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Poland is waiting for more renewables and nuclear power, so in the coming years coal and gas will war over the top spot in Poland’s Energy Policy Until 2040. BiznesAlert.pl has had a chance to take a peek at a draft of the latest version of the policy. The update will be debated and then adopted in mid April.
An outline of Poland’s Energy Policy update until 2040 as seen by BiznesAlert.pl contains a forecast of gas consumption in Poland until 2040. The update lowers the original forecast, but not in the same way as the operator of gas transmission pipelines Gaz-System, which also reduced the forecast demand for gas in Poland.
The PEP2040 update takes into account various factors, with gas prices and EU CO2 allowances prices on top of the list. The former raise the cost of producing energy from gas sources, increasing the attractiveness of coal, which was evident at the height of the energy crisis. The latter increase the attractiveness of low-carbon sources such as gas and zero-emission sources, i.e. the atom and RES.
Historical data included in the PEP2040 update show Poland’s gas demand at 21 billion cubic meters in 2021, and a decrease in this demand due to the energy crisis and the invasion of Russia in Ukraine to 17 bcm a year. All options assume an increase in gas demand by 2025. The demand for gas in 2025 is 21.8-26 billion cubic meters annually, depending on the changing circumstances. The lower threshold will be attainable at sustainable CO2 allowances prices and the higher if they continue to climb. The current price of EU ETS allowances is at around EUR 80 per ton.
These assumptions are not consistent with the National Ten-Year Transmission System Development Plan for 2024-33 that was submitted for consultations in February 2022. The plan, drafted by Gaz-System, says that in 2023 Poland will need 16.6 bcm of gas, and in 2024 – from 16 to 19.4 bcm. Meanwhile, according to the PEP2040 update, in 2025 the demand will be 5.2-9.4 bcm higher, reaching 21.8-26 bcm. Gaz-System believes in 2025 the demand will revolve around 20.2 to 21.3 bcm a year.
The PEP2040 update assumes in 2030 gas consumption will reach 22.8-27.6 bcm annually and 24.8-30.3 bcm in 2035, 30.1-25 bcm in 2040. Gaz-System forecasts in its draft plan: 24.1-28 bcm in 2030, 22.2-27.5 bcm in 2035 and 21.9-27.4 bcm in 2040. Gaz-System expectations are lower than those proposed in PEP2040.
The higher maximum demand included in the PEP2040 for 2025 could be covered thanks to infrastructure that already exists and is being planned. By then the LNG termnal is expected to reach a capacity of 10 bcm annually, and also by then, the so-called FSRU with a capacity of 6.1 billion cubic meters is to be built in the Gulf of Gdańsk. On top of that it will be possible to add another 4.5 bcm a year of capacity to the FSRU. In addition, the Baltic Pipe Gas Pipeline operates with a capacity of 10 bcm annually, and the Poles extract gas on the Norwegian shelf to the tune of 4 bcm a year. These volumes give a total of 30-34.5 bcm annually. Therefore, the infrastructure is to be ready to meet Poland’s gas demand in full from outside Russia, regardless of the demand forecast from the PEP2040 update, even in the highest consumption variant of 30.1 bcm in 2035, and in the variant of expensive CO2 allowances from the PEP2040 update.
However, Poland’s dependence on fluctuating gas prices may be important for the competitiveness of its economy even if security of supply is maintained. This is another reason why the version of the PEP2040 as seen by BiznesAlert.pl, proposes three scenarios for gas demand fluctuations depending on global events.
In the 2020s and 2030s gas and coal will compete. The structure of energy consumption in the draft update says that energy imports will play only an auxiliary role, and the majority of demand will be covered from domestic sources. Gas consumption in the energy sector in the forecast from the old PEP2040 amounted to 9 bcm in 2030. The update assumes a 6, 8 or 10 bcm demand in the Polish energy sector in 2030. It is inversely proportional to the consumption of coal.
The demand for hard coal in the energy sector is expected to be higher in the variant with lower prices for CO2 emission allowances and expensive gas and reach 21 million tons in 2030. It will be lower in alternative variants, amounting to 15-16 million tons, respectively. The fate of lignite will depend on the role of gas in the energy sector. Where the forecast for gas demand is lower, lignite consumption increases. In the forecast assuming the lowest gas consumption in the energy sector at 6 bcm, the demand for lignite in 2030 is the highest and reaches 21 million tons. If the gas consumption in the energy sector reaches 8 bcm, the demand for this type of coal is 15 million tons, and at 10 bcm – 16 million tons. It is worth adding that the old energy strategy estimated the demand for hard coal in 2030 at 47 million tons. So the update lowered this expectation by 10-33 million tons, which is to accelerate the drop in bituminous coal consumption and its and lignite’s participation to 8 percent in 2040, instead of 11 percent as previously expected.
This means that, depending on the scenario, the share of gas in the energy mix in 2030 will reach 15.21 or 28 percent. The old energy strategy said it would be 29 percent. The energy crisis and the war in Ukraine have caused a downward revision, but its scale is still below the forecast of Gaz-System and depends on the fate of coal in the coming decade. The share of lignite in the energy mix of Poland is expected to reach 6, 14 or 15 percent, while the old PEP2040 assumed 23 percent in 2030. Hard coal is expected to account for 13, 15 or 21 percent of Poland’s energy mix in 2030, compared to 29 percent under the old strategy. The share of gas is 15, 21 or 28 percent of Poland’s energy mix in 2030, according to the PEP2040 update.
In these considerations, the role of renewable energy sources is secondary, as their generation capacity will grow faster than the PEP2040 forecast before the update, giving a total of 88 GW of all generation capacity in Poland in 2030 according to the update. The old energy strategy expected 56 GW. The capacity will mostly increase in PV and onshore wind. The share of RES in the energy mix in the PEP2040 update is expected to reach 47 percent in 2030 against 33 percent from the old version.
In summary, the update presupposes a war between gas and coal until the atom-RES duo starts to flourish. If gas prices continue to soar and CO2 emissions do not skyrocket, gas will play a smaller role than previously forecast in favour of coal, particularly lignite, which will ensure the security of energy supply in the 2020s. PEP2040 provides for the maintenance of existing coal-based generation capacities until the end of their service life without prior shutdown. In turn, lower gas prices and higher CO2 emission allowances will promote gas at the expense of coal, especially hard coal, which Poland is expected to phase out faster than previously forecast.
It is expected that the government will discuss the draft update in mid April 2023. It is the subject of a dispute in the United Right coalition between factions advocating a greater and lesser role for coal. The first news about the update was published by the Rzeczpospolita daily.
Wojciech Jakóbik
