Friday, 07 May 2021 09:00

Energy security: Poland’s chief priority in the coal transition Featured

The Turów coal mine and power plant complex is “strategic for ensuring the energy security of Poland,” says PGE, the state-owned enterprise at the centre of a dispute with the Czech Republic over the extension of mining operations there.

In a rare move for an EU country, the Czech Republic took Poland before the European Court of Justice last February for extending mining operations at an open-pit coal mine near Turów, a Polish village just over the border.

Environmentalists who backed the case warned that Czech people are losing access to safe drinking water because of coal mining there.

EU judges are currently examining the complaint and could order temporary closure of the mine.

With a ruling expected anytime soon, Poland fears its electricity supplies will be put at risk.

The Turów mine and power plant are responsible for approximately 5% of national energy production, supplying electricity to around 2.3 million households, PGE says.

A potential shutdown would “obviously shake up the Polish energy system, which will not be able to quickly replace the decommissioned generation capacity”, PGE told EURACTIV in emailed comments.

But analysts say a bigger risk is looming on the horizon. Coal power generation has been declining steadily across Europe over the years as plants came under growing pressure from rising CO2 prices on the EU’s carbon market.

A recent report by think tank Agora Energiewende found that most lignite units in Germany, Poland and the Czech Republic will become permanently unprofitable in the second half of the 2020s.

With the price of CO2 hitting €50 per tonne for the first time this week, analysts say the days of coal are numbered.

“Carbon pricing has been a killer for coal in the past two years,” said Georg Zachmann, an analyst at the Bruegel economic think-tank in Brussels. “And people expect this to last,” he added, saying this is causing an acceleration in Europe’s coal phase-out.

According to Zachmann, the steady rise in carbon prices means “the market will kill coal potentially already this decade.”

Power shift: EU coal output falls 24% in 2019

Global warming emissions from the power sector fell by 12% last year, led by a steep decline in coal power generation, which was replaced half by natural gas and half by renewables, according to fresh data published on Wednesday (5 February).

Energy restructuring plan

As Poland last week approved an extension of Turów’s mining licence until 2044, campaigners have warned about the opening of a new 496-MW power plant unit in Turów, which was due to start operations on 30 April.

PGE says the new unit will be a “state-of-the-art facility” to replace the three oldest and most polluting units, but activists argue this is not good enough, in view of the climate crisis and the expected further rise in carbon costs expected with Europe’s tougher climate goals.

“All power production from coal in the EU must stop by 2030” in order to keep within the 2°C warming limit of the Paris Agreement, said Elif Gündüzyeli, a campaigner at Climate Action Network (CAN) Europe.

“Prolonging the coal mining activities until 2044 and adding a new lignite power unit to start operating now, which is also to be paid from citizens’ pockets, is outrageous,” she added, saying coal power production is a “dying business”.

In Poland, however, the coal exit is expected to take longer than in other EU member states.

The country still relies on coal for 70% of its electricity, the highest share among EU countries. And even though Warsaw has big plans for wind, solar, nuclear and gas, PGE says replacing all its coal-based units with clean electricity is a colossal endeavour that will take until 2050 to complete.

Energy security remains a chief concern for Poland, which has sought to create a safety net for coal plants to remain as a backup source of electricity during the transition. In April, the ministry of state assets proposed a restructuring of the country’s energy sector by nationalising coal units and using public money to keep them alive until they are eventually put offline.

Under the plan, 70 lignite coal units, which generated more than half of Poland’s electricity in 2020, will be purchased by the state and handed over to a single state-run National Energy Security Agency (NABE).

“NABE will be a fully self-sufficient entity that will, on the one hand, guarantee energy security, and, on the other hand, a sustainable transformation” of the Polish electricity system, said PGE.

“It will only conduct investments and modernisations necessary for the ongoing maintenance of the efficiency of the operated coal-fired units, not building new ones and gradually phase out coal-fired units,” the company told EURACTIV in emailed comments.

Poland seeks to nationalise coal plants so firms can finance green investments

The Polish government is planning to nationalise dozens of coal plants and use public money to keep them running to allow state-owned energy companies to invest in greener alternatives. EURACTIV’s media partner, Climate Home News, reports.

‘Bad bank’ for coal assets

The restructuring plan, which has not been finalised yet, will require approval from the European Commission under the EU’s state aid rules.

But analysts say the draft is incompatible with the bloc’s climate goals and is unlikely to be approved by EU competition regulators.

“The only way for it to get a green light from Brussels would be to set a coal exit date sometime in the 2030s,” said Paweł Wiejski, EU climate policy analyst at the Warsaw-based Green Economy Institute.

Earlier this month, the Polish government signed off an agreement with trade unions to shut the country’s last coal mine in 2049, just before an EU deadline to hit net-zero emissions by 2050.

However, analysts believe this may be too late and incompatible with the EU’s climate goals.

Indeed, the newly created National Energy Security Agency (NABE) is supposed to be aligned with Poland’s updated energy policy presented earlier this year, which assumes very high shares of coal in the electricity mix by 2040, said Paweł Czyżak, an analyst at Warsaw-based think-tank Instrat.

“These levels of coal generation would compromise the GHG-55% climate targets for the whole EU,” he said, adding that the plan “aims only at a prolongation of financing coal capacities in Poland with EU money”.

Still, Czyżak said the very fact that Poland decided to create a “bad bank” for coal assets is significant. “The government finally admits that this industry is a burden for the future of Poland’s energy system,” he said.

To be fair, Poland is not alone to struggle with its coal exit plans. Czechia, another top coal burner in Europe, has not yet decided on a coal phase-out date, with some in the government pushing for a 2033 exit and others preferring a later 2038 date.

In Germany, meanwhile, the government painfully agreed 2038 as the coal exit date last year, a target which environmentalists say is too late and provides overly generous aid for coal companies.

In March, the European Commission opened an in-depth investigation into Germany’s coal phase-out plan, saying it had doubts about a planned €4.35 billion compensation scheme for German energy and mining companies.

For Bruegel’s Zachmann, these different plans show that the coal phase-out strategies of Germany, Poland and the Czech Republic are “more lifelines to the coal industry than plans to speed up the phase-out.”

Brussels opens in-depth investigation into Germany’s coal phase-out plan

The European Commission has expressed doubts about a planned €4.35 billion compensation scheme for German energy companies, agreed as part of the country’s plan to phase out coal by 2038, saying the sums involved are “likely to constitute state aid” under EU law.