The Polish industry, which generates approximately one fifth of the country’s GDP, is highly energy-intensive compared to other EU countries. The high prices of electrical energy increasingly influence its competitiveness. This puts the industrial sector under growing pressure for urgent modernization and transition to green energy. “The key element of building a competitive advantage will be, in particular, energy consumption, the amount and time of this consumption, and a conscious approach to this issue,” emphasizes Michał Orłowski from the Tauron Group.
As highlighted in September analysis by the Energy Forum, Poland is one of the EU’s most industrialized countries. This sector produces over 20% of the national GDP and employs every fifth person working in Poland (over 3 million people, excluding those employed in the energy, heating, or gas industries). Domestic companies have a solid position in European supply chains and many Polish-made products are competitive in foreign markets.
Compared to other EU countries, Polish industry is highly energy-intensive, and high energy prices are a significant problem for sectors such as the chemical, steel, mining, metallurgy, or fuel processing industries. High energy prices constitute one of the main factors affecting the profitability of production and determining competitiveness.
“Energy is a product which, historically, was priced hourly, now it is priced every 15 minutes. Prices used to be relatively predictable, they were the result of coal prices, CO2, and during peak hours they were more expensive, during off-peak hours they were cheaper. However, now – the more we add renewable energy sources, which to a large extent are uncontrollable, dependent on weather, and essentially unpredictable, the bigger price fluctuations occur in the system. We already experience phenomena like negative prices, which, for now, still occur on a small scale, but this scale will grow each year. On the other hand, in certain hours prices can be much higher, reaching several thousand zlotys per megawatt-hour in practice. Thus, an industry that is flexible and can manage its energy demand, take advantage of these price fluctuations and use green energy when it’s cheapest, will be able to build its competitive advantage,” explains Michał Orłowski, Vice President of the Board for Asset Management and Development at Tauron Polska Energia.
In the first half of this year, electricity prices in Poland were among the highest in Europe. Issues include delays in energy transition, too slow a move away from coal, and technological processes in many sectors that are already outdated. As stressed by the Energy Forum, all this puts Polish industry under increasing pressure for urgent modernization. It is crucial to invest in energy efficiency, which can help companies reduce their environmental impact (Polish industry accounts for about 25% of all domestic emissions) and lower operational costs. An important element of increasing the flexibility of the industry is investing in energy storage.
“Today, we see energy storage mainly among individual consumers, but – due to a rapid decline in investment costs – it will be increasingly accessible for industry,” the expert assesses.
In the report, “Green Lifebuoy. Access to Clean Energy as a Condition for the Competitiveness of Polish Industry”, analysts from the think-tank WiseEuropa and the RE-Source Poland Hub foundation point out that investments in RES (Renewable Energy Sources) and gradually increasing access to clean energy are key to maintaining the competitiveness of Polish industry. This will allow reducing its cost and lowering the emissions of production.
“Sources generating green energy are an important element of the transformation. As the Tauron Group, we are preparing a series of such projects. We have the ambition to significantly increase our scale of green production. For example, we recently launched a project to build the second-largest wind farm in Poland, the Municipal Hill farm with a capacity of over 190 MW, which will supply energy to many of our customers and provide it when it is most needed, that is when photovoltaics produce less and wind energy can be a good supplement,” says the Vice President of the Tauron Board.
As he indicates, just as important as energy prices is the stability of supply, which requires, among other things, the modernization of existing infrastructure.
“We supply energy to about 6 million customers and for the transformation to be possible, it is necessary for distribution networks to be able to transmit and receive a larger amount of energy,” says Michał Orłowski. “At present, the entire network topology is changing, which has historically been based on large conventional sources producing in a relatively large cluster. But now, energy production looks completely different: we have many photovoltaic and wind sources, which are by nature more dispersed, and many prosumers who produce their own energy. Therefore, the entire distribution network requires transformation.”
The Tauron Group significantly increases expenditures on the modernization of distribution networks to meet the challenges resulting from the transformation. It annually allocates about PLN 3 billion for this purpose, although this amount may even double in the coming years.
“On the sales side, an attractive, green offer for customers and end-users is also necessary. We launched the Tauron Nowa Energia offer this year, which is the first large-scale offer guaranteeing green energy for up to nine years. For individual consumers, we also have five-year products. Thus, we offer standardized products that provide green energy in the longer term,” explains the Vice President of Tauron Polska Energia. “We are also working on bilateral contracts for larger recipients, for whom standard contracts are insufficient and who need solutions tailored to their needs.”
According to the “The Cost of the Absence of Decarbonization in the Economy” report, prepared by the Polish Development Fund and the Polish Economic Institute, the costs of companies operating are rising throughout Europe, due to high fluctuations in raw material prices and increasing prices of CO2 emission allowances. Only from mid-2021 to mid-2023, the price of electricity for companies and industry in the EU rose by 119% to values twice as high as in the US and China. This clearly reduces the attractiveness of investment in the region and weakens the competitiveness of European industry, hence investments in low-emission technologies that can provide cheap electricity to companies are becoming increasingly popular.
Experts discussed green energy for industry and the opportunities and challenges associated with it during the Green Industry Summit, which took place in October in Krakow. Tauron was a strategic partner of this event.
