The creation of NABE through the separation of coal assets from the largest energy companies will allow for faster implementation of the costly energy transition in Poland. Investments in carbon-free energy and distribution will no longer require further consolidation, and companies will be able to compete freely on the energy market – writes Radosław Szczerbowski, PhD.,Eng., from the Institute of Power Engineering.
Poland needs to make a fundamental change in its power generation and distribution system in the coming years. In fact, it needs to rebuild it from scratch. The goal is to ensure the country’s energy security and meet the increasing demand for energy.
Existing energy blocks are the simplest and cheapest reserve of the electricity system and must remain available until they are replaced by new, carbon free and renewable sources. Therefore, the stakeholders need to all agree that from the technical and economic point of view, until 2050 Poland will need to cover its power demand mostly with domestic sources.
It should be noted that in the medium and long term there will be a significant increase in demand for electricity. It will be primarily related to the development of electromobility and heat pumps. Therefore, the planned decommissioning of coal units with the projected increase in electricity demand requires a significant acceleration in the expansion of capacities installed in renewable sources.
In 2022, Polish power plants, both conventional and renewable, produced enough electricity for the economy and households. It is also worth noting that there has been a more than 50 percent increase in electricity production from renewable sources. At the same time, the installed capacity in the National Electricity System has already exceeded more than 60 GW. The largest share in this growth was accounted for by photovoltaic power plants, mainly prosumer power plants. The power installed in photovoltaics has already exceeded 13 GW, and the total power in renewable sources is already almost 24 GW.
However, the energy system must be able to provide sufficient power and electricity in the event the weather dependent sources are incapable of generating power. Only the ability to stabilize power production from unstable sources offered by controllable units guarantees energy sovereignty. In this context, the creation of the National Energy Security Agency (NABE), which will take over coal-fired generation assets from energy groups, seems a logical solution.
PGE, Enea, Energa and Tauron (state owned companies – ed.), after the separation of their coal assets, will gain considerable space to grow, and above all, the possibility to obtain financing for investments in renewable energy sources, the development of distribution networks, energy storage facilities or innovative technologies. For energy companies, it will be important to consistently implement a strategy that will lead to a rapid reduction in the emissions of their energy mix and provide them with better competitiveness and new foundations for the future with the possibility of implementing further large investments, but already in zero-emission sources.
It is worth mentioning here that after the document sent to the companies by the Ministry of State Assets emerged in the press, the share prices of the largest energy companies on the stock exchange increased. Increased rates and stock market movements clearly indicate that the offer has gained the recognition of investors. Thus, it seems that the proposal to repurchase coal assets by the State Treasury is a positive signal for investors, which makes the process of creating NABE more credible.
PGE, Enea, Energia and Tauron have more than 30 GW of installed capacity in the National Electricity System, accounting for more than 60 percent of the electricity system’s capacity and even more, for about 70 percent of the electricity produced in the country. At the same time, it is the energy groups that are most affected by the carbon footprint associated with energy production in units that run on hard and lignite coal.
The current structure of generation assets significantly limits the investment potential of energy companies in the segment of low – and zero-emission sources, which makes the pace of energy transition insufficient.
The creation of NABE through the separation of coal assets from the largest energy companies will allow for faster implementation of the costly energy transition in Poland. Investments in carbon-free energy and distribution will no longer require further consolidation and companies will be able to compete freely in the energy market.
It is obvious that as the gradual integration of new renewable sources, and in the future also nuclear energy progress, the role of coal-fired power will decrease and it will be possible to gradually phase out individual coal blocks. This should be done without the risk of a power failure in the system. However, if the coal units are shut down quicker than new power generation sources are added to the grid, Poland’s energy security would be at risk.
This is all the more important because renewable sources, wind and PV, are characterized by much shorter operating times and irregular power generation depending on the weather. Therefore, it is especially important in the context of energy security to ensure available capacity and energy in the electricity system rather than installed power.
NABE will not invest in the construction of new units, it will only maintain the existing facilities. The Agency’s task will be to coordinate a process where it will identify the units to be upgraded and define their scope-so as to plan the necessary actions and avoid uncoordinated shut downs of unprofitable units. Thanks to the merger of coal assets in NABE, future decisions on the disposal of individual energy sources will not depend on the immediate business interest of energy groups, the pressure of their shareholders, competition between them. The Agency is to act as a stabilizer of the energy system during the transition period, while safeguarding the country’s energy sovereignty.
Energy policy should primarily ensure the country’s energy security. Investments in new generation sources will help to modernize the national energy mix and reduce its emissions, and thus the cost of purchasing CO2 emission allowances. However, due to the scale and complexity of the investments, their implementation will be spread over the next few years. The energy revolution we are witnessing, the shift away from burning fossil fuels and towards low – and zero-emission sources is happening now. Therefore, the transformation of energy companies, which have a large share of fossil fuel generation and the cost of CO2 emissions is a burden for them, is necessary.