Energy transition in Poland: Renewables on course for growth

Poland is clearly Europe’s coal central. Although Polish coal-based generation fell by 12% in 2020, it became the region’s largest producer of electricity from coal, after Germany saw a 39% fall in coal electricity production, according to an analysis by think tank Ember. Despite this, on the back of a population of approximately 38 million and economic output that is several times lower than Germany’s, demand for electricity in Poland is much lower than in its neighbour to the west. The country’s unique position becomes even clearer when compared to the rest of the European Union: Poland generates as much electricity from coal as all other member states combined – except for Germany. For decades, hard coal and lignite power plants have dominated the electricity mix, with their share totalling nearly 70 percent at the end of 2020.

However, the energy transition is also gaining momentum in Poland – albeit progressing much slower than in the rest of Europe. Renewable energy sources are becoming increasingly important to energy supply, and new government resolutions aim above all to spur the expansion of PV and offshore wind, while onshore wind development likely soon joins the two. This is how Poland intends to substantially reduce its specific carbon dioxide emissions, an extremely urgent matter in light of the EU’s ambitious climate goals. In a two-part mini-series, en:former will take a look at the country as it transforms from a coal to a renewables-based energy economy. In Part 1, we will analyse the status quo.

Mining industry, a major employer steeped in tradition

Understanding Poland’s strong dependence on coal and difficulty in transforming its energy system warrants a look to the past and present. Coal fuelled Silesian industrialisation in the 19^th and 20^th centuries. To date, the ‘black gold’ has been a guarantor of employment and a driver of the economy for large swaths of the Polish population. Coal continues to be synonymous with work ethic and independence from Russian energy imports especially in rural areas.

And the sector remains an important employer to this very day. At the beginning of 2021, about 80,000 people worked in the Polish coal mining industry, with at least as many jobs depending on the coal economy and its suppliers. This frequently holds true in more rural and economically weak areas remote from the boom region near the nation’s capital Warsaw. This clearly puts the percentage share of workers in this sector above that in other European countries.

However, the sector’s job count was much higher in the past. Hard coal mining in particular has experienced a substantial decline in recent years. Since 2007, annual production volumes have dropped from nearly 90 million to just under 60 million metric tons in 2019 – a 30% decline. The reason for the decrease are that the coalbeds lie much farther below the earth’s crust than in other regions around the world, making mining more expensive than elsewhere. Moreover, coal extracted under these more challenging conditions often fails to meet the quality standards imposed by steel manufacturers for use in blast furnaces, except for a single site likely to remain the biggest European coking coal and coke producer. The upshot: Nearly a fifth of energy coal demand is met by imports.

Closure of all coal pits by 2049

Despite the long tradition, last September the Polish government and the country’s extremely influential miners’ union agreed an exit date: All Polish coal pits are to be shuttered by 2049. The accord further envisages the presently held discussion on cushions to enable today’s mining workers to work until they retire or receiving state aid in cases where this is not possible, to be settled in a social contract.

This decision is remarkable given that in December 2019 Poland was the only EU country unwilling to make a pledge to becoming carbon neutral by 2050. However, the government reconsidered its position in view of the economic setbacks caused by COVID-19 and mounting pressure from the EU’s Green Deal. Poland’s coal power stations also face difficulties. Europe’s oldest power plants increasingly suffer from certificate prices in European emissions trading, which are at an all-time high and are likely to continue rising. This translates into substantial added costs that jeopardise the profitability of these generation assets.

Renewables on course for growth

A look at the electricity mix makes the dependency on fossil fuels blatantly obvious: Based on figures published by Energy Monitor, the share of hard coal and lignite in power production was 70 percent in 2020, followed by natural gas and oil, accounting for 10 and just under 3 percent. So more than four-fifths of the electricity is generated by conventional power stations, while renewable energy sources have a share of some 17 percent. Wind energy leads the way in the renewables arena with 10 percent, whereas solar and hydro each account for slightly over one percent. Wind energy in particular has been on the rise for years, more than doubling its share of the electricity mix since 2014. Nearly 0.5 GW new wind onshore capacity and 2.4 GW PV capacity entered the grid in 2020, thanks to CfD auctions and prosumer solar boom respectively.

This puts Poland in the bottom one-third percentile in an EU-wide comparison in terms of the share of renewables in the electricity mix. However, the Polish government aims to give wind and solar power a huge boost by introducing the country’s new energy plan through to 2040 (PEP2040). The objective is to reduce the proportion of electricity produced from coal from 70 to no more than 56 percent by 2030, while significantly increasing the share of renewables to at least 32 percent by the same year. The main lever for achieving this goal is the expansion of solar and offshore wind farms.

This should help reduce greenhouse gas emissions by 30 percent by 2030 compared to 1990 levels. In 2018, Poland’s carbon dioxide emissions totalled 415 million metric tons. representing a drop of 13 percent. Climate and Environment Minister Michal Kurtyka was thus optimistic following the announcement on the short messaging service Twitter: “PEP2040 will be our compass in the transition to a zero-carbon economy”.

The transition plan envisages the implementation of the PEP2040, drawing a total of nearly 355 billion euros from 2021 to 2024. According to Kurtyka, the envisaged transformation of the energy system will create up to 300,000 jobs over the next 20 years. In addition to the construction of new power plants, the focus rests above all on the expansion of renewable energy.

Part 2 of the mini-series will entail en:former outlining the renewable expansion plans in more detail.