Poland’s rooftop revolution

Poland may be one of the last bastions of coal plants in Europe, but the country is currently experiencing massive growth in rooftop solar panels. 

This week’s pod discusses the country’s exit from coal and the prospect of replacing the dirty fuel with gas and renewables. 

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guest: 

• Joanna Mackowiak-Pandera, CEO of Forum Energii. 

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:29

Hello listeners and welcome to the Montel Weekly Podcast, bring You Energy Matters in an informal setting. Today's pod focuses on one of Europe's largest energy markets and a last bastion for coal. Poland, we will discuss the development of renewables in the country and the outlook for coal-fired electricity generation, especially given the backdrop of EU climate targets for 2030 and the objective of climate neutrality By 2050, will the country be able to expedite a planned export from coal? My name is Richard Sverrisson, and I'm joined by oanna Mackowiak-Pandera, who is CEO of Forum Energii, I think tank based in Warsaw. A warm welcome to you, Joanna.

Joanna Mackowiak-Pandera, CEO of Forum Energii: 1:09

Hello, Richard.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:10

I hope I got all those polish names and, uh, the phrases correct.

Joanna Mackowiak-Pandera, CEO of Forum Energii: 1:13

It was perfect. You did really excellent job.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:16

Thanks. That's good to hear. How are you getting on, in, in Poland, in, in, in terms of the COVID-19 outbreak? How is life for you, Joanna?

Joanna Mackowiak-Pandera, CEO of Forum Energii: 1:23

I think that we are all used to the situation. I mean, something which was. Quite unusual several months ago. Now it's becoming new, normal, uh, this is my impression, however, the, the new cases, uh, are growing. So we currently have 600, around 600, 800 cases a day, which is of course a sign that Autumn will be hot probably. But actually there are gossips that we will not have the similar. Lockdown as we had in spring. So we just tried to leave and, uh, as said, it's new, normal, I think,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:58

fingers crossed anyway. In terms of the energy market in Poland, how has that been affected? Have you seen a drop in power demand and certain, uh, maybe coal fired production or, or energy production in general?

Joanna Mackowiak-Pandera, CEO of Forum Energii: 2:10

It's a very interesting question because in fact. Whole transformation of the energy sector speed up dramatically in my view. So the first, uh, sign of, of course, there was, uh, demand drop as everywhere in Europe. In the most difficult days, it was about 20% on average. We say that the pandemic has resolved that in energy demand decline. By about 8%. But of course, it, uh, started to push out coal out of the system. And, uh, the whole discussion about, uh, energy transformation, the role of coal is now very advanced. The government now speaks with trade unions on actually closing down mines because it's inevitable, also because they bring dramatic economic losses and the liquidity of the biggest. Coal mining company, PGG, they lost actually financial liquidity. So it's the matter of months where they need to just dramatically change. So this is where we are. And of course, the discussion about what is the future, I mean, which sources can actually replace coal effectively is also there. I think that Poland or polls or decision makers, for years we observed that renewables were cheated as actually. Is not the best source of energy because it's not reliable. It's intermittent, it's variable. And it's foreign technology. Uh, we also had such voices, and now it's serious discussion how renewables can fill the gap when the coal will be phased out, and this is something which we expect in the next years to come. It's certain that Poland will phase. Coal generation gap. It's also because the capacity markets, which now still supports coal generation, will be phased out actually for coal after 2025. Uh, so it's matter of five years where the coal fired power plants will bring dramatic losses and they will not be able probably to operate in at least. Current electricity market. So also electricity market needs to be redesigned, but nevertheless, it's uh, then the question mark, which extent do you want to invest in the, uh, coal fired power plants? Because they, they need modernization above 50% of all coal fired power plants. They are older than 30, 35 years, which means, uh, that this is end of life for them. And of course. Different challenges on how to obtain financing. So there is a lot, uh, going on currently in Poland. It's a very interesting case and I, I think that Poland may become energy transition country most advanced, uh, in the world from coal to renewables without, uh, or maybe with a moderate share of.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:03

Absolutely. That's fascinating, a fascinating proposition. Joanna you raised a number of points, which I would like to return to to some of them. So if I could briefly summarize, I would say that the COVID-19 pandemic has in a sense accelerated the start of the demise of of coal fire generation. In Poland and the economics of the market and of these plants are also a sort of dark cloud looming, if you like. So from, especially from 2025 onwards. But if we can talk about the coal exit or potential coal exit in Poland, is it feasible? And by when, I mean you, you named a number of dates. I mean, Germany has said 2038 finally, although maybe the market conditions may, may deem that maybe a bit late if you like. But what's the situation in Poland like? Joanna.

Joanna Mackowiak-Pandera, CEO of Forum Energii: 5:49

It's a very good question. If you ask me when Poland can phase out call, I need to ask you which sector you mean as actually we are very much dependent on call. We are the third country in the world, most dependent on call. So we have a lot of call in the. Power sector, it's about 72%. It's district heating, also about 72%. And it's even households. So a lot of Polish homes, they still generate heat burning coal in the household, which results in heavy air pollution in winter. And we need to have strategy for the three sectors. And if you ask me, I think that, uh. For the heating sector and we, we did number of analysis, I mean also for, for the power sector, but when we talk about phasing out in heat generation, generally district heating and households, I think 2030 is possible. It's also because quality of life, it's. The matter of quality of air and the health, and actually Polish society support changes, of course, mostly in the bigger cities. Another challenge is villages and the energy poverty and so on. But this is feasible and when we talk about power sector. We think, and we actually did, uh, also an analysis about the future of Ignite. Uh, so we think that the phasing out Ignite in 2032 is actually inevitable. Uh, also because currently Open Mines, they were just. We probably over around the date, maybe there are official governments analysis, which, uh, prove that maybe they will last until 2035. But, uh, as I said before, it's also the matter of economics. So they will bring losses because of the high CO2 prices raising. So Ignite is as set around also 2032 and, and the rest hot goal, it's, uh, in the power sector, we think it's. 2035, uh, latest, uh, 2040. So this is what we now discussed in Poland. Still such date does not exist. I know that the government is working on such, uh, strict goals. So this is, in my view, what is possible in the next years.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:11

Absolutely. So, of course it's, it's very political as well, and the. The coal sector, there's a lot of jobs that depend on it as well. So obviously nothing can happen overnight here, but if you move away from coal, uh, how will you guarantee security supply? W would, would security supply be an issue?

Joanna Mackowiak-Pandera, CEO of Forum Energii: 8:27

We actually now also, uh, are working on modeling, which shows, uh, how we can fill the gap until 2030. So in the short run in the next 10 years. And we see that actually there, there is about four, uh, gigawatt of gas fired power plants. Also CHP, which are under construction and probably PO Poland would need about one, maximum, two gigawatt of, uh, gas fired power plants to balance the system, and the rest could be covered from renewables. So renewables, wind, and, and solar can fill the gap after 2030. All governments of Poland discuss, uh, nuclear energy since, uh, 10 years about. Uh, so it's still a project which is seriously considered, but nevertheless, uh, decisions are still missing. But if you take a look on the official plans and strategies. Theoretically after 2035, uh, nuclear power plant could also replace coal. But this is a such a long story, uh, and we think that renewables can fill the gap, of course, after big changes in the operation of electricity market. With the advanced flexibility options and uh, use of DSR and the other ancillary services and, uh, other measures which are of course needed in such a flexible and, uh, variable system,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:52

absolutely. Will then Poland be more reliable. Uh. Reliant, sorry, on, on imports from its neighbors. In such a scenario,

Joanna Mackowiak-Pandera, CEO of Forum Energii: 9:59

Poland will be more and more reliant on import if nothing will change. That's for certain, because the challenge is now that the, uh, wholesale prices are, uh, are highest actually in the region. And this is the reason why we import a lot of, uh, electricity and the imports are growing. And this became really the issue because for years we were rather the export country. And now, uh, politicians, they got stressed. With the increasing imports, uh, it's about 20 tett hours out of, uh, 160. So the numbers are, are actually growing and this is something which is, uh, at least theoretically not, uh, you know, it's strengthened security of supply. It's, it's great that loop flows, uh, has been solved between on the German Polish border, which it, it was the issues like. Six years ago, and now it's the cooperation between the TSO is better, so the flows are bigger, but nevertheless, uh, without changes in the only energy transition, like increased share of renewables because other countries. In Sweden, we have, uh, connection to Sweden, Germany, Czech Republic. They go for, uh, renewables and Lithuania. So we need to have more renewables in order to equal the balance in the trading, electricity trading to bring, uh, balance

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:23

you mentioned in terms of, you know, the coal exit. Some of these, some of the capacity will, will leave. The market will close, will, you know, be decommissioned and, and some of that will be met by. Gas, but I, we're not talking new gas fire plants are, we're talking existing plants and plants that are under construction now, Jonna, because there's a danger here. You'd, you'd lock, lock in in some gas plants into a very, you know, into a high emission scenario, which would be very costly. You

Joanna Mackowiak-Pandera, CEO of Forum Energii: 11:50

know, it's very interesting story with gas in Poland because for years we have perceived gas as so energy source from Russia and to. And it was actually why Poland did not diversify energy mix when other countries were doing that like 20 years ago or 10 years ago, 80% of gas came from Russia. Currently the numbers decreased and it's like 47% of gas coming from Russia to Poland. And I think that Poland just completely changed its attitude towards gas because of the diversification of the LNG Norway Baltic pipe and so on. So it's, uh, now big enthusiasm, uh, for gas. But, uh, as such, uh, we say that there is limits, it's fossil fuel. It's also a, a meeting, uh, CO2. Uh, still, actually not ours. Energy source, only about three to 4 billion of cubic meters are produced, uh, in Poland, and the rest is coming from abroad. And the numbers will grow in future. So when, uh, just replying your question, we say that about four gigawatts are now under construction and maybe we would need like one, two. Two gigawatts of, uh, gas pickers because we don't have actually gas pickers now to balance the system quickly. So mainly, uh, uh, the, the, the biggest amount of, uh, uh, gas generation in Poland is mainly now CHP. So we need just like gas pickers, uh, to balance the system.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:19

You know, some plants, coal fire plants have looked to convert to, to gas. I mean, I'm thinking of the Ostra Wanka. Plant, uh, I hope I pronounced that correctly. What's happening here? Joanna

Joanna Mackowiak-Pandera, CEO of Forum Energii: 13:30

Aca is, is quite symbolic project 'cause it's, uh, like symbol of coal collapse in Poland. Uh, it's, uh, perceived like that because despite the very strong push, political push, the project was canceled. Uh, finally in. And also the company Anga. And Anai is another story, but actually, Anga was, uh, bought by Orlen, uh, other big Polish, uh, energy company, which now, uh, wants to be multi energy, uh, company. And, uh, the, the future is, in my view, a little uncertain. So the project now is in the, let's say, transition phase. Orlen announced that they will continue the project in gas, but, uh, there is no official decision at the moment. The challenges that the Project Enka project was pushed into capacity market, so according to the. Regulation to this regulation, it should deliver capacity in 2023. If they will not do it, they, uh, need to pay big fines or other solution need to be, uh, found. And, uh, so it's, uh, still, uh, it's still, uh, let's say big. Story for the Polish energy system. And maybe the, the most important thing is that even if the project will be converted to gas, gas pipeline does not exist. I mean, enough capacity to deliver gas to the power plant. So it's also a challenge to build a pipe toka. Uh, so it's really like painful project for the Polish energy system. And Hector

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:04

sounds, sounds quite uncertain. Anyway, the future, I mean, constructing new pipeline certainly wouldn't come cheap. But, um, moving away from coal and gas, now, Janet, to the renewable sector in Poland, we've seen quite, uh, an upturn in, in, uh, new solar capacity. I mean, sort 7% rise in July alone. What's happening here is, is a, a pole suddenly, you know, is there they, they're seeing the light or the sun, if you like. Yeah.

Joanna Mackowiak-Pandera, CEO of Forum Energii: 15:29

We, you know, we also, uh, ask. Uh, frequently what's going on there because it's, it's really surprising. I, I remember discussions like four years ago, uh, where, uh, photo types were perceived as, you know, no option for the polish, uh, power system. And now it's just, uh, from, uh, 200 megawatts, uh, within, uh, last two and a half years. Uh. We reached above, uh, two gigawatt of, uh, installed capacity, and we expect that until end of this year, we'll have three gigawatt of capacity. And, uh, it's mainly rooftop pv. Uh, this is important. There are also some industrial, uh, PV plants. Which were, let's say, commissioned within, uh, auctions, uh, renewables auction. But we have very, you know, attractive, uh, subsidy scheme, which is coming from the National Fund from Environmental Protection. So polls now love pv, everybody now, uh, installs pv. And it's interesting because, uh, even pandemic, uh, did not, uh, stop this process or not even slow down this. Process, process. And of course, now is the question as actually the, the subsidies are coming from CO2 revenues. So we now hope that the project will continue also in this difficult times of pandemic and, uh, you know, lack of, uh, enough resources to support, uh, all the industries. Uh, we hope that. PV will continue.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:00

Of course, financing is an issue when you have, you know, very severe economic consequences of the coronavirus crisis. But in terms of these rooftop solar projects, these capacity growth, are people looking to replace sort of. Burning coal in households to with solar or is it, they're, they're, they're more of a, kind of maybe a threat to the retail electricity sector. If people, more and more people are, are becoming, uh, self-sustainable in, in power production. Is that what's happening? In

Joanna Mackowiak-Pandera, CEO of Forum Energii: 17:28

many cases, the, the subsidy is scheme is not me now with heat pumps, but in many cases people just move away from call, uh, to, uh, PV plus heat pump. Currently, the. Potential of the market in Poland is estimated at the level of 50,000 pieces yearly sold, which is also a lot. It's, um, much bigger than uk uh, market. Uh, and of course it will speed up the, uh, heat modernization or clean heat introduction because in many places of Poland, you don't have gas pipe. So, in fact, it's really hard to, uh, replace a call with, uh, pure electricity, like from the grid because it's still the most expensive source of heat, most costly. But I know that in many cases people just decide to, uh, install PV plus a heat pump, and then it's, you know, the sky is the limit. So we expect that the government will, uh. The support, uh, scheme for, uh, heat pumps as well. And it seems that heat pumps will have a bright future because once we speak about moving away in the next 10 years from coal in the house, uh, holds, it's, it's really the question, what, what can be the solution? And in some cases where you have, or cities or they have gas pipes. Probably gas is the quickest option and the cheapest one. But in many places we will not build new gas, uh, pipes because of host reasons and other reasons, which we know also related with neutrality, climate neutrality and 20, 30, 20 50 targets. And then, uh, heat pumps are really great, uh, solution for such places. It's of course still quite costly, uh, energy source, but we think that recovery funds. And, uh, other funds, actually, Poland will benefit from EU funds in the next eu, uh, financial perspective. Our estimation is that Poland can get, uh, modern, uh, 30 billion Euro only for the energy transformation. We are not talking about other, let's say, sectors, so it's only energy transformation. Uh, and, and of course many of the funds are conditional, so they can only be used for the advanced technologies, for renewables, for greed. So it's big opportunity for, for polished energy transition. And we say, if not now, than when. I think there will be no better time. I don't expect that in six years, uh, Poland can count on new funds from such big funds from the eu.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:04

Seems to be the apt opportunity to grab that time. Now, we haven't talked about wind. I can see Poland has some quite ambitious wind targets for, or targets for offshore wind by 2036 gigawatts, if I'm not mistaken. Uh, how, how realistic is that?

Joanna Mackowiak-Pandera, CEO of Forum Energii: 20:18

There are different numbers currently most. Uh, two projects are most advanced, one of Polyline Eria and one of PGE. And uh, I think that it's about 2.5, but the new law is under preparation, uh, and should be completed under end of the year. So in fact, uh, also it's quite. Quite new that Polish decision makers, they now announce its, you know, attachment to offshore energy, which is perceived as, uh, as, uh, most, uh, cost efficient and, uh, also more reliant compared to onshore wind. But there is also quite interesting development in onshore wind auctions. Uh, actually last year Poland became the third, uh, most attractive market in Europe. In terms of auctions, but it was because actually onshore, uh, wind industry, the project were stopped by the French, uh, changes in regulation among others. Distance regulation, which actually prohibits building windmills in the distance from cities and villages. And it stopped development on onshore wind for, uh, several years last year. Actually. It seems that this government has. That I'm very sorry to the energy industry, uh, to this onshore, uh, wind industry. And now, uh, they announced that there will be revision of the law, which will, um, withdraw from this distance regulation. And this is, uh, extremely important. Because, uh, there are no new project actually, which can compete effectively, uh, under the slow, uh, in the auctions. Uh, so once we want to have cheap onshore wind, uh, electricity, we need to change, uh, regulation in order to, you know, attract investor to, uh, to build new project.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:08

Absolutely. And there could be, you know, with the, the, there've been several PPAs signed in Poland, uh, this year in terms of renewable projects. And do you see that continuing?

Joanna Mackowiak-Pandera, CEO of Forum Energii: 22:15

I see big interest in PPAs. I still think it's very little bigger potential exists, but I think also it's, uh, government needs to introduce a strategy and expectations towards, uh, onshore wind because, uh, it was perceived as a. Inferior brother of renewables, so it was not treated, uh, properly in the last years.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:39

Janna, thank you very much for a fascinating insight into current market developments in in Poland. Um, we hope to have you back on the pod sometime again where we can see how far PO has got, but um, once again, thank you very much.

Joanna Mackowiak-Pandera, CEO of Forum Energii: 22:52

Thank you very much. It was my pleasure, and I encourage you to follow Polish Market.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:57

Absolutely. We have two correspondents there who follow it quite closely, Joanna, so we'll. We'll do our best, Tim. That's all for the Monte Weekly podcast this week listeners, remember to keep up to date with all our stories on Monte News. Follow us on Twitter and LinkedIn and subscribe to this podcast on Apple Podcasts, Spotify, or wherever you get your podcast from. Thank you and goodbye.