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Dispatch from Poland—July 2022

Polish Energy Policy in Search of Equilibrium

July 06, 2022
by
Robert Tomaszewski
7 min read
Photo Credit: CameraCraft / Shutterstock.com
Poland is the most coal-dependent country in the European Union. Despite the rapid acceleration of decarbonization, more than 70 percent of its energy is still produced from coal.

Poland is the most coal-dependent country in the European Union. Despite the rapid acceleration of decarbonization, more than 70 percent of its energy is still produced from coal. The war in Ukraine will reduce dependence on oil and gas from Russia, but it may also induce the government to slow down the closure of coal mines and coal-fired power plants. The country must find an equilibrium point in its energy transition where the pace of change matches the capabilities of domestic companies and society.

Over the past ten years, Poland has made an economic leap and at the same time a significant reduction in the economy’s carbon intensity. From 2010 to 2021, gross domestic product per capita increased by 56 percent while the economy’s energy intensity decreased by 27 percent and the carbon intensity of the energy supply decreased by 11 percent. Despite this, however, Poland still has the highest share of coal in national energy production among European countries—in 2021 as much as 72 percent of its electricity was generated from coal. To produce 1 megawatt hour (MWh) of electricity, 760 kilograms of CO2 must be emitted, twice as much as in Germany and more than three times the EU average.

Poland still has the highest share of coal in national energy production among European countries—in 2021 as much as 72 percent of its electricity was generated from coal.

The high carbon intensity of the energy sector and the slow pace of its transformation may significantly reduce the competitiveness of Polish companies due to high energy prices as well as to a higher carbon footprint in the supply chain than in other countries.

According to the Polish Energy Policy until 2040, which was adopted by the government in 2021, the energy sector’s emissions should fall to 533 kg CO2/MWh in 2030. Even with the implementation of the EU’s Fit for 55’ package, emissions from the domestic power sector will still be higher than the EU average today. Poland’s energy backwardness will mean that the slow pace of transformation will generate ever-greater risks for business. The country’s GDP is 50 percent export-based, with 75 percent going to EU countries.

The War in Ukraine Will Speed Up Transformation

Russia’s war against Ukraine and the need for the EU to quickly become independent from Russian hydrocarbons will accelerate decarbonization in the medium to long term. But in the short term it will have a destabilizing effect on energy markets, creating a temptation to return to using fossil fuels on a larger scale. Due to its dependence on coal, Poland is particularly prone to this risk.

Officially, Poland intends to accelerate its energy transformation. In March, the government adopted an update of the energy policy until 2040 to include the faster development of renewable energy sources, including photovoltaics and offshore windmills. Green sources are expected to account for nearly half of electricity production in 2040, up from the current 34 percent. The government is to strive to reduce the economy’s dependence on gas and oil, to intensify the promotion of public transport and railways, and to start the construction of a nuclear power plant in 2026 with a view for it to be operational in 2033.

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Green sources are expected to account for nearly half of electricity production in 2040, up from the current 34 percent.

The Specter of a Coal and Gas Trap

The temptation to use fossil fuels for longer may prove stronger. The reduction in the transmission of Russian gas through the Nord Stream 1 pipeline and the resulting reactivation of coal-fired power stations in Austria, Germany, and the Netherlands have made a huge impression in Poland. The government is increasingly suggesting that the extraordinary situation in the energy markets should prompt the EU to change its approach to coal in order to use it as a weapon in the fight against energy dependence on Russia.

Gas is to remain a transitional fuel and the expansion of the infrastructure for receiving it will increase Poland’s dependence on fuel imports. In turn, the construction of new gas-fired units may become a financial trap for energy companies—the EU’s tightening climate policy may mean that the planned investments may never pay off and the cost of their use will become ever higher due to carbon pricing.

Poland’s arguments are unlikely to be heard in Europe, but they may set back the national debate on the energy transition, strengthening skeptics and populists who call for opening coal mines and building new coal-fired power plants. The transition is already polarizing public opinion and the rapid rise in energy prices is fuel for fringe groups ready to question the sense of moving away from fossil fuels. Reliance on coal for too long and excessive expansion of gas capacity may prove to be a trap from which Poland will find it difficult to escape.

The Nuclear Question

The war in Ukraine has not changed the balance of power between the countries that support the development of nuclear energy and its opponents. However it will further polarize the EU’s approach to large-scale nuclear energy.

Poland’s nuclear power program is still in its conceptual stage. However, after years of stagnation, it appears to be back on the list of government priorities. On March 31, 2022, the state-owned Polskie Elektrownie Jądrowe company, which is in charge of implementing the program, submitted an environmental report on the first nuclear power plant in Poland, which paves the way for launching cross-border consultations on the document. If the procedure is completed this year, it will be possible to quickly issue a final environmental and location decision for the construction of reactors.

Nuclear energy will remain part of foreign policy but not energy policy—Poland will continue to use the prospect of building a nuclear power plant to warm up relations with the United States, France, and South Korea.

A binding decision is to be reached in 2022, after final offers from France, South Korea, and the United States have been analyzed. The choice will depend on the possible political benefits as well as financial conditions and technical specifications. The American firm Westinghouse is still the front-runner, but uncertainty related to energy prices and the geopolitical situation, as well as the approach of the parliamentary elections in 2023, may lead the government to postpone the decision on the construction of the power plant. As a result, nuclear energy will remain part of foreign policy but not energy policy—Poland will continue to use the prospect of building a nuclear power plant to warm up relations with the United Stats, France, and South Korea, but it will not seek to finalize it in real terms.

Looking for Equilibrium

As noted at the start, in coming months and years Poland will try to find a point of equilibrium for its energy transformation. How to do this will be the responsibility of the government that will be in place after the 2023 parliamentary elections.

Another victory for the Law and Justice party will lead to the continuation of the current line in energy policy, based on a slow departure from coal and the slow development of renewable energy. A victory of the opposition, led by the Civic Platform, may accelerate the development of renewable energy sources as well as the decarbonization and decentralization of the energy sector. The differences will not be huge. At the end of the day, it is the EU’s climate policy that will determine to a greater extent the pace of transformation for Poland’s energy sector and economy.

If the energy transition does not reach a balance, it will divide Polish society into winners and losers. There will be the rich, driving electric cars charged for free from home photovoltaic panels, and the poor, condemned to expensive and dirty energy from the grid. Poland must avoid this scenario at all costs, just as it must avoid the temptation of returning to a coal-and-gas-fuelled past.

Robert Tomaszewski is senior energy analyst with Polityka Insight.