Poland and the race to 55

Poland and the race to 55
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How does a coal-dependent country like Poland make the shift to clean energy? Pamela Largue speaks to Michał Motylewski of international law firm Dentons and Joanna Maćkowiak-Pandera, President of Forum Energii, to find out.

Poland is the third most coal-reliant country in the world. Traditionally, climate and energy policies have been led by a right wing and conservative government, creating a challenging and at times tense landscape for transition.

However, the winds of change are blowing and there seems to be consensus within the country that coal is no longer the answer and transition to cleaner energy is the only option.

This article was originally published in Power Engineering International 4-2021.

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There are several key factors driving this shift. Firstly, the county is running low on domestic coal supply. With coal production falling, Joanna Maćkowiak-Pandera explains that Poland can no longer cover demand with domestic good quality coal.

Maćkowiak-Pandera is founder and leader of Forum Energii – the first energy transition think tank in Poland – where she focuses on European energy and climate regulations, electricity markets and renewable energy sources.

Another important factor highlighted by Pandera is the growing awareness of Polish society that renewable energy is healthier and less polluting.

Winter air quality is poor with at least three million houses being heated with coal in single furnaces.

Michał Motylewski, attorney-at-law, is a managing counsel in Dentons’ Warsaw office and a member of the Warsaw Energy and Natural Resources practice team. He suggests that this social awareness is bringing Poland to a point of no return.

“Poland is at a crossroads with its overall awareness of the economic, environmental and social issues that result from being dependent on a such a climate-adverse fuel.”

Adding fuel to the Polish energy debate is the rising price of carbon, making electricity production from coal simply unaffordable.

Pandera highlights that coal power plants are extremely old, with more than 70% of plants over 30 years old and extremely inefficient. She adds: “It no longer makes any sense to modernize them. So the challenge is understanding how to fill this coal gap with clean resources.

“According to our modelling, in the next nine years we should phase out 23GW of coal because it will be highly unprofitable. So it’s a challenge.”

As Poland faces and embraces energy transition, the dichotomy is clear. Poland has access to standards, best practices and funds through the European Union.

On the other hand, it’s a fast developing sector and there is uncertainty amongst decision makers concerning how to best deal with these novel challenges.

Policymakers and citizens alike are asking: How do we live, operate and prosper?

Motylewski suggests that the answers to Poland’s questions lie in a thorough policy framework. “In terms of regulation and policies, if you don’t develop a comprehensive policy, and you don’t make an effort to drive it, no matter how hard it is, there will always be a major bottleneck, a backlog, something stopping you from delivering.”

Fit for 55

Over the past ten years, Poland has started to realize the need for renewables. In 2019 the concept of a European Green Deal developed which would ensure climate neutrality by 2050.

Motylewski notes: “This is when it dawned on everyone that to get there by 2050, we actually need to have some deliverables, something of which we can say: We are doing this right.”

Fit for 55 is Europe’s most comprehensive attempt at regulation and provides an inclusive roadmap to achieving decarbonisation. It will require a paradigm shift in Poland and throughout Europe, and will also require common effort for the common good: a new form of capitalism.

Pandera and Motylewski highlight the challenges and opportunities associated with this ambitious piece of legislation. One of the biggest challenges is the extension of the ETS to non ETS sectors, which will include carbon pricing in buildings and transport.

Carbon pricing in general could be politically controversial if not dealt with in a fair manner. Ensuring fair redistribution of the cost of the energy transition within society is important, as increasing energy poverty must be avoided.

Motylewski says: “This is about a new model of society and reducing inequalities. We need to overhaul the entire system in Poland.”

Integration of developing renewables is another key challenge. Flexible technologies must be utilized to integrate renewables and give impetus to the digitalisation and automation of the power sector, ultimately increasing security of supply.

However, to achieve this, good, smart projects are needed, something which is currently lacking in Poland.

In contrast however, massive opportunities are to be found in terms of electrification of heating and transport, the inclusion of green gases such as hydrogen, and also in developing a bio methane supply chain through tapping into the country’s significant agricultural potential.

The prosumer market is also becoming very popular. “We have over 20,000 companies now operating in the market, which developed over only a few years. Deployment is increasing 200% annually,” says Pandera.

Poland is investing in a diversified energy mix and with it comes a greater diversity of market participants. Financial institutions and asset managers are becoming conscious of and preparing for new investment landscapes.

Competence centres are being developed to assess investment opportunities, and effectively shape financial policy to facilitate financing at different levels.

A just transition

As with any country heavily reliant on coal and shifting to cleaner energy sources, the question of how to ensure a just and fair transition is high on the agenda.

Pandera explains that Poland had several bad experiences in the early 1990s, when many workplaces, and plants collapsed overnight, and regions and people were left to recover on their own steam. The open pit mines are a symbolic void and the trauma has left a scar.

In order to overcome this sensitive history, open discussion with the decision makers to formulate a clear path is important. New projects delivering new jobs are needed. International partners, new technologies, and good ideas will drive transformation and help avoid the mistakes of the early 90s.

“In terms of the EU’s Just Transition Fund, we are advising on how to plan revitalization and looking at new kinds of jobs needed for the region. Coal is the biggest employer in the region and once it’s closed down, then the question is how to keep the unemployment rate low,” says Pandera. Motylewski suggests: “We must encourage international cooperation and encourage everyone to bring solutions to the table, using the funds available to reduce the risk, encourage investment decisions and deliver.”

Both Motylewski and Pandera agree that Poland’s coal intense regions have the resources to ensure this transition is successful. Skilled workforces and local infrastructure mean there is a solid base from which to start.

Testing ground

Poland is a good testing ground for energy transition. As fast growing economy, it shares struggles with other countries in terms of infrastructure and grid development to accommodate growing renewables.

Investing in grid resilience, automation and digitalisation, as well as utilizing the data to increase network efficiency will be a priority now.

Seeing how the country develops and delivers on this will provide a comprehensive blueprint, suggests Motylewski, on how best to connect resources and offtakers, how best to integrate clean energy and how best to decarbonize heating and cooling. The transition is giving rise to new innovation from the ground up.

“We may have small, local initiatives, but if you add them up, you get an effect of scale that serves a large industrial area, and serves a large city. You can profit from that. This open minded approach should be promoted in different parts of the world.”

Pandera emphasizes that if Poland can manage energy transition, everybody will manage it. However, the country must adjust its signal to the world. The Polish narrative is changing and utilities are divesting in coal assets and deciding on coal phase-out plans. This is the message that must be conveyed.

Motylewski adds: “Energy transition is the biggest opportunity in Poland, and this is also a lesson for anyone who looks at challenges and asks: What can I do about it? Can I manage that challenge? In Poland we answer: Yes you can.”

The overriding consensus throughout the discussion is that in order to achieve the energy transition in Poland, all industries must stay focused, be open to change and use the ample resources at hand. This, coupled with a handful of courage, will see significant social and economic change: change that will secure a healthier planet for future generations.

For more details on Poland’s Fit for 55 commitments, listen to Enlit Europe’s ‘Energy Transitions’ podcast:

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