In 2024, the need to accelerate the energy transition became increasingly apparent. In Poland’s context, the optimal solution appears to be a combination of developing new dispatchable gas-based power capacities and converting existing coal-fired units. Unfortunately, plans for energy storage facilities remain at the project stage, summarizes Maciej Stańczuk, energy and energy transition expert at the BCC (Business Centre Club).
The expert views the decarbonization of the energy sector in 2024 positively, noting a significant acceleration. By September 2024, the share of hard coal in Poland’s energy mix dropped to 35% (26 percentage points lower than the previous year), lignite accounted for 22%, and the share of renewable energy sources (RES) increased to 30%.
The process of eliminating hard coal from Poland’s energy system is progressing faster than expected. On windy and sunny days, especially weekends when energy demand is lower, Poland becomes one of Europe’s largest exporters of renewable energy. Unfortunately, the lack of adequate energy storage often forces the Polish Power Grid (PSE) to disconnect renewable energy sources, leading to wasted surpluses.
“Plans for energy storage facilities remain at the project stage. Despite ambitious investment goals by Polish energy companies, a breakthrough in this area is still ahead of us,” the expert claims.
Issues with the Distance Law
Ultimately, the energy sector aims to rely on renewable energy sources, but the lack of changes to the so-called distance law significantly hampers the development of onshore wind power. A simple change from 700 meters to 500 meters could accelerate wind farm construction, but the amendment has not yet been passed by the Sejm. The likelihood of its approval before the end of 2024 is minimal, which is disappointing.
According to the expert:
“The biggest challenge in transitioning away from coal remains ensuring adequate dispatchable capacity in the National Power System (KSE) until stable nuclear energy sources are operational. Poland is pursuing two projects: large nuclear reactors (such as the Choczewo power plant) and small modular reactors (SMRs).”
Nuclear reactors will primarily serve as energy sources for the IT sector and electromobility. Therefore, complementary technologies such as combined-cycle gas turbines (CCGT) or open-cycle gas turbines (OCGT) are necessary.
Risks of Phasing Out Coal-Fired Units
Coal assets can participate in the capacity market only until 2028. It will not be possible to replace these assets with CCGT or OCGT units within this period. By 2030, over 8 GW of coal-fired power plants and cogeneration plants are planned to be decommissioned. Between 2031 and 2040, an additional 7-8 GW of capacity will be phased out. Since these are dispatchable capacities, they must be replaced by similar types of capacity. For obvious reasons, RES cannot be considered dispatchable.
Building gas-fired units in such a short time is practically impossible (preparing and implementing new projects takes at least six years, there is a lack of general contractors, and the largest Polish firms face existential challenges). Therefore, solutions that mitigate the probable power deficit in the KSE are needed. One solution could be the simplest and cheapest technology, developed by Polish firms: converting existing coal-fired units to gas, gas-hydrogen blends, or biomass. This would reduce emissions below 550 g/kWh, qualifying them for capacity market auctions, and the investment period would not exceed 1.5 years. These conversions, which would otherwise lead to shutdowns, could complement the construction of CCGT and OCGT plants.
Impact of Freezing Energy Prices
Extending the practice of freezing energy prices until mid-2025 due to political factors (the 2025 presidential election) will not help restore Poland’s damaged energy market, Maciej Stańczuk adds.
“Freezing energy prices was justified during periods of extremely high inflation, exceeding 18%, and rising energy commodity prices after Putin’s invasion of Ukraine. However, this is no longer the case. While inflation is still above the National Bank of Poland’s target (2.5%), it is expected to be below 5% by the end of 2024.”
Financial Challenges for Energy Transition Projects
Financing barriers may pose a serious challenge for energy transition investments. International financial institutions, such as the European Bank for Reconstruction and Development (EBRD), are reluctant to finance CCGT units, which the current PSE strategy considers crucial for dispatchable capacity to replace coal-fired units. This is due to the exclusion of gas from the European taxonomy.
In conclusion, 2024 has highlighted the urgency of accelerating Poland’s energy transition. The optimal approach appears to be combining new gas-based dispatchable power capacities with the conversion of existing coal units.
“Proposals to accelerate the energy transition in Poland should be rational, budget-friendly, feasible in a short timeframe, and capable of generating additional state revenue. It is also essential that Polish companies benefit from the transition and are involved throughout the investment chain. I hope that the current investment surge will continue in the coming years, enabling the realization of necessary projects,” concludes Maciej Stańczuk.
Source: ceo.com.pl
