At last Poland has a new energy strategy, but it may lose its prime minister if the opponents of Mateusz Morawiecki decide to use the dispute over the energy sector to unseat him – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
The energy strategy has arrived
The media are being swamped with rumors that the Prime Minister Mateusz Morawiecki may be soon replaced with the current CEO of Orlen Daniel Obajtek. Even though this rumor has been circulating for years, today’s circumstances may actually show how much truth there is to it.
After seven years the Polish government officially updated the country’s energy strategy, i.e. the 2040 Polish Energy Policy (PEP). Even though at the moment of releasing this article the content of the document has not been revealed yet, word is that it does not significantly differ from the draft that was presented back in 2019. It proposes a slow decarbonization with a goal to decrease coal participation in the energy mix to a minimum of 11 percent by 2040. The entire process is supposed to be 'just’, which means it entails a social contract that is currently being negotiated with miners. Coal generation is to be replaced with nuclear power (first NPP in 2033 and 6-9 GW by 2043) and renewable energy with offshore wind farms carrying the heaviest load (about 11 GW by 2040). All of this is to reduce CO2 emissions low enough to meet the EU climate policy goals and lower energy prices in Poland.
The energy strategy was welcomed by the state-owned sector. „We happily welcome the adoption of the 2040 Polish Energy Policy by the Council of Ministers. The entire energy sector has been waiting for this document. A just transition, a zero-emission energy system and good air quality are the pillars of the 2040 PEP. These elements hold an important place in the PGE Group strategy. Our plans to develop RES, especially offshore wind farms and low-emission facilities such as cogeneration in district heating, converge with the ambitious goals presented in the document adopted by the Council of Ministers,” Wojciech Dąbrowski CEO of Polska Grupa Energetyczna (PGE) said. The adoption of the strategy means the government decided to go in the direction the state-owned companies have already taken, those include PGE, as well as Tauron, Enea and Energa that is owned by PKN Orlen. These companies want to achieve decarbonization and replace their coal assets with renewables. Now, they can be sure that the government supports their journey.
However, the strategy was criticized at both ends of the discussion. On the one hand it is criticized by Forum Energii (Energy Forum), which wants the energy transition to take place quicker, and on the other by United Poland, i.e. the government coalition member that believes coal should stay. BiznesAlert.pl reported that United Poland revealed that the ministers from its party did not support the government resolution on the new strategy. Unofficially they criticize the government’s approach to coal and gas, as well as the costs of the climate policy, which will have to be borne by energy consumers in Poland.
The Forum Energii think tank doesn’t like the strategy either, as it believes the transition should be faster. The organization did applaud the adoption of the document, which waited „almost seven years”, but also stated it was „disappointing”. „It does not refer to the new EU reduction targets, which we adopted. This may stand in the way of acquiring EU funds for reforming the energy sector, and it comes at a time when decisions on splitting the subsidies for the just transition are being made. The electricity system is still at risk – we are accelerating our plans for shutting down coal-fired power stations, but we are not saying how we will cover the gap before 2030,” Aleksandra Gawlikowska-Fyk from Forum Energii wrote.
The dispute over the energy strategy may impact Poland’s political future, because it has become yet another source of conflict in the collation government of the United Right. United Poland wants to remove the Prime Minister Mateusz Morawiecki and its arguments may convince Law and Justice’s MPs from Silesia who are afraid the new decarbonization policy will be too strict. It is worth reminding that interventions from these parliament members have previously changed Morawiecki’s position during talks with the European Commission. Also Morawiecki himself was elected as an MP from Silesia. At the same time trade unions argue that the status quo is defendable and are escalating their demands with regard to the social contract that is being negotiated with the government. Those expectations stand in contrast to the PEP and include a return to coal in the Ostrołęka C power plant. The fight for voters in Silesia will be of key importance to the ongoing talks, which may be dominated by the dispute between the coalition members.
United Poland is afraid the PEP won’t meet the expectations. First, it is not too late to build a nuclear power plant. Second, a transition without nuclear power will have to be based on gas, which will increase demand in Poland to a level that will not make it possible to do away with Russian gas after 2022, when the Yamal contract with Gazprom will expire. A team of politicians from the camp of the Minister of Justice Zbigniew Ziobro under the leadership of Janusz Kowalski, Deputy Minister of State Assets, known for being a harsh critic of the EU climate policy, warn that the gas demand forecast is underestimated and in reality will reach 19 bcm in 2025, which means it will more or less stay at the current level. Additionally, the new investments in gas – the Dolna Odra power plant, new gas blocks in the Żerań and Siekierki CHP plants – will increase the demand for gas by 1 bcm, 700 mcm and 700 mcm respectively. According to United Poland, these data are unreliable, and the risk of becoming too reliant on gas from the East again is growing due to the insufficient infrastructure connecting the region of Lesser Poland and the Podkarpackie voivodship, an issue which forced Poland to buy gas from Ukraine to cover the gap in gas supply. This means that if the vision of the opponents of the PEP comes true, Poland may not be able to deliver the fruits of its diversification efforts – LNG from the terminal and gas from the Baltic Pipe – to its south-eastern end, and will be forced to buy from the East. It is worth mentioning that Gazprom won’t be the only company available, there will be non-Russian providers as well – in Lithuania and Ukraine.
The critics of the PEP close to minister Zbigniew Ziobro also argue that the authors of the strategy did not explain where they would take the money to implement the energy transition, whose costs the critics estimated at PLN 1.6 trillion, especially due to the fact that gas investments may have limited ability of receiving EU financing. The challengers of the project also warn that if funds from the Cohesion Fund are used, there will be less money for local governments. They also argue that by saying yes to a more strict EU climate policy, the government hiked up CO2 allowances prices, and thus generated new costs that will have to be covered by energy consumers. Ziobro’s supporters wanted Poland to veto the latest EU climate proposal, but the prime minister agreed to increase the CO2 emission reduction target from 40 to 55 percent in 2030.
The never-ending dispute
It is good that Poland has an official energy strategy. It offers the basis for pursuing investments necessary for ensuring the energy and economic security of the state, thanks to new capacities generated with nuclear power and renewables. This is the best gift the Government Plenipotentiary for Strategic Energy Infrastructure Piotr Naimski could get for his 70th birthday, which he celebrated on the 2nd of February, the day the government adopted the energy strategy. His goal is finalize the Baltic Pipe and start the construction of a nuclear power plant in Poland in cooperation with the U.S. and/or France.
However, the government is not in a mood to celebrate. It looks like another political dispute is looming, as the differences between the members of the United Right coalition are growing, especially when it comes to the energy sector. I predicted this turn of events in May 2020 and it starts to come true. These are the reasons why the rumors about an early election in the fall of 2021 are not without a grain of truth. Even worse, an election may not mean these disputes will be over, because Ziobro’s team also criticizes the PKN Orlen-Lotos-PGNiG merger, which is heralded by Daniel Obajtek, the supposed new prime minister, and some members of the Law and Justice party. In their opinion, the changes in ownership in the fuel sector are not based on a reliable analysis, which are, in their opinion, missing. Therefore, nobody knows whether replacing the prime minister would alter anything in the worsening relations in the governing coalition.