power plant (four times higher than a gas-fired power plant)?

Can the construction of a nuclear power plant be an alternative to coal?

I mentioned earlier the discussion about nuclear energy that has been going on for 15 years. The decision of the government in this matter was not made. The energy ministry announces that in 2033 we will have 1-1.5 GW in the first nuclear power plant, and later in 2043 two more blocks will be given every two years. These announcements are difficult to consider real. No economic analysis justifying the implementation of these investments, the financing model, etc. was provided.

Interview by Piotr Stępiński