Statkraft greens Polish steel with 10-year PPA

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Cost-sensitive energy-intensive industries such as steel manufacturing can appear at odds with the energy transition amid fears cleaning their power supply could make European companies even more vulnerable to cheap imports.

However, Norwegian renewables company Statkraft and Texan steelmaker Commercial Metals Company (CMC) are demonstrating in Poland how to combine business needs with the requirement to decarbonize.

“Partnerships like these make it possible to support the growth of the industry,” said Jerzy Kozicz, president of CMC Poland sp. z o.o. “It also demonstrates our engagement and support to new technologies of energy generation in Poland.”

PPA contracts

The companies have signed a power purchase agreement (PPA) linked to a portfolio of such supply contracts held by Statkraft in Poland. The renewables company does not own clean energy generation assets in the nation. Instead, it offers bankable power supply agreements.

“As a market integrator, Statkraft enables the development of renewable projects and simultaneously ensuring long-term price stability to customers such as CMC,” said Koen Dejonghe, business development manager at Statkraft. “This transaction shows CMC’s leadership in the energy-intensive industry, which I expect will be followed by others.”

The agreement pertains to 20% of CMC’s Polish power consumption for ten years from next year. Renewables are taking root in traditionally coal-dependent Poland, whose solar generation capacity grew 175% last year to hit 1.3 GW.

Solar growth

Last year’s strong growth was driven mainly by rising incentives for rooftop PV and an extension of net metering access to businesses and energy communities. The Polish government is also supporting commercial and industrial PV, as well as large scale solar through renewable energy auctions.

The last generation capacity auction for small scale solar and wind installations saw PV developers sweep the board to secure 750 MW of new facilities. The results of the fourth procurement round held for projects with a generation capacity of up to 1 MW were published recently after the Energy Regulatory Office (ERO) staged the AZ/9/2019 auction last month. The final price secured for the solar power to be generated fell from the level recorded in the previous small scale auction at the end of 2018. In the latest round, the ERO reported a minimum price of PLN269/MWh ($70.41) and a maximum of PLN327. Those figures, which exclude goods and services tax on the energy, compare to PLN288.99 and PLN364.99, respectively, in the previous round.

EU funds

With the Polish PV market awakening and industrial power consumers eyeing renewables as a viable replacement for coal, the trend could be further accelerated by the European Commission’s latest funding announcement. Commission president Ursula von der Leyen wants the EU, member states and private investors to drum up €1 trillion ($1.11 trillion) to realize the bloc’s vision of a Green New Deal.

Of that figure, around €143 billion would be spent over a decade on economic reforms in regions heavily dependent on the fossil fuel industry, via a Just Transition Fund. From the first instalment of €7.5 billion, Poland will receive €2 billion to prepare its economy for mid-century net-zero-carbon plans.