The Bełchatów coal mine is a large mine in the center of Poland. It is one of the largest coal desposits in the country, with estimated reserves of 1,930 million tons. Annual production is around 50 million tons.
These ambitions are, as one might suspect, not without their challenges. Poland has historically relied strongly on heavy coal for its energy needs, with the result that today, around three-quarters of its electricity demand is still met by coal-fired generation. That’s a hard habit to break. It also means that a strong culture and sense of community have grown around coal mining, and the country is understandably proud of its coal heritage and expertise. But the winds of change are blowing across the sector and they are proving hard to ignore.
Poland’s coal plants are old, mostly inefficient, and costly to maintain and operate. They require considerable outlays if they are to meet EU emission standards. With some plants due for decommissioning in the near future and recent government plans to build four new coal plants unsuccessful (just one was successful), you can see why renewables may be transforming into an all-around more attractive solution to the country’s energy needs.
There are other pressures, too, of course. The need to meet the Paris Agreement’s binding commitments, the force of public opinion (increasingly in favor of renewables) and general concern over climate change are all key drivers here, just as they are elsewhere in Europe.
Like many other European countries, the desire from both domestic businesses and (more recently) international companies to benefit from green energy is also a key driver. For many years, businesses in Poland have benefited from low labor and operating costs. However, the balance sheet is changing with energy costs on the rise and an increase in social responsibility that sees sustainability at the core of their operations.
As a result, we’re seeing increasing demand from these organizations for alternative energy solutions that embrace renewables. This includes power purchase agreements, C&I developments, and an increase in PV installers using our solar distribution channels. Like the rest of Europe, companies are now seeing these options as cheaper long-term energy sources and more appropriate sustainable and environmentally friendly solutions. Shareholders and investors alike increasingly expect organizations to be able to demonstrate such environmental credentials.
There’s additional pressure from those businesses with a Polish footprint that have signed up to the RE100. Comprising the world’s most influential companies, signatories are committed to 100% renewables. The global corporate renewable energy initiative brings together hundreds of large and ambitious businesses committed to 100% renewable electricity, with a mission to accelerate a global shift to clean energy and zero-carbon grids – delivering a cleaner, healthier future. And that means they’re pressing for change and action now.
The Polish government has also brought in some changes to the energy market, introducing, for example, contract for difference auctions. However, with higher electricity prices and continually lowering development costs, there are other routes to the market.
For us at BayWa r.e., PPAs look more promising, as they offer fixed purchase prices, more commercial certainty, and a reduction of risks. This is an avenue some companies are exploring as they look to manage their energy source and costs, and it’s looking increasingly attractive, with energy costs currently on the up. Poland is now the only country in Eastern Europe where corporate PPAs are an option.
What then, is the potential for renewables, particularly wind and solar, in Poland? Firstly, the country offers a vast, relatively sparsely populated area, making it suitable – subject to sunshine and wind being available – for large-scale solar PV and wind farm installations.
Solar PV offers the added advantage that it’s possible for these to quickly operate at grid parity, reducing worries about the need for government subsidies. We’ve proved this, for example, with our Barth solar park in Germany and our Don Rodrigo (1 and 2) solar parks in Spain.
We’re now also currently constructing Poland’s largest subsidy-free solar farms in Witnica municipality – 64 MW project with an additional 50 MW subsidy-free already in the planning. This is important as it offers a way forward for developers without the need for financial support from the Polish government.
Solar PV is a relatively new sector for Poland, but there’s a big appetite for it and it’s now the fastest-growing segment in the country’s renewable energy mix. Last year, the total installed capacity was a little over 1.4 GW. According to the Polish Institute of Renewable Energy (IEO), by the end of 2020, this is likely to have risen to more than 2.5 GW. The lion’s share of the activity comes from micro installations by individuals and small business prosumers, of up to 50 kWp. And despite the pandemic and resulting general economic slowdown, in the first six months of this year, this market accounted for more than 500 MW.
The IEO also notes that by 2025, there’s potential for the solar market to have grown to 7.8 GW.
The drivers for this growth are a mix of societal expectation and awareness of the role energy can play in the battle against climate change, EU CO2 reduction targets, and a recognition by the government that the sector needs support to help it get off the ground and grow at the required rate.
The result has been setting up some government and municipal subsidies, such as the Moj Prad, Czyste Powietrze, Energy Plus, and Prosumer schemes.
The recent amendment to Poland’s Energy Act has brought with it some welcome changes to VAT rules, longer energy balancing scheme settlement cycles, and a widening of the definition of the ‘prosumer’ qualification requirements, which are making it easier for schemes of up to 50 kWp to connect to the grid.
The introduction of a thermo-modernization tax allowance has also encouraged growth, as has the specter of higher energy prices in the near future. Simultaneously, the cost of solar PV products is falling, all serving to make small-scale solar PV installations a considerably more attractive option than had previously been the case.
Likely, this segment will eventually be overtaken by the growth in the commercial and industrial markets, but for the short term, at least, there’s no sign of the appetite abating. The critical period for this segment of the market would seem to be 2023-24 when the existing support mechanisms are no longer available.
By far, the most significant hurdle for renewable projects is undoubtedly grid capacity. There’s a need for modernizing both the transmission and distribution networks across the whole of the 312,696 sq km country, but particularly in the north, where most existing renewable projects are to be found. There are no coal plants in the region, so existing infrastructure is sparse.
The costs associated with ensuring that capacity and connection are available mean that only the larger generation projects, whether wind or solar, will be commercially viable.
The Polish Wind Energy Association (PWEA) estimates that land-based wind energy’s potential is more than 12 GW, but with the same grid capacity challenges.
There’s potential for offshore wind, too. A long stretch of one of Poland’s many borders runs along the Baltic Sea, and the Polish government is said to be planning a major offshore wind installation here – but a recent report suggested a start-up would not happen until 2025. This would add to the 13 wind projects currently under consideration by several companies in the Polish Baltic Sea territory. PWEA says the generation potential offshore is in the region of 12-14 GW.
There were some headlines at the back-end of 2019 casting doubt on whether Poland would meet its binding EU target of achieving 15% of its energy requirements from renewables by 2020, which is disappointing. But despite this, we still believe that there is plenty of solar potential in Poland.
Its population of almost 40 million deserves to have access to clean, green electricity and to break free from the grip that coal has held over many decades. BayWa r.e believes it’s crucial to rethink energy no matter which country it works in, and we hope that we can help and support Poland in its journey toward renewables.
By Łukasz Zaziąbł, who is responsible for Business & Sales Development at BayWa r.e.’s Polish solar distribution unit. Before joining BayWa in 2017, Łukasz Zaziąbł has been working in the solar industry as a Country Sales Manager, since 2013.
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